Positions Open: New Transit Authority Board

No simultaneous service on AATA and new Washtenaw Ride board

Articles of incorporation for a new Act 196 transit authority, called The Washtenaw Ride, were filed with the state last week, on Oct. 3, 2012. The Ann Arbor Transportation Authority had hoped the new authority’s board would convene on Oct. 11, but that meeting was cancelled because key appointments to that board have not yet been made.

Simultaneous service on the 15-member Washtenaw Ride (Act 196) board and the AATA board generated legal questions.

Simultaneous service on the 15-member Washtenaw Ride (Act 196) board and the seven-member AATA board generated legal questions. (Illustration by The Chronicle.)

It was previously assumed that the seven Ann Arbor appointments to the new authority’s 15-member board would serve simultaneously on AATA’s board. Now, it appears that different appointments will be made.

Responding to an emailed query from The Chronicle, Ann Arbor mayor John Hieftje wrote late Friday afternoon: “On Monday night [at the council's Oct. 15 meeting] I will put out a call for applications to serve on the 196 Board. I will not be appointing anyone to that board who would also sit on the AATA Board.”

An application for all city boards and commissions is available on the city clerk’s website.

An informal 15-member group has been meeting as the board of the unincorporated authority for around a year. Some members of the AATA board and many others had assumed that upon incorporation, the informal group would become automatically installed as the board of the new Act 196 authority. However, that won’t be the case. Ann Arbor’s seven representatives to the new authority’s board first need to be nominated by the mayor and confirmed by the city council – under terms of a four-party agreement ratified between the cities of Ann Arbor and Ypsilanti, Washtenaw County and the AATA.

More significantly, according to several sources, the apparent current view of the Ann Arbor city attorney’s office is that service on the AATA board is not legally compatible with simultaneous service on the board of the new transit authority. So appointing seven Ann Arbor members to the new authority’s board would require nominating seven individuals who are different from those who might continue to serve on the seven-member AATA board.

Another issue apparently identified by the city attorney’s office is the fact that Act 196 of 1986 refers to an additional 30-day window for a jurisdiction in the county to opt out of inclusion in the new transit authority – a window that has not yet opened. Letters of notification sent by the AATA in late September to all jurisdictions in the county referred to a statutory 30-day window starting with the filing of the articles of incorporation. But Act 196 also requires that the new transit authority itself notify jurisdictions, which also triggers a 30-day window for opting out. The statute makes clear that it’s the later of the two windows that is relevant. Because the new transit authority does not yet have a seated board, it has not yet acted to notify jurisdictions countywide.

In any case, some jurisdictions have already opted out of the new Act 196 authority. The Northfield Township clerk’s office responded to a Chronicle phone query with confirmation that on Oct. 9, the township board decided to withdraw from the new authority on a 4-0 vote. The Chronicle has as-yet-unconfirmed reports that the boards of Salem Township and Manchester Township have also voted to opt out.

Another wrinkle: The change in composition of the Ann Arbor city council after the Nov. 6 election. Councilmember Stephen Kunselman (Ward 3) has told The Chronicle that he would like to pursue the possibility of Ann Arbor opting out – and he thinks there might be six votes on the new council to accomplish that. If Ann Arbor opted out, it would effectively end the initiative.

Delay in Decision: Implications for Board Makeup

The question of whether the same individual could simultaneously serve on the boards of the two transit authorities has been under discussion by attorneys for the city of Ann Arbor and the AATA for the past week. On Oct. 8, mayor John Hieftje – in a response to an emailed query from The Chronicle – could not offer anything definitive on the board compatibility question. And AATA board chair Charles Griffith wrote on the same day that “… we are still seeking clarification with [legal counsel] but are confident we will resolve and move forward. We do think that the city’s best interests are served by ensuring continuity from one entity to the next.”

In the interest of promoting continuity, it’s conceivable that some members of the current AATA board could resign their positions on that board, in order to become eligible for appointment on the new Act 196 board. Hieftje’s statement would allow for that possibility.

Boards for both organizations will need to exist until a possible transfer of assets is made from the AATA to The Washtenaw Ride. That transfer can’t happen until all conditions of the four-party agreement are met – including a voter-approved funding source for expanded services that are to be offered by the new transit authority.

Ann Arbor’s regular appointment process for a board or commission stipulates that candidates are nominated by the mayor, then confirmed by the full city council. That confirmation can’t take place until at least the next regular meeting of the council after the nomination has been made – unless approved by an eight-vote majority on the 11-member body. Based on Hieftje’s written statement, nominations for Ann Arbor’s members to the board of The Washtenaw Ride could not be made any sooner than Nov. 8 – the next council meeting after Oct. 15.

So under the city’s regular appointment process, confirmations would then come no sooner than the council’s Nov. 19 meeting – which will be the first meeting of the newly-constituted city council following the Nov. 6 election. Departing from the council will be three councilmembers who could have reasonably been expected to support the nominations made by the mayor: Carsten Hohnke (Ward 5), Sandi Smith (Ward 1) and Tony Derezinski (Ward 2).

So the additional lag in time has potential implications for the actual makeup of the new authority’s board.

Opt-Out Window

The additional time lag also has implications for the possibility that Ann Arbor itself would opt out of the new authority, as well as for the timing of any millage vote. More detail on that is included below.

Incorporation under Act 196 initially includes by default every jurisdiction in Washtenaw County. But the statute provides more than one way of opting out of inclusion.

Opt-Out Window: Which Window?

The working assumption for many observers has been that the trigger of a 30-day timeframe for a jurisdiction to opt out was the event of incorporation. But the language of the act itself ties a possibly different timeframe to the notification of jurisdictions in the county. [.pdf of Act 196 of 1986]

Section 8. (5) A political subdivision or other entity that is part of a public authority under this act may withdraw from the public authority until the expiration of the thirtieth day following the date the public authority is incorporated or until the expiration of the thirtieth day after receiving notification under subsection (7), whichever is later, without meeting the conditions listed in subsection (1) or (2).

And according to the statute, the notification in subsection (7) is properly done by the new authority:

Section 8. (7) An authority that forms under this act on or after May 1, 2006 shall notify all political subdivisions or portions of any city, village, or township that are included in the authority that the political subdivision or portion of the political subdivision is included in the authority. The authority shall include in this notification notice of the right to withdraw from the authority under this section. The political subdivision or portion of the political subdivision that is notified has 30 days after receiving the notification to withdraw from the authority pursuant to subsection (5).

Although the AATA sent letters of notification on Sept. 27 to every jurisdiction in the county – of the intent to file the articles of incorporation – that does not satisfy the requirement in subsection (7). Those letters did satisfy a requirement in the Washtenaw County board of commissioners’ resolution ratifying the four-party agreement – commissioners had required that notification letters of an intent to file be sent.

When the new transit authority eventually sends out letters of notification to all jurisdictions – stating that those jurisdictions are included in the authority – only at that point will the later relevant 30-day window open.

Opt-Out Window:  Implications for Ann Arbor’s Participation?

If Ann Arbor board appointments are delayed for another few weeks and the relevant 30-day window does not open until December or later, it’s conceivable that the complete picture of which jurisdictions are participating in The Washtenaw Ride might not be finalized until next year.

The extension of the 30-day window well past the November election also has implications for the possibility of the city of Ann Arbor opting out of new Act 196 authority. While the current edition of the city council almost certainly does not have the six-vote majority necessary to opt out, the council will seat three new members after the election. Carsten Hohnke (Ward 5) and Sandi Smith (Ward 1) chose not to seek re-election, and Tony Derezinski (Ward 2) did not win the Democratic primary in August.

The council approved the four-party agreement on just a 7-4 vote – and three of the seven votes of approval were cast by outgoing councilmembers. Ann Arbor councilmember Stephen Kunselman (Ward 3) has told The Chronicle that he would like to pursue the possibility of Ann Arbor opting out – and he thinks there might be six votes on the new council to accomplish that.

If the city of Ann Arbor opted out of the new Act 196 authority, that would effectively end the initiative. The four-party agreement does not appear explicitly to contemplate the possibility that Ann Arbor would opt out. But by its terms, the city would withdraw from the agreement if Ann Arbor opted out – because as residents of a non-participating jurisdiction, Ann Arbor voters would necessarily fail to approve any millage that the new Act 196 authority requested. Excerpted from the four-party agreement:

If Ann Arbor voters fail to approve the NEW TA [transit authority] Act 196 funding source before December 31, 2014, regardless of whether it is approved or not by the other voting jurisdictions, then the City shall withdraw from this agreement without penalty, shall veto any attempted termination by AATA of the AATA-City operation agreement, and shall refuse to designate and/or assign its millage under Section 3(a).

Opt-Out Window: Implications for Millage Vote Timing?

The AATA has indicated that a possible funding scenario is to ask voters in Washtenaw County to fund the new transit authority with a property tax of 0.584 mills. A millage proposal might be put on the ballot as early as May 2013.

But given the now-extended timeframe for seating the new board, a May 2013 millage vote presents an increasingly challenging timeframe for an effective millage campaign to be mounted.

Even before the additional delays were apparent, Tom Heywood, director of the State Street Area Association, feared that a millage would not pass if voted on that soon – because he thought there would not be adequate lead time for a millage campaign. Heywood made the remarks at a Sept. 25 meeting of Ann Arbor’s district advisory committee (DAC), which helped advise the unincorporated authority and will continue to do that.

Incompatible Offices

It’s been widely assumed that the current seven members of the AATA board would serve as Ann Arbor’s representatives to the new transit authority’s board. However, according to multiple sources, the view of the Ann Arbor city attorney’s office appears now to be that simultaneous service on the two boards is disallowed, because such service would violate the state’s statute that characterizes incompatible offices. [.pdf of Act 566 of 1978 (Incompatible Public Offices)]

Incompatible Offices: Transit Authority Exemption

By way of background, the statute on incompatible offices provides an explicit exemption from applying the statute’s key clause (Sec. 2) for certain types of transit authorities. The Washtenaw Ride and the AATA don’t have the kind of relationship to each other that is exempted by the statute. But the argument that simultaneous service is not allowed on the two boards doesn’t depend on the failure to meet the exempted condition. Here’s the specific exemption:

Sec 3. (11) Section 2 does not prohibit a public officer or public employee of an authority created under the public transportation authority act, 1986 PA 196, MCL 124.451 to 124.479, from serving as a public officer or public employee of another public transportation authority if each public transportation authority has members consisting of identical political subdivisions.

For reference, Sec. 2 is fairly short:

Sec. 2. (1) Except as provided in section 3, a public officer or public employee shall not hold 2 or more incompatible offices at the same time.

It’s clear that the two transit authorities in question – the AATA and The Washtenaw Ride – don’t meet the condition for the exemption in subsection (11), because they consist of different political subdivisions. From that, however, it does not necessarily follow that the two offices are incompatible.

But because the exemption criterion is not met, the definition of “incompatible offices” as provided by the statute has to be applied.

And according to the statute, here’s what “incompatible offices” means:

‘Incompatible offices’ means public offices held by a public official which, when the official is performing the duties of any of the public offices held by the official, results in any of the following with respect to those offices held:
(i) The subordination of 1 public office to another.
(ii) The supervision of 1 public office by another.
(iii) A breach of duty of public office.

So the question becomes: Are the offices of AATA board member and Washtenaw Ride board member incompatible under (i), (ii), or (iii)?

Incompatible Offices: Subordination, Breach

It seems clear that if the two offices are incompatible, then it’s not because of (ii) – because AATA board members will not be supervising Washtenaw Ride board members, or visa versa.

But under (i) or (iii) it’s now apparently the view of the Ann Arbor city attorney’s office that simultaneous service on the two boards is not allowed. The new transit authority’s board might be analyzed as subordinate to the AATA board, because the new authority has no assets. And without assets, the new authority’s board cannot perform the most basic of duties assigned to it by Act 196 – notifying jurisdictions in the county that they are included in the authority, which starts the 30-day window for opting out. In order to complete that required task, the AATA would presumably need to appropriate money to the new transit authority to cover the cost of materials and postage associated with that notification. That could conceivably make the new authority’s board dependent on, and therefore subordinate to, the AATA board.

A breach of duty generally would result from a conflict in the fiduciary responsibilities between offices. The two entities – the Washtenaw Ride and the AATA – are separate, so it’s conceivable that there’s a separate fiduciary responsibility to them. But it’s also conceivable that a counterargument could be made – that in this case, the fiduciary interests of the two entities are completely aligned.

The fact that the discussion among the various legal counsel extended over several days is consistent with a divergence of views on the matter. But Hieftje’s statement – that he’ll seek applications so that the new authority’s board can be filled without requiring simultaneous service on the AATA board – makes the matter essentially academic.

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  1. October 12, 2012 at 6:54 pm | permalink

    This is absolute stunning reportage. I’m staying on the (Chronicle) bus and looking for my seatbelt.

  2. October 12, 2012 at 7:00 pm | permalink

    I have to wonder if any of the current members of the aata board will resign from it so that they can be appointed to the new board.

  3. October 12, 2012 at 7:10 pm | permalink

    If there were a massive flight of AATA board members to the new board, it could affect current operation of the system, since the Act 55 (AATA board) authority will be in charge at least through the rest of this fiscal year. (Federal – till 4th Q 2014) And if the millage doesn’t pass, even longer.

  4. By JK
    October 12, 2012 at 7:21 pm | permalink

    Finally! Reducing conflict of interest! Go legal counsel!

  5. October 12, 2012 at 7:40 pm | permalink

    Re: possibility of AATA board members resigning to be eligible to serve on the new authority’s board:

    In the interest of promoting continuity, it’s conceivable that some members of the current AATA board could resign their positions on that board, in order to become eligible for appointment on the new Act 196 board. Hieftje’s statement would allow for that possibility.

    The immediate challenge is to identify qualified warm bodies to serve on the new board. Up to three AATA board members could resign and still leave the AATA board with a quorum of four, which is needed to continue conduct business. That would reduce the number of additional bodies needed for service on the new authority to just four. But additional resignations from the AATA board beyond three would result in a need to find a qualified warm body to maintain a quorum on the AATA board, which is not a net gain.

    The city council, in its post-election incarnation, would likely be reluctant to confirm current AATA board members (who’d resign to be eligible) as members of the new board, if they are not Ann Arbor residents. That would mean the AATA board would retain at least David Nacht (Scio Twp), Jesse Bernstein (recently moved outside Ann Arbor) and Eli Cooper (not sure where, but outside Ann Arbor).

  6. October 12, 2012 at 8:02 pm | permalink

    Re (5): I don’t find the prospect of the AATA operating with a bare quorum for a year, especially with mostly outside Ann Arbor members, very encouraging.

    The current AATA board has, in my opinion, exceeded their charter. They have invested substantial Ann Arbor tax monies in services outside the city. That last sentence can be argued with on a couple of bases, but the point is much money has been spent on transition to countywide, express services to jurisdictions who are not paying for them, and enhanced service to Ypsilanti. I’m personally inclined to forgive the last. The point is, having mostly non-Ann Arbor residents running our city bus system is not a very appealing picture.

  7. October 12, 2012 at 8:26 pm | permalink

    This is a fascinating conundrum. Conundrum. Don’t you love that word? Had to write it twice.

  8. By Tom Whitaker
    October 12, 2012 at 9:46 pm | permalink

    “It’s been widely assumed that the current seven members of the AATA board would serve as Ann Arbor’s representatives to the new transit authority’s board.”

    And we all know what happens when we ASSUME…

    Yet again, it’s ready, fire, aim. Why did no one ask the city attorney for an opinion on this two or three years ago?

  9. October 13, 2012 at 8:25 am | permalink

    I love the Chronicle! What a scoop!

  10. October 13, 2012 at 1:55 pm | permalink

    So, if the board must form before it sends notification to jurisdictions and the opt-out period then obtains – how can the board be constructed with regard to participation? There seems to be a chicken-and-egg thing here. Is that particular interpretation of Act 196 included in any documents locally or is that the Chronicle’s reading of the Act?

    The packet sent to townships includes a form to be returned to the AATA. Has Ann Arbor received that packet? And if so, is there a chance that the form has already been returned with the “yes, we’re in” box checked?

  11. October 13, 2012 at 2:19 pm | permalink

    I’m surprised people even thought they could serve on both boards…that conundrum (there you go, Ruth :)) shouldn’t have even been considered.

  12. October 13, 2012 at 3:09 pm | permalink

    Re: [10]

    The articles of incorporation lay out the initial board composition and how board members are to be selected:

    The governing bodies of the Cities of Ann Arbor and Ypsilanti and the Charter Township of Pittsfield shall appoint their respective directors in accordance with their adopted policies and procedures for appointment to boards and commissions and retain the right to remove and replace such directors in accordance with the same procedures. The other districts select directors through Act 7 Interlocal Agreements, which contain procedures for appointment and removal. … The directors shall revisit the Board make-up if … all communities within one of the Act 7 districts withdraw from the Authority.

    Re: “Has Ann Arbor received that packet?

    From previous Chronicle reporting:

    Responding to a phone query, Washtenaw County clerk staff told The Chronicle that certified letters had already been sent on Sept. 27 to the clerks of all jurisdictions in the county of an intent to file the articles of incorporation on Oct. 3. Letters were also sent to all elected officials in the county. Information included in that communication was the last day to opt out of inclusion – Nov. 2 – as well as sample resolutions that could be used by a jurisdiction’s governing body to decide the opt-out question. [.pdf of sample letter] [.pdf of sample resolutions] Included in the information packet was a set of FAQs about transit and a set of FAQs about Act 196 incorporation. [.pdf of FAQ about transit] [.pdf of FAQ about the Act 196 filing]

    As clerk of a jurisdiction in the county, the Ann Arbor city clerk received the mailing from the AATA, along with councilmembers – and I’ve observed the received mailing in the hand of an actual councilmember.

    Re: “And if so, is there a chance that the form has already been returned with the ‘yes, we’re in’ box checked?”

    With respect to whether the city of Ann Arbor is actually in or out, the response form just doesn’t matter. The response form has no legal implications – and was clearly intended to be used as a communicational courtesy, not as the legal mechanism for opting in or out. And to be clear, there is no “opting in.” On filing everybody was in. No action required. You could imagine a jurisdiction passing a resolution expressing its desire not to opt out – but that would be political window-dressing.

  13. By Chuck Warpehoski
    October 13, 2012 at 8:54 pm | permalink

    The incompatible office issue is a bit vague. My understanding is that Grand Rapids determined that it wasn’t a problem when they went through their transition to an act 196 body. That said, I think it is appropriate that the process follow the most cautious interpretation of the law.

    As I watch this whole thing play out, I’m amazed at how complex interjurisdictional efforts like this are. Four or five years ago I heard a local elected official lay out a vision for getting countywide transit on the ballot by November 2010. Appropriately, the AATA has followed a more deliberate and participatory process with their 30-year vision and 5-year plan.

    Just today I overheard an employee at the Peoples Food Coop talk about the challenges he faces getting home from work because of poor weekend and evening bus service. I see a real need to build on our good M-F, 9-5 Ann Arbor service. So, while I’m champing at the bit to see this through, I support the decision to double-check the protocol and take the time needed to do it right.

  14. By Eric R Bassey
    October 15, 2012 at 11:35 pm | permalink

    Isn’t spending Ann Arbor tax money to improve transit between Ann Arbor and other regional municipalities just a fundamentally wise investment designed to stimulate the long term economy by facilitating access to Ann Arbor’s businesses, events and entertainments, as well as providing businesses with a larger labor pool? Why would we *not* do this? Especially before the larger economy fully returns and infrastructure costs and interest rates go up?

  15. By Steve Bean
    October 16, 2012 at 9:00 am | permalink

    @14: “Why would we *not* do this?”

    Because endless growth isn’t all it’s cracked up to be.

    Because there’s a disconnect between those who pay the cost (resident property owners) and those who benefit (business owners, resident or not, and non-resident workers).

    Because the larger economy is about to take a long recess and we’re going to be on our own for a while.

  16. By Steve Bean
    October 16, 2012 at 9:03 am | permalink

    And because (as Chuck alluded to in #13) we have unmet resource allocation issues that are more local in nature and limited resources to address them.