Yousef Rabhi (D-District 8), chair of the Washtenaw County board of commissioners, talked with an advocate from the homeless community before the April 2 county board meeting. (Photos by the writer.)

The board ultimately voted to direct county administrator Verna McDaniel to work with community partners to address immediate needs of the homeless. In general, McDaniel has budgetary discretion to spend up to $50,000 on professional services contracts, and up to $100,000 for any proposed goods, services, new construction or renovation. Later in the week, she allocated $35,000 to the Delonis Center – which is run by the nonprofit Shelter Association of Washtenaw County – to keep its nighttime warming center open through April 30. The warming center had originally been slated to close for the season on April 6.

The resolution also directed the administration to develop a plan by May 7 for updating the county’s Blueprint to End Homelessness, which was adopted in 2004 but appears to be dormant. The process of updating that plan is to be completed by Oct. 1, 2014.

Conan Smith (D-District 9) had initially suggested allocating $40,000 to the shelter to keep the warming center open another month. Other commissioners had concerns about throwing money at the shelter without any input from shelter staff, and without knowing specifically how the money would be used. Because the item hadn’t been included on the agenda, representatives from the shelter staff didn’t attend the meeting.

Some commissioners thought there should be a strategic plan in place before any additional funding is given – and they seemed to assume that such a plan doesn’t already exist. Mary Jo Callan, director of the county’s office of community & economic development, noted that the city of Ann Arbor and several other entities are working on this issue, in partnership with the Shelter Association. The board had received a briefing from the association’s executive director, Ellen Schulmeister, at their Feb. 6, 2014 working session.

The vote on the resolution was 6-2, over dissent from Republicans Dan Smith (District 2) and Alicia Ping (District 3), who both objected to the process. Rolland Sizemore Jr. (D-District 5) was absent.

Dan Smith called it “completely and entirely inappropriate” to be making policy and budgetary decisions on the fly, in response to a few people who showed up to speak during public commentary. He supported updating the Blueprint to End Homelessness, but thought it was a discussion that should take place at a working session before taking action at a regular board meeting. Yousef Rabhi (D-District 8) responded by saying that commissioners are elected to work for the people. When people come to the board, it’s important to address their concerns in a serious manner, he said.

Because of the length of the meeting, some men who were staying at the shelter missed the 9:30 p.m. curfew. Typically, anyone showing up after that time isn’t allowed inside. Greg Dill, the county’s director of infrastructure management, contacted the shelter staff and made arrangements for the men to be accommodated.

In other action, commissioners gave initial approval to a two-year pricing proposal – for 2016 and 2017 – to provide police services to local municipalities through contracts with the county sheriff’s office. Some commissioners expressed concern about the financial sustainability of this approach to funding police services, and cited the need for new revenue sources for public safety. Sheriff Jerry Clayton was on hand to present the pricing proposal, and supported suggestions to seek a new funding source. As he’s done in the past, Clayton characterized the issue of public safety as one that encompasses economic development, human services and other aspects of the community.

Commissioners also gave initial approval to a new brownfield redevelopment plan for the Thompson Block in Ypsilanti’s Depot Town, and took final action to add autism coverage to the health care benefits for employees. They postponed action on a resolution related to the county road commission until May 7, following an April 17 working session that will focus on that issue. The board also was briefed on the 2013 audit and comprehensive annual financial report (CAFR), and received an award for financial reporting from the national Government Finance Officers Association.

During communications, Felicia Brabec (D-District 4) reported that the review of applications is underway for the current cycle of coordinated funding, a partnership to fund social service agencies that involves the county, city of Ann Arbor, and several other entities. For this cycle, 105 applications were received, representing $8.7 million in requests. The amount of available funding this year from all partners is $4.4 million. “So it’s a difficult, difficult process,” she said. Funding recommendations will be brought to the board in May.

On April 2, the board also honored five local businesses and institutions with “healthy workplace” awards, and recognized the Ann Arbor Community Center for 91 years of service.

Funds for Homeless Shelter

This year, the issue of homelessness has been highlighted during public commentary at several county board meetings. That was again true on April 2.

Washtenaw County owns the Delonis Center building at 312 W. Huron in Ann Arbor, but does not operate the shelter. Operations are handled by the nonprofit Shelter Association of Washtenaw County, led by executive director Ellen Schulmeister. Schulmeister had briefed commissioners about services for the homeless at their Feb. 6, 2014 working session. Her briefing had come in response to advocacy from several homeless advocates at the board’s Jan. 22, 2014 meeting, when commissioners had also discussed the need to do more.

The county budget included $51,230 for the Delonis Center in 2013 and that amount was increased to $160,000 this year as part of the regular budget approval process late last year. The county funding is set to increase again to $200,000 in 2015 and remain at that level through 2017. The Shelter Association’s annual budget is $2.583 million.

The Delonis Center was built to house 50 beds, but there have been 75 beds since 2009. In addition, the Delonis Center operates a warming center in its dining room, for a maximum of 65 people – although during the harshest weather, more are accommodated. The warming center is open from mid-November through April 6. There is no drug testing, but people are given a breathalyzer test and are not admitted into the shelter if their blood alcohol level is over .10 – above the legal intoxication level of .08.

Funds for Homeless Shelter: Public Commentary

Several people spoke to advocate for the homeless at the April 2 meeting. Diane Chapman noted that the warming center would be closing on April 6, and she wasn’t sure the weather was good enough for that to happen yet. She said she personally has had to rescue people to prevent them from freezing, so she was asking commissioners to help. It’s not a good thing to put people on the street right now.

Felicia Brabec (D-District 4) talks with advocates for the homeless during a break in the April 2 county board meeting.

Ray Gholston introduced himself as a resident of the Delonis warming center. He said he was outraged at the planned closing of the warming center on April 6. “This is a potential crisis,” he said, which would result in dozens of people put out onto the streets, and some could possibly die because of exposure to the elements. Basic shelter is not just a right for the privileged few, he said. It is a human right for everyone. Even prisoners of war get food, clothing and shelter, he noted – the United Nations mandates it. How much money does it take to roll out a cot and give a man a blanket? he asked. There are animal shelters, and if dogs and cats were on the street, there would be outrage and anger, he said. Some people on the streets are U.S. veterans who’ve served honorably, he said – look at how they’re being repaid.

Gholston told commissioners that he has a full-time job. “I’m not some bum. I work for a living,” he said, but he can’t afford to rent an apartment in Ann Arbor. How is he supposed to keep up his appearance and hygiene for his job, if he has to sleep on the streets? If the warming center is closed, people will be sleeping on private property, he said, and urinating and defecating in the streets. “This is a shame,” he said. America isn’t a third-world nation, but it could turn into one. He requested that the board do anything in its power to extend the availability of the warming center. He hoped they’d use their humanity to do the right thing.

Elizabeth Kurtz reminded commissioners that a group of people had approached the county board in January about issues related to the warming center. [She was referring to the Jan. 22, 2014 meeting.] As a result, she said, some people from the warming center met with commissioner and board chair Yousef Rabhi; county administrator Verna McDaniel; Mary Jo Callan, director of the county’s office of community & economic development; and Ellen Schulmeister, executive director of the Shelter Association of Washtenaw County. During the meeting, Kurtz said, everyone agreed that there would be continuing dialogue about improving the warming center and addressing homelessness issues. At no point, no human being should be forced to sleep outside in the elements, she said.

Kurtz felt that the board had ignored these issues and had not given them the attention they deserve. She said the homeless community won’t rest until they have access to the human rights they’re entitled to. She read a statement that urged the board to force the Delonis Center to keep the warming center open, or to make other accommodations for people who are using it, such as hotel rooms or temporary trailers. The statement also referred to Kurtz herself, stating that she was “kicked out of the warming center for a non-criminal offense” and asking that she be allowed to return.

Christopher Ellis said he didn’t want to cast aspersions on the shelter. The staff does a humane job, and without it he wouldn’t have survived the winter. But he questioned the morality of closing the warming center on April 6. It should be looked at, he said.

Funds for Homeless Shelter: Board Discussion

Responding to the public commentary, board chair Yousef Rabhi (D-District 8) thanked the advocates for the homeless, and said he felt he’d had a lot of opportunities to talk with them about these issues. He thought he’d been open and honest with them about the barriers. He agreed that the community needs to care for everyone, but it’s important to realize that this is part of a broader picture that includes affordable housing and resources to find jobs. He hoped that the tax base problems caused by the down economy would be turning around, but there haven’t been as many resources to address the issue because of that.

The Delonis Center is a great partner, Rabhi said, in leveraging county tax dollars with private funding and other sources. It’s a complex issue with many moving parts, he said, which includes wage disparity and access to economic opportunity.

Mary Jo Callan, director of the county’s office of community & economic development, and Conan Smith (D-District 9).

Conan Smith (D-District 9) asked to amend the April 2 agenda so that the board could formally discuss the issues that had been raised.

Because this issue had not originally been on the agenda, no one from the Delonis Center was on hand to answer questions. So later in the meeting, Mary Jo Callan – director of the county’s office of community & economic development – was asked to provide some context. Callan reminded commissioners that the former shelter, which was demolished several years ago, was an 80-bed facility. The current shelter was originally recommended to be 200 beds, but ultimately was built with 50 beds and opened in 2003. More beds were added later, bringing the total to about 75 beds.

The Shelter Association also has a rotating shelter of 25 beds that’s housed by local religious groups. There’s also a warming center, which began with just chairs set up in a room for about 50 people. In 2009, the Ann Arbor Downtown Development Authority purchased bedding for the center, so that clients could sleep in the floor, Callan said.

This winter, there’s been an increase in the number of people seeking services from the shelter – some nights, as many as 80 people. The warming center and the rotating shelter operate from November 18 through April 6, Callan said. The intent is that during the harshest winter months, people are provided with safety and warmth.

There are about 4,500 homeless people in Washtenaw County, Callan reported. There’s a growing lack of affordable housing, both locally and nationwide. She noted that the Urban Institute recently issued a report indicating that for every 100 people in Washtenaw County who are earning 30% or less than the area median income, there are 18 units of affordable housing.

Callan said Schulmeister wasn’t able to rush to the April 2 meeting when this issue arose, but she’s very interested in the board’s discussion. Although the Shelter Association tries to be as responsive as possible, Callan added, as a single nonprofit, it’s difficult to address homelessness in the entire community.

Noting that the cold weather isn’t over yet, Conan Smith said he didn’t want to wait two weeks to make funding available for what might be an emergency situation. “You know me – I’m not a throw-the-money-at-a-problem kind of person,” he said, adding that he wants to understand the root cause and what’s at play. But this is a situation that might need the county to throw money at the problem in the short term, Smith said.

The county doesn’t have the capacity for a year-round warming center, Smith added, but he hoped there was a way to address the next several weeks, until the weather warms up. He also wanted to know what resources are needed for longer-term solutions.

Yousef Rabhi (D-District 8).

Rabhi replied that the board needs to be respectful of the Shelter Association as an organization. It’s a separate nonprofit, and receives money from other sources, not just the county. So any solutions should be developed in conjunction with them, he said. For him, the closure of the warming center was a new issue, Rabhi added – he hadn’t realized until recently it was closing on April 6. There needs to be a long-term strategy, he said, because this would arise again in future years. But he acknowledged that there’s a spectrum of need, including short-term problems.

Felicia Brabec (D-District 4), who serves on the sustainable revenues for supportive housing services task force that was created in 2007, reported that the task force is looking at long-term solutions, including a potential millage and an endowment.

Conan Smith then put forward a proposal to allocate $40,000 as emergency funding to the shelter for an additional month. His rationale was based on his recollection that Schulmeister had said it cost about $10,000 a week to operate the warming center.

Andy LaBarre (D-District 7) said he hoped commissioners would keep this discussion in mind as the county moves forward with the disposition of the Platt Road property. As chair of the board’s working sessions, he reported that the issue of homelessness would be a topic for the first working session in May.

LaBarre clarified with Callan that from November 18 through April 6, a nighttime warming center was open. During the day, it opens up if temperatures are 10 degrees or colder. Responding to another query from LaBarre, Callan said the other major public funders for the shelter are the city of Ann Arbor and the Michigan State Housing Development Authority.

Callan told commissioners that the shelter staff are interested in being as flexible as possible. “I also want you all to know that the shelter staff has been working overtime literally for months,” she said. It’s a very complex, crowded, difficult place to be. So the feasibility of keeping it open would depend on whether it’s tenable from the staff’s perspective, she said. It’s been a very difficult season for everyone, Callan added – both the people who need services, and the people who provide those services.

Rabhi wondered if extending the warming center for a month would actually address the issues that have been raised. April 30 is an arbitrary end date, too, he noted. That’s a struggle for him.

Alicia Ping (R-District 3) asked what the $40,000 would be used for. Is it for operations? Conan Smith said he was responding to the request for keeping the warming center open past April 6. Ping responded, saying that this is a bigger issue than just the next few weeks. She pointed out that the 10-day forecast called for temperatures in the 50s. “I don’t know that this is the right use of our money to keep the warming shelter open when clearly it is warming up.”

Ping also noted that the county isn’t in charge of the shelter. The county could provide funding, but the shelter can do anything it wants with that. Smith pointed out that the county owns the Delonis Center building.

Brabec noted that even though highs are forecast in the 50s, the lows will still be in the 30s. It highlights the struggle of needing to address short-term needs while also looking for long-term solutions. The $40,000 might help address the short-term need for residents, she said. It can run on parallel tracks.

Ronnie Peterson (D-District 6) wouldn’t support spending money unless there was also a long-term strategy in place before then, involving other partners who should also make an investment. Callan replied that more communications and connections could be made, but there’s also a lot happening regarding emergency shelter, rapid re-housing, supportive housing, and affordable housing. She suggested scheduling another working session on these issues.

People in the shelter are being housed, Callan said, “but that is an uphill battle.” Social equity and a dearth of affordable housing are issues in this community, she said, as is a lack of living-wage employment. “The most basic social service is a job,” she said.

Conan Smith (D-District 9).

Rabhi agreed that the broader discussion needs to include the issue of a living wage. He noted that earlier in the day, President Barack Obama had talked about the need to raise the federal minimum wage to $10.10. Even at that, Rabhi noted, people wouldn’t necessarily be able to afford housing in Ann Arbor, but it’s a good step. He planned to bring a resolution to the April 16 meeting in support of raising the minimum wage.

Rabhi also talked about the need to include regional partners, including other county governments in southeast Michigan.

Conan Smith said he didn’t expect the conversation to end when the warming center closes, but he hoped to provide funding to give people the flexibility of addressing short-term needs. He didn’t want to be inactive, when people had asked for a response.

Brabec suggested directing the county administrator to work with regional partners and return to the board with a plan, including both emergency shelter and also a longer-term strategy. Smith cautioned against spending $40,000 so that people earning $70,000 or more could come up with a plan, saying he trusted the county administrator not to do that. He wanted the $40,000 to directly help people who are homeless.

Ping opposed allocating any dollar amount, but noted that county administrator Verna McDaniel already has discretion to allocate funding if she chose to – up to $100,000.

C. Smith then made a formal motion – a resolution directing the county administrator to work with regional partners to address short-term sheltering issues and to bring a plan back to the board for longer-term housing issues by no later than May 21. LaBarre proposed amending the motion to replace “housing” with “shelter.”

Rabhi noted that the board is asking staff to come up with a solution “to a problem that we have not been able to solve in the history of mankind.” He hoped that the goal for the proposed resolution is to tell commissioners what tools are available to move forward, and to put the issue in context. McDaniel replied that it wouldn’t be possible to find a solution, but it would be realistic to propose a strategy.

Noting that the county’s Blueprint to End Homelessness was created in 2004, Rabhi recommended that the board dedicate 2014 to updating that blueprint and making it relevant for today. It could be another 10-year plan with a strategy for moving forward. He suggested asking staff to develop that by the fall, while addressing short-term needs in the meantime.

Rabhi then proposed a substitute resolution:

Resolved that the Board of Commissioners directs the Administrator to work with the County’s Community Partners to address the short term needs of the homeless in Washtenaw County;

Be it Further Resolved that the Administrator develop a plan for the Board of Commissioners to engage in a comprehensive update to the Blueprint to End Homelessness;

Be it Further Resolved that this strategic plan be presented no later than May 7, 2014, the strategic plan shall include a context of the last decade’s investments in housing and homelessness in Washtenaw County, a current picture of where the county is at today and a strategy for updating the plan over the course of 2014;

Be it Further Resolved that the Board of Commissioners will conclude this process by October 1, 2014.

Conan Smith withdrew his resolution, and LaBarre withdrew his proposed amendment to Smith’s resolution.

Dan Smith (R-District 2) criticized the approach, calling it “totally inappropriate.” April 6 has been looming for months, and the county has been doing a lot of work on this issue for a long time, he noted. “To make public policy based on the number of people who show up and speak at the podium is entirely inappropriate.” There are other agenda items, and staff and members of the public had been waiting over three hours for the board to conduct its business, he observed. And yet, the board takes something that’s not on the agenda and spends 90 minutes discussing it, then coming up with a proposal “on the fly.”

D. Smith said he had no problem taking up this issue in the future, including updating the Blueprint to End Homelessness. It’s also an appropriate topic for a working session, he said. But Smith said he wouldn’t support this resolution.

Rabhi replied that the board works for the people of Washtenaw County, and when people come forward with a concern, it’s important to address it in a serious manner. “That’s what we owe to the citizens who elected us to serve on this board,” Rabhi said.

Outcome: The resolution passed on a 6-2 vote, over dissent from Dan Smith (R-District 2) and Alicia Ping (R-District 3). Rolland Sizemore Jr. (D-District 5) was absent.

Funds for Homeless Shelter: Coda

Later in the week, McDaniel allocated $35,000 to the Delonis Center, which has agreed to keep the warming center open through April 30. The funding will come from the county’s unearmarked reserves.

Road Commission

The April agenda included a resolution regarding the county road commission. The resolution, if passed, would leave the county road commission as an independent entity. The resolution also states that the county board does not support making the road commission’s board an elected body. [.pdf of board resolution]

The resolution is in line with recommendations of a board subcommittee that was appointed in October of 2013 to look at the future of the road commission. At its final meeting on March 1, 2014, the subcommittee voted to recommend that the road commission remain an independent operation, and not be absorbed into the county government.

Andy LaBarre (D-District 7).

That subcommittee vote came over dissent from Conan Smith of Ann Arbor (D-District 9), who argued that consolidating the road commission into the county would allow for more flexibility and accountability in oversight. Currently, the road commission is overseen by a board with three members appointed by the county board of commissioners to six-year terms. Smith thought that asking voters to approve a countywide road millage – when the revenues aren’t allocated by an elected body – would be a tough sell. It would be especially tough to sell to voters in the city of Ann Arbor, who already pay a millage for street maintenance within the city.

But others on the subcommittee were in line with the strong support from township officials for keeping the road commission independent. Most township boards in the county have passed resolutions supporting the current structure, citing their strong relationships with the road commission staff and board.

The subcommittee did not make any recommendations on whether to expand the road commission from three to five members. The three county commissioners who served on the subcommittee – Conan Smith, Dan Smith (R-District 2) and Alicia Ping (R-District 3) – had agreed that the question of expansion was primarily a political one, and should be taken up by the county board. Subcommittee members indicated that they’d be willing to discuss it further, if directed to do so by the county board.

Regarding the question of whether road commissioners should be elected positions, the subcommittee unanimously passed a resolution recommending not to pursue that option. The sense was that elections would be dominated by urban voters who are heavily Democratic, but who would be electing commissioners to oversee road projects in rural communities.

The three current road commissioners are Doug Fuller, Barbara Fuller, and Bill McFarlane, who was appointed by the county board at its March 19, 2014 meeting. At that time, board chair Yousef Rabhi (D-District 8) voiced support for expanding the road commission board to five members.

These issues come in the context of a state law that opened the door to possible consolidation of the road commission into the county. In 2012, the Michigan legislature enacted amendments to Section 46.11 of Public Act 156 of 1851, which allows for county boards of commissioners to transfer the powers of the road commission to the county board. There’s a sunset to that section of the law, however. Unless extended by the legislature, it will expire at the end of 2014.

At the April 2 meeting, Conan Smith (D-District 9) moved to postpone the item until the board’s May 7, 2014 meeting. It’s the first board meeting that follows an April 17 working session, when issues related to the road commission will be discussed.

Outcome: On a voice vote, commissioners voted to postpone the road commission item until May 7. Dissenting was Alicia Ping (R-District 3).

Thompson Block Brownfield Plan

A brownfield redevelopment plan for the Thompson Block in Ypsilanti’s Depot Town area was on the agenda for an initial vote. [.pdf of Thompson Block brownfield plan]

Fred Beal, president of JC Beal Construction Inc. and co-founder of Beal Properties LLC.

The plan covers 400-408 N. River St. and 107 E. Cross St., an historic property that has been declared ”functionally obsolete and blighted.” That qualifies the project as a brownfield under the state’s brownfield redevelopment financing act (Public Act 381), which allows the owner to receive reimbursements for eligible activities through tax increment financing (TIF). Approval also will allow the developer to apply for Michigan Business Tax Credits. The property is currently owned by Thompson Block Partners LLC, led by Stewart Beal of Beal Properties. Beal’s father, Fred Beal, attended the April 2 meeting but did not formally address the board.

Beal plans to create 16 “luxury lofts” in the structure’s second and third floors, and up to 14,000 square feet of commercial space in the remainder of the site. The project is estimated to cost about $7 million.

The resolution on the April 2 agenda also would end a previous brownfield plan for part of the same site, which was approved in 2008. A fire in 2009 delayed the project. The new plan now covers the 107 E. Cross, which was not part of the original plan, and includes public infrastructure improvements, such as streetscape enhancements along North River Street.

The Washtenaw County brownfield redevelopment authority approved this plan at its March 6 meeting. Subsequently, the plan was approved by the Ypsilanti city council on March 18. The city council’s action included approving an “Obsolete Properties Rehabilitation” certificate, which freezes local millages at the current, pre-development level for 12 years. Because of that, the project’s TIF capture will apply only to the state’s school taxes.

The project can get up to $271,578 in eligible cost reimbursed over a 12-year period, for activities including brownfield plan and work plan preparation, limited building demolition, selective interior demolition, site preparation and utility work, infrastructure improvements, architectural and engineering design costs, asbestos and lead abatement, and construction oversight.

The intent of the state’s brownfield redevelopment financing is to support the redevelopment of urban sites that will increase the municipality’s tax base. Tax increment financing allows an entity to capture the difference between the taxable value before a project is undertaken, and the value of the property after it’s developed.

A public hearing on this proposal was also held at the April 2 meeting. Only one person – Tyler Weston, a real estate agent representing Thompson Block Partners – spoke briefly, telling the board that the financing would help the project.

Thompson Block Brownfield Plan: Board Discussion

Yousef Rabhi (D-District 8) praised the project, saying it’s an example of Beal’s commitment to the community. It’s in the heart of Depot Town and has had a lot of challenges, he noted. Rabhi serves on the county’s brownfield redevelopment authority board, which had recommended approval of this proposal.

Responding to a query from Felicia Brabec (D-District 4), Nathan Voght of the county’s office of community & economic development explained that the brownfield is the only TIF legislation that doesn’t allow for an opt-out – every taxing entity participates equally. But in this case, because of the “Obsolete Properties Rehabilitation” certificate, local millages will be frozen for up to 12 years, so there won’t be any increment available for TIF financing – with the exception of the state’s school taxes.

Brabec also asked about the differences between this proposal and the one approved in 2008. Voght noted that the 2009 fire damaged the entire structure, so the need for demolition changed. The overall eligible costs decreased from about $307,000 to about $271,000.

Outcome: Commissioners gave initial approval to the brownfield plan. A final vote is expected on April 16.

Police Services Contract

A two-year pricing proposal for contracts to provide police services to local municipalities was on the April 2 agenda for initial authorization from the county board.

From left: Sheriff Jerry Clayton and Greg Dill, the county’s director of infrastructure management.

On July 6, 2011, commissioners had authorized the price that municipalities would pay for a contract sheriff’s deputy through 2015. The price in 2012 – $150,594 per “police services unit” – was unchanged from 2011, but has been rising in subsequent years by about 1% annually. The complex, politically-charged process of arriving at those figures in 2011 involved more than a year of discussion between the sheriff’s office, other county officials and leaders of local municipalities that contract for these services.

The board’s decision in 2011 was based on a recommendation from the police services steering committee. That same group is recommending the next pricing changes as well, based on the cost of a police services unit (PSU). The PSU price for 2014 is $153,621. For 2015, the PSU price will be $155,157. In the following two years, the PSU price is proposed to be $156,709 in 2016 and $158,276 in 2017.

Those figures are based on a 1% annual increase in direct costs to contracting municipalities. That rate of increase for PSUs is included in revenue projections for the county’s four-year budget, which the county board passed at its Nov. 20, 2013 meeting. The budget runs from 2014-2017, and includes revenue projections based on contracts for 79 PSUs.

According to a staff memo, there will be an addition to the 2016 and 2017 prices for in-car printer replacement, after the total cost of ownership is determined. The memo also notes that the pricing is based on salaries stipulated in current union contracts with the Police Officers Association of Michigan (POAM) and the Command Officers Association of Michigan (COAM). Those contracts run through 2014, and new contracts are currently being negotiated. The memo states that ”no assumptions were made for salaries or fringes change in this cost metric in anticipation of any union negotiations.” [.pdf of staff memo]

The county – through the sheriff’s office budget – pays for the difference between the price charged for each PSU, and the actual cost to provide those services. In 2011, that difference was $25,514.

In 2016, the cost per PSU is expected to be $195,104 – a difference of $38,395 compared to the price being charged to municipalities. In 2017, the cost per PSU is estimated at $199,188 – a difference of $40,912. [.pdf of cost estimates]

On April 2, sheriff Jerry Clayton described the cost model, explaining that it includes direct costs like salaries and benefits, which are paid by each contracting entity. It also includes indirect costs and overhead, which those entities partially pay. The county covers a portion of the indirect costs and overhead. The county also picks up the difference between the cost estimates and the actual cost, he said. In 2011, for example, the actual cost for delivering services was about $2,000 more than what was estimated per PSU. In 2012, the difference was about $4,500 more per PSU than estimated.

Because the sheriff’s office has about 400 positions – full time, part time and seasonal – there will always be openings, Clayton said. And because of that, his office has been able to offset those higher-than-expected costs by leaving some positions unfilled. But through budget cuts over the last few years, that flexibility becomes more challenging, he said.

Clayton said he supports the 1% increases in 2016 and 2017, but noted that it doesn’t account for possible changes to the POAM and COAM contracts. The result of those contract negotiations could have a big effect on the final price, because of the direct cost, he said.

He urged commissioners to think about how to find a sustainable revenue stream to support public safety countywide. Clayton noted that in the previous budget, the sheriff’s office came under its expenditure targets without compromising service, and also exceeded revenue. So the office has met its obligations as it relates to the overall county budget, he said. “But the ability to do that moving forward becomes a little more challenging.”

Police Services Contract: Board Discussion

Felicia Brabec (D-District 4) agreed that the county needs a sustainable revenue source for public safety. She asked if it was a trend that the difference between cost estimates and actual costs is increasing. SiRui Huang, finance manager for the sheriff’s office, said she thought 2013 would be close to the estimate, because there was a reduction in the fringe benefit rates.

Ronnie Peterson (D-District 6).

Ronnie Peterson (D-District 6) described the county as growing, which results in demand for services. He wondered when they would revisit the methodology used for policing the county, and the policy for contractual agreements with local municipalities.

Clayton replied that the financial architecture that’s in place to establish cost and price is sound. But the most recent analysis of recommended staffing levels for public safety in the county was done in 2000, he said. It established ideal staffing levels and minimum staffing levels. One of the recommendations from that report, which hasn’t been implemented, is to mandate the minimum staffing levels in some jurisdictions.

In theory, the county could mandate those minimal levels before it enters into a contract with the jurisdiction, he explained. If the jurisdiction indicates that it can’t afford the minimal level, then the county could decide not to enter into a contract to provide police services. Clayton said he didn’t recommend this approach, but it was an option that had been recommended.

When the study was done 14 years ago, the population of Washtenaw County was about 300,000, Clayton noted. Now, it’s closer to 350,000.

Peterson indicated that as the economy improves, he thought the county’s population would grow even more. The cost to the county’s general fund of providing public safety is increasing, but the county has to pay the price for the economic health of the community, Peterson said. There needs to be more discussion of this issue, he said.

Peterson said he’d like to see the “magic” of the current proposal work, but he didn’t see how it was a sustainable model.

Yousef Rabhi (D-District 8) asked about the cost difference again, wondering if it would be consistent with the previous difference of about $25,000. Huang noted that the difference is estimated to increase in 2016 and 2017, but she restated that it doesn’t take into account any possible reductions that might occur based on current union negotiations. So the cost might change, she said.

Rabhi told Clayton that he wasn’t going to challenge this proposal strongly, adding that Clayton has been a great sheriff for the whole county. Rabhi noted that the cost difference, paid by the general fund, is borne by all county taxpayers – including those who live in jurisdictions that also have their own police departments, like Ann Arbor. That’s another issue to discuss in the future, Rabhi said, in addition to the funding sustainability. Whether you live in Ann Arbor or Bridgewater Township, public safety is important, he said, “and we need to find a way to fund it in a fair way, countywide.”

As the sheriff’s office is asked to bear more of the financial burden, Rabhi said, that makes it more fragile as a governmental unit. It’s important to look for new potential funding sources for public safety, he concluded.

Conan Smith (D-District 9) said the board should be grappling more with the issue of funding for public safety, especially considering that public safety accounts for more than 60% of the general fund budget. [That amount includes funding for courts, the prosecutor's office and other criminal justice units – not just the sheriff's office.]

Kent Martinez-Kratz (D-District 1) and Stefani Carter, a local attorney who was filling in for corporation counsel Curt Hedger.

Smith noted that the proportion of cost that’s being paid for by the sheriff’s office is increasing faster than the proportion paid for by the contracting entities. He wondered why that’s the case.

Clayton reiterated his point that it’s not a sustainable situation. He pointed out that while it’s not sustainable for the sheriff’s office, it’s also a problem for the contracting jurisdictions, which can’t afford to take on additional expenses. For some jurisdictions, the contract for police services accounts for almost 70% of their general funds. So raising the price for those jurisdictions isn’t really an option.

Public safety is key to other issues in the county, including human services and economic development, Clayton said. The county has reached the point where they need to consider creating other funding sources to sustain police services countywide. He noted that the sheriff’s office also provides services to jurisdictions that already have their own police departments, like Ann Arbor and Pittsfield Township. The sheriff’s office provides a safety net, he said, but there’s a limit to what they’re capable of in terms of resources, “and I think we’re there.”

C. Smith praised Clayton for making giant strides in integrating the sheriff’s office with nearly all aspects of the county, and for framing the issue differently for the board and the public. “I don’t see this as a city versus township fight,” Smith said. “I see this as a common struggle to provide public safety and quality of life for all of us.” The conversation should focus on what outcome the county is trying to achieve, he added, and how they fund that outcome.

Smith said he’d like to consider a countywide police force approach, whether that’s supporting the existing police forces or expanding the services that the sheriff’s office provides.

Clayton stressed that if other jurisdictions want to keep their police departments, that’s what they should do. He joked that it will save a lot of headache if that’s clear – the sheriff’s office isn’t trying to take over anything. C. Smith said he understood that Clayton was sensitive to that, but he thought it was a conversation they needed to have. It doesn’t make sense to “hyperlocalize” services in a lot of cases, Smith said.

There can be a happy medium, Clayton replied, in terms of collaborating. So that’s another option, and one that the sheriff’s office has pursued.

Dan Smith (R-District 2) agreed that public safety is a countywide issue, and praised Clayton and his staff for their work.

Outcome: Commissioners unanimously gave initial approval the police services contract proposal. A final vote is expected on April 16.

2013 Audit

Two representatives from the accounting firm Rehmann, which conducts the county’s audit, attended the April 2 meeting: Nate Baldermann and Mark Kettner. They gave part of a presentation on the county’s 2013 audit and comprehensive annual financial report (CAFR). [.pdf of 2013 CAFR] [.pdf of 2013 audit summary]

From left: Mark Kettner and Nate Baldermann of the accounting firm Rehmann.

Baldermann, a principal at Rehmann and former board member of the Michigan Government Finance Officers Association, began by presenting the board with a certificate of achievement for excellence in financial reporting, for the county’s 2012 CAFR. The award is given by the national Government Finance Officers Association. Baldermann noted that this is the 23rd consecutive year that the county has received this award. Out of about 2,000 local governments in Michigan, only 102 are receiving this award.

Kelly Belknap, the county’s finance director, gave an overview of the staff process involved in developing the CAFR, which reflects thousands of individual financial transactions. She gave highlights from a 2013 year-end financial presentation that staff had made at the board’s March 19, 2014 meeting, showing that the county had ended 2013 with a $3.92 million surplus for its general fund.

The complete audit, which consists of multiple documents, totals over 400 pages, Belknap noted.

Pete Collinson, the county’s accounting manager, gave a summary of the CAFR, which is over 200 pages. Over the years, the requirements have grown in complexity, he noted, and that’s reflected in the amount of information that’s included in the CAFR. At the same time, the finance staff has been reduced, he said, so the auditors have been helping assemble it.

Collinson highlighted some upcoming changes, including GASB 67, which takes effect this year and will be reflected in the next CAFR, and GASB 68, which takes effect in 2015. In 2014, the main change will be more disclosures in notes to the financial statements, he said. But in 2015, the county’s unfunded actuarial accrued pension liability will be booked as a liability in the county’s statement of net position, which will be a significant change, he said. The county’s finance staff have been working closely with their auditors and actuaries to plan for that, Collinson said.

Mark Kettner of the accounting firm Rehmann also gave a few remarks, noting that the auditor’s letter is included in the CAFR. The new term is “unmodified,” he said, which means it’s a clean statement. It’s an opinion just on the financial statements, he said – it’s not an opinion on the county’s financial controls. And it’s not an opinion on the county’s financial position, Kettner said, “although your financial position is pretty good, all things considered – coming off the last five or six years we’ve gone through.”

Kettner referred to a meeting – an “exit conference” – that he held with county administrator Verna McDaniel, board chair Yousef Rabhi and financial staff. There were a few areas for improvement, he said, because it’s a large organization. But there was nothing that he felt he needed to tell the board that night, Kettner added. The county is doing great, he said.

2013 Audit: Board Discussion

Dan Smith (R-District 2) asked about a section of the auditor’s letter:

We did not audit the financial statements of the Washtenaw County Road Commission, which represents 77.4% of the assets and 90.5% of the revenues of the aggregate discretely presented component units. Those statements were audited by other auditors whose report was furnished to us, and our opinion, insofar as it relates to the amounts included for the Washtenaw County Road Commission, is based solely on the report of the other auditors.

He asked Kettner to explain what that means, and why the audit refers to the road commission at all.

Kettner replied that the county government is considered the primary government for purposes of the audit. But the audit also is required to include all of the “component units” of county government, which are shown on pages 66-67 of the CAFR. In addition to the road commission, those units are: the department of public works, the office of the water resources commissioner, the hazardous materials response authority, and the brownfield redevelopment authority. The financial notes describe these operations in more detail.

Component units are separate legal entities, with a majority of their governing boards appointed by the county board of commissioners, or with the county board taking some level of financial accountability. For example, the county board must authorize any debt that’s issued by these other component units.

Dan Smith (R-District 2) talks with auditors from the accounting firm Rehmann before the start of the April 2 meeting.

Kettner noted that some of these component units conduct separate audits – that’s the case with the road commission. If Rehmann, as the primary unit’s auditor, takes responsibility for these separate audits, then it’s not mentioned in the auditor’s letter, Kettner said. But if the firm is not taking responsibility – “and there’d be no reason that we’d want to,” he said – then it’s mentioned in the letter, along with a perspective in terms of the financial significance of that unit. That’s why the letter includes the percentages reflecting the road commission’s assets.

Smith pointed out that even though the county board is responsible for the road commission’s debt, county commissioners don’t see the road commission’s budget or approve it. The road commission’s funding comes from the state, through Act 51, he noted. He observed that the GASB accounting standards are national, and probably don’t recognize the rather unique place that Michigan’s road commissions hold compared to all other states.

Kettner replied that although Rehmann doesn’t review the road commission’s financial statements annually, there is a periodic evaluation. The CAFR includes a description of the road commission, he said. That description states: “The Road Commission may not issue debt or levy a tax without the approval of the County Board of Commissioners. The Road Commission deposits its receipts with and has investments through the County.”

Noting that it’s outside of Kettner’s purview, Smith pointed out that the road commission has been the topic of discussion by the county board in Washtenaw County as well as across the state, as the result of state legislation passed in 2012 that allows for the possibility of county governments to absorb road commission operations. [For background on that discussion, see Chronicle coverage: "No Major Change Likely for Road Commission."]

Referring to the auditor’s management letter, Smith highlighted a statement that Michigan state statutes require local governments shall not spend in excess of amounts appropriated in a budget. But in many cases, Smith noted, there isn’t much of a penalty for violating those statutes. What’s the mechanism for enforcing that?

Kettner replied that page 81 of the CAFR lists the instances in which county units spent money in excess of appropriations during 2013. For an entity the size of Washtenaw County, he said, it’s unrealistic to expect that there would never be an item that’s over budget. Sometimes these items don’t show up in the CAFR because the county board amended the budget after the fact. In 2013, many of the excess expenditures were relatively minor, Kettner said. The largest one – $1.75 million over a budgeted $3.27 million in the accommodations ordinance tax line item – reflects a decision by the county board to distribute additional funds from the accommodations tax. The board voted to do that, he explained, but they didn’t do the technical step of voting to amend the budget.

From left: Felicia Brabec (D-District 4), chair of the ways & means committee, and county administrator Verna McDaniel.

There were about a half dozen items that Kettner said were relatively significant, and “we don’t want to see those again.”

Smith noted that to him, the words “shall not” in the state statute seemed like pretty strong wording, but there’s nothing to enforce it. Kettner replied: “That’s how the state writes those laws, you know.” The auditing firm submits its report to the state, Kettner explained, and that includes an audit procedures report form. The form includes boxes that must be checked if there’s an issue, he said. That will result in a letter from the state, asking how the county plans to address it.

Smith then asked how the audit and CAFR will look when GASB 68 takes effect. Kettner referred to page 119 of the CAFR, which contains a table of the county’s pension system. One column lists the unfunded actuarial accrued liability for the system, which in 2012 was $126.28 million. In 2015, when GASB 68 is implemented, the county will have to add that liability as part of the county’s statement of net position – page 41 of the CAFR. That liability will result in a deficit for the county’s unrestricted net position. For the 2013 CAFR, the unrestricted net position shows a positive $32.826 million.

However, Kettner stressed that this change will not affect the general fund budget. “You’re going to continue making your contributions to fund those pensions as you always have,” he said. But the financial statements will be more meaningful by adding that liability to the statement of net position.

There were no questions from other commissioners.

County Jail Bonds

Commissioners were asked to give initial approval to authorize the re-funding of up to $16.5 million in outstanding capital improvement bonds, which were originally issued in 2006 to fund expansion of the county jail.

John Axe, the county’s bond counsel, brought reading material to the April 2 meeting.

According to a staff memo, $16.9 million in principal remains of the original $21.675 million bond sale. The county’s bond counsel, Axe & Ecklund, is advising the re-funding because of lower interest rates, and estimates a net savings of about $869,000 over the life of the bond issue. The new issue would be called “County of Washtenaw Capital Improvement Refunding Bonds, Series 2014.” [.pdf of refunding resolution]

Kent Martinez-Kratz (D-District 1) asked the county’s bond counsel, John Axe, about interest rates. Axe told the board that current interest rates on the bonds are between 4% and 4.3%. He estimated that the re-funding interest rates would be between 2.2% and 3.8%. The bonds would be sold in June.

Axe said he hoped the savings would be even higher than the estimated $869,000.

Outcome: Commissioners unanimously gave initial approval to the bond re-funding. A final vote is expected at the board’s April 16 meeting.

Autism Coverage

At the board’s March 19, 2014 meeting, commissioners had given initial approval to add an Autism Spectrum Disorder (ASD) rider to existing active employee and retiree benefits. It would allow the county to provide health insurance coverage for the treatment of autism, and was on the April 2 agenda for a final vote.

Adding the rider would cost the county an estimated $182,589 this year, according to staff – to be paid to Blue Cross Blue Shield of Michigan. To cover that cost, each county department will be charged on a per-employee basis. In addition, the county will pay for claims made by employees for this benefit, with the assumption that most if not all claims would be reimbursed by the state.

Ellen Rabinowitz, Washtenaw County’s interim public health officer. She is also executive director of the Washtenaw Health Plan.

At its Jan. 22, 2014 meeting, the board received a staff presentation about the possibility of offering such coverage. Colleen Allen, CEO of the Autism Alliance of Michigan, attended that meeting to answer questions and advocate for coverage. The board created a committee to explore the cost to the county for providing employee health insurance coverage for autism. Committee members were LaBarre, Felicia Brabec (D-District 4), and Ronnie Peterson (D-District 6). The committee’s charge was to: (1) investigate the cost and sustainability of coverage of autism spectrum disorders; and (2) recommend a policy providing and funding coverage if the state reimbursement fund is exhausted.

The federal Mental Health Parity & Addiction Equity Act of 2008 mandates that any group plan with 50 or more members – like Washtenaw County government – must offer both medical and mental health benefits. Under more recent federal health care reform, there’s been an expansion of benefits, and mental health benefits are considered a mandatory part of basic health care, starting this year. However, autism isn’t included as part of that mental health mandate.

On the state level, in October 2012 a state of Michigan mandate took effect stating that all fully insured plans must provide coverage for the diagnosis and treatment of autism spectrum disorders (ASD). The county is not a fully insured plan, however. Because the county is self-funded, it was exempt from this state mandate.

The costs of treatment are estimated to be about $60,000 a year to cover a child with autism. The state of Michigan has made coverage a priority, and has started setting aside funds to reimburse organizations that provide coverage. In fiscal year 2012-13, $15 million was made available, with an additional $11 million in fiscal 2013-14. Of that, only about $500,000 has been expended on reimbursements. The program is handled by the Michigan Dept. of Insurance and Financial Services.

The state program provides for reimbursement of up to $50,000 per year per child between the ages of 0 to 6, up to $40,000 per year from ages 7-12, and up to $30,000 per year for ages 13-18.

County staff have estimated that offering the coverage would result in up to a 5% increase in medical expenses, or up to $1 million annually. This year, medical expenses are budgeted at about $20 million. The county is expected to be fully reimbursed by the state of Michigan for the amounts that are allowed under the autism program.

Autism Coverage: Public Commentary

Ryan Schuett, a Washtenaw County employee whose daughter has been diagnosed with autism, thanked commissioners for acting quickly. He talked about the effect that the autism spectrum disorder has on employees. “Speaking humbly, I’m tired – very tired,” he said. In 2013, he worked over 1,000 hours of overtime to cover out-of-pocket costs associated with his daughter’s treatment. He averages between 64-72 hour workweeks, while also trying to be a good father and husband.

As an emergency dispatcher, he deals with other people’s problems while putting his own aside, Schuett said. He enjoys his work, and even more so when he knows he works for an institution that stands beside him. The treatments for his daughter are life-changing, he said. But because of the treatment costs, he has sometimes had to make the decision not to provide it. The board’s decision has made it possible for him not to seek employment elsewhere, Schuett said. Autism is affecting more people nationwide, and isn’t going away. He again thanked commissioners for helping the families of employees.

Autism Coverage: Board Discussion

Felicia Brabec (D-District 4) said she was pleased to see this move forward. It was very poignant that they’d be voting on it that day, she noted, because April 2 is World Autism Awareness Day. It’s a much-needed benefit, she said.

Dan Smith (R-District 2) pointed to numerous county liabilities that are laid out in the comprehensive annual financial report (CAFR), which the board had been presented earlier in the evening. Those are significant, he noted, and the unfunded liabilities will continue to hamstring the board’s ability to be nimble and responsive.

He said he wasn’t happy to see the autism coverage brought forward for a final vote at this time. He supports adding the coverage, but thought it should be part of the board’s regular budget reaffirmation process later in the year. “However, given that it is World Autism Day, I think it would be a little uncouth to vote against this at this point,” he said.

Outcome: Commissioners unanimously gave final approval to adding autism coverage.

First-Quarter Entitlement Grant Update

A report from the county’s office of community & economic development was included in the April 2 agenda, updating the board on the roughly 30 state and federal formula grants administered by the OCED. The grants are awarded based on state or federal allocation formulas. In 2014, those formula grants total about $9.6 million. [.pdf of entitlement grant update]

There was no presentation or discussion of this item.

Recognitions & Proclamations

Several resolutions honoring local individuals and businesses were on the April 2 agenda. Here are some highlights.

Recognitions & Proclamations: Public Health Week

The agenda included a resolution proclaiming April 7-13 as Public Health Week. Ellen Rabinowitz, the county’s interim public health officer, was on hand to present the Washtenaw Healthy Workplace Awards to five local businesses. Each institution has taken great strides to promote healthy behaviors in their work places, she said.

The awardees are:

• National Kidney Foundation of Michigan
• Ann Arbor Area Transportation Authority
• Manchester Community Schools
• Manpower Inc. of Southeast Michigan
• City of Ann Arbor

Recognitions & Proclamations: Ann Arbor Community Center

Reverend Yolanda Whiten, president and CEO of the Ann Arbor Community Center, was presented with a resolution honoring the center for 91 years of service. She has served in that position since 2007.

Reverend Yolanda Whiten, president and CEO of the Ann Arbor Community Center.

From the resolution: “Washtenaw County Board of Commissioners hereby honors and expresses its sincere appreciation and deepest respect to The Ann Arbor Community Center for continuing to achieve its mission: ‘Influenced by a rich African American heritage, the Ann Arbor Community Center is a catalyst for transformation within the city and its greater community. With a primary focus on youth, adults and families, the Ann Arbor Community Center provides programs and services that promote self-reliance, social and economic well-being, diversity and community involvement.’”

Several supporters of the community center attended the meeting and gave Whiten a round of applause.

Communications & Commentary

During the April 2 meeting there were multiple opportunities for communications from the administration and commissioners, as well as public commentary. In addition to issues reported earlier in this article, here are some other highlights.

Communications & Commentary: Same-Sex Marriage

During public commentary, Sandi Smith – president of the Jim Toy Community Center board – thanked the board for its help in opening the county clerk’s office for four hours on Saturday, March 22. “It was an amazing experience,” she said. Over 70 couples got married, including some who’d been waiting 20-30 years, she said. “Trust me – you’ll all be on the right side of history on this,” Smith said.

Federal judge Bernard Friedman had issued a ruling on Friday, March 21, 2014 in the case of Deboer v. Snyder. In that ruling, Friedman found that Article I, Section 25 of the Michigan Constitution – which limits the benefits of marriage to unions between one man and one woman – did not advance any legitimate state interest. So the ruling had the effect of making same-sex marriages legal in Michigan.

But the day following the decision, on March 22, the U.S. Court of Appeals for the Sixth Circuit issued a temporary stay on Friedman’s ruling. Michigan’s Gov. Rick Snyder and Attorney General Bill Schuette are appealing Friedman’s decision.

Smith noted that county clerk Larry Kestenbaum was obviously very instrumental in allowing same-sex marriages to take place on the morning of March 22. Smith also thanked county administrator Verna McDaniel, sheriff Jerry Clayton, the clerk’s office staff – including Ed Golembiewski – and the facilities staff, who had to clean up afterwards. She hoped that it would never have to be repeated again, because she hoped the right to marry would soon be open to everybody.

County administrator Verna McDaniel.

Responding to Smith’s commentary – and noting that Smith and her partner, Linda Lombardini, are his friends – Yousef Rabhi (D-District 8) said he was proud of what the county could do in moving this issue forward. It warmed his heart. He noted that during U.S. president Barack Obama’s speech at the University of Michigan earlier that day, Obama had told the audience not to jeer at things they don’t like, but to organize. In that context, Rabhi said Michigan needs a new attorney general – someone who’ll stand up for the people in Michigan and not waste taxpayer dollars in appealing a ruling that provides for marriage equality. Everyone who loves each other should be able to get married, he said. He thanked Smith and Lombardini for their activism.

Conan Smith (D-District 9) said Kestenbaum deserves the most credit. Kestenbaum had asked the board “to do something that was real easy,” Smith said. He noted that it was a tough vote that the board had debated, but it was Kestenbaum’s leadership that made it happen, he said.

By way of background, the county board – at its Feb. 19, 2014 meeting – had approved what’s essentially a fee waiver for the expedited processing of a marriage license, which ordinarily takes three days. The resolution passed by the board on Feb. 19 allows the county clerk, consulting with the county administrator, to establish a “fee holiday” on the day preceding a period during which the office’s vital records division would be closed for four or more days, or when an unusual number of marriage license applicants are expected to appear. During a “fee holiday,” the charge for immediately processing a marriage license is 1 cent.

Last year, Kestenbaum had publicly indicated that he intended to waive fees for same-sex marriages, in anticipation of a court ruling that would allow such marriages. Subsequently, however, his authority to waive fees was challenged, and he learned that the county board would be required to grant that authority.

On Feb. 19, Kestenbaum had told the board that he expected various legal challenges to same-sex marriage bans to wind their way through the federal court system without a specific ruling affecting Michigan, and that his office would be unlikely to see a sudden influx of requests for same-sex marriage licenses.

Communications & Commentary: Coordinated Funding

Felicia Brabec (D-District 4) reported that the process of reviewing applications for coordinated funding is underway.

The county is one of several partners in the coordinated funding approach. Other partners include the city of Ann Arbor, United Way of Washtenaw County, Washtenaw Urban County, the Ann Arbor Area Community Foundation, and the RNR Foundation. It began as a pilot program in 2010, and has been extended twice since then. The most recent extension was approved by the county board at its Nov. 6, 2013 meeting, and authorized the allocation of children’s well-being and human services funding for 2014 through 2016. That resolution also authorized the continued management of those funds through the county’s office of community & economic development (OCED), using the coordinated funding approach – with some modifications.

The coordinated funding process has three parts: planning/coordination, program operations, and capacity-building. The approach targets six priority areas, and identifies lead agencies for each area: (1) housing and homelessness – Washtenaw Housing Alliance; (2) aging – Blueprint for Aging; (3) school-aged youth – Washtenaw Alliance for Children and Youth; (4) children birth to six – Success by Six; (5) health – Washtenaw Health Plan; and (6) hunger relief – Food Gatherers.

During the current funding cycle, 105 applications were received, representing $8.7 million in requests. That compares with 76 in the previous funding cycle, Brabec noted, for requests of $6.6 million. The amount of available funding this year from all partners is $4.4 million. “So it’s a difficult, difficult process,” she said. Brabec is one of 18 volunteer reviewers, plus four staff.

The recommendations will be brought to the board in May.

Communications & Commentary: Misc.

During public commentary, Thomas Partridge referred to U.S. president Barack Obama’s speech at the University of Michigan campus earlier in the day, where Obama advocated for raising the federal minimum wage. Partridge called on lawmakers to provide adequate resources for affordable housing and public transportation. He called attention to the May 6 election, when voters in Ann Arbor, Ypsilanti and Ypsilanti Township will be voting on a new public transit tax for expanded services. He said all public bodies in Washtenaw County should work to weed out corruption. He criticized Gov. Rick Snyder and other Republicans, and urged voters to elect progressive Democrats this year.

Present: Felicia Brabec, Andy LaBarre, Kent Martinez-Kratz, Ronnie Peterson, Alicia Ping, Yousef Rabhi, Conan Smith, Dan Smith.

Absent: Rolland Sizemore Jr.

Next regular board meeting: Wednesday, April 16, 2014 at 6:30 p.m. at the county administration building, 220 N. Main St. in Ann Arbor. The ways & means committee meets first, followed immediately by the regular board meeting. [Check Chronicle event listings to confirm date.] (Though the agenda states that the regular board meeting begins at 6:45 p.m., it usually starts much later – times vary depending on what’s on the agenda.) Public commentary is held at the beginning of each meeting, and no advance sign-up is required.

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Michael Ford, CEO of the Ann Arbor Area Transportation Authority, just before the start of the Feb. 20, 2014 AAATA board meeting. (Photos by the writer.)

That main item was a board vote to place a millage request before voters on May 6, 2014. The request – on a 0.7 mill tax that would be levied to pay for additional services over the next five years – would need a majority of votes across the city of Ann Arbor, the city of Ypsilanti and Ypsilanti Township to be approved.

The millage is supposed to pay for a set of service improvements over a period of five years. Those improvements include increased frequency during peak hours, extended service in the evenings, and additional service on weekends. Some looped routes are being replaced with out-and-back type route configurations. The plan does not include operation of rail-based services.

The AAATA has calculated that the improvements in service add up to 90,000 additional service hours per year, compared to the current service levels, which is a 44% increase.

The board’s vote to put the question on a May 6 ballot was unanimous, and came after more than a dozen people spoke during public commentary at the start of the meeting, urging the board to take the step of making a funding request of voters.

Elected officials as well as leaders of the faith, labor and disability communities all spoke in favor of making the request of voters to fund the service expansion, citing arguments based on economic and social justice. They pointed to the long period of planning that had begun about three years ago with a much more ambitious effort to expand service countywide. The current, more limited approach – focused just on the “urban core” area of the city of Ann Arbor and the two Ypsilanti jurisdictions – was a way to meet urgent transportation needs, they said.

After the board’s vote, during public commentary at the end of the meeting, one Ypsilanti resident recalled her own history marching with Rosa Parks down Woodward Avenue in Detroit. Although she’s been involved in activism for many years, she told the board, she could not think of anything that she was in the room to witness that was this important to her personally and to the city in which she lives.

Compared to typical AAATA board meetings, the atmosphere was relatively boisterous, as supporters at times chanted, “More buses, more places, more often!” But one speaker at the end of the meeting cautioned against the celebratory mood, saying there was now a lot of work to do. A counterpoint to the solid support the board heard from most of the speakers had been offered by the very first speaker of the evening. He asked the board to delay the election until November, arguing that it would save the roughly $80,000-$100,000 cost of holding the May election, and result in broader participation in the vote. Another point raised by that speaker was concern that everyone pay an equitable share for the additional transportation.

Although the main event was the resolution that placed the millage question on the ballot, the board’s agenda featured nine other items, many of which were at least tangentially related to the millage question.

For example, in other action the board approved a change to its budget to allow for up to $100,000 to be spent on the cost of holding the special election. The board also approved a funding agreement with Ypsilanti Township, to make explicit what will happen to the township’s existing purchase of service agreement (POSA) if the millage is approved. And as part of the board’s routine annual business, it approved a funding request to the state of Michigan – but did not factor in an increased level of service in the budget submitted to the state. That was done on the instruction of the Michigan Dept. of Transportation. That request can be amended if the millage succeeds.

Also at the Feb. 20 meeting, the board approved changes to its bylaws. Those changes were prompted by a change in governance to the AAATA last year – the addition of the two Ypsilanti jurisdictions. With the increase from seven to 10 members, the definition for the number of board members constituting a quorum or a majority needed to be modified. Out of that review of the bylaws came a decision to increase public speaking turns from a two-minute time limit to three minutes.

In other business, the board approved the hiring of a consultant to help the AAATA with a planned upgrade to its computer-aided dispatch and vehicle locating software. The board also approved the recently completed audit report for the 2013 fiscal year, which ended Sept. 30, 2013.

Another item approved by the board was a new contract for unarmed security services. And finally, the board authorized a contract for an insurance broker.

Among the various operational updates received by the board was the announcement that the newly constructed Blake Transit Center in downtown Ann Arbor would be open by March 17, 2014.

Ballot Question

Several items on the Feb. 20 agenda related to putting a 0.7 mill tax proposal on the May 6, 2014 ballot.

Ballot Question: Public Commentary – Meeting Start

Brian introduced himself as a 10-year Ann Arbor resident. He asked that the board delay the placement of the millage question on the ballot until the November 2014 general election. Given a multi-million dollar investment, a delay of six months would not be that significant. He felt there was no real reason not to talk to “the majority of citizens who want into this, or potentially not into this.” He pointed to the additional $80,000-$100,000 the AAATA would need to spend to hold a special election in May instead of waiting until November.

He also asked that all communities pay an equal millage rate. [The millage to be levied by the AAATA, on which voters will decide on May 6, will have an equal rate across all three jurisdictions. The point being raised was that the city of Ann Arbor and the city of Ypsilanti already levy city millages that are dedicated to transit and are passed through to the AAATA.] Ann Arbor property owners have paid a millage for many years, he pointed out, and that has bought a lot of capital, infrastructure and equipment to support the transportation system. Ann Arbor residents have fronted a lot of the cost to the AAATA, so it would be fair for everyone to pay equally into the system. He concluded by thanking the board for their time and service to the community.

State representative Jeff Irwin (D-53), an Ann Arbor resident, thanked the AAATA for the excellent service that is provided in his community. He reported that he’d had the opportunity to use the service many times. It was wonderful that a small Midwestern like Ann Arbor can have a bus service as great as the AAATA.

State representative Jeff Irwin (D-53).

He supported the AAATA’s effort to continue to examine and propose to the public a plan to really expand that service – to increase the amount of service in the evenings or on Sundays. But he also encouraged the exploration of expanding service in a more thorough way outside the boundaries of the city of Ann Arbor. That would respect the economic reality of the region we live in, Irwin said. It’s important to do a better job of serving Pittsfield Township and Ypsilanti Township and the city of Ypsilanti.

This is a great idea, Irwin said, because when you connect people and places, then great things happen. That’s because people have an opportunity to get to the doctor or get to church or get to the store. Businesses and people also connect, he said. He asked the AAATA board to continue the effort to propose new options for citizens, so that the transportation network in Ann Arbor can expand in a complete way to include all of Ann Arbor’s neighbors “in a way that our citizens deserve.” He hoped he had a chance as a citizen to vote on this issue – because we’ve been talking about this for a long time. “The community is ready for expansion, I believe, and I’m certainly ready for expansion.”

Mark Coryell introduced himself as president of the American Federation of Government Employees, Local 3907, which represents employees of the Environmental Protection Agency lab in Ann Arbor. He was also speaking on behalf of WeROC – the Washtenaw Regional Organizing Coalition. He asked those who were there to support the board’s vote to stand – and around 30 people rose from their seats. He called the analysis that the AAATA had put into the question “really quite impressive.” He called Irwin’s comments on point, and told the AAATA it was a national leader. What WeROC sees is a good community investment in the future, at a time when other communities are disinvesting in the things that would bring them a future – future jobs, future growth and future quality of life. WeROC represents a lot of labor and faith-based organizations, he said.

And the people WeROC represents and ministers to would be using these services, Coryell said. He added that we shouldn’t take for granted that everyone owns a motor vehicle. When you arrive in southeast Michigan from a major metropolitan area in another part of the country, it’s amazing how dependent Michigan is on the motor vehicle, he said. “We are behind the times in adjusting to the new future of sharing our transportation systems,” he said. When the snow melts, people will be reluctant to drive on the roads, and he ventured that a lot of people would want to take the bus to work. So WeROC sees a lot of benefit to those people that the organization represents.

Ypsilanti mayor pro tem Lois Richardson told the board she was speaking with her political hat.

For workers, it would help get them back and forth between a job, he said, and public transportation makes it cheaper for them. WeROC supports the millage, Coryell concluded, and would like to see the board vote affirmatively.

Lois Richardson introduced herself as mayor pro tem of the city of Ypsilanti.

It’s been a real pleasure to work with the AAATA’s CEO, Michael Ford, over the last year or two to bring more service into Ypsilanti, she said. She’s looking forward to the expansion and she would support it. She’s a member of WeROC, she noted, but right now, she was speaking with her “political hat.” She appreciated the bus service in Ypsilanti.

She had moved away from the area for a while, and when she first moved back, she was a regular transit customer and always got good service. Now, she reported, she’s an occasional transit customer. And the service she gets is good. She thanked Ann Arbor for the years it has supported the bus service. She was looking forward to expanded service in Ypsilanti. Richardson congratulated Ford for doing a good job bringing the effort to this point: “You need my help? Call me.”

Dave Hendricks introduced himself as pastor at Emmanuel Lutheran Church in Ypsilanti.

He wanted to look at the issue from a religious perspective. His congregation serves a population in Ypsilanti that is sometimes forgotten, he said. They provide food pantry options, clothing and a hot meal during the week. The folks who need those services, he said, are the people who need bus services.

Pastor Dave Hendricks of Emmanuel Lutheran Church in Ypsilanti.

Just from a theological perspective, he and his congregation feel that the transportation expansion is an opportunity to serve people who are sometimes marginalized. He hoped the AAATA would continue its efforts.

Roderick Casey introduced himself as an elected Democratic delegate for Ypsilanti Township, and also a member of WeROC. He told the board, they were doing a great job. In the 36 years he’s lived here the population has boomed, he said. But he was now very concerned about a phenomenon that has come to Ypsilanti: insurance redlining. It’s really hurting a lot of people in the city of Ypsilanti and Ypsilanti Township – because it causes the price of insurance to go up. So right now transportation expansion is needed. He asked the board to continue to support expansion of service.

Jim McAsey introduced himself as an organizer with the Graduate Employees Organization, also a member of WeROC. “Is WeROC in the house?” he asked, and that drew applause and cheers. “We believe passionately that public transportation is a social justice issue,” he said. There are many people in the community who don’t own cars who still need to get around. GEO members don’t make a lot of money and cars are very expensive, he said. So a lot of GEO members depend on buses – because rent is expensive in Ann Arbor and they need to get back and forth. Many GEO members live in Ypsilanti and they have trouble getting back and forth on the weekends or late at night. GEO members need better public transportation, he said. “The bus system here is fabulous, but let’s make it even better,” he told the board. GEO supports the millage. “Let’s get it done. We’ll help you get it done,” he concluded.

Lionel Swan introduced himself as an employee of the Washtenaw Intermediate School District (WISD). He works in the young adult program – which is for 18-26 year-olds. The WISD tries to teach skills like being able to get to their jobs. These are kids with cognitive disabilities, he said. The bus system is “absolutely essential in our program,” he told the board. He agreed with everyone who spoke in favor of expansion. He allowed there were some routes he would like to see extend a little farther. He told the board he rode the bus about four times a week – and he was always impressed by the timeliness and cleanliness of the buses and the friendliness of the drivers toward a very needy group of folks.

The proceedings were documented by several people in the audience using smartphones.

Sam Facus introduced himself as a graduating senior at the University of Michigan. He’s very dependent on the bus service in Ann Arbor, he said. As a graduating senior who’d like to stay in the community and not own a car, it’s very enticing to him to have better public transit options to get where he needs to go and to live a sustainable life.

Joel Batterman told the board he now lives in Detroit, but he’s an Ann Arbor native, so he feels a close connection with his hometown. Since he was a high school senior at Huron High School, he’s been interested in how to improve transit – in the area and in the wider Detroit region. He now works with MOSES, which does congregation-based community organizing in Detroit. WeROC is the Washtenaw County affiliate. Better public transit is a key pillar to a prosperous region, he said.

He’d heard some concerns about the multi-jurisdictional nature of the millage. It’s a new and different thing for this community, but it’s urgently needed, he contended. Growing up in Ann Arbor, he didn’t get over to Ypsilanti that often. But he’s come to understand that the communities – in the county and in the region – are really intertwined. “We can’t allow the boundaries that Thomas Jefferson’s surveyors drew 200 years ago to get in the way of providing transportation … wherever people need to go.” Batterman concluded his remarks by saying he was looking forward to extended hours on Route #2 and Route #4 whenever he’s home.

Martha Valadez, an organizer with Partners for Transit, told the board she was happy and pleased to see the turnout at the board meeting in support of the expansion. She told the board the attendance at the board meeting by residents of all three jurisdictions was evidence that they really are adamant about the need for more transit now.

Her group was happy to see that the planning and development committee had recommended the 0.7 mill tax be placed on the ballot. It’s important that additional services be put in place this year, she said. Last week, Partners for Transit held a coalition meeting with over 35 organizations that are really passionate about transit. After the board’s decision, she said, she hoped they would be able to move forward by getting the word out about the importance of transit expansion.

Susan Borey [unconfirmed spelling] introduced herself as a former member of the Washtenaw County committee for disability issues. At that time she was employed and mostly used taxicabs. Now she’s unemployed and a senior, and she relies on the buses. She called the AAATA bus drivers the “finest ladies and gentlemen I have ever known,” which drew immediate applause.

Ian Robinson, president of the Huron Valley Central Labor Council.

She was very concerned about maintaining the quality of service in Ann Arbor as the AAATA expands. For example, seniors need bus shelters and benches. There’s no longer a shelter along Huron Street near Lurie Terrace, she said. She pointed out that there’s not good public transportation that lets you off directly at the Quality 16 theater on Jackson Road, in Scio Township. She also described how the bus service is wonderful in this town – but bus stops are not cleared of snow. The curbs are absolutely and positively treacherous, she said. She couldn’t imagine how people with disabilities manage with wheelchairs and scooters.

Ian Robinson introduced himself as a University of Michigan faculty member and the newly elected president of the Huron Valley Central Labor Council.

The council will be discussing endorsing the millage to support the expansion of transit at its next meeting – the first Tuesday in March. He plans to argue in favor of it on two grounds: (1) regional development; and (2) social justice.

It’s critical to have sound regional infrastructure, Robinson said. It’s critical that people can still get transportation to work. Good public infrastructure is a core principle of sound economic development, he said. As far as social justice goes, he added, the labor council stands for all working people.

Ann Arbor Center for Independent Living (CIL) director of advocacy and education Carolyn Grawi addressed the board. She told the board that if there were better transit across the state, she could have arrived 25 minutes earlier.

Carolyn Grawi, Ann Arbor Center for Independent Living (CIL) director of advocacy and education.

She’d just come from Lansing. She then led supporters in a chant: “More buses, more places, more often!” We need services everywhere, she said. Some community members across all three areas of the urban core do not have service today: “We need services to get where we need to go.”

The services from AAATA have been outstanding for many years, but improvement in necessary, Grawi said. We need to make sure that anyone who wants to ride the bus or wants to board a paratransit vehicle can get to where they need to go, as often as it’s necessary.

Right now there are people who are missing medical appointments and who can’t get jobs because of a lack of transportation. The AAATA gets lots of people where they need to go on a timely basis, she said. But there are a lot who are still waiting to get there.

Grawi concluded by telling the board that Ann Arbor CIL has endorsed the millage proposal. The Washtenaw Bicycling and Walking Coalition (WBWC) also endorsed the millage, as did Partners for Transit.

She concluded with another round of chants: “More buses, more places, more often!”

Ballot Question: CEO’s Remarks

About the millage request, CEO Michael Ford called the vote “the big ask that’s on the agenda.” He called the vote to put the millage on the ballot one of the most important actions taken by the AAATA in the last decade or so. The board had demonstrated its commitment to the vision last month when it approved the five-year program. The next commitment was to take a step toward approving the funding component of that program, Ford said. He believed that the AAATA had sufficient support, saying “I’ve heard a lot tonight.” He pointed to grass-roots organizations, businesses, community leaders, employees who had participated in the planning process – as well as bus riders.

Ford said that to get to this point, the AAATA had engaged citizens, business leaders, elected officials in pursuit of a plan to provide improved public transportation service. The AAATA had heard over and over again about the unmet service demands. The leaders of the urban core communities had supported the effort. Ford then ticked through the names of those who’d participated: Ann Arbor mayor John Hieftje; Ann Arbor city councilmembers Sabra Briere, Sally Petersen, Stephen Kunselman and Chuck Warpehoski; Ypsilanti mayor Paul Schreiber; Ypsilanti city councilmember Pete Murdock; Ypsilanti city manager Ralph Lange; Ypsilanti Township supervisor Brenda Stumbo; and Ypsilanti Township clerk Karen Lovejoy Roe.

Supported by that leadership, Ford said the AAATA had developed the five-year service plan. Based on input from the community, riders and others, adjustments had been made to the service plan. The final component is the funding proposal, Ford said.

Ford stated that the funding proposal had been fully supported by a financial task force led by former Washtenaw County administrator Bob Guenzel. Ford invited Guenzel to the podium to summarize the task force’s report.

Ballot Question: Financial Task Force

Guenzel began by congratulating Ford and the board for bringing the process to this point. He put the current financial task force in the context of the original task force that dated back to 2011, when the now-demised countywide initiative was underway.

From left: former Washtenaw County administrator Bob Guenzel and AAATA outside legal counsel Jerry Lax.

The AAATA had asked some people to come together to test that countywide plan, to see whether it was accurate in its assumptions about services, and also about the amount of money it would take to fund that plan.

A sub-group had been established to work closely with AAATA staff and issued a report saying the countywide plan was well prepared, complete and reasonable, he said.

Now, a couple of years later, Guenzel continued, we’re at a very different point. The group was asked to conduct the same kind of review for the five-year urban core transit plan.

The group had met in December, January and February, Guenzel reported. That resulted in a consensus finding that the AAATA’s methods and assumptions related to that plan were reasonable.

He read aloud from the document produced by his work group [.pdf of Feb. 5, 2014 financial task force finding]:

Findings and Recommendations. The FTF recognizes the accomplishments of the Service Review Sub-Group, as follows:

• The Service Review Sub-Group was charged with examining a Five Year Transit Improvement Program budget containing a list of proposed services for the Urban Core communities of Washtenaw County. As the result of the deliberations, analysis, and effort, the Service Review Sub-Group determined that the funding analysis (Appendix 1) is reasonable.
• The Service Review Sub-Group reviewed the development of the service program that includes later night service on weekdays, more hours of service on weekends, new service for both the east and west sides of the service areas, and more service for seniors and people with disabilities. The Service Review Sub-Group found no material issues with the method used in calculating the service hours and the proposed schedules. (Appendix 2)
• The Service Review Sub-Group discussed the assumptions made for the ridership level estimates identified in the program. Staff shared the estimates of Steer Davies Gleave (SDG) estimates and increases seen on Route 4 serving Washtenaw Avenue combined with the general system growth over the past ten years, as data supporting assumptions regarding ridership growth. SDG estimates were interpolated by Authority to arrive at annual growth rate assumptions. (Appendix 3)
• The Service Review Sub-Group further discussed revenue vulnerabilities related to ridership forecasts and 2012 legislation repealing the personal property tax beginning in 2014. The Service Review Sub-Group requested a ‘what-if’ analysis of two questions:
  1. What is the financial risk of a 25% shortfall in projected ridership growth, and therefore passenger revenues?, and
  2. What is the financial risk of an uncompensated shortfall in the personal property tax revenues? (The 2012 legislation will exempt personal property from taxation by local jurisdictions by 2023, but a referendum scheduled for August 2014, if successful could make up at least some fraction of the revenue shortfall.)

About the personal property tax question, Guenzel summed up the financial task force view as: “Who knows for sure?” It might affect the AAATA by a maximum of about $300,000, Guenzel said. There’s enough flexibility in the long-term plan to take care of that, he added. A shortfall in ridership projections could also be absorbed by the plan, Guenzel said. So the task force felt confident in the soundness of the planning work the AAATA had done.

Guenzel summed up by recommending that the financial task force be allowed to continue to meet from time to time. More importantly, he continued, the funding level is complete and they found it to be reasonable. So the task force found the AAATA’s assumptions to be reasonable – concerning the level of services and that a 0.7 mill tax, combined with the rest of the revenue, would support that program over five years.

After Guenzel concluded his remarks, Ford wrapped up by saying, “Tonight it’s up to you, the board, to take the next step, to make this plan a reality.”

Ballot Question: Issue Analysis

AAATA strategic planner Michael Benham gave a presentation to the board on the issue analysis. From the board’s information packet, here are the pro-con arguments listed for making a funding request.

Arguments in favor of TheRide placing a property tax levy on the ballot:

• The need for improved transit service is immediate as evidenced by the many requests for service that TheRide has received during the planning period and on a day-to-day basis, and TheRide has worked with the community to propose a specific program of services that responds to that need.
• Millage funding will allow TheRide to leverage State and Federal dollars that would not otherwise come to the region. It is estimated that each new local millage dollar will attract 2 additional dollars of State and Federal money.
• TheRide’s funding sources have been relatively fixed for many years, while demand for service in all areas has increased. TheRide provided a record setting 6.6 million trips in 2013 for example. The unmet need for transit services will only be satisfied by additional service, which must be paid for with new funding sources.
• In the particular case of Ypsilanti City, their general revenue millage has reached its cap and an Authority millage is the only way to pay for additional transit services.
• As TheRide system becomes increasingly regional – with many routes crossing jurisdictional boundaries – it makes sense to begin the transition to a more regionally funded system.
• Community surveys conducted in 2011 and 2013 indicate that support for transit is extremely high, that TheRide is regarded as a very well-run organization, and that there is significant willingness on the part of voters to support a millage for transit.
• TheRide’s reputation as a very well-run organization is reinforced by comparisons to other transit agencies, as evidenced by the findings of our recent Peer Comparison.
• The recent Annual Audit and the findings of the Financial Task Force also reinforce TheRide’s reputation as financially sound and well-managed.

Risks / Issues related to placing a property tax levy on the ballot:

• The most obvious risk is that a majority of the people will not vote for the millage and it will not be approved. However, if this was the outcome, TheRide would continue to provide service, making minor improvements within existing budget constraints, as it has for many years. Existing service would continue and unmet needs for transportation would remain unmet.
• Passage of an Authority millage will create a new level of accountability for TheRide, requiring the Authority to ‘prove’ the value of its services every five years (and this might be considered an advantage by some). TheRide’s Continuous Improvement Program will need to expand to track new services and make any needed adjustments.
• The emergence of a 4-county Regional Transportation Authority has raised a concern that a separate millage might be sought by that organization. The State Law that created the RTA provides for additional regional taxing mechanisms that might be more closely aligned with and acceptable for funding regional transportation services than local property tax millages. There is no Regional funding request planned currently. It could be years before the RTA identifies its preferred funding level and approach. Most importantly, the RTA is primarily concerned with regional (4-county) transit issues while TheRide’s program is focused strictly on meeting local transportation needs with local services.
• Many of the proposed services in the program are during off-peak travel times like evenings and weekends when fewer people are traveling. Ridership can take years to build to expected levels. TheRide will have to carefully manage expectations so that evolving services are given a chance to develop.
• TheRide’s funding model is not well understood by some, which has led to questions as to whether the funding model is ‘fair’. The 5YTIP has been designed to ensure that each community pays for the service they get, either via a millage or through a Purchase of Service Agreement. Ann Arbor will pay more for service because Ann Arbor will receive more service.  The other communities pay less for service because they get less service. POSA communities pay for their services based on fully allocated costs. A particular concern voiced by several individuals is that the transit millage should be ‘flat’, that is, levied at the same rate throughout TheRide’s jurisdiction. The recommendation for funding is a flat 0.7 mil levy across the entire jurisdiction of the Authority.
• A question has been raised about the role of passenger fares in paying for the services proposed in the 5YTIP. Passenger fares currently account for about 20% of operating costs, which is typical for a transit organization of TheRide’s size. The funding proposal for proposed new services is expected to maintain that ratio over the long run. TheRide’s last fare increase was implemented in two phases, with an increase from $1 to 1.25 in May of 2009 and an increase from $1.25 to $1.50 in May 2010. There were corresponding increases in reduced fares for special users at the same time. Fares for advanced reservations on A-Ride (services for seniors and individuals with a disability) also increased during the same time period from $2.00 to $2.50 to $3.00. TheRide’s fares are in line with those seen in the industry as a whole. It is believed that another fare increase so soon after the 50% increase during 2009- 2010 would be excessive and detrimental to ridership. Staff recommends consideration of a fare increase during the implementation period of the 5YTIP, but not to include it as a foregone conclusion.

Ballot Question: Survey Results

Reporting out from the planning and development committee, board member Eric Mahler summarized a presentation from Hugh Clark of CJI Research that was given to the committee at its Feb. 11 meeting. [For earlier Chronicle coverage of those survey results, see: "Survey: Majority Favorable on Transit Tax"]

The survey of 842 registered voters in the three-member jurisdictions of AAATA was conducted by CJI in late 2013 to gauge support for public transit and possibly a future millage. It found that 63% of those surveyed would probably or definitely support a transit millage.

AAATA board member Eric Mahler.

Mahler highlighted some of the other results of the survey: about 54% think that changes in the area are taking us in the right direction; and 59% think that in general, development improves things, while 21% think that development hinders the area. That’s counter to national trends, Mahler said. People here are feeling good about the direction the area is taking and about where they live, he said.

Of those polled, 57% reported that they’d used the AAATA in the last year, Mahler said. [The survey question asked if the respondent or anyone in the household had used the AAATA in the last year.] Of those surveyed, 79% had a favorable opinion of the ride, Mahler said. Only 6% had an unfavorable opinion, he said.

On the millage question, Mahler noted that for a survey question asking if respondents had heard anything about the proposed expansion of the AAATA’s member jurisdictions, 49% said they had not. About 45% said they’d heard something. Of those who use the AAATA at least once a month, 53% said they were likely to use the new service, Mahler said.

Mahler also noted for the survey question on additional services for seniors, 45% said they’d be in favor of more taxes to support additional services for seniors, while 40% said they would not. Mahler said that even without the educational effort that’s still to come, those numbers are good news for the AAATA.

When asked what priorities public transit should have, the top response was that public transportation supports seniors and those with disabilities – with 93% saying that is an important aspect of public transportation. Attracting jobs came in at 85%, and 83% said that it gets more people to more jobs. That’s what the message has to be, Mahler concluded.

It was clear that there’s an opportunity and a need to educate for this effort, Mahler said. It’s also clear that the AAATA has credibility and trust with the public that it’s willing to listen.

Ballot Question: Board Discussion – Ballot Language

When the board reached the item on its agenda, board chair Charles Griffith said it was a historic move for the AAATA, so the board did not take it lightly.

From the audience, Carolyn Grawi asked that the resolution be read aloud. Griffith then read aloud the entire resolution.

The specific ballot language that Griffith read aloud  differed from the language drafted and included in the original board packet. The approved language explicitly highlights the capture of a portion of the millage by TIF (tax increment finance) authorities. The approved language also swaps in “seniors” for “the elderly”:

PUBLIC TRANSPORTATION IMPROVEMENT MILLAGE

To improve public bus, van, and paratransit services – including expanded service hours, routes, destinations, and services for seniors and people who have disabilities – shall the Ann Arbor Area Transportation Authority levy a new annual tax of 0.7 mills ($0.70 per $1000 of taxable value) on all taxable property within the City of Ann Arbor, the City of Ypsilanti, and the Charter Township of Ypsilanti for the years 2014-2018 inclusive? The estimate of revenue if this millage is approved is $ 4,368,847.00 for 2014. This revenue will be disbursed to the Ann Arbor Area Transportation Authority and, as required by law, a portion may be subject to capture by the downtown development authorities of the Cities of Ann Arbor and Ypsilanti, the Washtenaw County Brownfield Redevelopment Authority, and the local development finance authority of the Charter Township of Ypsilanti.

The ballot language is subject to requirements in Michigan’s General Property Tax Act.

Earlier in the meeting, reporting out from the performance monitoring and external relations committee, Roger Kerson said the committee had talked about the ballot language “a lot, a lot, a lot.”

AAATA board member Roger Kerson.

They thought it had been finalized, but then it had to be tweaked, he said, describing a couple of cycles of finalization and further tweaking. They’d worked very hard to be compliant with all the laws that apply when you make an ask from voters. It must be clear what the money is to be used for.

The proposed language will be used for buses, vans and paratransit, he said, not airplanes, helicopters or trains. After much analysis, Kerson continued, there’s a requirement that it be noted in the ballot language that some of the new tax would be captured by tax increment finance authorities (TIFAs) like downtown development authorities and brownfield authorities.

Kerson said that the “huge majority” of the funding, 97-98%, would go to the AAATA, but that the remainder could be captured by TIFAs. The PMER committee concluded that this is “the right move at the right time.”

Ballot Question: Board Commentary

Larry Krieg led off comments by saying it’s a historic event for the AAATA. It’s important to take a moment to think about it and say why it’s important, he said. He was a teacher at Washtenaw Community College for 25 years, he said. Something he noticed when he taught there was “when a student’s car failed, they would be very likely to fail my class.” Many of his students lived in Ypsilanti Township or other parts of the county that are not served by the AAATA. That’s important because “education of our people is going to be the root of our future prosperity.”

He also saw WCC grads who were looking for jobs, who did not own cars. Even though they were qualified for certain jobs, they were sometimes not able to accept available jobs, because they could not get to those jobs. By having better transportation, job seekers will have the ability to reach other parts of Ypsilanti township and city.

Krieg said he was impressed by the careful work that AAATA staff had done in preparing the proposal. Some people might wonder why the board did not vote on this last month, he said. The reason is that there needs to be careful analysis of the likelihood of success and exactly what the money is going for. He’s now convinced that the analysis has been done and the AAATA has an excellent chance of going forward with this.

Responding to the issues of fairness that had been raised, Krieg noted that the millage rate is flat. But he allowed that Ann Arbor residents will be paying more – through an existing millage. Ann Arbor also gets more transportation services, he noted. He had checked with the staff and gone over the figures and had determined that what AAATA strategic planner Michael Benham had said in his presentation was true: People will get what they pay for. About Ypsilanti Township, which he represents on the board, Krieg said: “We are paying less, and we are getting less.”

One thing a lot of people don’t realize, Krieg said, is that a gas pump works two ways: it pumps gas into your car and money out of the state and out of the local economy. On the other hand, when you pay a few cents for a transit tax, the vast majority stays in our community, he said. Michigan is a donor state as far as money that leaves the state and goes through the rest of the county.

Roger Kerson observed that when the AAATA board had started the conversation about expanding transit, he thought there were only three current board members serving on the board at the time. [Charles Griffith and Anya Dale were also serving at the time.] At that time, the AAATA had a more expansive [countywide] vision, he said. The nature of the AAATA board is to be collaborative and transparent, he said, so that expansive plan was adjusted based on feedback from constituents and others.

What the AAATA is doing now is downscaled compared to the original vision of a countywide authority. The current plan “is the right plan and it’s the right time,” he said. It’s been an educational process, and he was glad the AAATA went through it. He felt the right lens through which to view the issue is “needs.” People need to get around, he said. He also stated that this is a “pay to play” financing mechanism.

Board chair Charles Griffith offered a final comment of his own. He told the people who came out to the meeting that the board appreciated hearing from them. Over the years, many people had asked the AAATA for this or that additional service. When those had been small requests, the AAATA had sometimes been able to meet the request. But for other larger requests, he noted, the answer had always been the same: Unless a new source of revenue can be found, a new service can’t be added without taking away some other service. Now the AAATA can finally say: If the voters agree, the AAATA can provide you with that additional service.

Griffith’s remarks prompted a standing ovation from the audience.

Outcome: The board voted unanimously to place a 0.7 mill transit tax on the May 6, 2014 ballot.

Ballot Question: Public Commentary – End of Meeting

Harvey Summers told the board that he was a member of WeROC. He thanked board members for their vote and looked forward to supporting the millage with his vote.

Carolyn Grawi spoke on behalf of CIL, WBWC and Partners for Transit. She thanked the board for their vote and the AAATA staff for their hard work.

John Waterman thanked the board for their work. [Waterman was one of five finalists for the initial appointment to the board of the southeast Michigan regional transit authority. He founded the nonprofit Programs to Educate All Cyclists (PEAC).] A good plan has been laid out, but the “game is on,” and he cautioned that there is a lot of work to be done. He also cautioned against the celebratory mood. He would put efforts of his staff and students to help pass the millage.

Michelle Barney.

On the topic of paratransit service, Waterman stressed the need to train as many people with disabilities as possible to use the fixed-route service, which is more cost efficient and leads to greater independence. It also opens up paratransit service for those who cannot do without it, he said.

Michelle Barney told the board that she wanted to thank them for their vote, saying, “I was almost on the verge of tears when you voted,” because it meant that much to her personally.

She told the board that the community was losing University of Michigan grads who are moving away due to a lack of transit. There’s a real sea change going on, she said, with many young people opting not to try to own cars, because they’re sick of them. It also provides service to people of different racial groups.

She recalled her own history as a bus organizer in 1959 for a youth march for integrated schools started from Cass Tech in Detroit to Washington D.C. She also recalled marching down Woodward Avenue with Rosa Parks in 1964-65.

She’s been involved in activism for many years, Barney told the board, and she could not think of anything that she was in the room to witness that was this important to her personally and to the city in which she lives.

Funding Agreement with Ypsilanti Township

By way of background, the 0.7 mill tax, if approved on May 6, 2014, would be the first ever levied by the Ann Arbor Area Transportation Authority. Existing dedicated transportation taxes, levied by the two cities and passed through to the AAATA, would remain in place.

For Ann Arbor, the rate for the existing tax is 2.056 mills, which is expected to generate a little over $10 million by 2019, the fifth year of the AAATA’s transportation improvement plan. For the city of Ypsilanti, the rate for the existing transit millage is 0.9789, which is expected to generate about $314,000 in 2019.

For the owner of an Ann Arbor house with a market value of $200,000 and taxable value of $100,000, a 0.7 mill tax translates into $70 annually, which would be paid in addition to the existing transit millage. If the millage were to pass, the total Ann Arbor transit tax paid on a taxable value of $100,000 would be about $270 a year.

If it’s approved by voters, the total amount of revenue expected to be generated by the 0.7 mill tax in 2014 is $4,368,847.

Here’s a detailed breakdown of how the roughly $4.3 million generated by the new AAATA millage would fit into the overall funding picture for AAATA services:

Revenue Source     Amount
State              $12,910,884
Federal            $4,507,490
Fares              $8,801,200
A2: 2.056          $10,980,259
A2: 0.70           $3,387,910
Ypsi C: 0.9789     $313,798
Ypsi C: 0.70       $202,730
Ypsi TWP: 0.70     $778,207
POSA               $1,087,344
Third Party        $1,204,196
Advertising        $375,000
TOTAL              $42,969,822

-

Here’s how that breakdown shapes up as a pie chart:

Pie chart of revenue sources for AAATA five-year transit improvements. (Data from AAATA, chart by The Chronicle. )

In Ypsilanti Township, the AAATA calculates the 0.7 mill levy to be commensurate with the level of service the township would receive as a result of transportation improvements. But the 0.7 mill levy would generate about twice as much as the amount paid by the township in its current purchase of service agreement (POSA). So Ypsilanti Township’s POSA amount would not be paid in addition to revenue from the 0.7 mill tax.

The board considered an additional item at its Feb. 20 meeting – a funding agreement with Ypsilanti Township governing that POSA. The agreement makes clear that if the 0.7 mill tax passes, then the township’s service, which would increase under the transportation improvement plan, would be paid by the 0.7 mill tax. [.pdf of AAATA agreement with Ypsilanti Township]

Reporting out from the performance monitoring and external relations committee, Roger Kerson described the funding agreement with Ypsilanti Township.

From left: AAATA board members Eli Cooper and Larry Krieg.

On joining the AAATA, the township had pledged to continue to provide the same amount that it’s currently paying through its POSA, Kerson explained. If the millage passes, it will generate more than twice what the POSA amount is – $800,000 compared to about $325,000, Kerson said.

That’s the amount of service Ypsilanti Township will get, he said. So as far as fairness goes, everybody gets the service they pay for, he said. That’s why the committee recommended the agreement to the full board.

When the board reached the item on its agenda, Larry Krieg – the Ypsilanti Township representative to the AAATA board – asked the board to support the resolution on the funding agreement with the township, saying that without this agreement, the rest of the five-year plan wouldn’t work.

Outcome: The board voted to approve the funding agreement with Ypsilanti Township.

Budget Change to Cover Cost of May Election

Reporting out from the performance monitoring and external relations committee, Roger Kerson noted that because the AAATA millage would be the only item on the ballot, the AAATA would need to pay the cost of administering the election. That would be between $80,000 and $100,000, Kerson said. So the board would need to amend the budget to do that. He pointed out that in this scenario, the millage would generate $4.3 million, which would be matched about 2:1 by federal and state revenues. So if the millage proposal passes, that would equate to $12 million annually, against a $100,000 one-time expense.

Those remarks came as an indirect response to public commentary that had called for a delay until November 2014 to hold the election in order to save the cost to the AAATA of holding the millage vote.

Given the views that had been expressed during public commentary about the need for rapid implementation, Kerson said, the committee concurred that the AAATA should go ahead with that cost.

When the board reached the item on its agenda, there was no further discussion.

Outcome: The board voted unanimously to approve the budget change to pay for the cost of the May 6, 2014 election.

Bylaws

The board considered approval of several changes to its bylaws. One change gives speakers during public commentary an extra minute per turn to address the board. The time limits per speaker for each of two slots on the agenda are increased from two to three minutes as part of the bylaws changes. So someone could address the board for a total of six minutes at a meeting.

That additional change to the bylaws comes as AAATA board members reviewed their rules and revised them to reflect the addition of two new member jurisdictions in addition to the city of Ann Arbor: the city of Ypsilanti and Ypsilanti Township. It was last year, under separate processes, that the two Ypsilanti jurisdictions were admitted into the AAATA. The authority also changed its name at the time to include the word “area.” [.pdf of AAATA bylaws changes]

The bylaws changes considered by the board included some straightforward consequences of the increase from seven to 10 board members, such as: changing the definition of a quorum from four to six members; and raising the majority approval threshold from four to six members – for items like adopting a labor contract or approving a financial transaction in excess of 5% of the annual budget.

A change that was independent of the board size was also considered for some other voting items: relaxing the requirement from “a majority of the Board duly appointed and confirmed” to “a majority vote of board members present.” That means some types of resolutions could win approval with support from as few as four board members at a meeting.

In a separate board action, before the bylaws change the board considered a resolution to waive a condition in the bylaws that requires written notice be given to board members two weeks before a vote on a bylaws change. The resolution was prompted by additional amendments that had been made within the two-week window. One of the bylaws changes considered on Feb. 20 was to relax the requirement of notice to just one week in advance of a vote.

Reporting out from the performance monitoring and external relations committee, Roger Kerson noted that as some later amendments were made, the board had not provided the full period of notice to board members to take action that night – under the bylaws. The bylaws have a provision for waiving that notice, which the board would be using that evening.

Bylaws: Board Discussion

When the board reached the item on the agenda, Eli Cooper asked if there had been any follow-up on the voting provisions in the bylaws – about how other entities handled similar issues.

AAATA board member Jack Bernard.

AAATA financial analyst and planner Bill De Groot responded to Cooper, saying staff had looked into the question of voting power with respect to the possibility that a minority of the board could count as a majority for a vote. For important business, he said, there was the greater requirement of majority already in the bylaws and that was increased consistent with the added members of the board.

Jack Bernard said he wanted to mention for the record that the newly revised bylaws include a specific time reference, related to the terms of appointments for individual board members. ["The term of office of a Board member shall be five years other than for members of the Ann Arbor Area Transportation Authority Board as of June 15, 2013, who shall serve for the remainder of their terms, as provided by the Articles."]

The next time the bylaws are changed, Bernard said, the time reference should be removed.

Outcome: On separate votes, the board unanimously approved the waiver of the notice requirement and the changes to the bylaws.

State Funding Request

The AAATA has to apply every year to the state of Michigan for its state operating assistance. According to staff memos in the board’s information packet, the Michigan Dept. of Transportation instructed AAATA not to include assumptions of the five-year service improvement plan in this year’s application.

So this year’s application to the state for the AAATA’s portion of Act 51 money will include a budget as follows: estimated federal funds of $5,348,338, estimated state funds of $9,905,017, estimated local funds of $11,241,134, estimated fare box of $6,184,503, and estimated other funds of $647,288 – with total estimated expenses of $33,326,000.

That application for state operating assistance could be amended, if the millage vote on May 6 succeeds.

Reporting from the planning and development committee, Eric Mahler said the committee had heard a review from AAATA manager of service development, Chris White, on the AAATA’s application for state operating assistance. That includes both capital and operating funds. Because the millage has not yet passed, MDOT had requested that the AAATA not include expansion of services in the request. Mahler ventured that the request from the state could be amended when the millage passes, which White indicated was the case.

Outcome: The board voted unanimously to approve the application for state funding assistance.

CAD/AVL Consulting

The board considered awarding a $168,000 consulting contract to TransSystems of Boston, Mass. to assist the AAATA in making an upgrade in its computer-aided dispatch and vehicle-locating software (CAD/AVL).

As part of a planned upgrade for this type of software for its regular fixed-route buses, the AAATA is also looking to bring in-house the reservation and booking of paratransit rides. That’s currently part of its contracted paratransit service provider’s scope of work. That service provider is SelectRide. The switch to in-house paratransit bookings is planned for May 1, 2015, the day after the AAATA’s current contract with SelectRide ends. That contract was recently extended through April 30, 2015 in action taken by the AAATA board at its Dec. 19, 2013 meeting.

By implementing the paratransit part of the project, the AAATA wants to get some experience with the upgraded software before moving forward with its regular fixed-route buses.

According to staff memos in the board’s informational packet for the Feb. 20 meeting, the type of CAD/AVL system that the AAATA is upgrading allows dispatchers to locate, track and manage fixed-route bus operations. It also provides information on real-time adherence to the bus schedule. Further, it monitors and reports the status of engine components and on-board systems, such as the wheelchair ramp.

Reporting out from the planning and development committee, Eric Mahler noted that the consultant is important to make the most of the opportunity to upgrade the technology in a cost-effective way. Without the consultant, it’s felt that the AAATA might miss important opportunities to improve the service and to save money. Mahler said the urgency of hiring the consultant had been well established, saying that it’s important that the project get started right away because the upgrade to the AAATA’s systems depends on it.

When the board reached the item on its agenda, Eli Cooper noted that Ann Arbor is a place where networked automobiles are being piloted. He would willingly support keeping transit in the high-tech game.

Jack Bernard noted that the advanced system is critical for better paratransit service – so that a rider can, for example, have as much notice as possible that a ride won’t be arriving until the end of a scheduled window. He urged the board to support the resolution.

Larry Krieg wanted people to understand that the system the AAATA will be replacing was cutting edge 15 years ago. Equating one software year to 10 human years resulted in a system that was 150 years old, he said. Some of the problems that the AAATA has had with locating buses for interactive maps relates to the way the “elderly” system is trying to get information out.

Outcome: The board voted unanimously to approve the contract with TransSystems.

CAD/AVL Consulting: Public Commentary

During public commentary at the end of the meeting, Carolyn Grawi spoke on behalf of the Ann Arbor Center for Independent Living. And she responded indirectly to some of the remarks on accessibility.

“As you know, I have high expectations,” she said. The mobile app is great, but she wanted to note that about one-third of the population or more can’t use it. It’s important that when a new feature is launched, it’s launched to be accessible from the start. The print size for the mobile app is too small and does not change in size. She was excited to see the board moving ahead with the AVL/CAD consulting, which will lead to a software upgrade. Scheduling is a nightmare right now, she said. She also told the board that the AAATA doesn’t have enough paratransit vehicles on the road.

FY 2013 Audit

The board was asked to consider a resolution accepting the audit report for the fiscal year that ended on Sept. 30, 2013 (FY 2013). [.pdf of FY 2013 audit report]

FY 2013 Audit: Presentation from Auditor

David Helisek and Josh Yde of Plante Moran gave the board a presentation on its FY 2013 audit. The AAATA fiscal year runs from October through September, so the FY 2013 audit was for the year ending on Sept. 30, 2013. Two documents were presented: the financial statements, including the federal programs audit; and the required communications to those charged with governance.

From left: Dave Helisek of Plante Moran and AAATA controller Phil Webb.

Helisek reported that the presentation had been made in greater detail to the AAATA’s performance monitoring and external relations (PMER) committee earlier in the week.
Helisek noted that the bulk of the first document is the AAATA’s document – the financial statements. The only part of that contributed by Plante Moran are the first two pages, which includes the independent auditor’s report.

Helisek told the board that the report showed an “unmodified opinion,” which is the highest level of assurance that an auditor can give a set of financial statements, he said. That means that the statements fairly reflect the position of the authority as of Sept. 30, 2013 as well as the changes in that position. That’s the opinion that the AAATA strives to achieve on an annual basis, and it’s the one that Plante Moran has given for the third year in a row, he said.

Josh Yde highlighted some details from the balance sheet. He first noted that GASB 63 standards had changed the wording from “net assets” to “net position.” The total assets are now up to $66.2 million, he noted, which is up by about $12 million compared to FY 2012. Most of that is due to the increase in capital assets with the construction of the Blake Transit Center. Equipment is also up about $6.8 million, he noted, mostly due to new bus purchases in the current year.

Liabilities increased from about $2.9 million to $4.4 million. Most of that is due to accounts payable – related to the Blake Transit Center as well as other outstanding expenses. Finally, the net position increased to about $62 million, up from about $51 million last year. Most of that is due to the investment in capital assets, he said.

The unrestricted net position is up about $400,000 this year, Yde said. That means the current revenues are covering the cost of AAATA’s current costs of providing services. He noted, however, that of the $14.7 million, about $7.5 million relates to property tax revenue that will need to be used for operations in FY 2014.

The statement of revenues, expenses and changes in net position shows that operating revenues increased about $3.2 million. The largest portion of that is due to the increase in the depreciation in all the new assets, as the infrastructure continues to grow. Operating revenues are up about $240,000. Most of that is due to AirRide revenues, which was in operation for the full fiscal year.

The non-operating revenue is all up, Yde continued. Local non-operating revenue is up about $1.4 million. And most that is due to property tax revenue as well as purchase of service agreements  (POSAs).

Before capital contributions, Yde said, all that leads to a change in net position of about negative $4.7 million. After the capital contributions of $15 million, that results in a change in net position of positive $10.4 million.

Helisek picked up the presentation from there. He reviewed the federal compliance portion of the audit. If you spend more than $500,000 of federal money, then a federal compliance audit is required, he explained.

The amount of federal funds spent by the AAATA in the FY 2013 was just under $17 million. Helisek told the board that they tested the federal transit cluster of about $14 million. So about 83% of the funds that came to the AAATA were tested. He said that they’d come across no issues of non-compliance as it relates to deficiencies or weaknesses.

Helisek noted that there was one finding on the last page: related to a depreciation expense calculation. As part of the audit, they did some testing and noted there needed to be some adjustments to some specific assets related to depreciation. That was brought to the attention of AAATA financial staff and they agreed with Plante Moran’s view, and they made the adjustment. He told the board that while it was an adjustment, it was a “non-cash adjustment.” It did not affect the budget over the year. However, auditing standards do require that the issue be communicated to the board.

As far as the letter to those charged with governance, Helisek noted that the first section is pretty much boilerplate. What you’re looking for are problems, he said, adding that there’s no communication on problems. The audit went very well and there were no disagreements with management on standards or the application of auditing standards.

The second section of the letter is more focused on legislative issues and informational items – things that might be “hot in Lansing,” he said. The one item that has been hot for the last 18 months is the state’s personal property tax, and the election that’s coming up in August. That could change how property taxes are collected, and would affect any entity that relies on property taxes. [The Aug. 5, 2014 ballot measure would mitigate against loss of personal property tax revenues by replacing part of the state use tax with a local tax administered to the benefit of metropolitan areas in Michigan.]

FY 2013 Audit: Board Discussion

Reporting out from the performance monitoring and external relations committee, Roger Kerson noted that on page 8 of the audit report, the amount the AAATA had spent on administration had gone down [$7,258,563 in FY 2013 compared to $7,277,201 in FY 2012] but money spent on operations went up [$24,811,414 in FY 2013 compared to $21,635,160 in FY 2012]. That showed the AAATA was putting its resources into “putting buses on the street,” he said, calling it a good sign.

When the board reached the item on its agenda, there was no discussion.

Outcome: The board voted unanimously to accept the FY 2013 audit report.

Insurance Broker

The board considered awarding a new five-year contract to Marsh USA Inc. of Grand Rapids, Mich. – the same insurance broker that’s consulted for the Ann Arbor Area Transportation Authority for the last 10 years. The contract is for up to $270,000 of consulting work.

Marsh USA will provide insurance brokerage services for general, automobile, workers’ compensation, property and public officials/employee liability insurances.

Reporting out from the performance monitoring and external relations committee, Roger Kerson noted that the AAATA purchases about $1 million worth of insurance every year, which is necessary given that the AAATA is driving buses around. So the AAATA uses a broker to help get the best price, Kerson said.

Outcome: The board voted unanimously to approve the contract with Marsh USA.

Unarmed Security

The board considered awarding a contract for unarmed security guard services to DK Security. The contract covers three properties: AAATA headquarters at 2700 S. Industrial Hwy., the Blake Transit Center at 328 S. Fifth Ave. in Ann Arbor, and the Ypsilanti Transit Center at 220 Pearl St.

The contract was for one year, with an option to extend the contract for four one-year periods.

The contract conforms with AAATA’s living wage policy, which mirrors that of the city of Ann Arbor. The policy currently requires vendors to pay a minimum wage of $13.96 per hour without providing health care benefits and $12.52 per hour when providing health care benefits.

The amount of the contract is not to exceed $270,400, which provides up to 14,299 hours (holidays included) of security coverage at a fixed-hourly rate.

The previous vendor, Advance Security, was one of 15 bidders for the work, but was not selected.

Reporting out from the performance monitoring and external relations committee, Roger Kerson noted that the bids that came back for the unarmed security work were a little bit lower than the incumbent vendor had bid, so the AAATA would be saving a little money on that. He noted that the new vendor still complied with the AAATA’s living wage policy.

Outcome: The board voted unanimously to approve the unarmed security contract with DK Security.

Communications, Committees, CEO, Commentary

At its Feb. 20 meeting, the board entertained various communications, including its usual reports from the performance monitoring and external relations committee, the planning and development committee, as well as from CEO Michael Ford. The board also heard commentary from the public. Here are some highlights.

Comm/Comm: Ridership

Reporting out from the performance monitoring and external relations committee, Roger Kerson updated the board on ridership. Ridership is down due to the weather, he said, which would probably affect the yearly total because the drop was fairly significant in January.

Comm/Comm: Blake Transit Center

As part of his report to the board, CEO Michael Ford noted that the AAATA had received a temporary certificate of occupancy for the new Blake Transit Center last Friday (Feb. 14, 2014) and the move into the facility is scheduled for the week of March 10. The building will be open by March 17, which is St. Patrick’s Day, Ford pointed out. There’s still more work to do, but Ford wanted to thank AAATA maintenance manager Terry Black and anyone who had anything to do with supporting that project.

Ford also thanked the bus riders and the drivers for “hanging in there” during the transition. It’s been a struggle, given the weather conditions.

Comm/Comm: Blake Transit Center Art

Reporting out from the performance monitoring and external relations committee, Roger Kerson said the committee had previewed the public art component for the BTC, saying it “looks really cools.” It’s a tile mosaic of figures representing the diversity of the community, he said. It’s less than $100,000 so the board does not need to approve it, Kerson noted, but it the board will be kept in the loop.

Present: Charles Griffith, Eric Mahler, Susan Baskett, Eli Cooper, Roger Kerson, Anya Dale, Gillian Ream Gainsley, Jack Bernard, Larry Krieg.

Absent: Sue Gott.

Next regular meeting: Thursday, March 20, 2014 at 6:30 p.m. at the Ann Arbor District Library, 343 S. Fifth Ave., Ann Arbor [Check Chronicle event listings to confirm date]

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On Dec. 4, 2013, city administrator Steve Powers attended his first DDA board meeting as a member. (Photos by the writer.)

The board also considered a resolution added to the agenda on the day of the meeting, related to the contribution-in-lieu (CIL) parking agreement for the 624 Church St. project – but ultimately decided to table that resolution pending further review at the committee level.

The DDA’s Dec. 4 resolution allocating $280,000 for the Main Street light pole replacement ended the political wrangling over who should pay for those downtown Ann Arbor light poles. Replacement of the deteriorating poles was identified by the city as a need in the first half of 2012. The source of an estimated $600,000 required for the project was specified in the city’s CIP (capital improvements plan) that year as coming from the DDA – though the funds were at that time not authorized by the board.

In the spring of 2013, the city council weighed how it might clarify the city’s ordinance that restricts the DDA TIF (tax increment finance) capture. In that context, DDA executive director Susan Pollay told the council that the DDA might not be able to afford to pay for the Main Street light pole project – if the council changed the ordinance language to clarify the calculations in a way that did not favor the DDA. The question of the DDA’s TIF capture was not ultimately settled until the council’s Nov. 18, 2013 meeting.

In the interim, the city council voted at its May 20, 2013 meeting to request that the DDA allocate at least $300,000 for the $580,000 light pole project. After the council then declined at its Oct. 21, 2013 meeting to approve a budget allocation for the remaining $280,000 that was needed for the project, the DDA board passed its Dec. 4 resolution, citing the urgency of replacing at least 36 of the poles as the reason for its decision.

According to the DDA’s resolution, staff will use the DDA funding to begin now with replacement of those poles most in need of being removed, with the remainder replaced in the summer of 2014.

Also at its Dec. 4 meeting – in connection with the city’s pending sale to Dennis Dahlmann of the former Y lot, at William Street and Fifth Avenue – the DDA board passed a resolution that waived claim to $1,439,959 in reimbursements from the sale that the DDA has calculated it might be owed. The city council adopted a policy on Oct. 15, 2012 that included depositing net proceeds (after reimbursements) from the former Y lot sale into the city’s affordable housing trust fund.

So the DDA board’s action is an attempt to increase the amount that will be deposited into the affordable housing trust fund. The resolution passed by the DDA board also calls on the city council to waive the city’s claim to reimbursements. The city purchased the property in 2003 for $3.5 million and has made interest-only payments for the last 10 years on a loan for that amount. The agreed-upon sale price to Dahlmann is $5.25 million.

In another formal action taken on Dec. 4, the DDA board accepted the audit report from the most recently concluded fiscal year – FY 2013, which ended June 30, 2013. The auditor issued an “unmodified” or clean opinion.

The board also considered a request, which was ultimately tabled, from the developer of the 624 Church St. project. The developer is asking for an extension of the contractual agreement under which parking permits could be purchased using the city’s contribution-in-lieu (CIL) program. The program allows a developer to satisfy certain zoning requirements that parking spaces be provided for a project – by purchasing monthly permits in the public parking system at a premium rate, instead of building the spaces on site. The developer of the 624 Church St. project wants the ability to extend the 15-year minimum to cover a 30-year financing period – based on feedback from firms that would be providing the financing. The DDA board ultimately voted to table the question pending further review by the board’s operations committee.

The board’s newest members introduced themselves at the meeting: city administrator Steve Powers and Main Street retailer Cyndi Clark.

Also at its Dec. 4 meeting, the board heard a range of updates on various projects and public commentary. Highlights included a report from the Main Street BIZ (business improvement zone), which has enough money in its fund balance to handle sidewalk snow removal for the coming winter, without collecting the winter tax assessment to which it is entitled. In a separate update, there’s a possibility that downtown ambassadors could be hired by the DDA as soon as the summer of 2014.

Other topics covered in updates included the effort to save the State Theater, the NHL’s Winter Classic on New Year’s Day, and The Puck Drops Here festivities on New Year’s Eve.

Main Street Light Poles

The need to replacement the Main Street light poles due to rusting bases has been known since last year – in early to mid-2012.

Downtown Ann Arbor Main Street light pole on northeast corner of Main & William. Photograph is from the city of Ann Arbor, taken in April 2012.

This spring, at city council meetings, replacement was characterized as an urgent public safety issue, because the bases of some of the poles are rusting. Various statements were made about the number of light poles that had failed, but responding to an emailed query from The Chronicle earlier this year, city of Ann Arbor staff indicated that in early 2012 two of the light poles fell – due to a structural failure at the base of the poles caused by rust. After inspection of all the poles, two additional light poles were deemed to be in immediate risk of falling and were also replaced.

The poles were part of the city’s CIP last year with the source of the funds identified in the CIP that year as the DDA’s TIF (tax increment finance) fund. The status of the funding – estimated at that time to be $600,000 – was identified as not yet authorized.

Over the course of the year, the replacement of the light poles became part of the fractious politics between the city council and the DDA.

In timeline overview form:

• April 1, 2013: Initial approval of DDA TIF capture ordinance revision (Chapter 7). Main Street light poles were cited as a project the DDA might not be able to pay for if the Chapter 7 revisions were approved.
• April 15, 2013: City council approves an amendment put forward by Sally Petersen (Ward 2) to the Chapter 7 revision, which delayed applying the revised language until FY 2015.
• May 20, 2013: City council approves FY 2014 budget amendment that affects DDA budget.
  

  Whereas, The DDA is forecasted to receive $568,343 more in TIF revenues than anticipated in the proposed FY14 budget;
  Whereas, Council desires to support the public housing program in the DDA area;
  RESOLVED, The DDA TIF fund revenue and expenditure budgets be increased by $568,343 for the purposes of creating a one-time transfer;
  RESOLVED, The DDA Housing fund revenue and expenditure budgets be increased by $300,000 to reflect Council’s desire for the DDA to support affordable housing in the DDA area; and
  RESOLVED, Ann Arbor City Council requests that the DDA allocate at least $300,000 for the replacement of the light poles on Main Street.

• June 5, 2013: DDA board meets and executive director Susan Pollay reports the council’s action. She tells the board that she’s meeting with city staff to figure out how the light poles will be paid for.
• July 3, 2013: DDA board allocates $300,000 for the light pole replacement project at the same meeting it allocates $250,000 for other capital projects, and $59,200 to support the creation of a business improvement zone in the South University area. One “whereas” clause characterized the council’s action in a way that is not based on the wording of the city council’s May 20 budget amendment.
  

  Whereas, Through the 2013/14 budget approval process it was determined that the City would undertake this street light replacement in calendar year 2013, with the DDA allocating $300,000 toward the cost of the project, and the City allocating $216,000; [.pdf of complete DDA light pole resolution]

• Oct. 21, 2013: City council resolution allocating $280,000 toward the project fails on a 7-4 vote. It needed eight votes for approval.
• Oct. 31–Nov. 1, 2013: City staff inspect the 81 light poles, determining that 36 need to be replaced within 6 months and the remaining 45 within 1-2 years.

Until the Oct. 21 council resolution failed, according to city of Ann Arbor public services area administrator Craig Hupy and DDA executive director Susan Pollay, their intent was that a cost-sharing arrangement between the city and the DDA would allow for the DDA to purchase the fixtures for all the poles, with the city paying for the poles. The DDA proceeded with the purchase of the fixtures. That left insufficient funds to deal with the 36 Main Street light poles most in need of replacement. The initially planned splitting of the costs, which did not come to fruition, appears to have contributed to the timing of the DDA’s resolution to allocate the additional $280,000 on Dec. 4.

Main Street Light Poles: Board Deliberations

Roger Hewitt began deliberations on Dec. 4 by indicating he believed it was back in May when it was determined that the light poles on Main Street were rusting out at the bases, and that they all needed to be replaced. [The need to replace the poles was identified a year earlier in 2012, with the source of the funds identified in the city's CIP that year as the DDA's TIF fund. The status of the funding – estimated at that time to be $600,000 – was identified as not yet authorized in the CIP.]

Hewitt indicated that in May, the DDA passed a resolution that it would allocate $300,000 of the $580,000 for the total cost of the project – which would be carried out by the city, he said. [The DDA's resolution was actually passed on July 3, 2013. What was passed in May – on May 20, 2013 – was a city council budget amendment that included a request for the DDA to allocate at least $300,000 toward the light pole project.]

Hewitt continued by saying that the city’s portion was going to be $280,000, but when asked to approve the additional funds, that resolution “was not successful at the city council.” There was therefore a shortage of $280,000, Hewitt said. An examination had been done, and many of the light poles are a safety hazard, he said. So the DDA was recommending that $120,524 be allocated in this fiscal year. That’s the amount remaining in a bond fund for State Street improvements that were done back in 2000 or so, Hewitt said. It’s money that had been sitting in a fund that had been unspent for about 10 years. This would require changing the budget, he said. And then in the next fiscal year [FY 2015], Hewitt continued, the remaining money would be allocated. Hewitt alluded to the fact that the FY 2015 budget has not yet been adopted by the DDA board.

DDA board chair Sandi Smith.

DDA board chair Sandi Smith offered what she described as a “super friendly amendment” to change the description of the fiscal years to match the city of Ann Arbor’s labels. [The current fiscal year, which started July 1, 2013 is FY 2014 under the city's labeling scheme. The DDA has historically named the calendar years spanned by the fiscal year – e.g., calling this year FY 2013-14.]

John Mouat asked if there was conversation about the State Street improvement project. He wanted to know what the status of the project was. Hewitt told Mouat that the project was completed over 10 years ago. Hewitt said that in the upcoming fiscal year, the DDA should take a look at improvements in that area. Some of the improvements made back then had taken a beating, Hewitt said, so he felt it would be appropriate to spend some money in the State Street area to do repairs in the existing streetscape.

Mouat wondered whether some aspects of the State Street project had not been completed in the context of the moratorium on new streetlights.

By way of background, the “moratorium” on additional streetlights has its origins in a budget amendment approved by the city council in 2006. The history and current policy (which includes the moratorium) was reviewed in a message to councilmembers from city administrator Steve Powers this past summer. [.pdf of July 9, 2013 email]

At the Dec. 4 meeting, Hewitt said he didn’t think there were any streetlights that were a part of the State Street project plan that were not completed. DDA executive director Susan Pollay explained that as the lights were installed, the DDA discovered that the streetlights that had been selected didn’t cast as much light as they’d hoped. There were some very tall lights that fit that description, she said – at that time, light pollution was a very big concern, she added. The light levels were low, she said. Some light was supposed to be provided by store windows.

Pollay described how “dollars were held back” so that additional light could be added to the area. Ultimately the design, which looked good on paper, was not successful in achieving the desired light levels, she said. There’s an unofficial understanding that the city’s electric bills are not supposed to be increased by adding more lights. As the DDA waits to understand what the city policy on replacing streetlights might be, Pollay said it was appropriate to use that money to replace the light poles on Main Street. At some point, the light levels on State Street would be revisited, she said.

Mouat thanked Pollay for that clarification. John Splitt wanted to reaffirm that he hoped something could be done in the coming year in the State Street area – in connection with the lighting, as well as with the planters. Russ Collins offered what he called a “niggling point” about the Washington Street area: The streetlights on Washington Street are off – they’re not functioning on the south side, Collins said.

Outcome: The board voted unanimously to approve the additional $280,000 in funding.

Proceeds of Y Lot Sale

By way of background, at its Nov. 18, 2013 meeting, the Ann Arbor city council approved the sale of city-owned property downtown – a parcel north of William Street between Fourth and Fifth avenues – to Dennis Dahlmann for $5.25 million. The city purchased the property for $3.5 million 10 years ago and has been making interest-only payments on the property for that time. A balloon payment is due at the end of this year. The DDA has been shouldering roughly half of the interest payments on the loan taken out by the city.

The former Y building offered 100 units of single-resident occupancy (SRO) low-income housing. Soon after the city’s purchase, the mechanical systems in the building failed, and all the residents needed to be relocated. The building was subsequently demolished, which the DDA paid for. Equipment was installed so that it could be used as a surface parking lot until its ultimate disposition was determined.

At its Nov. 18 meeting, the council did not delve into the question of how the net proceeds of the pending sale would be defined, but some councilmembers indicated they were pleased that the result would be a deposit into the city’s affordable housing trust fund. A year ago at the council’s Oct. 15, 2012 meeting, councilmembers adopted a resolution that indicated the proceeds of the sale would:

“… first be utilized to repay the various funds that expended resources on the property, including but not limited to due diligence, closing of the site and relocation and support of its previous tenants, after which any remaining proceeds be allocated and distributed to the Affordable Housing Trust Fund …

That council policy was approved after the DDA board passed its own resolution on Sept. 5, 2012, encouraging the city to return to a previous policy that dedicated the net proceeds of sales of all city-owned land (not just the Y lot) to support affordable housing.

On Dec. 4, Keith Orr offered a replacement to the resolution that was included in the board packet. Orr alluded to the fact that he was bringing forward the resolution – because he served in the “Dave DeVarti seat” on the DDA board – even though many people had worked on it.

By way of additional background, during his period of service on the DDA board, DeVarti was a staunch supporter of funding for affordable housing. DeVarti was not reappointed, and in late 2008 Orr was appointed to replace him. After DeVarti left, board members sometimes have quipped that they were “channeling Dave DeVarti” when they spoke in support of affordable housing.

During public commentary at its Nov. 6, 2013 meeting, DeVarti addressed the board on the topic of the former Y lot, suggesting that the DDA purchase the lot outright, so that the need to repay the loan would be removed as the impetus toward selling the lot. That approach would give the city a lot more flexibility, he had argued.

The substitute resolution offered by Orr at the board’s Dec. 4 meeting included a separate “whereas” clause establishing the DDA’s position that affordable housing is in the interest of the downtown. The revision also named specifically the net amount that the DDA believes it has invested in the property: $1,439,599. And finally, the revised resolution separately recommended the city council waive its own reimbursement of its costs in connection with the sale of the former Y lot parcel.

Orr pointed out that the address of the property is 350 S. Fifth. He noted that the city now has a purchase agreement. Orr said that part of the sales agreement is that entities that had investment money in the property would be reimbursed. [Later in the meeting, city administrator Steve Powers, who was attending his first meeting as a DDA board member, corrected Orr's statement, pointing out that this was not part of the sales agreement but rather a city council resolution, passed in 2012.] The largest portion of the DDA’s contribution was paying for the demolition of the former Y building and picking up a portion of the interest payments.

A document provided at the DDA board meeting showed the demolition costs at $1.469 million and interest payments totaling $600,426 since 2004. The net contribution, factoring in the income the DDA received from the surface parking operations it established on the parcel after demolishing the building, was $1,493,959. So the resolution asked the DDA board to waive reimbursement of that amount. [The copy of the resolution distributed to the audience named $1,439,959 as the amount of the DDA board was waiving. That's the amount Orr named in reviewing the resolution. A separate document distributed at the meeting with the actual breakdown of payments and costs showed $1,493,959. The correct math based on those figures is the greater amount: $1,493,959.]

The resolution also asked the city council to waive its claim to reimbursements, which Orr said was around $ 2.7 million. The goal, Orr said, was to ensure that a substantial investment in affordable housing can be made.

Joan Lowenstein followed Orr’s description by saying that the DDA’s goal has been to see that the maximum amount from net proceeds of the sale go into the city’s affordable housing trust fund.

Orr confirmed Lowenstein’s understanding, but added that the resolution reflected everything that the DDA could do to maximize the investment in affordable housing as a result of that property sale. The DDA’s commitment to affordable housing, Orr said, was confined to investments within the district, or within 1/4 mile of the district. The city had more flexibility, Orr said.

Al McWilliams asked about the general motivation to use the proceeds from the Y lot to support affordable housing. Orr said that one reason is historical: The former Y building had included 100 single-resident occupancy units that provided low-income housing.

Orr continued by saying there’s always been this feeling that the proceeds of the sale should help low-income and affordable housing. Orr also pointed out that when board chair Sandi Smith served on the city council, the council was already talking about doing that. “It’s not a particularly new idea,” he concluded.

Bob Guenzel said that in his mind, it was more than a promise that those 100 units would be rebuilt in the downtown area, even if not on the same piece of property. That hasn’t happened for a number of reasons, Guenzel said, but the “substitute” is that the proceeds of the sale would be used for affordable housing. A lot of people remember that community commitment that was made, he concluded.

Russ Collins asked: Does the city have specific plans to build – or cause to be built – affordable housing? Collins wondered if there was any plan to contract with the Delonis Center [a homeless shelter located in Ann Arbor] to operate supportive housing? He wondered if there was any strategic plan to actually execute anything?

City administrator Steve Powers said that the city council’s first action would be to complete the sale of this property. He said he was not aware of any specific steps pending after that.

Collins ventured that there’s no strategic plan that the city is party to, other than “collect a bunch of money and use it for affordable housing?” “Council has no strategic plan …? If they do, that’s great,” Collins said. Powers responded to Collins by saying that the city is a party to work with the Washtenaw Housing Alliance (WHA) and the county’s office of community and economic development. There’s not a city-specific plan at this time, Powers said. WHA and the county’s office of community and economic development are talking about doing an assessment of affordable housing needs.

There’s a continuum, Guenzel said, from the very poorest to what is called workforce housing. He told Collins that there are a lot of discussions about it.

Historically, Smith said, there were funds in the affordable housing trust fund, and that has been spent down. There was no ability to plan for those funds, she said, because the balance is under $200,000 right now. It’s pretty nominal, she said, and you can’t build a unit for that amount. Guenzel noted that the question of whether some funds could be used for bricks-and-mortar versus supportive services was yet to be determined.

Collins had concerns about how prudent it is to allocate money toward a generally good idea without a clear strategy of what to do. “It’s great to do nice things. The DDA tries to do nice things, and we’re told that we’re a shadow government,” he said. If there’s no community strategy for addressing this, the DDA is doing something that might be nice in the future, he said, but he indicated he didn’t feel this was genuinely addressing the issue.

Smith replied that she didn’t necessarily think the DDA was the organization to tackle affordable housing. Smith noted the DDA has historically set aside money for affordable housing – and it’s now built into the DDA ordinance that the DDA is required to set aside $300,000 annually for affordable housing. She strongly supported the resolution because the DDA would then be able to leverage funds with the city and the county. She pointed to the last “resolved” clause that called on the city to follow the DDA’s example. Then those resources could be used to create a solid plan and move forward, she said.

John Mouat asked if it would be possible to take advantage of the city’s housing and human services advisory board (HHSAB). That would be a good entity to consult with in its advisory capacity. Powers indicated that he thought HHSAB had already had those kinds of discussions.

Outcome: The board unanimously approved the resolution waiving the DDA’s interest in proceeds of the sale of the former Y lot.

Proceeds of the Y Lot Sale: Parking Contract

Toward the end of the meeting during communications time, John Splitt indicated that he had some concerns about the sale of the former Y lot, based on the contract – under which the DDA manages the public parking system for the city. Under the contract, he said, the DDA is supposed to be given notice about the removal of parking spaces from the system. Sandi Smith stated that “We have not received written notice.”

Roger Hewitt responded to Smith by saying that he’d reviewed the most recent contract and he was not sure that the city actually is required give notice. DDA executive director Susan Pollay said that the contract refers to a “lease” and not a “sale.” Splitt said he just wanted to make sure that there was enough time to move equipment.

City administrator Steve Powers responded by saying that the city would be providing information about that, quipping: “It’s in the mail.” In connection with the sale of the property, the city would work through the removal of the parking equipment with the DDA, Powers said.

From the parking contract [emphasis added]:

The City shall not lease any portion of individual Facilities to third parties where such lease (either alone or cumulatively with other leases in such Facility) would reduce the number of usable parking spaces in such Facility by more than one percent (1%) or five (5) parking spaces, whichever is less, without first (i) providing DDA with thirty (30) days prior written notice; (ii) consulting with DDA about the location and terms of use of such leased spaces to reduce the impact of such use on DDA’s use of the Facility; and (iii) upon DDA’s written request delivered no more than fifteen (15) days after notice of the proposed lease, executing a side letter between City and DDA, the sole purpose of which is to make DDA whole for the loss of Gross Parking Revenue associated with the reduced parking spaces.

FY 2013 Audit

Board member Roger Hewitt made the motion to accept the DDA’s 2013 financial audit. Every year the DDA has an audit performed to ensure the DDA’s financial position is accurately stated. [.pdf of DDA FY 2013 audit]

DDA board member Roger Hewitt.

The DDA uses the same firm as the city [Rehmann], Hewitt said. The audit came back this year with an “unmodified” opinion, meaning there were no changes. He explained that the outcome essentially means that it was “clean” and that the DDA’s financial statements are an accurate reflection of the DDA’s financial position.

There was a suggestion, he allowed, to have an independent review of general journal entries. That’s been put in place, he said. A CPA the DDA has on contract will review those journal entries, he reported.

“Everything is just fine, according to our auditor,” Hewitt said. The conversation with the auditor was a good conversation that will help shape the budget in the upcoming year, Hewitt said.

Outcome: The DDA board voted unanimously to accept the FY 2013 audit report.

624 Church Street Parking CIL

By way of background, on Nov. 6, 2013 the DDA board approved the purchase of 48 parking permits under the contribution-in-lieu (CIL) program for a revision to a proposed residential development at 624 Church St. in downtown Ann Arbor. The spaces were approved to be provided in the Forest Avenue parking structure.

The CIL program allows a developer the option of purchasing permits to satisfy a parking requirement that would otherwise be satisfied by providing parking spaces on site as part of the project.

The original proposal for 624 Church, which received site plan approval from the city council at its March 4, 2013 meeting, was for a 13-story, 83-unit apartment building with approximately 181 beds. And for that version, the Ann Arbor DDA had authorized the project to purchase up to 42 monthly permits through the city’s contribution-in-lieu program.

The newly revised 624 Church St. project, which still needs planning commission and city council review, is larger than the original project, with roughly 122 units and 232 beds. The parking requirement is a function of the by-right premiums for additional square footage beyond the basic by-right of 400% floor area ratio (FAR). So the parking requirement for the revised project is greater than for the original version of the project. That’s why the DDA was asked to increase the number of permits from 42 to 48. The number of required parking spaces for the revised version of the project is actually 53, but five of them will be provided on site.

The DDA makes the decision about whether there’s adequate capacity in the parking system to allow the sale of additional monthly permits – because the DDA manages the city’s public parking system under a contract with the city.

Ann Arbor’s “contribution-in-lieu-of-parking” program was authorized by the city council on April 2, 2012. That program allows essentially two options: (1) purchase monthly parking permits in the public parking system for an extra 20% of the current rate for such permits, with a commitment of 15 years; or (2) make a lump sum payment of $55,000 per space. It’s option (1) that the 624 Church St. project is using.

624 Church Street Parking CIL: Public Commentary

Brad Moore, architect for the 624 Church St. project, appeared before the DDA board during public commentary time at the start of the meeting. He asked board members to consider modifying the terms under which the 624 Church St. project would be able to lease spaces monthly parking spaces under city’s contribution-in-lieu (CIL) program. Currently the project has been allocated 48 spaces for the minimum period under the CIL, which is 15 years. It’s come to the attention of the developer (Opus) that as it lines up financing, the financing companies would like to have two 10-year extensions added to the agreement, so that the length of the agreed-upon leasing of the parking spaces would cover at least a standard 30-year mortgage.

Moore said that Opus was asking that the agreement be amended – to add an option for two 10-year agreements that would exceed the minimum financing period. DDA executive director Susan Pollay told Moore that the item could be brought to the board in the next few minutes as an action item during the operations committee report.

624 Church Street Parking CIL: Board Deliberations

A draft resolution was distributed to the board at the meeting that would have addressed the issue that Brad Moore had raised. Roger Hewitt said the issue had only been brought to his attention that day.

He said that in his experience, funding for large commercial real estate projects tended to be for a 20-year financing period. He referred to Village Green’s City Apartments project as well as Ashley Mews as examples.

The resolution would add an additional five years to the existing agreement so that it could run, at the owner’s option, for 20 years instead of 15 years.

The indication from Moore was that the five-year extension would still endanger the financing for the 624 Church St. project. Hewitt indicated a reluctance to commit to a parking agreement for the length of time that Moore was requesting. He wanted to see some evidence that a 20-year financing plan – which in his experience is typical – is not possible before setting a new precedent.

Russ Collins ventured that the matter could be tabled until more information is received. Moore said that the parking would not necessarily be tied up in a single structure. Hewitt reiterated his concern that a 30-year term in this case would set a precedent for other developers.

Al McWilliams proposed an approach that would provide for optional renewal.

After some back-and-forth, Sandi Smith indicated that her preference would be for Moore to come back to the operations committee and allow the committee members to “chew on it” a bit more. The next operations committee meeting will take place on Dec. 18 at 11 a.m. Hewitt said.

Outcome: The board tabled the question of the CIL agreement in connection with the 624 Church St. project.

Communications, Committee Reports

The board’s meeting included the usual range of reports from its standing committees and the downtown citizens advisory council, as well as public commentary. In addition to information reported earlier in this article, here are some highlights.

Comm/Comm: Main Street BIZ

During public commentary time at the start of the meeting, Ellie Serras introduced herself to the DDA board as the community relations director for the Main Street Business Improvement Zone (BIZ).

By way of background, the Ann Arbor DDA board voted on April 1, 2009 to award $83,270 to defray various costs associated with the formation of the Main Street BIZ. Those costs included accounting, auditing, operations and legal services.

On Dec. 4, Serras told the board she was there to bring them up to date on the organization’s activities and plans for the future, and to thank the board for their investment from the very beginning. A BIZ allows property owners to establish a vision and to select services compatible with that vision, she said. The DDA’s support of the Main Street BIZ allowed development of a successful campaign that has grown into a fully-functioning provider of important services that have improved the quality of the Main Street neighborhood, she told them.

The Main Street BIZ was established in 2010 according to the state enabling legislation, receiving overwhelming support from property owners in the three-block area of Main Street from Huron Street down to William Street, she said. The Main Street BIZ provides sidewalk snow removal, sweeping, handbill removal and landscape improvements in that area.

The services and contractors had been “skillfully managed” by the Main Street BIZ board of directors within the parameters of an annually approved budget, Serras said. Funding for the BIZ is generated by an assessment added on to the property owners’ summer and winter tax statements, she said. The BIZ board had been diligent in protecting the property owners’ investment and as a result, the existing fund balance is adequate so that even if this winter brings a severe snowstorm, the snow removal could be handled without imposing the winter tax assessment this year.

So the BIZ board has determined that no BIZ assessment would be on their 2013 winter tax statements. Even though the assessment will not be imposed, the area will still receive the same level of consistent services that it has over the last three and a half years, Serras said.

The Main Street BIZ is now currently contemplating the possibility of expanding its boundaries, she reported, based on positive comments from surrounding property owners. As it contemplates such an expansion, she continued, the Main Street BIZ would be using the blueprint that had been developed in connection with the grant that the DDA had awarded to the Main Street BIZ. The blueprint will be updated to include changes to the state statute and the procedures used for establishing a BIZ.

In appreciation to the DDA, Serras said, the BIZ board wanted to invite the DDA board to join the BIZ for coffee and pastries to talk about the BIZ – on Jan. 28 at 9 a.m. at the DDA offices. The BIZ would not be asking the DDA for anything, but wanted to express its appreciation for the DDA’s support. She alerted the board to the BIZ website: annarbormainstreetbiz.com

Comm/Comm: Downtown Citizens Area Advisory Council

Ray Detter addressed the board as chair of the downtown area citizens advisory council. He told the DDA board that the CAC has a holiday party every year when it discusses developments over the last year and things that it wants to work for in the coming year. He said the CAC supports more public art, more trees – and taking better care of those that are already in place. The group also supports improvements to the alley between East Liberty and East Washington near The Liberty Square parking structure, to make it a more public place, he said.

The CAC supports the DDA’s development of a streetscape framework plan, and its parking and transportation management plan. The downtown transportation plan is part of a transportation plan for the entire county, Detter said, that includes Zipcars, mopeds, the Ann Arbor Area Transportation Authority’s AirRide service and the getDowntown go!pass program. Detter continued by mentioning the north-south commuter rail project (WALLY), and the possible connector. The CAC wanted to avoid any need for additional above-ground parking structures, Detter said.

But the two most important areas of focus, he said, were population and retail. Retail will not thrive, he said, without a commitment to residential. The CAC applauded the success of Urban Outfitters, Bivouac and Renaissance, but was appalled by the loss of Selo/Shevel Gallery and Seyfried Jewelers.

Comm/Comm: State Theater

Ray Detter, speaking on behalf of the downtown area citizens advisory council, continued by saying that the CAC was committed to the survival of the State Theater as part of a historic theater district in downtown Ann Arbor. The theater helps define the essential identity of downtown Ann Arbor, he said. Detter noted that many people remembered the Campus Theater.

Detter acknowledged the demand for office space, but that can’t equal the value of the two theaters, he contended. The Michigan Theater, Detter said, had provided the venue for the first “talking pictures” in Ann Arbor in 1928 and the State Theater had been around since 1942. [DDA board member Russ Collins, who's executive director of the Michigan Theater, corrected Detter, pointing out that it was the Orpheum that was the first "talking picture" movie theater.]

The State Theater attracts 50,000 people a year, Detter said. Some people “might think it’s a dump at this point,” but there are ways of fixing it up, he said. Detter added that he was looking forward to the expansion of the Cinetopia series with the State Theater as one of the venues.

It’s a challenge to save the State Theater, Detter said. But the Michigan Theater board has taken the initiative to open a conversation with State Theater LLC to work on a way for the community to purchase and retain the State Theater as part of the “theater district.” The DDA should be a part of that process, Detter said. Other DDAs have done this kind of thing, “and we can do it, too.” Detter said he still remembered the $250,000 that had been given by the DDA for the lobby of the Michigan Theater.

Later in the meeting, Russ Collins followed up on Detter’s commentary by saying it was not a DDA matter per se. But regarding the State Theater, the Michigan Theater is in talks with the owners of the State Theater building. He was hopeful that would have a positive outcome with respect to preserving the cinema exhibition capability at the State Theater. He was happy with the owner’s willingness to talk.

Comm/Comm: New Board Members

Board chair Sandi Smith invited the new board members who’d been added since the last meeting to introduce themselves.

City administrator Steve Powers quipped that he would not need four minutes [the time limit afforded public speakers]. “It’s a pleasure to be with you,” he said. When mayor John Hieftje had asked him to serve, he’d agreed with enthusiasm, he reported. He appreciated and understands the importance of the DDA to the overall mission of the city. The city council had confirmed his appointment Monday night [Dec. 2]. He told the board he’d worked as city administrator for a little over 2 years. In that time, he’d gotten to know executive director Susan Pollay and had enjoyed the professional relationship between the city and the DDA. Powers saw his service on the board as strengthening that existing relationship between the city and the DDA.

Cyndi Clark introduced herself as a retail owner on Main Street for Lily Grace Cosmetics. A month ago, she’d just opened up a second business, she said – a spa. She was delighted to be on the DDA board. Her family lives in Ann Arbor and she was born and raised here, she said. She was delighted to be working with everyone. “It’s a full term for me!” she concluded.

Comm/Comm: Connector

By way of background on the connector study, the Ann Arbor Area Transportation Authority is currently conducting an alternatives analysis study for the corridor running from US-23 and Plymouth southward along Plymouth to State Street, then farther south along State to I-94. The alternatives analysis phase will result in a preferred choice of transit mode (e.g., bus rapid transit, light rail, etc.) and identification of stations and stops. A previous study established the feasibility of operating some kind of high-capacity transit in that corridor.

Roger Hewitt participates on the technical committee for that study. The DDA has contributed funding toward the study.

At the Dec. 4 DDA board meeting, Hewitt reported that three public meetings had been held on the connector project recently. The board then watched a video created to explain the project. After presentation of the video, Hewitt described the public meetings as an effort to get input on the different route options. The turnout was pretty good, he said. The morning session wasn’t all that well attended, with perhaps 10 people, Hewitt said, but the noon and evening sessions each had over 25 people attend, he said. People had a lot of questions and a lot of information was exchanged, he said, but he allowed there wasn’t as much feedback on specific transit routes as they would have liked.

Unless you’re in the “nitty gritty of it,” Hewitt felt that it’s a bit overwhelming to consider all the possibilities. The next meeting of the technical committee would take place on Friday [Dec. 6], he said, with a follow-up meeting the next Monday [Dec. 9]. The study needs to be completed in the first quarter of 2014, he said. The outcome of the study would be the “preferred local option,” Hewitt said, and he’d keep the board up to date on that.

Joan Lowenstein asked Hewitt to confirm that in the context of the basic “boomerang” route, there would still be a significant impact depending on how the route was planned through the downtown. Hewitt confirmed that, and said there had been a lot of discussion about it. One possibility that had been suggested was to just head south on State Street. There are significant problems with the width of all streets. He’d been pushing for the idea that the route needed to come at least as far west as the Blake Transit Center [on Fifth Avenue].

Right now, the group is looking at two stations – one in the central campus (State Street area) and one in the center of downtown (Main Street area). Neither the route nor the station locations have been determined, he said. There was some desire not to cross Main Street, he noted. That’s because the amount of federal support would depend on a demonstration that there’d be a savings in travel time – because “that’s how the feds measure things,” he said.

If the route crosses Main Street, then it would have to cross back over Main Street to get to the South State Street area, Hewitt explained, and with the current traffic backups on Main Street, it would be easy to get backed up during rush hour in the Main Street area. So the group is looking to stay east of Main Street.

From left: John Mouat and Roger Hewitt.

John Mouat asked for an analysis of the economic impact of such a project. In that context, he asked about the planned timing of the project. Hewitt responded by saying, “We’re talking about a while!” He noted that this is the second phase of the study, after the initial feasibility study. That study had shown that the existing ridership justifies a more robust form of transit than is currently in place. The current phase is an alternatives analysis, which would determine the local “favorite” route and mode of transportation. After that an environmental study would be done.

After all of that, you “stand in line for federal dollars,” Hewitt said. For a project that meets the right criteria, the federal government might fund up to half the cost of the project, he said. The cost, depending on the route and the mode, could be as little as $100 million and as much as $500 million. After getting the federal dollars lined up, he continued, you’d have to line up the local match. The University of Michigan has stated publicly that they’d be involved, he said, without putting a particular dollar figure on their participation. After construction and ordering of vehicles, Hewitt said, we shouldn’t expect anything rolling for 10 years.

But this phase of the study, Hewitt said, would be completed in the next three months or so. He felt that a decision was pretty close for the downtown route. It would mean a pretty big change to downtown, Hewitt said. He allowed that it’s hard to get people excited about this now, when the project is 10 years off.

Comm/Comm: Bicycles, Alt Transportation

Keith Orr gave an update on the bike share program. A representative from B-Cycle, the selected vendor, had been brought in by the Ann Arbor-based Clean Energy Coalition (CEC). They looked at potential sites for locating stations. The few on-street spots were too narrow for a station, Orr reported. So as of now, there were no requests from the CEC of the DDA for an on-street parking spot. The CEC still anticipates an Earth Day opening in the spring of 2014. Right now, the plan is for 14 stations, Orr said. Stations will be located as far north as the University of Michigan north campus, and as far west as Ashley Street.

Orr also reported out on the first usage stats for the Bike House – an enclosed facility in the Maynard Street parking structure. Orr reported that people love having it there, saying that it’s largely a commuting option for people. The time records for when people use it show that people use it primarily at the beginning of the day and the end of the day, he said, but it’s not the same people all the time. He concluded that people who are using the Bike House are not relying on one mode of transportation. Discussion is taking place about other locations where similar facilities could be constructed, Orr reported.

And based on recent go!pass stats, it continues to be a very robust program, Orr said. [The DDA funds the go!pass program, which is administered by getDowntown, whose staff are employees of the Ann Arbor Area Transportation Authority.] More rides were taken and more cards were sold and used. Orr concluded that it continues to be a very popular and important program.

Comm/Comm: Winter Classic, The Puck Drops Here

By way of background, two major events are scheduled for New Year’s Eve and New Year’s Day in Ann Arbor: The Puck Drops Here and the National Hockey League’s Winter Classic Game. In connection with the NHL Winter Classic Game to be played on New Year’s Day, the Ann Arbor Area Convention and Visitors Bureau is hosting a New Year’s Eve event called The Puck Drops Here, which will mimic the dropping of the lighted ball in Times Square, but with a 6-foot diameter lighted “puck” that is being fabricated by METAL.

At the DDA board’s Dec. 4 meeting, DDA executive director Susan Pollay reviewed highlights of the strategy that will be deployed for the NHL Winter Classic and The Puck Drops Here events.

For New Year’s Eve, the Fourth and William parking structure, as well as the Forest structure, will have a flat rate fee. That way, people will not have to stop at the cashier booth on their way out.

On New Year’s Day, the city council had approved the street closures that will be in place. The NHL has asked that staffing be provided at public garages, Pollay said. That would allow for the reservation of a parking space in advance. If people reserve in advance, that would allow them to drive directly to a specific location.

Staff would also be handing out maps – mostly with an eye to help people after the game find the place where they’d parked. Pollay also told the board that the names of those businesses that are going to be open on Jan. 1 would be listed on the back of the map.

At all structures and lots, Pollay said, a flat fee of $5 would be charged on New Year’s Day. It’s meant to reimburse the DDA for its costs, not to make a lot of money.

John Mouat asked if anyone had developed a projection of how many people will be needing to park. Pollay said that to her knowledge, no. As much as possible, people are being encouraged to use the buses and shuttles that will be provided. They’re also working to communicate to people about the parking that’s available at locations away from the stadium.

City administrator Steve Powers noted that lawn parking will be allowed, as it is on home football game days.

Comm/Comm: Downtown Ambassadors

By way of background, for several years, the Ann Arbor DDA has had an interest in maintaining some kind of additional police patrol presence in the downtown. In the mid-2000s, the DDA entered into a contract with the city of Ann Arbor with the implicit hope that the city would maintain the dedicated downtown beat cops. That contract was structured at the time to pay the city $1 million a year for 10 years, with the city able to request up to $2 million a year for a maximum of $10 million.

That hope was not realized, and the DDA has since discussed the idea of providing additional funding for police or for “ambassadors.” The idea of ambassadors was explored in the context of subsequent re-negotiations of the contract between the city and the DDA under which the DDA operates the parking system. The DDA wanted to be assigned responsibility for parking enforcement (a function performed by the city’s community standards officers) and imagined that activity to be performed in an ambassador-like fashion.

At its June 3, 2013 meeting, the city council approved a resolution encouraging the DDA to provide funding for three police officers (a total of $270,000 annually) to be deployed in the DDA district. DDA board members visited Grand Rapids this fall to observe a new downtown ambassador program in that city. The initial report from that visit was given at the Ann Arbor DDA board’s Nov. 6, 2013 meeting.

At the board’s meeting on Dec. 4, Roger Hewitt reported that the operations committee had a lengthy discussion about the idea of hiring ambassadors, based on the visit by some board members to Grand Rapids to see the ambassador program there. A number of views were expressed, Hewitt said, but most people thought it was a good idea and that the Ann Arbor DDA should aggressively pursue it. At the next operations committee meeting, Hewitt said, it would be pursued. Personally, he said, he would like to see something in place for the summer of 2014, if it’s possible to move that quickly.

Comm/Comm: Prosperity

Joan Lowenstein reported out on the partnerships committee discussion about the A2 Ypsilanti Regional Chamber’s annual Impact conference.

Keith Orr and Joan Lowenstein.

The focus this year was based on a presentation made by Lou Glazer of Michigan Future Inc. Glazer’s work suggested that there’s a strong connection between prosperity and placemaking, and attracting young talent. The trends indicate that prosperous states show a higher proportion of wages from the “knowledge industries” – medical, technical and legal professions, Lowenstein said. Prosperous states also have a high proportion of college grads. Taxes don’t play as much of a role in prosperity, she said – it’s all about educational attainment and quality of place. Michigan and Ann Arbor are lagging behind other places in terms of the number of young professionals who are attracted here.

For example, she said, Madison, Wisc. has twice the number of young professionals as Ann Arbor does, Lowenstein reported. Glazer had said that Ann Arbor has an important role to play in prosperity, but the elements that are key to that need to be embraced: transit, private sector growth and density, she said. A lot of people want to attract families, but attracting young professionals will lead to that, she said, because people tend to establish families where they get their first job. Ann Arbor needs to do a better job of engaging young professionals in the community by giving them a better voice, Lowenstein said.

One of the panels at the Impact conference included young people who are reluctant to put themselves out in public positions, because of the nature of the media and social media – because you can get trashed by putting yourself out in public, Lowenstein said. She called it an unfortunate element of our modern life.

DDA board member Al McWilliams will be working on DDA communications.

Lowenstein also reported that the partnerships committee meeting will establish a subcommittee focused on communications. Al McWilliams and Rishi Narayan will head up that subcommittee, she said – noting that McWilliams is involved in that sort of thing all the time. [McWilliams is founder of the ad agency Quack!Media.]

January’s board meeting, which was originally scheduled for Jan. 1 – because it’s part of the first-Wednesday meeting pattern – was shifted to Jan. 8. There was no traction for the possibility of changing the day of the week or the noon meeting time for the regular board meetings.

Comm/Comm: Pedestrian Crashes

During public commentary time at the end of the meeting, Ed Vielmetti addressed the board about pedestrian safety issues. He noted the outcome of the city council’s recent action on the city’s crosswalk law [and the announcement by mayor John Hieftje that he would be vetoing the change the council had voted 6-4 to approve]. The current ordinance mostly addresses outside-downtown issues, Vielmetti said, with its reference to non-signalized crosswalks. In preparing for the city council meeting, Vielmetti said, he’d looked at about eight years of car crash data. What he’d noticed consistently is that the majority of pedestrian crashes happen in the downtown and campus area – probably because lots of people are walking downtown.

The narratives in some of the accident reports often describe how the pedestrian was crossing with a walk light, while the car had a green light and was turning, but didn’t see the pedestrian, Vielmetti said. This is an issue that’s within the purview of the DDA to address, he added. There’s only so much education you can do, with a transient student population. And there’s only so much enforcement you can do without adding to the police force. But the engineering could be addressed, he said – through careful attention to the built infrastructure where people cross the street, or near parking structures where there are a lot of pedestrian-car interactions.

Present: Al McWilliams, Cyndi Clark, Bob Guenzel, Roger Hewitt, Steve Powers, John Splitt, Sandi Smith, Russ Collins, Keith Orr, Joan Lowenstein, John Mouat.

Absent: Rishi Narayan.

Next board meeting: Noon on Wednesday, Jan. 8, 2014, at the DDA offices, 150 S. Fifth Ave., Suite 301. [Check Chronicle event listings to confirm date]

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According to city of Ann Arbor CFO Tom Crawford, the city’s response to the letter would not require any city council action. The city staff would be explaining to the state how the city’s internal financial procedures mitigate against what Crawford characterized as a “minor issue.”

A note in the city’s own audit report called attention to the fact that:

An excess of expenditures over appropriation were reported in the local street nonmajor special revenue fund (final budget of $1,582,562 and actual of $1,623,495); this excess of $40,933 was absorbed by available fund balance. No other expenditures in excess of appropriations were reported.

The city’s local street fund receives Act 51 money from the state and is used primarily for street repair and maintenance.

If expenditures exceed the appropriations for any fund, it violates state statute, and thus triggers a letter from the Department of Treasury. The letter notes the violation and requires the city to file a corrective action plan (CAP) within 30 days. The CAP, according to Crawford, would not require any city council action, and would include an explanation of the city’s internal procedures. Crawford observed in an emailed answer to a Chronicle question that “They note expenses over by $40K but did not note transfers out that were under budget by $60K.”

Terry Stanton, with the state’s treasury department, responded to a Chronicle inquiry with an email that explained how common such letters are:

Letters, such as the one sent to the City of Ann Arbor, are not rare, with approximately 400 sent to local units in 2012 (there are about 1,800 cities, villages, townships and counties in Michigan).

Essentially, the letter acknowledges certain conditions which have been noted in a local unit’s audit report and informs a city (or village, township, county) that it needs to submit a corrective action plan. They are expected to indicate to the department how they plan to fix any deficiencies noted in the audit report.

To help ensure the local unit submits a corrective action plan in a timely fashion, there can be consequences if a plan isn’t submitted. Those consequences are outlined in the letter.

The audit of Ann Arbor’s FY 2013 financial statements was recently reviewed by the city council’s audit committee.

[.pdf of Nov. 22 state of Michigan Dept. of Treasury letter to city of Ann Arbor] [.pdf of final audit report released on Nov. 15, 2013]

From left: Mark Kettner of the accounting firm Rehmann; Carla Sledge, Wayne County’s chief financial officer; Kelly Belknap, Washtenaw County’s finance director; and Pete Collinson, accounting manager for Washtenaw County. (Photos by the writer.)

The county’s finance staff, along with the auditor, Mark Kettner of Rehmann, highlighted several points, including a relatively dramatic increase in the general fund balance over the last few years – from $9.7 million in 2009 to $16.8 million at the end of 2012. Kettner also explained upcoming accounting changes that will require unfunded liabilities from the county’s pension and retirement healthcare plans – now totaling nearly $250 million – to be recorded in a different way, with more disclosure.

The new accounting changes – required by the Governmental Accounting Standards Board (GASB) – won’t begin until 2015, but commissioner Dan Smith (R-District 2) wondered whether the county could implement the changes sooner. It might be possible, Kettner replied, but “I don’t know why you’d want to do it.” He suggested that the board hold a working session to go over the upcoming changes in more detail.

Kettner also pointed out that the changes will affect government entities in different ways. For example, it’s likely that there will be more impact on the city of Ann Arbor, because of how its many “enterprise” funds might be affected and the implications that would have on outstanding bonds. At minimum, the changes will mean more work for finance staff.

Also at the April 3 meeting, commissioners voted to add 39 new jobs in the community support and treatment service (CSTS) department, which provides mental health and substance abuse services to county residents. The work is primarily funded by the Washtenaw Community Health Organization, a partnership between the county and the University of Michigan Health System. Most of the new jobs are union positions. Dan Smith expressed concern about adding to the county’s payroll, but supported the resolution along with other commissioners in a unanimous vote.

The board also took an initial vote to dissolve The Washtenaw Ride. That Act 196 authority is a remnant of a failed attempt to create a countywide transit system last year. Efforts to expand the current reach of the Ann Arbor Transportation Authority are still underway, but don’t require the structure that was put in place under Act 196.

The topic of public transportation was raised later in the meeting as well, as Ronnie Peterson (D-District 6) asked about the county’s role in the southeast regional transit authority (RTA). The RTA was formed by the state legislature last year to coordinate regional transit in the city of Detroit and counties of Wayne, Macomb, Oakland and Washtenaw. There was not uniform support for Washtenaw County to be part of this effort, and it’s not yet clear what the impact will be on the AATA.

In other discussion, Yousef Rabhi (D-District 8) highlighted a proposal in front of the Ann Arbor city council regarding possible ordinance changes governing the Ann Arbor Downtown Development Authority. Depending on what the council decides, there might be implications for the county, he said, so he wanted to put it on the board’s radar. For background on this issue, see Chronicle coverage: “DDA Tax Capture Change Gets Initial OK” and “DDA Ramps Up PR after First Council Vote.”

Also briefly mentioned was a discussion that occurred at a late March county pension commission meeting, raising questions about the new labor contracts that the board approved on March 20, 2013. At issue is whether the county complied with a state law requiring supplemental actuarial analysis before pension benefit changes are adopted. The county administration subsequently conferred with outside legal counsel, and confirmed their view that no new actuarial analysis was necessary.

And although it wasn’t discussed at the April 3 board meeting, the recent labor contracts resulted in another issue related to compliance with state law: Elimination of the county’s healthcare benefits for domestic partners.

When the county’s previous labor contracts were opened for renegotiation, that triggered the need to comply with a state law passed in late 2011. PA 297 restricts public entities from offering domestic partner benefits. For the county, those benefits had been offered to “other eligible adults” who met certain criteria, like sharing the same residence. Nine county employees had been using those benefits, according to Diane Heidt, the county’s human resources and labor relations director. The benefits were eliminated as of April 1.

Heidt noted that even if the contracts hadn’t been renegotiated in March, the benefits would have eventually been eliminated when the previous contracts expired at the end of 2013. She said the administration was very disappointed about the change, and continues to explore other options that serve the employees while complying with state law.

2012 Finance, Audit Reports

The main action of the April 3 meeting related to the county’s financials, including a report from the auditor, Mark Kettner of the accounting firm Rehmann. Chronicle readers will likely recognize his name, as Kettner oversees audits for several local government entities, including the city of Ann Arbor.

Part of the financial presentation included an award to the county. As she has for the past several years, Carla Sledge – Wayne County’s chief financial officer and past president of the Government Finance Officers Association – presented the county with a certificate of achievement for excellence in financial reporting for its fiscal year ending December 2011. The award is based on the county’s timely completion of its state-mandated comprehensive annual financial report, or CAFR. This is the 22nd year that Washtenaw County has received a certificate of achievement.

Pete Collinson of the county’s finance department also gave a brief presentation with highlights from the current set of reports. The financial reports presented to the board are:

• Washtenaw County Comprehensive Annual Financial Report (CAFR) for the year ended Dec. 31, 2012.
• Washtenaw County single audit of federal awards for the year ended Dec. 31, 2012.
• Washtenaw County Building Authority financial statements for the year ended Dec. 31, 2012.
• Washtenaw County Department of Public Works projects financial statements for the year ended Dec. 31, 2012.
• Washtenaw County Water Resources Commissioner financial statements for the year ended Dec. 31, 2012.
• Washtenaw County Employees Retirement System (WCERS) financial statements for the years ended Dec. 31, 2011 and Dec. 31, 2012.
• Washtenaw County Money Purchase Pension Plan (MPPP) financial statements for the years ended Dec. 31, 2011 and Dec. 31, 2012.
• Washtenaw County Voluntary Employees Beneficiary Association (VEBA) financial statements for the years ended Dec. 31, 2011 and Dec. 31, 2012.
• Washtenaw County Community Support & Treatment Services (CSTS) financial statements for the year ended Sept. 30, 2012.
• Washtenaw County Employment Training and Community Services Fund (ETCS) financial statements for the year ended Dec. 31, 2012 (conducted by the accounting firm of Stewart, Beauvais & Whipple).
• Washtenaw County Employment Training and Community Services Fund (ETCS) single audit of federal awards for the year ended Dec. 31, 2012 (conducted by the accounting firm of Stewart, Beauvais & Whipple).

Collinson described the process of fiscal review leading up to the audit. Auditors arrive in January and stay for about five weeks, then work with county staff for an additional period to finalize the financial statements. The goal is to make a presentation to the board by the first meeting in April, he said. He joked that an audit “certainly isn’t something we’d choose to do” every year. An annual audit is mandated by the Michigan Uniform Budgeting and Accounting Act (PA 2 of 1968), which requires it for local units of government with a population of 4,000 or more residents.

There are two components to the audit, Collinson explained: (1) an audit of financial statements for all of the county’s funds, including assets, liabilities, revenues and expenditures; and (2) a “single audit” of all federal grants, to see if the county complied with federal requirements attached to those grants. Last year, he noted, the county received about $28 million in federal grants, “so it’s a significant part of our operation.”

The 206-page CAFR is the main document that’s produced as a result of the audit, Collinson said. He noted that the auditor has given the county a clean opinion.

He also highlighted the different sections of the CAFR. For example, a statistical section provides a range of trend data, including employee count, expenditures, revenues and other financial information. “It’s a helpful section to look at the trends over time,” he said. [.pdf of CAFR statistical section]

Collinson said he wouldn’t spend a lot of time on the general fund report, noting that the board had received a detailed update on 2012 year-end finances at its March 20, 2013 meeting. The general fund ended 2012 with a $2.3 million surplus, and a fund balance of $16.8 million – or 16.8% of annual general fund expenditures and appropriations. He characterized that position as very good, and in line with the minimum fund balance recommended by the Government Finance Officers Association (GFOA). It would be good to build on that, he added, but it was impressive to finally reach the minimum. “I didn’t think we’d get there in my years here,” he said.

From left: Commissioner Felicia Brabec (D-District 4) and county administrator Verna McDaniel.

Turning to the report on all of the county’s fund balances, Collinson noted that some funds are restricted and can only be spent for a limited range of purposes. All county fund balances totaled $102.275 million at the end of 2012. Of that, $31.989 million was unobligated. [.pdf of schedule of fund balances as of Dec. 31, 2012]

He also mentioned the CAFR’s schedule of long-term liabilities over the last five years. Primarily, those liabilities are debt – such as debt related to construction projects – and actuarial liabilities for the pension and retirement healthcare systems. [.pdf of long-term liabilities] The schedule of long-term liabilities shows that total liabilities have increased from $393.9 million at the end of 2008 to $446.6 million as of Dec. 31, 2012.

Collinson also highlighted the county’s state revenue-sharing reserve fund, which had a balance of $4 million at the end of 2012. That remaining amount will be spent in 2013, and the fund will “sunset,” he said. The state has reinstated revenue-sharing at a lower level, with the county getting about $2.8 million for the current year. That amount is expected to increase, he said.

New to the CAFR this year are changes that reflect the county’s implementation of Governmental Accounting Standards Board (GASB) statements 63 and 65. Certain items that were previously classified as assets are now called “deferred inflows.” And certain liabilities are now called “deferred outflows of resources.” In addition, the balance sheet (statement of net assets) is now called the statement of “net position.” Collinson joked that if he read the definition of these terms, it wouldn’t clarify things. He noted that the terms “assets” and “liabilities” have worked well for centuries, but GASB has decided to change the terminology. He characterized these changes as minor, though he noted that “bigger changes are coming down the pike.” [The reference was to implementation of GASB 67 and 68, which was discussed later in the meeting.]

Collinson reported that despite the economy, the county has maintained its AA+ bond rating with Standard & Poor’s, and an Aa2 rating with Moody’s. It’s the second-highest rating possible, he noted. The county administration hopes to secure the triple-A bond rating in the future.

Collinson concluded by introducing Mark Kettner from the accounting firm Rehmann, who reviewed the 2012 audit and answered questions from commissioners.

Kettner noted that the current report was “unmodified” – a new term that’s being used instead of the previous “unqualified.” Both mean that the audit was clean, which is the highest level of assurance for financial statements. He cautioned that “the auditor did not say that everything is OK.” That is, it’s not an opinion on internal controls or the county’s financial position. It’s an opinion that the financial statements are fairly presented in accordance with criteria that meet GASB principles, he said.

Kettner also highlighted some terminology changes that result from GASB’s new “clarity” standards. Like Collinson, he characterized the changes as subtle, adding that it created some “nuisance work” compared to previous statements.

Bigger changes are coming, however. About a month ago, Kettner said he met with county administration and board leadership to talk about the current report as well as upcoming GASB standards 67 and 68. It would take hours to explain, he said, but he summarized it as a very big change dealing with pension plans and retirement healthcare. It will require an extra actuarial report, more disclosure, and recording of liabilities in a different way.

He pointed to the current pension fund statement – on page 115 of the CAFR – and noted that the current unfunded actuarial liability of $101 million will be recorded in 2015 as a liability on the county’s governmental-wide financial statements. That won’t have as great an impact as it would if it were required to be booked as a general fund liability, he said. [.pdf of CAFR statement regarding pension fund] “It’s going to be a big pop into the financial statements,” he said.

Two years later, in 2017, the same thing will occur for retiree healthcare – the county’s Voluntary Employees’ Beneficiary Association (VEBA), a 501(c)9 trust established to pre‐fund retiree healthcare benefits. Kettner said the county will be booking that liability – now at about $148 million – on the governmental-wide financial statements. [.pdf of CAFR statement regarding VEBA]

There’s lots of lead time, Kettner said, but he suggested that the board hold a working session, and perhaps include the boards of VEBA and WCERS, to talk in more detail about what this transition will entail.

Kettner praised the county for completing its audit by the end of the first quarter, saying it’s as good as any publicly traded Fortune 100 or 500 company.

2012 Finance, Audit Reports: Board Discussion

Dan Smith (R-District 2) asked if there’s anything preventing the county from implementing GASB 67 and 68 standards sooner than required. There’s nothing to prevent that, Kettner replied, but “I don’t know why you’d want to do it.”

Smith said he’d like to do it in order to get a clearer understanding of the county’s financial picture, because the county will be forced to do it eventually. Kettner likened it to going to the dentist to get a root canal, and being offered the choice of doing it tomorrow or next week – you might want to put it off.

From left: Mark Kettner with the auditing firm Rehmann talks with Curt Hedger, the county’s corporation counsel.

The information about these liabilities is already provided in the CAFR, Kettner noted. The amount might change – either up or down – because different assumptions will be used under the new GASB reporting standards. The county will need to get a new actuarial report that uses a different set of assumptions. But he indicated that those changes likely won’t be dramatic. The main difference will be a greater amount of disclosures, and a booking of the liabilities under the governmental funds.

Kettner added that the county couldn’t implement the changes until it gets the necessary information from the Municipal Employees’ Retirement System of Michigan, a statewide system. Although only a small subset of county employees are enrolled in MERS, that pension system still must be included in the county’s audit. He described it as a “triple whammy” for Washtenaw County, because the county will be required to include information for all three systems: MERS, WCERS and VEBA.

For MERS, the county will have to include information related to the entire MERS system, not just for the small piece of it that relates to county employees. So under the new standards, the county’s financial statements will need to include a listing of all MERS investments and the rate of return for those investments. Then, the county’s financial staff will have to calculate the county’s “slice” of those investments as part of their report. “So it’s going to be rather complicated, and I don’t expect that you’ll have MERS ahead of time,” Kettner said.

Kettner also questioned whether the actuaries hired by the county are prepared to handle this additional workload yet. “I hear what you’re saying,” he told Smith regarding an early implementation, “but I would really advise against doing it.”

Smith noted that if the liabilities are currently on the county’s balance sheet – what’s now called its statement of net position – then the net position would be negative. It would make the statement look significantly different, he said.

That’s true, Kettner replied, but the rating agencies – Standard & Poor’s and Moody’s – are well aware of this information, and they know that actuarial information is based on an educated guess. In addition, it won’t be as big of a hit to the county as it will to the city of Ann Arbor, Kettner said. For a city that has a higher number of enterprise funds – like water, sewer and other utilities – the pension and retirement healthcare liabilities will have to be allocated to those funds. “All of a sudden those funds are going to get significant charges, and it could push them into a fund deficit,” Kettner explained.

The minor impact could be a requirement from the state to do a deficit elimination plan. But there’s potential for greater impact: If those enterprise funds have revenue bonds that are still being paid off, there might be covenants in those bonds stating that the funds can’t operate with a deficit. If that’s the case, Kettner said, then the city would need to figure out how to address it, which might entail rate increases. “That’s not going to go over very well,” he said.

The changes will hit governmental entities differently, he said. For the county, it will hit them in the governmental funds, “and to be honest with you, some people don’t even pay attention to those. Rating agencies are more concerned about your general fund, and any significant proprietary [enterprise] funds.”

Continuing his questions, Smith then highlighted a sentence from the CAFR, included in the notes on the pension system. He read it aloud, and asked Kettner to clarify. That sentence states: “However, for purposes of calculating the annual required contribution (ARC), the System uses the aggregate cost actuarial funding method, which does not identify or separately amortize unfunded actuarial liabilities.” Kettner explained that the county is using a different approach in its calculations to determine an annual required contribution to the pension plan, compared to what’s required as a GASB disclosure.

Smith indicated that he had other questions and comments, but he understood that Kettner’s scope was limited to the report of financial statements, not to the actual financial condition of the county.

Commissioner Kent Martinez-Kratz (D-District 1).

Andy LaBarre (D-District 7) asked Pete Collinson to elaborate on his remarks about the county’s fund balance.

Collinson noted that for many years, the fund balance was around $4 million, which would barely cover more than a couple of weeks of operating costs, he said. Former county administrator Bob Guenzel had tried to add to it every year, to build the fund balance slowly. In the last couple of years, the growth in the fund balance has been much greater, he said, from about $7 million to the current $16.8 million. [According to data provided in the CAFR, the general fund balance grew from $7.4 million in 2003 to $9.7 million in 2009, then jumped dramatically to $15.3 million in 2010.] Collinson called it a good surprise to reach that amount.

Yousef Rabhi (D-District 8) called the CAFR interesting, but noted that “the weeds can get tall pretty quick.” He was glad the county has a staff that’s “able to wade through those weeds” and provide answers to questions that commissioners might have. The work that the staff does is very valuable, he said.

Later in the meeting, Dan Smith made some additional comments on the CAFR, reflecting more on the county’s financial condition. He praised the staff, saying that even though many people were involved, the documents were unified with a consistent style that made it seem as though the same person wrote it.

Smith highlighted page 178 of the CAFR, with a chart comparing the county’s principle taxpayers in 2003 through 2012. [.pdf of Washtenaw County's top taxpayers] The county has a much broader tax base now than in 2003, he noted. Nine years ago, the top 16 taxpayers made up 9.89% of the county’s tax base. Now, that percentage is down to 6.88%. In 2003, several taxpayers represented more than 1% of the tax base. In 2012, no taxpayers are paying more than 1% of the county’s tax base. “I think that bodes well for the long-term future of the county,” Smith said.

The county’s top five taxpayers in 2003 were Pfizer, Visteon, General Motors, Detroit Edison and MichCon. By 2012, three of those – Pfizer, Visteon and General Motors – were not even in the top 16. The top five taxpayers in 2012 were Detroit Edison, McKinley Associates, Toyota, MichCon and Ford.

On pages 184-185, Smith pointed to a list showing the total debt across the entire county, including school districts, libraries, municipalities and other government entities. [.pdf of direct and overlapping debt table] The debt totals about $1.3 billion. If you divide that amount by the number of county residents, it works out to just $3,773 per person, Smith noted. If it was divided by parcels or taxpayers, that number would go significantly higher, he added. [Debt-per-capita is a factor weighed by bond rating agencies.]

Smith also highlighted page 23 of the audit for the office of the water resources commissioner. The office uses a straight-line amortization schedule of 50 years for its infrastructure. He noted that some of the county drains are well beyond that age, so there’s a building infrastructure deficit. It’s already clear that there are problems with roads, he said, and some of the county’s drains will likely start to collapse and fail as well. He pointed to a situation in Superior Township last year where a drain had not been maintained and it slowly sedimentized. The 50-year amortization schedule roughly equates to the lifespan of the county’s drainage infrastructure, Smith noted.

In wrapping up the discussion of financial reports, county administrator Verna McDaniel thanked the staff for their work. She thanked Dan Smith as well “for appreciating the CAFR to the extent that he does.” She joked that because she knew he would read the CAFR closely, “I read this darn thing front-to-cover myself.”

Outcome: This was not a voting item.

Jobs for Mental Health Services

A resolution was on the April 3 agenda to create 39 new jobs and reclassify 76 others for Washtenaw County’s community support and treatment service (CSTS) department.

CSTS is a county department employing about 300 people, but it receives most of its funding from the Washtenaw Community Health Organization, a partnership between the county and the University of Michigan Health System. The WCHO is an entity that receives state and federal funding to provide services for people with serious mental illness, developmental disabilities and substance abuse disorders. WCHO contracts for services through CSTS. Although staffing has remained fairly constant in the last five years, demand for services has increased by about 40%. These jobs are being created to provide the capacity to meet that demand.

The new jobs include client service managers, support coordinators, mental health professionals, mental health nurses, management analysts, administrators and a staff psychiatrist. All of the reclassified positions are client service managers. Of the 39 new positions, 30 of them are union jobs, represented by AFSCME.

According to a staff memo, the changes will add $14,255,535 to the CSTS 2012-2013 budget, bringing the budget total to $41,822,489. Of that, WCHO is providing $38,692,815, including revenues from grant pass-throughs. Other revenues include $165,190 from the Haarer bequest and $246,846 from a contract with the Washtenaw County sheriff’s office.

Jobs for Mental Health Services: Board Discussion

Yousef Rabhi (D-District 8) said he supported the move. There’s a lot of need that often goes unmet in other communities, but the county rises up to the challenge, he said. CSTS has been seeing more customers, even though its staffing level has been relatively flat, he said.

The need for more staff is crucial, Rabhi said, because it means better service for people in the community. It will also mean a net increase in union jobs, he noted, which he said he is very supportive of. He also praised the fact that some of the people who have been doing these jobs on a temporary basis will now have permanent, full-time positions. “And as a temporary employee, I can tell you that being a temporary employee is no fun.” [Rabhi works for the city of Ann Arbor's natural area preservation (NAP) program.]

From left: County commissioners Yousef Rabhi (D-District 8) and Andy LaBarre (D-District 7). Both represent districts in Ann Arbor.

Even in the face of shrinking government, Rabhi said, this proves that government is still relevant and necessary for this kind of service, because there is no private market to provide it. “We need to be there for those folks,” he said.

Felicia Brabec (D-District 4) said she wanted to echo Rabhi’s comments. It’s an important move for mental health stability in the community, for residents as well as workers. She asked for an explanation of where the money to fund these positions is coming from.

Tim Florence, CSTS medical director, reported that WCHO is the funder for these kinds of mental health services, and CSTS is the service provider. No county general fund dollars are being used.

Ronnie Peterson (D-District 6) wondered if the additional staff would be serving a specific geographical region. He said he’s interested in “providing services where services are needed.” Florence replied that WCHO/CSTS are responsible for providing all medically necessary services for county residents on Medicaid. Recently there has been a push to engage in more outreach, he said, especially in areas where there might be opportunities to expand services. Those areas include the 48197 and 48198 zip codes, he said. [That's a reference to the Ypsilanti area, which is part of Peterson's district.] But the services are provided to anyone in the county, he added, regardless of location.

Andy LaBarre (D-District 7) asked Florence to explain the restructuring that occurred in 2002, and wondered if there would be another restructuring locally as part of a broader statewide initiative. It was his understanding that Washtenaw County is being left untouched by a statewide restructuring, “and I think that speaks to our strength in terms of this service provision,” LaBarre said.

Florence explained that the WCHO is the community mental health service provider for this county, going back to the year 2000. The county board and University of Michigan formed this freestanding entity to provide mental health and substance abuse services to people with Medicaid, as well as to the uninsured. In 2002, there was a change made by the state Dept. of Community Health, which provides funding to WCHO. The state created PIHPs – pre-paid inpatient health plans – which basically set up a managed-care structure for these services, Florence said. The WCHO became the PIHP for Washtenaw County, as well as for other surrounding counties. The WCHO contracted with CSTS, which actually provided the services.

Now, the WCHO is trying to ensure that CSTS has the tools it needs – including administrative resources – to deliver these services, Florence said. There are some functions previously provided by WCHO that will move over to CSTS, he explained. Regarding the broader statewide restructuring, the number of PIHPs has decreased, he said, but Washtenaw County has been untouched by that change. He felt the county could help inform the state about ways to integrate mental and physical healthcare, which he called a wave of the future.

Florence noted that CSTS is serving about 40% more people today than it was 5 years ago, but staffing hasn’t increased.

Dan Smith (R-District 2) expressed concern about adding to the county’s employee base. The county isn’t close to being out of the woods financially, he said, and in the not-too-distant future there will be about $250 million impacting the county’s bottom line. [The reference was to an upcoming change in how pension and retirement healthcare liabilities will be accounted for on the county's financial statements.]

The current budget is based on continued declines in tax revenues, he noted. With the additional CSTS jobs, plus the two jobs added in information technology and water resources [on a vote taken at the same April 3 meeting], the total county headcount will reach about 1,375. That will be the highest headcount since 2008, he said. The county could be faced with the “unsavory” prospect of letting people go, he said, which no one wants. He also noted that the employees with union positions could have various bumping rights. [A “bump” is a union term referring to reassignment based on seniority.]

“I’ll be supporting this,” Smith concluded, “but I am still very, very cautious and leery about increasing the county’s headcount at this time.”

Peterson pointed out that the funding is revenue-driven, coming from dollars that are outside of the general fund. Public health services have avenues for resources that haven’t been available before, he said. These are long-term dollars from outside the general fund, Peterson added, and that’s why he’s supporting it.

However, Peterson also noted that he had in previous years raised concerns about the creation of the WCHO. He said he’s an advocate of mental health services, but he believes only one entity should be responsible for the delivery of services. The costs should be directly related to delivering services, not for administrative overhead, he said. “There are two separate entities here,” he said. “I won’t get into how much these two separate entities cost, because I don’t want to put somebody on the spot.”

Florence explained that all services provided by CSTS are those delegated to it by the WCHO. To date, there were a limited number of services that hadn’t been delegated, however, including “front door” services like intake and assessments, as well as crisis care and 24/7 phone access. Those services will now be transferred to CSTS, he said. Peterson replied that he was glad to hear it.

Outcome: Commissioners unanimously gave initial approval to the creation and reclassification of CSTS jobs. Commissioners Alicia Ping, Rolland Sizemore Jr. and Conan Smith were absent. A final vote is expected on April 17.

New Jobs in IT, Water Resources

Final authorization to create two new jobs – in IT support and water resources – was on the April 3 agenda. The items had received initial approval on March 20, 2013.

The water resource specialist will work in the county’s office of the water resources commissioner, Evan Pratt. The job is authorized at a salary range between $30,515 to $40,253. According to a staff memo, the position is needed due to heavy drain construction activity and an increase in soil erosion application inspections. The job is described as a revenue-generating position, bringing in an estimated additional $41,337 in each of the first three years, and a minimum of $15,000 annually after that. The staff memo indicates that the office has identified reductions within its budget to offset the increased cost of the position.

Pratt had attended the March 20 meeting and told commissioners that the construction activity is primarily in the city of Ann Arbor, which is paying for the work. He had described the change as “budget neutral,” saying this was the most cost-effective way to proceed, by shifting some responsibilities elsewhere within his office.

The IT system support technician was authorized at a salary range between $37,464 to $52,355. According to a staff memo, the new position is needed to provide back-up for the IT help desk and other staff support. It will be funded from IT contracts and a structural reduction of $32,647 in the tech plan appropriation.

Outcome: The creation of two jobs in IT and water resources won unanimous final approval, without discussion. Three commissioners – Alicia Ping, Rolland Sizemore Jr. and Conan Smith – were absent.

Public Transit: Dissolving The Washtenaw Ride

Taking a step officially to end an effort that stalled last year, commissioners were asked to give initial approval to dissolve a countywide public transit authority known as the Washtenaw Ride.

The Act 196 authority, created in mid-2012 and spearheaded by the Ann Arbor Transportation Authority, never gained traction and was for all practical purposes ended late last year when the Ann Arbor city council voted to opt out of the transit authority at its Nov. 8, 2012 meeting. Of the 28 municipalities in Washtenaw County, the city of Ypsilanti is the only one that hasn’t opted out.

Commissioner Dan Smith (R-District 2).

The April 3 resolution was similar to one that county commissioner Dan Smith (R-District 2) had considered bringing forward in November of 2012, though he decided not to pursue dissolution at that time. [See Chronicle coverage: "End of Road for County Transit Effort?"] The April 3 resolution would rescind the board resolutions that created the transit authority, and request that the state legislature also take action to dissolve the Washtenaw Ride, in accordance with Attorney General Opinion #7003. That AG opinion stated that “the dissolution of a transportation authority organized under the Public Transportation Authority Act requires an act of the Legislature and may not be accomplished by the unilateral action of the city in which it was established.” [.pdf of AG opinion 7003]

The county’s role in creating the transit entity had been laid out in a four-party agreement with Ann Arbor, Ypsilanti and the AATA, which commissioners approved on Aug. 1, 2012 in a 6-4 vote. Subsequent revisions involving the other entities resulted in the need for a re-vote by the county board, which occurred on Sept. 5, 2012.

There are two other transit efforts now under way. Washtenaw County is part of a southeast Michigan regional transit authority (RTA) created by the state legislature late last year. The RTA was formed to coordinate regional transit in the city of Detroit and counties of Wayne, Macomb, Oakland and Washtenaw.

Separate from the RTA effort, the AATA has been meeting with representatives of the county’s “urban core” communities to discuss possible expanded public transit within a limited area around Ann Arbor. It would be a smaller effort than the previous attempt at countywide service. The AATA hosted a meeting on March 28 to go over details about where improvements or expansion might occur, and how much it might cost. [See Chronicle advance coverage: "Costs, Services Floated for Urban Core Transit."]

Outcome: The initial vote to dissolve The Washtenaw Ride was approved unanimously, without discussion. Three commissioners – Alicia Ping, Rolland Sizemore Jr. and Conan Smith – were absent. A final vote is expected on April 17.

Public Transit: Regional Transit Authority (RTA)

The issue of public transit was also raised later in meeting, during one of the opportunities for communications from commissioners. Ronnie Peterson asked about the regional transit authority (RTA): When was the board going to discuss the county’s role in that effort, or in any alternative approaches to public transit?

Yousef Rabhi replied that he had attended the recent meeting of “urban core” communities, facilitated by the Ann Arbor Transportation Authority. The group – which included representatives from Ann Arbor, Ypsilanti, Ypsilanti Township, Pittsfield Township and other municipalities – talked about how to fund and govern expanded public transit. He noted that the Act 196 authority “did not work out the way most people had hoped, so we’re looking at new ways of funding it.”

Rabhi also hoped the RTA had a role to play, and said he was working with the county’s representatives on the RTA board – Richard Murphy and Liz Gerber – to make sure the opportunities for this county are fully explored under the new RTA structure.

Peterson asked whether the county board needed to take any action, or will there be any discussion about their involvement in the RTA or in any alternative to the RTA? Rabhi replied that the county’s involvement is governed by the state law that created the RTA. At this point, Washtenaw County is part of the RTA and the county board doesn’t need to take any action. The RTA board’s first official meeting is on April 10 in Detroit, he said, although the board met informally last month. Rabhi said he attended that meeting as well, and was the only elected official there from the four-county region and Detroit. Compared to other RTA board members, the Washtenaw County representatives have a lot of background and experience in transit, he said. “They bring a different voice to the table, which I think will be valuable.”

Commissioner Ronnie Peterson (D-District 6). In the background is Andy LaBarre (D-District 7).

The effort is being staffed by SEMCOG and other partners, Rabhi said, and has about $6 million in federal funding. The RTA board is discussing how to build sustainability within the organization and move forward.

Peterson wondered what the impact was on the AATA. It’s debatable, Rabhi replied. “I think the full implications of the legislation have yet to be determined.” He said he was working with the county’s RTA representatives and state legislators “to ensure that AATA is fully protected so that we can continue to have a robust transit system here in Washtenaw County, and potentially expand that transit system to the urban core areas.” The RTA was created to connect regions, Rabhi noted – like how to get from Ann Arbor to Detroit, and from Detroit to Mount Clemens. “But getting from Ann Arbor to Ypsilanti, that’s our task,” he said.

Responding to another query from Peterson, Rabhi said the county’s only obligation to the RTA at this point is to appoint two board members, which happened in December of 2012. [The appointments were made by the county board chair at the time, Conan Smith, and did not require confirmation by the full board.] If the RTA board decides to put a tax proposal on the ballot, or to pursue a vehicle registration fee, then voters of Washtenaw County will have an opportunity to weigh in on that, Rabhi said.

Regarding a possible transit tax to support the RTA’s efforts, Dan Smith said he wanted everyone to be clear about how that would work. If the RTA board decides to put a tax proposal on the ballot, the entire RTA region votes on it as a whole. That area – covering four counties and Detroit – has a population of over 4 million, he noted, although he added that there are fewer registered voters than that. Even so, Washtenaw County is a relatively small piece of that, he said, with a population of about 348,000 residents. So Washtenaw County voters “probably won’t have a whole lot of say-so” in the outcome of a millage vote, he said.

Andy LaBarre noted that in order for the RTA board to put a tax proposal on the ballot, a super-majority of that board would need to approve it. There’s also the option for a single county veto, he said. For example, if both representatives from Washtenaw County voted against putting a tax proposal on the ballot, it wouldn’t move forward. LaBarre hoped all of this information could be clarified at a future working session.

LaBarre, who chairs the board’s working sessions, continued by telling Peterson that the topic of the RTA will be on the agenda for a working session in August or September. By that time, he hoped they would have more information about what the RTA intends to do, so that the county board can talk about more specific roles that Washtenaw County can play.

Peterson said he appreciated Rabhi’s involvement in support of regional transit, but felt it was important to have a discussion about this issue by the full board.

Public Hearing for Urban County Plan

Commissioners were asked to set a public hearing for April 17, 2013 to get input on the Washtenaw Urban County‘s five-year strategic plan through 2018 and its 2013-14 annual plan. The hearing will be held at the county board of commissioners meeting at 6:30 p.m., in the boardroom of the county administration building at 22o N. Main St. in Ann Arbor.

The Urban County is a consortium of Washtenaw County and 18 local municipalities that receive federal funding for low-income neighborhoods. Members include the cities of Ann Arbor, Ypsilanti and Saline, and 15 townships. “Urban County” is a designation of the U.S. Dept. of Housing and Urban Development (HUD), identifying a county with more than 200,000 people. With that designation, individual governments within the Urban County can become members, entitling them to an allotment of funding through a variety of HUD programs. The Urban County is supported by the staff of Washtenaw County’s office of community & economic development (OCED).

Two HUD programs – the Community Development Block Grant and HOME Investment Partnership – are the primary funding sources for Urban County projects.

Outcome: Authorization to set a public hearing on April 17 won unanimous approval, without discussion.

Communications & Commentary

During the evening there were multiple opportunities for communications from the administration and commissioners, as well as public commentary. Here are some highlights.

Communications & Commentary: Retirement System

During the time set aside for liaision reports, Dan Smith (D-District 2) gave a brief update on the late March meeting of the Washtenaw County Employees Retirement System (WCERS) commission. He noted that the stock market is doing very well, and that has had a positive impact on the balances in the WCERS account. The commission is starting to begin the discussion about doing some explicit inflation hedges, he said. There’s a concern that in a few years, inflation might start to inch up a bit, and at this point there are no explicit hedges against that.

Smith also reported that there had been a discussion about possible PA 728 pension change requirements in the recently approved labor contract.

Smith was alluding to an issue related to the precedent-setting agreements reached in mid-March with 15 of Washtenaw County government’s 17 bargaining units. The new contracts, approved by the board on March 20, aimed to protect unions before Michigan’s right-to-work law took effect on March 28, and cut legacy costs for the county. All but one of the new agreements run for more than 10 years, through Dec. 31, 2023.

The issue raised at the WCERS meeting was whether the process of securing new contracts violated Public Act 728 of 2002. In relevant part, PA 728 states [emphasis added]:

A system shall provide a supplemental actuarial analysis before adoption of pension benefit changes. The supplemental actuarial analysis shall be provided by the system’s actuary and shall include an analysis of the long-term costs associated with any proposed pension benefit change. The supplemental actuarial analysis shall be provided to the board of the particular system and to the decision-making body that will approve the proposed pension benefit change at least 7 days before the proposed pension benefit change is adopted. For purposes of this subsection, “proposed pension benefit change” means a proposal to change the amount of pension benefits received by persons entitled to pension benefits under a system.

The county’s new labor contracts state that employees hired after Jan. 1, 2014 will participate in a defined contribution retirement plan, instead of the current defined benefit plan – the Washtenaw County Employees’ Retirement System (WCERS). In defined benefit plans, retirees receive a set amount per month during their retirement. In defined contribution plans, employers pay a set amount into the retirement plan while a person is employed. The most common defined contribution plan is the 401(k). Similar changes in retiree healthcare plans will also affect new employees.

Although current employees will keep their defined benefit plan, anyone hired before Jan. 1, 2014 – including current employees – will be offered a one-time opportunity to transfer their WCERS employee account to the newly created defined contribution system. That decision must be made within a window between Jan. 1, 2014 and Feb. 28, 2014.

The county did not conduct a supplemental actuarial analysis related to these new contracts. Dan Smith, who cast the lone vote against the contracts, had cited a lack of information about the impact of the changes as one reason why he didn’t feel comfortable supporting the agreements. From The Chronicle’s report of the March 20, 2013 meeting:

A 10-year contract “severely binds future boards and dramatically eliminates the flexibility that they have to respond to situations that may face them seven or eight years down the road.” There are some benefits to that as well, [Dan] Smith noted, but he’s not able to find enough data or information that would make him comfortable with that length of time. It would be different with a two-year contract, which gives the county the chance to respond to changing conditions, he noted. With a 10-years contract and the unknowns surrounding the costs and benefits of the various provisions, “I’m just not comfortable moving forward with that at this time.”

D. Smith also cited concerns about legal questions “that continue to nip away at this.” He wished the legislature would just leave this issue alone, but instead they continue to pick at it “week after week after week.” He didn’t know how it will play out, but “I do know that if we did this contract in the traditional way … we wouldn’thave a bull’s-eye on our back for that.”

Responding to a follow-up query from The Chronicle, county administrator Verna McDaniel stated via email that the county had sought outside legal counsel on the issue. She indicated that the county’s position is: There was no need for an actuarial analysis because no changes were made to the existing pension benefits, and the law does not require an analysis for the new defined contribution system that will be offered to employees hired after Jan. 1, 2014.

Communications & Commentary: Retreat Follow-up

Ronnie Peterson (D-District 6) asked about the follow-up to a board retreat held on March 7. [See Chronicle coverage: "County Board Priorities Emerge at Board Retreat."] He noted that the board has set a course for the next 10 years on one of the budget’s largest components – labor costs. The 10-year contracts are rare in the state, he noted, but now the other budget components must be put in place for the county’s long-term stability. [For background on those labor agreements, see: "New Labor Contracts Key to County Budget"]

Yousef Rabhi (D-District 8) said he has received a report from the retreat’s facilitator, Mary O’Hare, but he hasn’t had a chance to review it yet so he hasn’t sent it to other commissioners. He plans send it out and possibly schedule a presentation on it. Rabhi added that it’s essential to have another retreat and a more focused discussion. That will likely happen in May, he said.

Andy LaBarre (D-District 7), chair of the board’s working sessions, reported that he would send out a revised schedule of upcoming sessions, and asked commissioners to let him know if there were topics they’d like to discuss.

Peterson said he hoped there would be time at the retreat for commissioners to get to know each other and learn about their priorities. Rabhi replied that he’d gotten feedback from a few commissioners, who felt that the last retreat wasn’t focused enough on the board’s priorities. So the format for a second retreat will be different, he said, with more opportunity for commissioners to share their thoughts.

Communications & Commentary: Ann Arbor DDA

Yousef Rabhi (D-District 8), one of the commissioners representing Ann Arbor, told the board that he wanted to make everyone aware of discussions happening at the Ann Arbor city council regarding funding for the Ann Arbor Downtown Development Authority. The council’s action could have implications for the county, he said, so he wanted to put it on their radar.

Commissioner Kent Martinez-Kratz (D-District 1), whose district covers Chelsea and other parts of the county’s west side, asked Rabhi to elaborate. What might the implications be for the county?

Rabhi said his understanding of the proposal is that the funding mechanism would change so that the DDA would capture fewer tax revenues in its district, and more dollars would come back to the county. The downside, he added, is that there would be less money for the DDA to do their work in downtown Ann Arbor. It’s just something to be aware of, Rabhi said.

For Chronicle coverage related to the proposed Ann Arbor DDA ordinance changes, see: “Planning, DDA: City Council to Set Course?” “DDA Tax Capture Change Gets Initial OK” and “DDA Ramps Up PR after First Council Vote.”

Communications & Commentary: Land Bank

Ronnie Peterson reported that he had asked county administrator Verna McDaniel to be involved directly with the new land bank committee. He’s also asked that she extend an invitation to communities that have been greatly impacted by the economic downturn, with neighborhoods that have seen home values drop – including Ypsilanti, Ypsilanti Township and Superior Township. He has asked that the meetings of the land bank committee be public, so that anyone can attend.

By way of background, at its March 20, 2013 meeting, the board voted to form a committee that will explore the feasibility of creating a land bank. The resolution named three people to the committee: Peterson, county treasurer Catherine McClary, and Mary Jo Callan, director of the county’s office of community & economic development. The committee is directed to report back to the board by Aug. 7, 2013.

A land bank is a mechanism for the county to take temporary ownership of tax- or mortgage-foreclosed land while working to put it back into productive use. “Productive use” could mean several things – such as selling it to a nonprofit like Habitat for Humanity to rehab, or demolishing a blighted structure and turning the land into a community garden.

Communications & Commentary: Waste Knot Awards

Yousef Rabhi highlighted the upcoming annual Waste Knot awards, on Thursday, April 11 from 5-7 p.m. at Weber’s Inn. The Waste Knot program encourages businesses and organizations to increase waste reduction and recycling activities.

Responding to a follow-up query from The Chronicle, Jeff Krcmarik – the county’s environmental supervisor – reported that this year the county is also partnering with the Community Partners for Clean Streams and recognizing the 2012 Environmental Excellence Award winners. The event’s guest speaker will be Josh Bloom, a building contractor who specializes in LEED-certified buildings. Locally, Bloom designed and built the new LaFontaine auto dealership in Dexter.

Communications & Commentary: Thomas Partridge

The only speaker during public commentary was Thomas Partridge, who criticized commissioners for not adopting a comprehensive, people-oriented agenda that focuses on the most vulnerable people in the county, including the disabled, senior citizens, mothers with children, and everyone who suffers from the difficult economic climate. Yet meeting after meeting, commissioners bring county managers and outside contractors, like the auditors, to make presentations, he said, while not sending resolutions to the state legislature calling attention to the waste of requiring annual audits. There are many unmet needs, he said, including needs for affordable housing, and accessible public transportation to that housing.

Present: Felicia Brabec, Andy LaBarre, Kent Martinez-Kratz, Ronnie Peterson, Yousef Rabhi, Dan Smith.

Absent: Alicia Ping, Rolland Sizemore Jr., Conan Smith.

Next regular board meeting: Wednesday, April 17, 2013 at 6:30 p.m. at the county administration building, 220 N. Main St. in Ann Arbor. The ways & means committee meets first, followed immediately by the regular board meeting. [Check Chronicle event listings to confirm date.] (Though the agenda states that the regular board meeting begins at 6:45 p.m., it usually starts much later – times vary depending on what’s on the agenda.) Public commentary is held at the beginning of each meeting, and no advance sign-up is required.

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Assertion of the attorney-client privilege can, on occasion, inappropriately shield public records from view. This column shines a light on the subject by considering such a case.

Sunshine Week is an occasion to remind ourselves that open government is good government.

Michigan has two laws that are key to open government: the Open Meetings Act (OMA) and the Freedom of Information Act (FOIA). Both of these laws rely crucially on good faith. For example, the FOIA allows a public body to deny access to certain public records – like those that are protected by the attorney-client privilege.

If a record is requested and then denied based on the attorney-client privilege, a requester has no way of judging whether the assertion of privilege is appropriate. A requester relies on the good faith of government officials that privilege is not inappropriately extended to records that are not in fact protected by privilege. A requester can resort to a lawsuit, which under Michigan case law can result in the review of the records by a judge to confirm – or refute – the public body’s assertion of privilege. But few requesters have the wherewithal to file a lawsuit over a FOIA denial.

Here at The Ann Arbor Chronicle, we’re celebrating Sunshine Week by laying out a recent occasion when we requested records under the FOIA, were denied the records, appealed to the city administrator, were denied under the appeal, but then were able to obtain some of the records by other means. The record in question is an email written by Ann Arbor city attorney Stephen Postema. This provides an opportunity to evaluate independently, without filing a lawsuit, whether the city inappropriately asserted attorney-client privilege in denying access to a record.

We consulted on the matter with an attorney, Marcia Proctor, who agreed to analyze the relevant factors in a hypothetical scenario. Proctor is former general counsel of the Michigan Bar Association, a specialist in legal ethics, whose practice specializes in professional responsibility for lawyers and judges.

We first present the hypothetical scenario, followed by a brief discussion of the relevant factors in the scenario identified by Proctor. We then present the text of the email and apply the various tests outlined by Proctor. We reach the conclusion that the city inappropriately asserted attorney-privilege to the document.

We then evaluate whether a different exemption provided by the FOIA might apply. That exemption allows a public body to withhold communications internal to the body – to the extent that they are non-factual and preliminary to a final decision by the body. In the balancing test prescribed by the state statute, we reach a different conclusion than the city did: We think the public interest in disclosure outweighed any interest the city had in shielding this frank internal communication from public view.

Finally, we urge the city council to weigh in on the city’s administrative policy on FOIA response, which is currently being revised. It’s important for councilmembers to set the overarching principle that guides the city’s FOIA responses. And we think that guidance should be biased in favor of disclosure.

The Hypothetical

Here’s the hypothetical scenario we outlined for Proctor:

The results of a city’s annual financial audit are presented to the city’s audit committee at a regularly scheduled public meeting. Among the items in the report, and highlighted by the auditor orally, are instances of an employee who claimed mileage reimbursements while at the same time receiving a vehicle allowance. The auditor characterizes the instances as a “double dip” and violation of city policy. The records produced under a FOIA request identify the employee as the city attorney. The city attorney reports directly to the city council, and serves at the council’s pleasure.

Sometime after the meeting, the city attorney writes an email to all city councilmembers, the chief financial officer and the city administrator, addressing his reimbursements identified in the audit report.

Subsequently a second meeting of the audit committee is convened, in part to discuss the mileage reimbursements. The records produced under a second FOIA request exclude the city attorney’s email, and an appeal to the city administrator challenging the denial is unsuccessful.

Factors to Consider

Proctor identified four key factors to consider, in evaluating whether the email described in the hypothetical scenario might have attorney-client privilege properly attached. Summarizing Proctor, in Michigan the attorney-client privilege attaches to information satisfying the following factors:

1. The information is a communication;
2. The communication is made in confidence by a client to his or her attorney (or by the attorney to his client);
3. In the communication, the attorney is acting as legal advisor;
4. The communication must be for the purpose of obtaining legal advice on some right or obligation.

In the hypothetical, Proctor noted that the record in question is an email communication, thus satisfying Factor 1.

With respect to Factor 2, Proctor identified as relevant whether all the parties copied on the email – representatives of finance and administration – are ongoing clients in the scope of the city attorney’s duties. Although it wouldn’t be unusual for finance and administrative staff to be included in the scope of the city attorney’s  duties, Proctor notes that if the city attorney’s duties don’t cover giving advice to those staff, then communications that include a third party are generally not privileged. She also identified as relevant whether there was a label or some other indication that the communication was made in confidence. Based just on the limited facts in the hypothetical scenario, Proctor couldn’t conclude whether Factor 2 would be satisfied.

For Factor 3, Proctor highlighted that attorney-client privilege applies just when the lawyer is acting as legal advisor to the client in the matter. In the hypothetical scenario, she observed, it’s the city attorney’s own conduct that appears to be the core subject matter of the communication – given that the auditor’s report has called into question whether the city attorney’s mileage reimbursements were proper. Proctor noted that under lawyer ethics rules, a conflict of interest between a client’s interest and the lawyer’s own interests can prevent a lawyer from advising the client. But if the lawyer is not advising the client as the client’s lawyer, then the communication cannot be privileged.

Also related to Factor 3, Proctor notes that a lawyer might be asked to perform a variety of functions beyond providing legal advice – including providing input on business, financial or political issues. The email described in the hypothetical scenario, Proctor observed, appears to relate to the business duties of the audit committee. It’s only when the lawyer is acting as a lawyer for the client that a communication can be privileged, Proctor stressed.

Under Factor 4, Proctor indicated that if the purpose of the email is merely to explain the city attorney’s own past acts, not to advise the city council on some right or obligation, then the attorney-client privilege would not apply. The attorney-client privilege only protects the legal advice requested or provided, Proctor notes, and does not protect underlying facts relating to the subject matter.

Here we note that Proctor’s identification of the relevant factors in the hypothetical scenario should not be construed as Proctor making any claims about anyone’s professional conduct.

City Attorney’s Email

The hypothetical scenario is consistent with an actual recent scenario. How do the four relevant factors apply to the actual text and context of the email? We think that application of the four factors leads to the clear conclusion that the email in question was improperly withheld under Michigan’s FOIA under the exemption covering the attorney-client privilege.

City Attorney’s Email: Full Text

We’ve numbered the paragraphs for ease of reference.

1. From: Postema, Stephen
Sent: Fri 1/18/2013 5:03 PM
To: Postema, Stephen; *City Council Members (All)
Cc: Powers, Steve; Crawford, Tom
Subject: RE: Privileged and Confidential: FW: File: A05-01217 Litigation Updates Mayor and Council:

2. This is to inform you that I am back in the office after a restful vacation in Costa Rica with two of my children. However, I came back with a bad case of bronchitis. My body is clearly not used to all that rest.

3. It is always interesting to find what issues have arisen when one leaves. When I came in on Wednesday, I met briefly with Tom Crawford to discuss e a copy of the audit report. I had never seen the audit report, much less the paragraph on “reimbursement” issues, although Tom had discussed just in general terms the issue with me on December 31st when he asked about my contractual provisions and I gave him the appropriate paragraphs.

4. I will provide you additional information in a longer memo, but the audit report is obviously incorrect:

5. First, there is no violation of City policy as stated. Tom and I called the auditor on Wednesday to inquire what City policy he was referring to. (Steve Powers agreed that we should call the auditor.) The auditor didn’t know off the top of his head and reviewed the file. I spoke with him today and he admitted that there was no violation of City policy in the files he reviewed and the statement was incorrect. However, he is going to talk to his associates further, and let us know if he has missed anything. Any one-second review of the City’s mileage policy demonstrates that the auditor’s statement is incorrect.

6. Second, in any case, the terms of my agreement with the Council is my contract which was specifically negotiated. It calls for a car allowance (not a mileage allowance) and separately for travel reimbursement. This is no surprise to anyone. I have followed mileage reimbursement procedure for almost a decade. (Although I rarely file them even when entitled to.)

7. Amazingly, as to my contract, the auditor confirmed for me that he had not been informed of my contract, nor had he reviewed it, but that it would certainly be relevant. I told him I appreciated his candor.

8. Third, the fact that an auditor has put an incorrect statement in an audit report without even checking whether a City policy is in fact violated or whether another document (such as a contract) may govern the situation raises a host of concerns in my mind, but that is for Steve Powers and Tom Crawford to deal with in the bigger audit picture.

9. As to the specific issue of the incorrect statements in the audit report, Tom and I will be dealing with the auditor on this correction.

10. Fourth, the third sentence of the paragraph is also incorrect: “the City became aware of this situation during the year..” The City and the finance department has always been aware of my contract, as is the whole City, as the contract is FOIAed all the time and is posted on the internet.

11. Fifth, there seems to be a question about my decision to give up the car allowance. I thought about this issue in September as I completed my year end report. I then made this proposal in early October to Councilmember Higgins as I always have done. I did this because the raise I was due this past fall, would have put me in a situation where I had a similar salary to the City Administrator – but still a car allowance. If the City Administrator did not have a car allowance, I thought it best for me to forgo mine – just as a leadership issue. (Steve Powers wouldn’t have cared about the issue, as he is not like that, but I just thought this was the right thing to do.)

12. There was no discussion with the admin. Committee on my part about this first. I just thought it was a reasonable proposal that made good policy sense. It was not because of any issue or problem with a car allowance. Related to this, I have to manage a whole department, and I have other things to spend this car allowance money on in the upcoming budget as I am down two FTEs from when I started this job, and things are always tight.

13. Finally, I will provide additional information to the Council as we resolve this issue. In the meantime, I request that this information not be made public while this is ongoing. It is always a sensitive issue when an auditor has made a factually incorrect statement in an audit, particularly one stating that a violation of City policy has occurred. Tom Crawford will be providing a formal written response the audit, which will include this issue. Obviously, the audit committee will also be involved at the next audit committee meeting.

14. I’m sorry for delay from Wednesday when I reviewed this issue, but I wanted to get an understanding of what was going on here from the auditor’s side before I wrote you.

15. I have been informed that the reporting on this issue has not bothered to link the actual reimbursement policy at issue nor mention the actual terms of my contract. When appropriate I will address this issue also.

16. As always, please contact me with any questions or concerns.

17. Stephen K. Postema
Ann Arbor City Attorney

City Attorney’s Email: Ann Arbor Chronicle’s Factor 1 Analysis

Factor 1 requires that the privileged information be a communication, and there’s no question that the email is a communication. So it’s uncontroversial that this factor is satisfied.

City Attorney’s Email: Ann Arbor Chronicle’s Factor 2 Analysis

Factor 2 requires that the communication be made in confidence and not include third parties who aren’t clients.

The email includes at least two indications that it was sent in confidence. First, the subject line includes “RE: Privileged and Confidential.” The subject line also includes reference to “Litigation Updates.” Because the email itself doesn’t include litigation updates, it’s possible that the subject line label was inadvertently recycled from a different email and that the label was not intentionally applied. But even if the label was recycled, we think it’s almost certain that the label reflects an intention that the email was sent in confidence.

Second, the body of the email, in paragraph (13), includes a statement from Postema that “I request that this information not be made public while this is ongoing.” Here it’s not clear what the antecedent is of “this information.” The phrasing as a “request” – that the recipients of the communication could choose to honor or not – seems to allow for the possibility that this is not meant as an attorney-client privileged communication. That’s supported by the qualification “while this is ongoing,” which implicates that it would be appropriate at some future time to disclose the information – which doesn’t seem consistent with attorney-client privilege.

But all this hinges on the intended antecedent of “this information.” And “this information” might plausibly be the fact that, according to the city attorney, the city’s independent auditor has characterized the audit report as containing an inaccuracy. That is, the referent of the phrase “this information” is plausibly not the city attorney’s email itself, but rather some of the facts contained in it. Based on the email itself, and the subsequent assertion of attorney-client privilege, we think it’s fair to conclude that it was Postema’s understanding that the email was sent in confidence.

And based on The Chronicle’s experience, it’s the general understanding among most city officials that employees of the city – in particular, top level staff like the city administrator or the chief financial officer – are considered ongoing clients of the city attorney’s office. So the fact that Steve Powers and Tom Crawford are included doesn’t exclude the communication from attorney-client privilege.

We think it’s fair to conclude that Factor 2 is satisfied.

City Attorney’s Email: Ann Arbor Chronicle’s Factor 3 Analysis

Factor 3 requires that the lawyer be acting in his capacity as the client’s legal advisor. However, the majority of the email appears to be confined to Postema’s reports on the content of conversations with others – including the auditor, who is not Postema’s legal client – and Postema’s explanations of his past actions. It’s difficult to see how attorney-client privilege could be extended to Postema’s report of a conversation he had with a non-client. Further, the explanation for Postema’s desire to eliminate his car allowance from his contract – which involves Postema’s theory of how his car allowance might be perceived when contrasted with the city administrator’s lack of a car allowance –  doesn’t appear to involve a legal analysis or legal advice, but rather Postema’s theory of good leadership. So by sending this communication, Postema does not appear in any way to be acting as the council’s legal advisor.

The only paragraphs that might conceivably be construed as containing legal analysis or advice are paragraphs (6), (7) and (8). In those paragraphs, Postema might be considered to be offering an implicit legal opinion that his employment contract governs whether there was a policy violation, and an implicit opinion that his contract allows for both a vehicle allowance and mileage reimbursements.

But to the extent that Postema is acting as the city council’s legal advisor by writing the email, then he would have an apparent conflict in rendering this legal advice – because his own interest in establishing that he did nothing wrong obviously conflicts with the city’s interest in having a clear understanding of the facts, so that appropriate policy changes can be undertaken if necessary.

The most generous approach, we think, is to assume that Postema was adhering to his ethical obligation not to provide legal advice to a client on a matter in which he had a conflicting personal interest, in which he could reasonably anticipate could conflict with the city’s interest. But that forces the conclusion that he was not acting in his capacity as anyone’s lawyer by writing the email; thus, he was not making a communication to which attorney-client privilege properly applies.

It’s fair to conclude that Factor 3 is not satisfied.

City Attorney’s Email: Ann Arbor Chronicle’s Factor 4 Analysis

Factor 4 requires that the purpose of the communication be to provide legal advice on some right or obligation. The evaluation of Factor 4 is similar to that of Factor 3. In evaluating Factor 3, we noted that the email does not appear to contain much – if anything – in the way of legal analysis or advice. It’s confined to Postema’s explanation of his past actions and his reports of conversations with others.

Because the underlying facts related to the subject matter aren’t protected by privilege, it’s difficult to see how any of Postema’s reporting of facts concerning the audit are protected by attorney-client privilege.

It’s fair to conclude that Factor 4 is not satisfied.

Frank Communication

In addition to citing the Michigan FOIA’s attorney-client privilege exemption in denying Postema’s email to The Chronicle, the city of Ann Arbor asserted another exemption allowed under the FOIA. That exemption allows a public body to withhold records that are communications internal to a public body – but only to the extent that they are non-factual and preliminary to a final determination of the body, and only to the extent that the public interest in disclosure is outweighed by the public body’s interest in frank communication.

First, it’s not clear how the “frank communication” exemption could apply to the entire text of the email. The exemption applies only to non-factual communication – and much of the content of the email recites factual information pertinent to the audit committee’s work. When a record contains information that does qualify for an exemption as well as information that does not qualify for an exemption, then the Michigan FOIA requires that the exempt information must be separated from the non-exempt information (i.e., it must be redacted), and the non-exempted information must be disclosed.

The only portions of Postema’s email that appear potentially to be eligible for redaction under Michigan’s FOIA are those portions where Postema appears to draw negative conclusions about the professional performance of the independent auditor. For example in paragraph (8), Postema writes:

… the fact that an auditor has put an incorrect statement in an audit report without even checking whether a City policy is in fact violated or whether another document (such as a contract) may govern the situation raises a host of concerns in my mind, …

If we confine ourselves to just those portions of the email where Postema is expressing his exasperation to the council about the auditor’s performance, the Michigan FOIA requires a balancing test to be applied: Does the city’s interest in frank communication among its agents outweigh the public’s interest in disclosure?

In weighing that balance, the city appears to have concluded that the city’s interest in shielding from public disclosure Postema’s attitudes toward the auditor’s performance outweighed the public’s inherent interest in disclosure. Obviously, we weighed the balance differently. We think the public interest is best served by revealing the character of the city attorney’s relationship to the city council as documented in his email.

And in his email, Postema appears to have selectively omitted factual aspects of his conversation with the auditor that tend to mitigate Postema’s apparent position. His position seems to be this: Even though there was no factual basis for doing so, the auditor still inserted the note about mileage reimbursements in his report.

What Postema omitted in his email to the council was a significant consideration, and one we think he certainly should have included – if his purpose was to apprise the council of relevant facts related to his investigation of how the audit was conducted.

In his email, Postema faithfully reported to the council the fact that the auditor had, in conversation with Postema, acknowledged the factual incorrectness of the phrasing in the report – the phrasing indicating that there’d been a violation of city policy. What Postema did not convey to the council was the fact that his conversation with the auditor, described in his email, included a statement by the auditor characterizing the situation as “illogical.” From the auditor’s email to Postema, recounting the same conversation [emphasis added]:

As I also stated in our conversations, from a business practices standpoint, our conclusion (with or without the existence of a policy) was it would be illogical and, therefore inappropriate, to make mileage reimbursements to persons having a car allowance. This conclusion is in the absence of knowledge of an agreement that would reasonably identify that payment of both mileage reimbursement and car allowance is acceptable and appropriate.

We think it’s to the city’s credit that this email from the auditor was included in the city’s official formal response to the auditor’s note.

But in his own communication to the council, Postema chose not to include this perspective on the auditor’s original conclusion – that the conclusion had been based on the idea that the mileage reimbursements were illogical, if not a violation of a written policy. At the January council audit committee meeting that followed Postema’s email, the auditor emphasized that there had not been a violation of a policy per se, because there was no written statement among the city’s policies that if an employee had a vehicle allowance, then the employee was not eligible for reimbursement for mileage.

For the auditor, it may have been self-evident that vehicle allowances are not compatible with mileage reimbursements – so self-evident that a written policy wouldn’t be needed. Whether Postema’s “travel” clause in his contract would cover ordinary mileage – for example, to drive to Lansing to represent the city in court – was not a question the city council audit committee wanted to entertain at its January meeting.

It’s worth noting that even in the revised version of the report, the auditor notes the problematic character of the reimbursements, observing that  ”… in each instance the expense report was not subject to independent review and approval.” And the city’s own recommended policy revision includes a new procedure that would require the chair of the council administration committee to sign off on the mileage reimbursements for its two direct reports – the city attorney and the city administrator.

In addition to the omission of a relevant fact, Postema made an assertion in his email to the council that is factually wrong. In addition to the “violation of city policy” phrase, in paragraph (10), Postema disputes the accuracy of part of the auditor’s note:

Fourth, the third sentence of the paragraph is also incorrect: “the City became aware of this situation during the year..” The City and the finance department has always been aware of my contract, as is the whole City, as the contract is FOIAed all the time and is posted on the internet.

First, Postema’s reasoning here is muddled. Whether the finance staff had always been aware of his contract is not material to whether the city became aware of the issue of possibly inappropriate mileage reimbursements during the year.

Postema’s assertion is also refuted by the facts. In responding to a different request made under the FOIA, the city provided The Chronicle with a written statement from the auditor to a member of the city council’s audit committee. And that statement indicates that the issue of the city attorney’s mileage reimbursements had been brought to the auditor’s attention through a fraud risk questionnaire response, dated June 29, 2012, filled out by a member of the financial services staff.

It’s also significant that according to the auditor’s statement, the questionnaire response indicated that the issue had been raised previously, and that the city’s internal staff auditor had communicated the issue to the city’s CFO. This gives additional context to the auditor’s recommendation this year that the city consider having the internal staff auditor report directly to the city council audit committee, instead of to the CFO.

In any case, it’s evident that the auditor’s original report – stating that the city became aware of the situation during the year – was accurate, contrary to Postema’s assertion.

Conclusion: More Sunshine, Please

It’s in the public interest, we believe, for the public to understand the nature of the relationship between the current city council and the person who currently serves as the city attorney.

So we weighed the balance differently than the city did with respect to the “frank communication” FOIA exemption. We think it’s clear from Postema’s email that the city council – at least in this instance – did not receive a complete, accurate and unvarnished report from its city attorney about city business. And we think it’s important that the public be aware of that.

It’s not an appropriate use of Michigan’s FOIA exemptions to shield officials from embarrassment or to allow for needless denials of information. It’s our view that the city of Ann Arbor is routinely over-broad in its assertion of exemptions under the FOIA. And it’s our view that the city’s FOIA response procedures rely too heavily on input and control by the city attorney’s office. But we think it’s to the credit of the city of Ann Arbor that the administration is currently engaged in a revision to the administrative policy on FOIA response.

Given that it’s Sunshine Week, we call on the city council to weigh in on that administrative policy. We think the city council should weigh in on the basic overarching principle guiding the FOIA policy.

Currently, the guiding principle of the policy can be fairly paraphrased as follows:

(A) The city of Ann Arbor will produce no requested records, except those that the city is required by the FOIA to produce.

A better policy would be one that is biased in favor of disclosure. That guiding principle would be the following:

(B) The city of Ann Arbor will produce all requested records, except those records that the city is expressly prohibited from producing by some federal, state or local law.

We think (B) is a better starting point for an administrative policy. Even if the city council were to opt for (A), then the council should make that decision explicitly and openly as the governing body of the city – through a formal resolution put forth at an open meeting.

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The original version of the letter had indicated three instances of an employee with a vehicle allowance also being reimbursed for mileage, and characterized those reimbursements as a “violation of city policy.” It was subsequently revealed that it was the mileage reimbursements of city attorney Stephen Postema that had caused the auditor to flag the issue.

But after further review – pushed by Postema and chief financial officer Tom Crawford – auditor Mark Kettner agreed that there was no written policy per se that disallowed the dual claims. Kettner is a principal at Rehmann, the city’s auditor, which is in the first year of a five-year contract.

But Kettner also noted that his original conclusion of inappropriateness was based on his view that the dual claims would be “illogical” whether a policy existed or not. Kettner also indicated in reaching his conclusion of inappropriateness that he had not reviewed Postema’s employment contract, which Postema and Crawford contend would have permitted Postema to claim mileage reimbursements in addition to the vehicle allowance.

Postema’s contract was altered last year, chronologically after the contested mileage reimbursements, so that his vehicle allowance was eliminated.

The new wording of Kettner’s letter omits the characterization of the mileage claims as a “violation” but still calls attention to the issue, and adds language to highlight the problematic character of the reimbursements – that “… in each instance the expense report was not subject to independent review and approval.”

Postema’s contract stipulates that his reimbursements for travel are to be made according to standard city procedures. And one new procedure recommended by Crawford in his written response to the auditor’s report would address the lack of independent review. The recommendation is to require that reimbursements claimed by the city attorney or the city administrator – who are the city council’s two direct reports – be approved by the chair of the council’s administration committee.

[.pdf of original letter] [.pdf of revised letter] [.pdf of Crawford's Jan. 24, 2013 response]

This brief was filed from the city council’s chambers on the second floor of city hall, located at 301 E. Huron. A more detailed report will follow: [link]

Ingrid Sheldon, a member of the Our New Downtown Library campaign committee, reviews her notes before speaking during public commentary at the Nov. 19 meeting of the Ann Arbor District Library board. (Photos by the writer.)

Two people spoke during public commentary, directly addressing the issue of the downtown building at 343 S. Fifth Ave. Ingrid Sheldon – representing the Our New Downtown Library committee, which had campaigned in support of the bond proposal – told the board that committee members were disappointed but willing to continue supporting the library however they can. Other committee members in attendance included Betsy Jackson and Donald Harrison.

Also addressing the board was Lyn Davidge, who had run for a seat on the library board but had not been elected. During her campaign she had advocated for renovation of the downtown building, not new construction. She volunteered to serve on any citizen advisory group that she hoped the board would form soon, to give input on the building’s future. Davidge also urged the board to add a public commentary slot at the end of their monthly meetings – because she felt it would encourage more participation.

There was scant discussion among board members about the Nov. 6 outcome or next steps for dealing with the downtown building. In a brief report to the board, Prue Rosenthal – chair of the board’s special facilities committee – indicated that the committee members hadn’t yet made any decisions or had any substantive discussions about what to do next. There was no discussion about the possibility of forming an advisory committee.

In other action, the Nov. 19 meeting included an audit report by the accounting firm Rehmann for AADL’s 2011-2012 fiscal year, which ended June 30. The audit was clean, and included a recommendation to start conducting periodic inventories of “moveable capital assets” – items like furniture and fixtures.

During her director’s report, Josie Parker highlighted a financial concern that is outside of AADL’s control: The possible elimination of the state’s personal property tax. PPT legislation will likely be handled in the state legislature’s lame duck session. If the PPT is eliminated and no replacement revenue is provided, the library would lose about $630,000 annually in revenues, Parker said. The library’s annual budget is roughly $12 million.

Parker also related positive news. Again this year, AADL has been ranked with five stars by the Library Journal – the highest ranking awarded by the journal for library use in a community. AADL is the only library system in Michigan that achieved that level. In its category – libraries with budgets between $10 million to $29.99 million – AADL ranked fourth nationwide. 

Public Commentary

Two people spoke during public commentary at the start of the meeting.

Ingrid Sheldon told the board that she was representing Ellie Serras and the rest of the Our New Downtown Library committee, which had campaigned in support of the $65 million bond proposal – she noted that some of the other committee members were attending the AADL meeting too. The committee worked hard and was very disappointed that they weren’t able to convince the majority of voters to invest in a new library, she said. However, they were excited that so many people started talking about this core community asset. No one had negative things to say about the library – everyone loves it, Sheldon said. The Ann Arbor library system has a national reputation, Sheldon observed, but perhaps the community takes that for granted.

She reported on a recent visit she’d made to the Traverwood branch, and the activities she saw there. People were tutoring, working on computers, reading – “someone was even Skyping to China,” she said. The campaign committee had not been able to convey that this kind of demand for services exists at the downtown library too, she said. The downtown library is the “trunk from which the branches draw their nutrients.”

The infrastructure needs for the building haven’t gone away, Sheldon continued, and now the board has heard community input. She wanted the board to know that the committee is ready to help make the library become more than it already is. She thanked them for their vision of making the library an institution to enhance learning for all.

Lyn Davidge, who had run in the Nov. 6 general election for a seat on the library board but was not elected, began by saying “Sorry, ladies!” [The one male board member, Ed Surovell, was absent.] She said she was sure they thought they would be rid of her after the election, but she was back. She observed that her campaign to get people to attend AADL board meetings appeared to be working. She felt she needed to set an example by speaking during public commentary.

Even though she won’t have the opportunity to join the board, Davidge said, she thought her campaign message had resonated with a lot of voters and that she had something to contribute to the ongoing discussion. [Davidge had supported renovating the downtown building rather than constructing a new library.] She wanted to be one of the first people to volunteer to serve on one of the citizen advisory committees that she hoped the board would create soon. She noted that she and board member Nancy Kaplan – and possibly others – had advocated for such committees. As the board selects people to serve in an advisory role, she hoped they would include people from the business community, academia, and others with talent and experience who can provide new options for possible renovation. A lot of details about possible renovation were missing in the pre-election conversation, Davidge said, and she hoped the board and staff would seek advice from knowledgeable engineers, architects and others in the coming months.

Davidge also urged the board to seek more input from the library staff – not just the department heads, but the staff who run the day-to-day operations. She believed that these employees could provide important insights. Davidge concluded by requesting that the board add another opportunity for public commentary at the end of its meetings, so that people could give feedback about board decisions and discussions that had occurred during the meeting. If people could provide immediate feedback to the board, that might encourage more people to attend board meetings. “You never know until you try and I hope you’ll consider trying it.”

Facilities Committee Report

In her report as chair of the board’s special facilities committee, Prue Rosenthal noted that their work will continue to move forward, although she added that they were obviously disappointed in the outcome of the Nov. 6 election, when voters rejected the library’s bond proposal. The committee members are Rosenthal, Nancy Kaplan and Ed Surovell.

Board president Margaret Leary noted that the board had previously voted to amend its charge to the special facilities committee. That change – made at the board’s July 16, 2012 meeting – extended the committee’s work through 2012, and included the charge of recommending “measures needed to maintain the existing building should a bond to replace the downtown facility fail to pass.” The committee had originally been formed in April of 2012.

On Nov. 19, Rosenthal said the committee would be meeting with the “appropriate professionals” and library staff to figure out how best to use the available funding to ensure that the library works as well as it possibly can. The committee hasn’t made any decisions or had any substantive discussions about what to do next, she said.

Kaplan added that board appreciates the community’s input, including ideas and suggestions for how to move forward. The board is listening, she said. Leary echoed those sentiments.

Financial Report

Ken Nieman – AADL associate director of finance, HR and operations – gave a brief financial update to the board. [.pdf of finance report] He described October as a “pretty normal month, as most of them are here.” Through the end of October, the library has received 94.7% of its budgeted tax receipts – or $10.617 million. AADL’s fund balance stood at $7.937 million as of Oct. 31.

Five items were over budget, he said, but are expected to come back in line with budgeted amounts by the end of the fiscal year. Those line items are purchased services (related to an annual payment for Brainfuse, an online tutoring service), communications, software, supplies, and a line item for “other operating expenses.”

Board members had no questions for Nieman about the financial report.

Audit Report: It’s Clean

In reporting from the board’s budget and finance committee, Barbara Murphy said the committee had met earlier in the month with Dave Fisher of the accounting firm Rehmann to review AADL’s audit results. She described it as a very positive meeting.

From left: AADL board members Margaret Leary, Barbara Murphy, and Rebecca Head. Barely visible behind Head is Prue Rosenthal.

Sherry Brubaker, an audit and assurance manager at Rehmann, gave the board an overview of the results later in the Nov. 19 meeting.

The audit gives a clean opinion of AADL’s financial statements for the fiscal year 2011-12, Brubaker said – the same as in recent prior years. The audit also looked at AADL’s internal controls for systems like payroll and cash receipts.

AADL’s fiscal year runs from July 1 through June 30. Total general fund revenues for the year were $11.94 million – about $300,000 less than the previous year. About 91% of revenues ($10.87 million) come from property taxes, Brubaker noted. Total general fund expenses for the year were $11.7 million, leaving a surplus of $236,793 for the year. Expenditures were under budget by about $373,000.

Out of the library’s $8.1 million in combined fund balances, $7.55 million is unassigned and available for spending at the library’s discretion. That amount equates to about 65% of general fund expenditures – representing several months of operating expenses.

The library has about $4.5 million in investments, Brubaker noted. Its cash is invested primarily in short-term certificates of deposit. AADL has no debt. Net assets total $30.96 million.

Brubaker said that during the audit, it was noted that a physical inventory of movable capital assets hadn’t been completed. The firm recommends that such an inventory be conducted every three or four years, she said. That recommendation was discussed with the finance committee, and Brubaker believed that the recommendation would be implemented.

Board president Margaret Leary asked for examples of moveable capital assets. Brubaker replied that it includes assets like furniture and fixtures – items that cost more than $1,000 with an expected life greater than two years.

Outcome: Without further discussion, the board unanimously voted to accept the 2011-12 audit.

Rehmann provided only print copies of its audit to AADL, which in turn provided print and scanned versions to The Chronicle. [.pdf of scanned audit] The Chronicle converted the document to a searchable text version using optical character recognition (OCR), though the process left the text with several scanos. [.pdf of OCR audit]

Director’s Report

AADL director Josie Parker reported that personal property tax (PPT) legislation is headed to the House Tax Policy Committee later this month and will likely be handled in the state legislature’s lame duck session. The Michigan Library Association will continue to lobby for a revenue replacement, she said.

If the PPT is eliminated, the library would lose about $630,000 annually in revenues, Parker said. Proposals to find replacement revenues currently would provide only a fraction of that amount, she added. [For more background on this issue, see Chronicle coverage: "Ann Arbor Library Board Briefed on Tax Issue."]

Parker also reported that the library recently had received a $40,000 donation from the Friends of the Ann Arbor District Library, a nonprofit that runs the bookstore in the downtown library’s lower level. Parker read aloud a letter from FAADL treasurer Mary Borkowski, praising the library for its work.

In the final item of her report, Parker announced that AADL had again been ranked with five stars by the Library Journal – for the fifth year. It’s the highest ranking awarded, and AADL is the only library system in Michigan that achieved that level. In its category – libraries with budgets between $10 million to $29.99 million – AADL ranked fourth nationwide.

Parker also congratulated other Michigan libraries that were ranked: Kent District Library in Comstock Park, Bloomfield Township Public Library, and Plymouth District Library. Those libraries received three-star rankings.

These rankings aren’t about how much money is spent or how many people the library employs, Parker said – it’s about how well the libraries are utilized in the community. Per-capita metrics include circulation, visits, program attendance, and public Internet terminal use.

Parker told the board that the public wouldn’t use the library as much as they do unless there were mechanisms in place to facilitate it. She pointed to a combination of facilities and their design, hours of operation, and the opportunity for the public to give feedback in a variety of ways about the kinds of services and programs they want, such as self-checkout, online renewal, and no limits on the amount of items that can be checked out. Unlike many libraries, Parker said, AADL’s philosophy is that it’s a sign of success when a lot of the collection is being used. The goal is to make the library as easy to use as possible, and there are policies to encourage that.

For the 220 people who work at AADL, these policies and procedures are normal and often goes unremarked, Parker said. But in fact it is remarkable, and she wanted to thank all of the employees for everything they did.

Her remarks were followed by applause from the board and others attending the meeting. Board president Margaret Leary noted that Parker’s motto is “Be generous,” and that’s exemplified by AADL’s policies, Leary said. Users of the library can affect those policies in very direct ways by telling the library staff what they want, she said.

“And they do tell you in Ann Arbor,” Parker quipped.

Present: Rebecca Head, Nancy Kaplan, Margaret Leary, Barbara Murphy, Jan Barney Newman, Prue Rosenthal. Also AADL director Josie Parker.

Absent: Ed Surovell.

Next meeting: Monday, Dec. 17, 2012 at 7 p.m. in the fourth-floor conference room of the downtown library, 343 S. Fifth Ave. [Check Chronicle event listing to confirm date]

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From left: County commissioners Ronnie Peterson and Rob Turner. Turner has been the board's point person for dealing with a debt crisis in Sylvan Township. (Photos by the writer.)

Chief among those was a report on the debt crisis in Sylvan Township. The county picked up a $175,000 interest payment on May 1 that the township couldn’t afford to make, related to $12.5 million in bonds that were issued 11 years ago – and backed by the county’s full faith and credit – to build a water and wastewater treatment plant there.

Rob Turner – who represents District 1 on the county’s west side, where the township is located – reported that township officials hope to seek voter approval in August for a 20-year, 4.4 mill tax to cover the remaining payments. However, some commissioners expressed skepticism that township voters would approve a tax now, after rejecting a similar proposal in November. The county is also pursuing legal action for breach of contract, and is working with the township to reach a consent agreement that can be submitted to the court to outline a repayment strategy. If the millage doesn’t pass, it will be up to a judge to determine a tax levy. Commissioners were told that township residents will be assessed for the debt, one way or another.

In another report to the board, county administrator Verna McDaniel told commissioners that the county had agreed to a one-year extension to continue administering the Washtenaw Head Start program, through July 31, 2013. As part of the budget process last year, the county board had voted to relinquish its 46-year administration of the program on July 31, 2012. But the process to find another entity to administer Head Start has taken longer than expected, so the county reached an agreement with federal officials to operate the program another year.

McDaniel reported that the agreement waives a 20% local match of about $750,000 that the county had previously been required to provide. Because of that decrease there will be program changes, though details haven’t yet been worked out. While several commissioners praised the decision for easing the eventual transition to a new Head Start administrator, Ronnie Peterson expressed concern that the program’s high standards would be compromised.

The board also got an update on ongoing efforts to address how the county handles animal control services, in preparation to issue a request for proposals (RFP) later this year. Those services are currently being handled through a contract with the Humane Society of Huron Valley, which ends on Dec. 31, 2012. Board chair Conan Smith passed out a schedule for the board’s animal control policy task force meetings, with the first one set for Wednesday, May 9 from 8-10 a.m. at the county’s Learning Resource Center, 4135 Washtenaw Ave. The policy task force meetings will be open to the public.

Financial reports were also on the May 2 agenda, including the 2011 audit and an update on long-term liabilities. Wes Prater voiced concern that the county now has dramatically more in long-term liabilities than it did just five years ago. Total legacy liabilities, including pension and retiree health care benefits, have increased from $302.198 million at the end of 2007 to $346.572 million at the end of 2011.

Other items addressed during the meeting included: (1) an update from Yousef Rabhi on plans to put Project Grow gardens on the county-owned Platt Road site of the former juvenile justice center; (2) approval of up to $270,000 in bonds to fund an extension of the Sugar Creek drainage district in York and Augusta townships; (3) a resolution of support for the U.S. Clean Air Act; and (4) public commentary regarding the dangers of DTE Energy’s “smart” meters.

Commissioners also honored Hazel Bowman for her 25 years of volunteer service in the county’s foster grandparent program, giving her a standing ovation.

Sylvan Township Bond

Verna McDaniel introduced the topic of Sylvan Township’s bond payments during her county administrator’s report, but asked commissioner Rob Turner to elaborate. Turner represents the district where Sylvan Township is located – District 1, on the county’s west side.

Sylvan Township Bond: Background

In 2001, $12.5 million in bonds were issued – backed by the county’s full faith and credit – to build a water and wastewater treatment plant in Sylvan Township that was intended for future development. Under a contract with the county, the township is obligated to make the bond payments. [.pdf of June 20, 2001 county board resolution authorizing the bonds] The township expected that connection fees from developers would cover those payments, but the development never materialized and the township has been struggling to make payments.

Township officials put a millage proposal on the November 2011 ballot to levy a 4.75 mill, 20-year tax that would fund the bond payments. But Sylvan Township residents rejected the millage by a vote of 475 to 328.

As soon as the millage failed, it became clear that Sylvan Township – located west of Ann Arbor, near Chelsea – would not be able to make its payment in May of 2012. Because the county had backed the bonds with its full faith and credit, it is ultimately responsible for making the payments, even if it isn’t reimbursed for those payments by the township.  The county has an interest in making the bond payments to avoid having its AA+ bond rating negatively affected.

Even if the millage had passed, proceeds alone would not have been sufficient to cover the entire cost of the bond payments, however – forcing the county to tap its capital reserves as well. The millage proceeds were also intended to repay the county to cover any amount used from the county’s capital reserves, as well as interest. The proceeds would also have been used to repay the county treasurer’s office, which advanced about $1.2 million to the township in 2007 and 2008 related to this project.

At their Oct. 19, 2011 meeting, county commissioners gave final approval to a contract with Sylvan Township related to the township’s bond repayment schedule. However, the contract was contingent on voters passing the 4.75 mill tax, so the contract was nullified in the wake of the November 2011 vote. A staff memo accompanying the contract resolution indicated that if the millage failed, the county could file suit against the township for breach of contract in failing to meet its debt repayment obligation. Such legal action could result in a court-ordered assessment on township residents.

Currently $9.7 million in principal is owed, plus interest – another $175,000 in November and two payments totaling $350,000 in 2013 – and the $1.2 million that was advanced by the county treasurer. In total, $11.425 million is owed.

Sylvan Township Bond: Board Discussion

Rob Turner reported that as expected, Sylvan Township failed to make its May bond payment of $175,000, and that payment was made by the county. [McDaniel later clarified for The Chronicle that the payment was made out of the county's capital reserve fund, which has an available balance of about $4.7 million.] The county’s legal counsel had met with the township’s legal counsel to start working on a consent agreement related to repaying the county.

Meanwhile, Turner said, the township board plans to make another effort to pass a millage. However, the millage will be set at a lower rate – 4.4 mills – because property values are higher than previously expected. The news about property values was released in April, as part of the county’s annual equalization report.

Everything else, including the payment structure and contract with the county, would be the same as what was previously approved prior to the November vote, Turner said. Any new contract with the county would also be contingent on voters approving the millage, which township officials plan to place on the Aug. 7 ballot. That contract would require approval by both the township and county boards.

From left: Washtenaw County corporation counsel Curtis Hedger and board chair Conan Smith. Hedger has been on medical leave – this was the first meeting he has attended since January, and he received a round of applause from commissioners for his return.

Ronnie Peterson asked for further explanation of the township’s default, saying he couldn’t recall this kind of situation happening here in the past. Curtis Hedger, the county’s corporation counsel, reviewed the history of the bond and said that by not making its May 1 payment, the township breached its contract with the county. He explained that parallel paths are being pursued: the county is taking legal action against the breach of contract, and the township is planning to ask voters for a millage.

In response to another query from Peterson, Hedger clarified that the county made the $175,000 payment on May 1.

Turner reported that May 15 is the deadline for putting a millage question on the Aug. 7 ballot – that’s the preferred approach. If the millage fails, they’d still have time to get a court judgment that would assess a millage on township residents on their December tax bills.

Turner pointed out that this potential outcome has been discussed – it was a situation that has been known. If the millage fails again, it would be better to have a consent agreement filed with the court for approval, to avoid additional legal expenses on both sides.

Peterson – who represents a district that covers most of Ypsilanti – then said that because people like to dip into his community’s business, “let me dip a little, too.” Why hasn’t a consent agreement been reached before now? An obligation has been called, he said. Sylvan Township should be knocking on the county’s door. ”There’s nothing to negotiate – you’re in default,” he said. All communities are hurting badly, Peterson said, but this situation is non-negotiable.

Turner replied that township officials did approach the county several months ago. They knew well ahead of time that they wouldn’t be able to make their payments. But the county’s legal advice was to wait until that non-payment actually happened. The township isn’t fighting this, Turner said – they want to work it out with the county.

Alicia Ping asked what would happen if the millage fails again. What would be assessed on each property owner in the township?

Hedger replied that the point of the consent agreement is to determine that amount. He explained that the consent agreement, reached between the county and township, would be presented to a judge as a recommendation. If there’s no agreement, it’s in the hands of the judge to determine how much to levy.

Ping wondered why the judge couldn’t order 4.4 mills to be levied now, so that it could go on the June tax bills, rather than wait until the county had to make another $175,000 payment. All of the commissioners had sat around the table and made budget decisions, Ping said, and they understand that $350,000 is a lot of money. She didn’t have confidence that Sylvan Township voters would approve a millage they had rejected in November. So why not just ask for a judgment now?

Hedger said the county is pursuing  dual tracks – taking legal action over the breach of contract, while trying to reach a consent agreement that can be presented to the judge. He cautioned that the judge might not accept the recommendation in a consent agreement. Ultimately, it would be the judge who determines the amount to levy.

Ping said the county is asking other residents to be very patient. She asked whether this approach is the fastest way to get money out of Sylvan Township. It is, Hedger said.

Conan Smith said he wanted to highlight the work that Turner had done. Turner has regularly updated the board about the severity of the problem and the consequences of the millage failure, he said, while at the same time being cognizant of the residents and of the damage to their quality of life if the county were to unilaterally demand full payment. The county is taking a measured course, he said. They’re partners. It’s not exclusively the fault of the developer or the township board – the county board played a role too. They need to find a way to get through this situation that keeps the county whole but doesn’t create a dire situation for residents who are already feeling financial stress.

Smith told commissioners he felt content with the process. He doesn’t want to end up with the county picking up the tab, nor should the county try to punish the township. It was great that Sylvan Township’s leaders came forward and are willing to try again with the millage. The right course of action is to get through this without undue hardship while keeping finances stable, he concluded.

Felicia Brabec asked Turner if he had any sense that the voters’ mood had shifted on this issue since November. That’s a good question, Turner replied. There’s a group that has organized against the millage, but they’re also against any payment, he said. Last year, voter turnout was very low. The hope is that if there’s a larger turnout and people are better informed, the millage might pass.

Brabec asked if there are plans for further education before the millage vote. Turner said he’ll make himself available for another town hall meeting, though he said the township’s legal counsel doesn’t want to hold such a meeting. Prior to the November 2011 vote there were three public forums, with about 100 people attending each one, Turner said. The exchanges became personal against the township board. While Turner said he was treated with respect, a lot of anger was directed at township board members. The township’s legal counsel is also a resident of the township, which puts him in a difficult situation, Turner said.

From left: Greg Dill, the county's infrastructure management director, talks with county commissioner Dan Smith.

Dan Smith said he was happy that the county made the bond payment, and maintained the county’s good credit rating. That’s important, he said, because a good credit rating lowers the cost of funding activities like the Sugar Creek drainage project they were voting on that night.

Smith said he also approved of efforts to minimize the impact on Sylvan Township residents. A judgment issued every year could result in widely varying millage rates, he said. At least a voter-approved millage or a court-ordered consent agreement would provide some stability, and help with planning and budgeting.

It’s disappointing that no member of the Sylvan Township board has attended any county board meeting, D. Smith said. [Current trustees are Robert Lange, Luann Koch, Arlene Grau, Reuben Lesser Jr. and Scott Cooper.] This has been an extremely public matter involving tax dollars, he noted, and is fairly unique because public bodies are involved in negotiations. But the county board has heard nothing directly from the township – it would have been nice if they had come to a meeting two weeks ago or a month ago, and let commissioners know about the situation in person.

D. Smith then directed a question to Hedger, asking whether Hedger’s advice stems from the fact that the only ways additional taxes to repay the bond can be extracted are through a judgment issued by the court, or through a voter-approved millage. That’s exactly right, Hedger replied. In that case, Smith noted, it binds the hands of the county board as well as the township board, in terms of actions they can pursue.

Peterson said he’d appreciate it if information about situations like this would be shared prior to the meeting. If he were a resident of Sylvan Township, Peterson said, he’d be upset that people had been aggressive in the past but now “I’m paying the bill.” He wondered how the county board could have approved loaning money to an entity that didn’t have a way of guaranteeing repayment.

[According to minutes of the July 2001 meeting, when the board gave final approval to the Sylvan Township project, Peterson seconded the motion for all three resolutions related to the project – including issuance of the bonds. All three resolutions passed unanimously. The minutes do not record any discussion that might have occurred. In addition to Peterson, current commissioners who also served at that time are Barbara Bergman, Leah Gunn, Wes Prater and Rolland Sizemore Jr., who was absent at that July 2001 meeting. Other commissioners at that time were Vivienne Armentrout, Dillard Craiger, Richard DeLong, Jeff Irwin, Martha Kern, Larry Kestenbaum, Christina Montague, Suzanne Shaw, Steve Solowczuk, and Joe Yekulis. Bob Guenzel was serving as county administrator.]

Peterson said the board should review its policies regarding when the county grants its full faith and credit to a project. If you don’t have cash reserves or assets to cover the payments, he said, you shouldn’t be borrowing money – that’s what caused the nation’s housing crisis. The board should have said no to the project, Peterson said. “We’re in it to our neck, but part of it is our fault.”

Turner responded to Peterson, saying “Amen!” He said he totally agreed, but at the time, everyone felt that the housing growth wasn’t going to correct itself. “That is an assumption that should never have been made,” Turner said.

The money will be paid back to the county, Turner said. It will be paid back by some people who didn’t even live in the township when this project was approved. It’s even more hurtful that residents could be forced to pay it without a vote. [That is, if a millage fails to win voter approval, a judge will make a ruling to assess residents instead.] The situation has a long and complex history – “it’s a mess,” Turner said. This could have been a successful project, he said, but everything went against it. His heart breaks for the people of Sylvan Township and the burden they’ll have to carry, he said.

Referring to the county’s May 1 payment on the bond, Rolland Sizemore Jr. said he didn’t know how the administration could write a check for $175,000 without informing him, and he hoped it didn’t happen again. He asked whether the county would recoup its legal expenses. Hedger said it’s not automatic, but they could ask to be reimbursed. Sizemore wrapped up the discussion by saying that he’d be very upset if something like this happens again.

Sylvan Township Bond: Board Discussion – Coda

Later in the meeting, Rob Turner said he didn’t want to beat a dead horse, but he wanted to clarify that everyone was in agreement about the plan to work with Sylvan Township on a contract similar to the one they had approved last year, laying out a plan for repayment if the millage passes. No one responded, which Turner took to mean assent.

Wes Prater said he thought Turner was doing the right thing, and that he knew Turner had spent a lot of his personal time working on this situation. Prater said he believed Turner was making headway. “Maybe the third or fourth time [the millage vote] will be successful, Prater quipped. He added that he really hoped it would work out this time.

Head Start Update

During her county administrator’s report, Verna McDaniel told commissioners that the county had agreed to a one-year extension to continue administering the Head Start program, through July 31, 2013.

County administrator Verna McDaniel, left, talks with Diane Heidt, the county's human resources and labor relations director.

By way of background, last year – as part of the budget process – the county board voted to relinquish its 46-year administration of Washtenaw Head Start on July 31, 2012. The plan is for federal Head Start administrators to issue a request for proposals (RFP) to seek other interested entities that could take over the program.

The RFP wasn’t issued until April 19, McDaniel reported, and the selection process typically takes 8-12 months. That meant that on Aug. 1 of this year, an interim agency would have taken over the program, running it until federal officials selected a new grantee.

Rather than have two transitions, the county negotiated to extend its administration of Head Start until the next grantee is selected, McDaniel said. This will allow for a smoother transition and avert an interim management period. In exchange, federal officials have agreed to waive a required 20% local match. The program will be funded only through $3.8 million in federal dollars, for which the county must apply for as it has done every year. [McDaniel later clarified for The Chronicle that the match amounted to about $750,000, which the county has previously funded through a combination of cash and in-kind contributions.]

McDaniel said that her staff had met with union representatives earlier in the day to discuss the change, and the union is being very cooperative.

Head Start Update: Board Discussion

Ronnie Peterson wanted details about the impact of eliminating the 20% match. Classroom size is important to him, he said, as is the teacher-to-student ratio. The county has a nationally recognized program because of its high standards, Peterson noted. He did not want those standards to be compromised, and asked for regular reports during this transition period.

McDaniel said that eliminating the 20% match would not result in lower standards or reducing the number of students that participate.

Board chair Conan Smith noted that every year, the county must apply for federal funding to operate Head Start. County staff had not intended to do that for the coming year, but now they will, he said. The application must articulate any program changes, and the staff is working on that now. Because the 20% match is being eliminated, there will almost certainly be program changes “to the negative,” he said, but those details are still being worked out.

Smith pointed out that the will of the board last year had been to relinquish the program to save money. If they now decided they wanted to maintain the program in its same form, they’d need to spend hundreds of thousands of dollars, he said. So there will be changes to the program’s scope and delivery of services. The number of children in the program won’t be cut, and the county hopes to partner with other institutions like the Washtenaw Intermediate School District. If that happens, they might even be able to serve more children, he said. But the reality is the program will likely change, and the staff is working on a plan for that.

The alternative, Smith noted, is that an outside organization would come in and take over with fewer resources and inevitably the program would offer fewer services. Extending the county’s involvement gives commissioners the chance to guide the process, he said, and ensure that the children are taken care of. “Is it going to be the program we had last year? No, it is not,” Smith said. But they knew that when they made the decision during the budget process. No one feels good about the situation, he concluded, but that’s the reality of it.

Felecia Brabec said she echoed Peterson’s concerns, and she appreciated the hard work that was focused on the transition. She wondered if it would be possible to find out which entities respond to the RFP. McDaniel replied that typically, the federal officials receive four or five proposals, and she’d try to get details for the board.

Brabec pointed out that there are many educational institutions in this county that would be a good fit for Head Start. It would be good to support those applications, she said, rather than proposals from outside the area.

Yousef Rabhi described the extension as a great course of action, to ensure the program only goes through one transition, not two. It will preserve the program’s leadership and make less of an impact during the transition, he said.

Peterson then spoke at length about his concerns for the “county’s babies” who are born into poverty, and how he feels responsibility for their welfare. He hoped that the county would bring in Head Start experts to act as consultants and guide the county through this transition period.

Animal Control Services

During the May 2 meeting, commissioners were updated on ongoing efforts to address how the county handles animal control services.

Rob Turner, who serves on an animal control services work group led by sheriff Jerry Clayton, reported that a meeting for May 1 had been cancelled and rescheduled for May 15. The work group includes representatives of the county, the Humane Society of Huron Valley, and other municipalities that have animal control ordinances. That group was created by the county board earlier this year and is tasked with developing a methodology to determine the cost of providing animal control services.

At the board’s April 18, 2012 meeting, commissioners had discussed the need for a policy task force on animal control issues to also convene. On Wednesday, board chair Conan Smith passed out a schedule for the task force meetings, with the first one set for Wednesday, May 9. He noted that the resolution passed by the board at their Feb. 15 meeting had set a May 15 deadline for an initial report from the task force. But since its first meeting will be just a few days before that, he said he wasn’t sure what kind of report they could make.

Six meeting dates are scheduled for the policy task force, all on Wednesdays from 8-10 a.m. at the county’s Learning Resource Center, 4135 Washtenaw Ave.: May 9, May 23, June 13, July 25, Aug. 22 and Sept. 12.

Smith described the approach he wanted to take as a bit experimental, using the kind of interest-based process that the county uses in its labor negotiations. He has asked that the meetings be facilitated by staff of the Ann Arbor-based Dispute Resolution Center.

Topics to address include defining the county’s state-mandated services, selecting the non-mandated services they’d like to offer, and identifying the revenue sources available to fund those services. For example, if the county wants to provide animal control services for cats – which the county considers a non-mandated service – then they’d need to find out how much it costs to do that, and what revenues are available to pay for it, Smith said. Serviceability levels are important, he added, because that will be included in the request for proposals (RFP) that the county eventually issues. If the county learns that the desired service levels cost more than its ability to pay, some decisions will need to be made about that.

Another issue is to set policies for pursuing repayment through the courts for animal abuse cases. Smith said he hoped to have preliminary recommendations from the task force in August, with final recommendations in September.

The board had previously set a deadline of Sept. 15 for the sheriff’s work group to complete their recommendations, with a final task force report to be made by Oct. 15. Ronnie Peterson pointed to the amount of meeting time scheduled for the task force, indicating that six two-hour meetings seemed like a lot. Smith hoped it wouldn’t take that long to do the work – if it’s done sooner, “I’d be delighted,” he said.

Noting that there are two parallel tracks – the work group and the task force – Felicia Brabec asked how those two entities would communicate. Smith said he didn’t know yet, but that he planned to communicate with the sheriff, county administrator Verna McDaniel, and commissioner Rob Turner, who all serve on the work group. It’s important that the two entities are “cross-communicating,” Smith said.

Yousef Rabhi reiterated the importance of communication. He noted that the purpose of the May 15 initial report from the policy task force was to provide some direction to the sheriff’s work group. Smith replied that at the first policy task force meeting, they should clarify the scope of their work, which might help the sheriff’s work group to prioritize its research.

Wes Prater clarified with Smith that these meetings will be open to the public and noticed in accordance with the state’s Open Meetings Act. He felt that the work of the policy task force should be simple – establishing the types of services the county will provide, and the level of service. They should start with mandated services and go from there, he said.

Turner cautioned that the recommendations will need to be reviewed at a work session, followed by an initial vote at a ways & means committee meeting, then a final vote at a board meeting. After that, the RFP will be issued, and there needs to be time to receive proposals, review them and make a decision about awarding a contract. All of this needs to happen before the end of the year, when the current contract with the Humane Society of Huron Valley ends. The board needs to be sensitive to this timeframe, Turner said. Otherwise, they’ll find themselves in the same position as they were last year.

2011 Finance, Audit Reports

There were three presentations at the May 2 meeting related to the county’s finances.

Mark Kettner of the accounting firm Rehmann.

In what’s become an annual ritual, Carla Sledge, Wayne County’s chief financial officer and past president of the Government Finance Officers Association, presented the county with a certificate of achievement for excellence in financial reporting for its fiscal year ending December 2010. The award is based on the county’s timely completion of its state-mandated comprehensive annual financial report, or CAFR. This is the 21st year that Washtenaw County has received a certificate of achievement.

Pete Collinson of the county’s finance department then gave a brief presentation of a set of financial reports: (1) a schedule of fund balances and net assets as of Dec. 31, 2011; and (2) a schedule of long-term liabilities over the last five years.

Collinson noted that the board had received a detailed report on 2011 year-end finances at its March 21, 2012 meeting. The county had used nearly $800,000 from its fund balance for the year, but the good news is that the amount was considerably less than anticipated. [The finance staff had originally projected that $5.3 million would need to be drawn from the general fund balance for the year – the board had approved the 2011 budget based on that assumption.]

The county also received favorable news from the equalization report in April, Collinson said, which means that 2012 property tax revenues will be higher than expected. He pointed out that the county also has $14.5 million in the fund balance for its general fund – or 14.2% of annual expenditures, “which is very good,” he said. [The total for all of the county's fund balances stood at $111.743 million at the end of 2011.]

Looking at the schedule of long-term liabilities, Collinson observed that the county’s bonded debt has decreased but its legacy liabilities – including pension and VEBA (Voluntary Employees’ Beneficiary Association) – are growing. [VEBA is a 501(c)9 trust established to pre‐fund retiree health care benefits. Total legacy liabilities have increased from $302.198 million at the end of 2007 to $346.572 million at the end of 2011.]

Collinson said there were no significant findings in the audit report, and that all other issues raised in the audit had been addressed.

He highlighted the county’s state revenue-sharing reserve fund, which stands at $10.8 million. About $6.8 million of that will be used in 2012, with the remaining amount to be used in 2013. At that point, the fund will be depleted, he said, but it’s hoped that the state legislature will reinstate revenue-sharing at some level beyond that.

Collinson reported that the county staff had a conference call in late April with Standard & Poor’s and have been told that the county’s AA+ bond rating will remain unchanged – a very favorable rating, he said.

In wrapping up, Collinson noted that this report is coming to the board a little later in the year than usual. He pointed to significant finance staff turnover in 2011, as well as the fact that finance director Kelly Belknap had been “borrowed” by the administration during the year. [Belknap began serving as interim deputy administrator a year ago, following the medical leave, then resignation, of deputy administrator Bill Reynolds.]

Collinson introduced Mark Kettner from the accounting firm Rehmann, who briefly reviewed the 2011 audit and fielded questions from commissioners.

[2011 comprehensive annual financial report (CAFR)] [communication from Rehmann to board] [building authority 2011 financial statement] [department of public works 2011 financial statements] [water resources commissioner 2011 financial statements] [employee retirement system 2011 financial statements] [money purchase pension plan (MPPP) financial statements] [VEBA financial statements] [2011 Michigan single audit]

2011 Audit Report: Board Discussion

Wes Prater noted that the financial status looks good, with the exception of long-term liabilities. It’s of concern to look at the last five years and see that the county now has nearly $50 million more in long-term liabilities than it did in 2007, he said.

“That’s a tough nut,” Kettner replied, adding that he agreed it was a scary outlook. Those are challenges that are going to survive the people in this room, he said. Previously, the county had a defined contribution plan, he noted, but shifted to a defined benefit plan – that was a policy decision that had an impact on long-term liabilities. To offset that, changes have been made in labor agreements, shifting more of the costs to employees. But benefit programs remain the county’s primary liability, he said.

County commissioners Alicia Ping and Wes Prater.

Prater said that it’s troubling to see such a dramatic increase over the past five years. The county owes its employees for the work they’ve done, he said, but the long-term liabilities are an issue the board needs to address.

Kettner noted that part of the issue is tied to workers taking retirements earlier than anticipated. That’s a strategy that helps the county’s short-term financial situation by removing people from its payroll, he said, but people then start drawing their retirement benefits sooner. Perhaps it’s time to start asking whether the county’s actuarial assumptions – as well as assumptions about interest rates and investment returns – are realistic, he said. These are challenges for everyone, Kettner said, and no one has the answers.

Rob Turner said that assumptions of 7.5% investment returns are nearly impossible. Even if those returns are in positive territory at 3-4%, he said, the system is still in a hole because it was based on getting much higher returns. He said the county’s VEBA and pension boards are looking into this, and will be hiring a new actuary.

The employees’ retirement system liabilities stood at $40.49 million at the end of 2007 and are now at $84.2 million, Turner noted. Just in the last year, those liabilities had increased by $14 million. It’s also important to work with the labor unions representing county employees to address this issue, Turner said, adding that there are “handcuffs” related to that, too. It was addressed in the last labor negotiations, he said, and will be an ongoing issue.

Sugar Creek Drain Bonds

Acting on a request from water resources commissioner Janis Bobrin, commissioners were asked to give initial approval to pledge the county’s full faith and credit for up to $270,000 in bonds to fund an extension of the Sugar Creek drainage district.

The project – which in total is budgeted at $349,899 – was requested by the Washtenaw County road commission. It entails relocating a portion of the county drain, including a section of 1,850 feet adjacent to Platt Road between Judd and Stoney Creek roads in York Township. A second phase includes removing sediment and vegetation, as well as making wingwall repairs, at the drain crossings of US-23, McCrone Road, and Gooding Road.

The Sugar Creek drainage district covers parts of York Township, Augusta Township and the city of Milan. The bonds will be repaid in part by assessing property owners in the district – 70% of the cost of the bonds will be paid in this way. [.pdf map of drainage district] The remainder of the funds will come from York and Augusta townships, the city of Milan, Washtenaw County, the Michigan Dept. of Transportation, and two railroads – Ann Arbor Railroad and Norfolk Southern Railroad. The county’s share of the cost is $24,203 – half of that will be paid by the county road commission.

A contract for the work has been awarded to Mead Brothers Excavating of Springport, Mich., the lowest responsible bidder.

Sugar Creek Drain Bonds: Board Discussion

Wes Prater said he felt the board needed an explanation, since this was a “pretty big project.” Janis Bobrin, the county’s water resources commissioner, described it as a standard construction project, aimed at protecting the road from continued degradation. She noted that her office had been petitioned by the road commission to do the work because of drain problems related to erosion on the county road. The process had involved quite a bit of time negotiating with a property owner in the area where the work will be done, she said.

Prater pointed out that the project showed cooperation between two county departments, though he noted that the road commission is an autonomous unit. [The road commission operates independently from the county, but its three commissioners are appointed by the county board. The water resources commissioner is an elected position.] Prater noted that the project is located in his district – District 4 – and the work is needed.

Bobrin described the relationship between her office and the road commission as a great partnership. Prater agreed, quipping that “it took a while to get there.”

Outcome: Commissioners unanimously authorized bonding for the Sugar Creek drain project. A final vote is expected at the board’s May 16 meeting.

Support for Clean Air Act

A resolution on the May 2 agenda expressed support for the U.S. Clean Air Act, and opposed “attempts to weaken, dismantle, overrule or otherwise impede the Environmental Protection Agency from enforcing or implementing” the act.

The resolution was requested by Dick Fleece, director of the county’s public health department. A staff memo accompanying the resolution notes that since the Washtenaw County Clean Indoor Air Regulation was implemented in 2003, the number of county residents using tobacco has dropped from 18% in 2003 to 12% in 2012. The memo notes that “supporting the Clean Air Act, along with national standards can provide protection from traveling air pollutants,” including emissions from Michigan’s 19 coal-fired power plants.

The only discussion on this item came from Yousef Rabhi, who said: “The Clean Air Act is awesome!” When the vote was taken, Rob Turner said he was voting against it because of concerns about the impact on business and employment.

Outcome: The resolution supporting the federal Clean Air Act passed on a 6-1 vote, with dissent from Rob Turner (R-District 1). Dan Smith (R-District 2) abstained. Barbara Bergman (D-District 8) and Leah Gunn (D-District 9) were absent, and Rolland Sizemore Jr. (D-District 5) had left the meeting early and was not present for the vote.

Food Policy Council Appointment

The May 2 meeting included a resolution to appoint Yousef Rabhi, a commissioner representing District 11 in Ann Arbor, to serve on the new Washtenaw Food Policy Council.

County commissioner Yousef Rabhi.

The county board approved the creation of the council at its March 21, 2012 meeting. The council’s goal is to support local “small and mid-sized farmers by fostering policies that encourage local food purchasing and production,” according to a staff memo. Among other activities, the council could also: recommend policy changes at the local, state and national levels; provide a forum for discussing food issues; encourage coordination among different sectors of the local food system; evaluate, educate, and influence policy; and launch or support programs and services that address local food needs.

Partners who have been working on this initiative include the Y of Ann Arbor, Growing Hope, Food Gatherers, the Food System Economic Partnership (FSEP), Slow Food Huron Valley, Eat Local/Eat Natural, Michigan Farmers Union, Ypsilanti Food Coop, and the Washtenaw County public health department.

The council will have a 15-seat membership roster, with members drawn from the following sectors: agriculture, nutrition, education, emergency food system, health care, food services, food manufacturers and distributors, waste management, planning or transportation, retail/business or economic development, human services, faith-based organizations, local governments (board of commissioners), public health, and at large community member(s). The county public health department will be responsible for recruiting members. A draft set of bylaws has also been developed. [.pdf of food policy council draft bylaws]

The council will initially use grant funds from the Michigan Dept. of Community Health, passed through to the Washtenaw County public health department. The council eventually expects to secure financial support from private grants and philanthropic funds. The project will also seek significant in-kind and volunteer support, according to a staff memo.

Outcome: Commissioners unanimously approved the appointment of Yousef Rabhi to the Washtenaw Food Policy Council.

Urban County Annual Plan

A public hearing on the annual plan for the Washtenaw Urban County took place during the May 2 meeting. Only one person spoke: Thomas Partridge.

The annual plan describes how the Urban County expects to spend the federal funding it receives from the Community Development Block Grant (CDBG), HOME Investment Partnerships Program (HOME) and Emergency Shelter Grant (ESG) programs, operated by the U.S. Dept. of Housing and Urban Development (HUD). [.pdf of 2012-2013 draft annual plan] [.pdf of list of planned projects]

The Washtenaw Urban County is a consortium of local municipalities that receive federal funding for projects in low-income neighborhoods. Current members include the cities of Ann Arbor and Ypsilanti, and the townships of Ypsilanti, Pittsfield, Ann Arbor, Bridgewater, Salem, Superior, York, Scio, and Northfield. An additional seven municipalities will become part of the Urban County as of July 1, 2012: the city of Saline, the village of Manchester, and the townships of Dexter, Lima, Manchester, Saline, and Webster.

“Urban County” is a HUD designation, identifying a county with more than 200,000 people. With that designation, individual governments within the Urban County can become members, making them entitled to an allotment of funding through a variety of HUD programs.

The Washtenaw Urban County executive committee meets monthly and is chaired by county commissioner Yousef Rabhi. The program is administered by the staff of the joint county/city of Ann Arbor office of community and economic development.

During the public hearing, Partridge said he was very interested in the plan because the Urban County receives state and federal resources for affordable housing. He was disappointed that the county board chair, Conan Smith, and other commissioners hadn’t personally invited constituents of the Urban County areas to speak at the public hearing. The meetings of the Urban County are out of the public view, Partridge said – the meetings are held at the Washtenaw County Learning Resource Center, 4135 Washtenaw Ave., and are not recorded by Community Television Network (CTN).

Partridge advocated for getting an extension on the deadline for submitting the annual plan, because public input on it had been inadequate. No one had been on hand to explain the plan, he said, and it’s almost completely devoid of specific goals for adding additional rental and single-family housing units. Partridge concluded by calling for more public hearings held at locations throughout the county, including in Ann Arbor.

Communications and Public Commentary

There are various opportunities for communications from commissioners as well as general public commentary. These are some highlights.

Communications: Project Grow

Yousef Rabhi reported progress that’s been made on an effort to put Project Grow gardens on the county-owned Platt Road site of the former juvenile justice center. He said he was approached by Eric Meves, a Project Grow board member, who had expressed interest in the property. [Meves attended the May 2 board meeting, but did not formally address commissioners. He had previously made a presentation about Project Grow during public commentary at the April 17, 2012 meeting of the Ann Arbor park advisory commission.]

The nonprofit already has 80 gardens at the nearby County Farm Park, Rabhi said. He pointed out that about 40 people are on a waiting list to get Project Grow plots, and the Platt Road property is available. The county wouldn’t need to do anything, because Project Grow volunteers would come in and till the soil, and install a separate meter on the water hookup so that they could pay for their water use. Project Grow would also add the county to its insurance coverage, so there would be no concerns about liability, he said.

Rabhi said it’s a great way to use the property until the county decides what to do with it, and that Project Grow understands that gardeners might need to leave at some point. [The possible disposition of the property at 2270 and 2260 Platt Road – which includes a vacant 42,320-square-foot building on 10 acres of land – was discussed at a March 8, 2012 board working session.] In this interim period, Rabhi said, having Project Grow gardeners on the site will help the county with security and lessen the likelihood of vandalism there.

Hazel Bowman was honored for her work with the county's foster grandparent program.

Communications: Hazel Bowman

During the May 2 meeting, commissioners passed a resolution honoring Hazel Bowman for her 25 years of work through the county’s foster grandparent program. County administrator Verna McDaniel read the resolution, stating that Bowman ”strengthens the fabric of our community through her work, gracious spirit and unfailing support of others.”

Bowman’s work over the years has included acting as a mentor, tutor and caregiver for children and youth with special needs at Clark Road Group Home, Jefferson Head Start, Henry Ford Elementary, and the Willow Run Early Learning Center.

Bowman received a standing ovation from commissioners and others in attendance.

The foster grandparent program connects qualified volunteers – U.S. citizens who are 60 or older, meet income guidelines, and are able to work 20 hours a week – with special needs children in public schools, hospitals, and day care centers. The foster grandparents receive a $212 monthly stipend, transportation assistance to the site, one meal each day of service, and a free annual physical.

Communications: Public Commentary – Smart Meters

Nanci Gerler told commissioners that she had spoken to the Ann Arbor city council about the growing problem of  DTE’s smart meters, which are now being installed in Michigan and other states, even though some customers don’t want them. There are protests and injunctions against the installation of smart meters in other communities, she said, but those aren’t widely publicized. It’s extremely critical that people are aware that these meters are unsafe, she said. Some people who are sensitive to electromagnetic frequencies see the effects immediately, with headaches, ringing in the ears and sleep disorders. Cost issues are another concern – some people have seen their electric bills increase dramatically after the meters are installed. The meters have also resulted in fires from faulty wiring, she said. “It’s going to impact every one of us,” she concluded.

Communications: Public Commentary – Most Vulnerable Residents

Thomas Partridge spoke during the two opportunities for public commentary. He described himself as an advocate for the vulnerable residents in the county, and urged commissioners to adopt a framework for supporting affordable housing, health care, transportation and education, especially targeted to the most vulnerable population. He criticized some county agencies for not having the best interest of residents at heart, citing specifically the Project Outreach Team (known as PORT), the Community Support & Treatment Services (CSTS), and the Washtenaw Community Health Organization (WCHO). Staff is too often neglectful and have callous attitudes toward residents, he contended.

Partridge also endorsed president Barack Obama for another term, and urged Obama to run on a more people-oriented platform to address unmet needs in health care, education, public transportation and housing, as well as giving emphasis to the needs of the disabled, senior citizens and college students with undue financial burdens.

Present: Felicia Brabec, Alicia Ping, Ronnie Peterson, Wes Prater, Yousef Rabhi, Rolland Sizemore Jr., Conan Smith, Dan Smith, Rob Turner.

Absent: Barbara Bergman, Leah Gunn.

Next regular board meeting: Wednesday, May 16, 2012 at 6:30 p.m. at the county administration building, 220 N. Main St. in Ann Arbor. The ways & means committee meets first, followed immediately by the regular board meeting. [confirm date] (Though the agenda states that the regular board meeting begins at 6:45 p.m., it usually starts much later – times vary depending on what’s on the agenda.) Public commentary is held at the beginning of each meeting, and no advance sign-up is required.

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A policy adopted by the AATA board on June 16, 2011 limits contracting with any one auditing firm to a total of eight years. That meant that the auditing firm the AATA had previously used, Rehmann Robson, was not eligible to provide auditing services when the AATA awarded the contract last year.

This brief was filed from the downtown location Ann Arbor District Library at 343 S. Fifth Ave., where the AATA board holds its meetings. A more detailed report will follow: [link]