City of Ann Arbor chief financial officer Tom Crawford before the Feb. 13, 2012 working session. (Photos by the writer.)

With the exception of one significant change – adding one police officer instead of cutting nine – the blueprint for this year’s budget will, with some slight revisions, follow the plan put in place last year. That includes a plan to eliminate five firefighter positions, pending labor negotiations with the firefighters union.

At the December budget committee meeting, city administrator Steve Powers described this year as taking a “breather” – while stressing that the review of the organization is an ongoing process.

The relative luxury of essentially following the second year of a two-year plan is made possible this year by positive news and outcomes on several fronts.

But at Monday’s working session, the city’s chief financial officer, Tom Crawford, urged a cautious approach, given pending uncertainties about the basic structure of funding local governments in Michigan. Among those uncertainties is the future of the personal property tax, which could drop the city’s general fund revenue by $1.76 million, if that tax were to disappear completely. He advised the council not to use one-time positive outcomes to increase expenditures. Instead, he recommended that the city should strive to increase its fund balance reserve to 15-20% of expenditures – it currently stands around 13%, or $10.5 million. The general fund budget for the city this year calls for $78,321,015 in expenditures.

One of those positive outcomes is the retiree health care funding level for FY 2013, recommended by the city’s actuary – $12.4 million. The city’s planned cost for FY 2013 was $15.3 million. But Crawford is recommending that all but $400,000 of that $2.9 million savings should continue to be paid into the city’s voluntary employees beneficiary association (VEBA), to reduce unfunded liabilities and to guard against future liabilities. The potential $2.9 million savings is a citywide figure.

But as a result of another VEBA-related policy choice that Crawford is recommending, the city’s general fund – out of which basic services like police, fire, planning, and the like are paid – would see a roughly $1 million boost. That policy change would start treating retiree health care as a true pre-funded system, instead of the current pay-as-you-go hybrid. The current hybrid pay-as-you-go approach places a higher burden on those funds that have a relatively large number of associated retirees – workers who were paid out of that fund while they worked for the city. [As of December 2011, the city's general fund had 366 active employees and 532 retirees.] Crawford’s recommended approach focuses on the gaps in pre-funding, which puts the financial burden where most of the liability is currently accruing – active employees. And that would translate to a $1 million general fund savings, compared to the current approach.

Crawford put specific pieces of positive budget news in the context of general positive news, suggesting that the city has now seen the worst of the 2008 economic downturn. Unemployment numbers are dropping – in the Ann Arbor area, unemployment stood at 5.5% in December. And state sales tax receipts are coming off depressed levels – that’s important, because the “revenue” in state shared revenue (the amount the state distributes to local units of government) comes from state sales tax receipts.

Among the specific pieces of positive news Crawford presented to the council was the expectation that the city would break even on the current budget year (FY 2012), which ends June 30, 2012. The city had expected to tap the general fund reserve for $1.1 million this year. In the previous year (FY 2011), the city also essentially broke even, when it had anticipated needing to spend $1.5 million from its fund balance reserve.

Compared to what was anticipated in the two-year plan for FY 2013, on the revenue side several categories are expected to increase. Additional expenses, compared to the two-year plan, include adding a police officer instead of eliminating nine positions.

The net effect of all the changes from the two-year plan is a $1.6 million surplus of recurring revenues against recurring expenses for FY 2013. Of that surplus, Crawford is recommending that the council allocate $150,000 for a pilot program for recruiting police officers. But the rest he’s advising the council to add to the fund balance reserve to guard against leaner years projected in FY 2015-16.

The police recruitment program would allow potential hires to work under the direction of an Ann Arbor police officer before being hired on as a sworn officer. The program’s rationale was described by police chief Barnett Jones at the Feb. 13 working session as stemming from the hiring process to fill nine officer positions that came open at the end of 2011, due to retirements.

Jones gave a presentation of year-end crime reports showing that crime in major categories is trending down for Ann Arbor. Despite the net gain of 10 officers now anticipated for FY 2013, compared to the AAPD staffing levels in the two-year plan, the department’s 118 sworn officers leave Jones 32 short of the 150 that he described at the working session as the “perfect” number of officers for Ann Arbor.

After the jump, this article includes charts and graphs of crime reports, more detail on the impact of retiree health care on the budget, the budget outlook for FY 2013, and the city council’s work schedule for ratifying the FY 2013 in late May.

Work Schedule

Some elements of budget timing leave very little room for flexibility. The city administrator is required by the Ann Arbor city charter to present a budget to the city council each April. And the administrator’s proposed budget must be adopted by the city council, with any amendments the council wishes to make, no later than the council’s second meeting in May.

This year, those constraints have translated into the following schedule.

• Feb. 13: Working session (budget overview, strategy, and police impacts)
• Feb. 27: Working session, if necessary
• March 12: Working session (fire department and other organizational impacts)
• March 26: Working session, if necessary
• April 16: City administrator presents recommended budget
• May 7: Public hearings on budget and fee changes
• May 21: Council consideration of the budget – amendments, adoption

The schedule indicates an apparently late start compared to the last three years, when the council has held off-site retreats to identify priorities and goals, starting in December or early January. Of those three years, the second was actually an exception to the strategy the council has tried to use since CFO Tom Crawford came on board six years ago: Plan in two-year cycles, even though the council adopts budgets one year at a time. On that strategy, every other year should work out to be a fairly straightforward exercise of making minor adjustments to the plan already in place.

So in late 2009, when the city was preparing its FY 2011 budget, that would have ordinarily been a light year for budget work. However, given the dramatic economic downturn a few months before, it wasn’t possible to pursue a strategy of making minor adjustments. Counting that middle year, the council’s pattern over each of the last three years has been to start in December or early January. So this year’s “late” start, though apparently an exception, is essentially a return to the two-year planning approach.

Retirement System Background

At the Feb. 13 work session, Nancy Walker, executive director of Ann Arbor’s employee retirement system, sketched out some background on the system, including its board membership: Jeremy Flack (fire trustee, chairman);
Alexa Nerdrum (citizen trustee, vice chairman);
Dave Monroe (police trustee, secretary);
Terry Clark (general member trustee);
Tom Crawford (city CFO);
Brock Hastie (citizen trustee);
Mark Heusel (citizen trustee);
Steve Powers (city administrator);
and Brian Rogers (general member trustee).

Walker noted that the board still has the same composition as it did before the charter amendment on board composition was approved by voters in the Nov. 8 election, because the change has not yet been collectively bargained. The pre-election charter language set forth the board composition as follows:

(1) The City Administrator and the Controller to serve by virtue of their respective offices; (2) Three Trustees appointed by the Council and to serve at the pleasure of the Council; (3) Two Trustees elected by the general city members from their own number (general city members being members other than Policemen and Firemen members); and (4) Two Trustees elected by the Policemen and Firemen members from their own number.

The revised charter language, which was approved by voters with a margin of 68% to 32% (with a majority in every precinct of at least 61%) retains nine members but distributes them differently, most notably by eliminating from the board the city administrator and one of the trustees elected from the general city membership. The revised board composition is: (1) the city controller; (2) five citizens; (3) one from the general city employees; and (4) one each from police and fire.

The Aug. 15, 2011 city council resolution that placed the charter amendment on the ballot noted that the change would also need to be collectively bargained:

RESOLVED, That if the amendment is adopted, the City Administrator and City Attorney shall immediate commence negotiation with the City’s collective bargaining units to implement the amendment and present to Council the necessary ordinance and contract documents for adoption to make the amendment effective.

Although the new city administrator, Steve Powers, is serving on the retirement board until the new board composition is collectively bargained, the terms of his contract state that he is not a beneficiary of the city’s retirement plan, but will instead have a 401(a) plan. The rationale for the change in the board’s composition was to reduce the number of board members who are also beneficiaries of the plan.

That recommendation had come from a 2005 “blue ribbon” commission – tasked to make recommendations about the city’s retirement board and the city’s pension plan. In 2008, a member of the retirement system’s board of trustees, Robert N. Pollack, Jr., resigned from the board in part due to the city’s failure to enact recommendations of the blue ribbon panel. [.pdf of blue ribbon panel report] [.pdf of Pollack's resignation letter]

At the Feb. 13 work session, Walker reported to the council that most of the blue-ribbon panel’s recommendations had now been implemented.

By way of additional background, the city’s retirement program is supported in part by the levy of a retirement benefits millage [labeled CITY BENEFITS on tax bills], currently at a rate of 2.056 mills, which is the same rate as the city’s transit millage. A mill is equal to $1 for every $1,000 of taxable value of a property.

Walker noted that the retirement system had undergone many changes in its administration, but described the transition as smooth. Among those changes include a new investment manager, a new medical director, a new pension analyst and a new executive director. Walker had joined the Ann Arbor retirement system in January 2011 after Willie Powell had retired in June 2011. Powell served as executive director for the retirement system for 11 years.

Walker also noted that the actuary used by the system as a consultant is also new. Previously the city’s retirement system had used Gabriel Roeder Smith & Company. Starting in 2011, the city began using Buck Consultants as its actuary. The Buck Consultants representative who handles the city of Ann Arbor, Larry Langer, was employed for 10 years by Gabriel Roeder Smith.

Retirement/VEBA Allocation

Larry Langer of Buck Consultants gave the council an overview of the pension fund and the VEBA systems. [.pdf of slide presentation]

Retirement/VEBA Allocation: Overview

City of Ann Arbor retirement system funded ratio graph.

Key takeaway points given by Langer to the council included the fact that the pension fund, for FY 2011 (ended June 30, 2011) had greater investment returns and lower salaries than expected and more retirements than expected. All those changes generated better-than-expected results compared to the June 30, 2010 projections. For FY 2013 the expected employer contribution is now $9,748,510. Based on projections from the prior year’s June 30, 2010 valuation, it had been expected that the city would need to contribute a total of $10,784,00 to the pension fund in FY 2013.

The funded ratio for the pension fund at the end of FY 2011 was 88%, which is a drop from the end of FY 2010 (June 30, 2010) when the funded ratio was 90.3%. But that’s less of a drop than was expected, Langer said. Based on projections from FY 2010 valuation, he had expected a funded ratio of 86.3%.

For FY 2012-14, the dip in the valuation, and the corresponding spike in required employer contributions, drew some questions from councilmembers. Langer explained that the dip corresponded to the economic downturn in 2008-2009. The valuation is keyed to a rolling five-year average, in order to damp the volatility of the measure, so those years continue to have an impact on the valuation until at least five years have passed. Langer cautioned that the funded status will continue to slip in the next few years as the last of the returns from the down years in 2008 and 2009 are reflected in the valuation.

On the VEBA side, which funds retiree health care, key presentational takeaways for the council were greater investment returns than expected, lower salaries than expected, and fewer claims. For the coming fiscal year 2013, the expected employer contribution for employees citywide is $12,379,000, not including some adjustments and interest.

Retirement/VEBA Allocation: VEBA Allocation Policy – How Much?

When the city’s chief financial officer, Tom Crawford, took the podium, he contrasted the expected employer contribution with the number that had originally been planned for FY 2013: $15.3 million. That reflects a citywide savings of roughly $2.9 million.

A number of factors contributed to the reduced cost, including a higher return on investments – 28% last year compared with the standard assumption of a 7% return. Crawford also pointed to ordinance changes reflected in recent collective bargaining agreements, which reduce the health care costs to the city for active employees. And employees hired after July 1, 2011 have an access-only retiree health care plan.

City of Ann Arbor retiree health care contributions. Red line: Historical and projected claims expenses. Green line: Actuarial calculation of contribution. City CFO Tom Crawford is recommending the city continue to make contributions based on the FY 2012 level (dashed blue line), in order to guard against rising claims expenses. (Image links to higher resolution file)

But Crawford noted that the investment returns and the claims amounts – which had contributed substantially to the savings – are relatively volatile and could reverse in the future.

So, of the citywide $2.9 million savings, Crawford recommended that the city continue to contribute $2.5 million of it to the VEBA to pay down unfunded liability and reduce future expenditures. In his presentation, Langer had noted that the VEBA is only 34% funded. On that figure, Langer said that the council might wail and gnash their teeth over the low amount, but it’s still 34% more than a lot other communities.

Crawford also noted that putting $2.5 million of the $2.9 million savings toward the VEBA would help pay down the city’s other post-employment benefit obligations (OPEB) – the city has a $12 million OPEB obligation arising from a settlement with the IRS. Crawford hopes to have that obligation paid off in 5 years.

Crawford noted that the city’s contribution to the VEBA has typically been more than the retiree health benefit costs. And the excess in the contribution, beyond the cost of claims, contributes to pre-funding future benefits. However, because of the increased number of retirees and the rising cost of medical care, the cost of claims is expected to exceed recommended employer contribution in the future. And that will mean that the city will have to rely more heavily in each year on the accuracy of the assumptions underlying the contribution (like at least a 7% return on investments).

In that context, Crawford recommended a VEBA funding policy that makes future city contributions to the VEBA based on the FY 2012 level – but adjusted up or down as a function of the total general fund revenues. That would provide better stability in financial planning and investing, and reduce radical changes in city expenditures, Crawford concluded.

Retirement/VEBA Allocation: VEBA Allocation Policy – Targeting Liability

Crawford’s recommended strategy for the overall citywide retiree health care funding level does not call for the kind of reduction in the city’s contribution that could be achieved if the actuarial OPEB cost were used to determine the city’s contribution.

City of Ann Arbor retirees by fund (department). The majority of city retirees – 65.8% – worked in positions paid for out of the city's general fund (red wedge).

However, a different policy change – one that would assign contributions to those city departments (funds) based on where the future liability is being accrued – would have the effect of saving the city’s general fund roughly $1 million a year.

Under the current system of allocating the city’s retiree health care costs, roughly 73% goes to pay retiree health care claims and the remaining 23% goes to pre-funding – through payments into the VEBA. It’s a hybrid between a pay-as-you go approach (in which each year’s retiree claims are paid out of the current year’s budget) and a pre-funding approach.

The current method essentially treats all retiree health care claims in any given year as unfunded liabilities. That approach means that a city fund (department) with a relatively high number of retirees compared to currently active employees has a relatively higher retiree health care contribution compared to other city funds.

City of Ann Arbor active employees by fund. While the majority of city workers are paid out of the general fund (53.3%), it's a lower proportion than the number of retirees paid out of the general fund (65.8%).

The new approach Crawford is recommending is a true pre-funding approach, and takes into account where the new liability is accruing. The city has already made contributions to the health care of retirees, so not all of the retiree health care claims in a given year are unfunded liabilities – part of those claims have, in a sense, been pre-funded.

So the accruing liability is with currently active employees as they work each additional year. And eventually, as new hires who came on board after July 1, 2011 are vested in the system, the city will see just a $2,500 per year liability in connection with those employees’ access-only plans. So instead of a 73%/27% split, the new allocation methodology would work out to 40%/60% – with 40% going toward the unfunded liability due to existing retirees’ health care and 60% going toward the accruing liability of active employees.

The effect of that shift has a variable impact on different city funds (departments), based on the proportion of retirees and active employees associated with each fund. In late 2011, for example, the general fund had 366.3 active employees, compared to 532.5 retirees. By way of contrast, the parks maintenance fund had 22.59 active employees, compared to just 10 retirees. So for the general fund, under the new methodology recommended by Crawford, the total retirement health care allocation would drop from $9,600,241 to $8,584,649, for a savings of roughly $1 million. But for the parks maintenance fund, the retirement health care allocation would increase from $258,909 to $322,960.

FY 2013 Budget Outlook

The $1 million savings to the general fund – which would result from the retiree health care funding methodology recommended by city CFO Tom Crawford – figures into the overall budget outlook for FY 2013 presented to the council by Crawford.

He began by putting the current year’s budget discussion in the context of the general economic and political climate. Unemployment is improving, he said. In the Ann Arbor area, the unemployment rate stood at 5.5% in December 2011, compared to a rate of 9.3% across the state of Michigan. State sales tax receipts are coming up from their depressed levels. Short-term interest rates are still near 0%. Property tax revenues are fluctuating slightly. Revenue from the federal stimulus package is disappearing. He noted that the state legislature is still considering the elimination of personal property taxes, but has focused little discussion on addressing the structural funding issue for local governments.

Crawford noted that for the previous fiscal year, the city had broken even, when it had planned to spend down the fund balance by roughly $1.5 million.

FY 2011
Revenues                $ 81,065,793
Expenditures              80,938,127

Net Excess/(Deficit)       $ 127,666
Unassigned Fund Balance $ 10,525,445 (13% of expenditures)

-

Crawford told the council that again this year, for FY 2012, the city is working realistically to break even, despite having budgeted to tap the fund balance for over $1 million. If the city does break even, that will result in maintaining its $10,525,445 in unassigned reserves, which is 13% of annual expenditures.

Compared to the two-year plan associated with the previous year’s budget, there’s been a net increase in expected recurring revenues [figures in millions]:

FY 2013
Recurring Revenues

$77.8 planned
----------
  0.6 increased tax revenues
  0.7 state shared revenues
  0.2 increased fire inspection revenues
 -0.6 remove police dispatch (loss of PSAP revenue)
 -0.2 bond user fees
  0.2 other
----------
$ 0.9 total change
----------
$78.7 revised

-
On the expenditure side, Crawford presented the council with a net reduction of $0.7 million compared to the two-year plan. The bulk of those reductions were related either to health care or the contracting out of the city’s police dispatching operation to the Washtenaw County sheriff’s office:

FY 2013
Recurring Revenues

$77.8 Planned
----------
 -1.2 remove dispatch (19 positions)
  0.8 add back 1 police officer, not cutting 9
 -1.0 change retiree health allocation method
 -0.3 police union employees health care
 -0.1 AFSCME union employees health care
  0.1 increased pension contribution
  0.3 higher energy costs
  0.2 higher tax refunds
  0.1 AATA
  0.1 AFSCME president
  0.1 increased severance
  0.2 Other
----------
 -0.7 total change

$77.1 revised

-

The increase in revenues and reduction in expenditures resulted in a net surplus of $1.6 million for FY 2013. Crawford cautioned against spending that surplus, even on one-time items, and advised instead that it be added to the city’s fund balance. The reason for his caution is based on a continued projected increase in expenses in FY 2014-16 of around 2% per year – which he characterized as about what you’d expect in a organization where the primary expense is employee compensation. Personnel costs outpace inflation, he explained.

Against that 2% increase in expenses, the city is projecting only a 1% increase in revenues. On that basis, Crawford is currently projecting that the city would need to spend $792,973 of its fund balance in FY 2015 and $2,112,030 in FY 2016.

In order to guard against any future economic downtown, Crawford said he’s advising that the city increase its fund balance reserve target to the range of 15-20% of annual expenditures. It currently stands at 13%. Still, Crawford said that compared to previous years, it was a nice forecast, with basically a $1 million challenge to meet in coming years – compared to the $2.5 million in savings the council had needed to find in previous years.

Policing, Crime Statistics

Out of the $1.6 million surplus anticipated for FY 2013, one new program that Crawford is recommending the city fund is a pilot program for recruiting police officers. It would cost $150,000. At the Feb. 13 working session, chief of police Barnett Jones explained that the rationale for the program stemmed from difficulties with the hiring process to replace nine officers who retired at the end of 2011. The city received a few hundred applications, but Jones told the council that seven of the nine candidates it had initially identified didn’t turn out to have the kind of backgrounds that rose to the level of professional standard that AAPD wants.

The pilot program would give the department a chance to work with officers on the beat before being hired on as full-time sworn officers. They’d work under the supervision of an AAPD officer and would spend a portion of their time downtown addressing nuisance issues. Despite the net gain of 10 officers now anticipated for FY 2013, compared to the AAPD staffing levels in the two-year plan, the department’s 118 sworn officers leave Jones short of the number he’d like. At the working session, he described the “perfect” number of officers for Ann Arbor as 150.

At the working session, Jones also presented year-end crime totals for the city – in the context of trends since 2002. In all categories of major crimes, the city is trending downward, except for one, criminal sexual conduct:

Ann Arbor Crime Trends: 2002-2011 (UDAA is automobile theft) (Image links to Google Spreadsheet and other charts.)

As a possible theory on why that category of crime has increased, Jones ventured that it’s the kind of crime that carries with it a stigma that acts as a barrier to reporting it. As women are increasingly comfortable reporting such crimes, the numbers have risen, he theorized.

At the working session, Jones rejected the idea that for other crimes the decrease in frequency could be attributed to a decreased number of officers – the idea being that are simply fewer officers to take the reports, leaving more crimes unreported. Jones said that for these types of crimes, he thinks it’s unlikely that anyone would fail to report them – in many cases they’re tied to payouts of insurance claims.

Data for categories of serious crimes was not presented at the working session. The most recent six months of all crime reports for Ann Arbor and some other jurisdictions are available through the website crimmapping.com

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Local attorney Stefani Carter talks with Rolland Sizemore Jr., chair of the county board's ways & means committee, before the Feb. 1, 2012 meeting. Carter will be filling in for the county's corporation counsel, Curtis Hedger, who is taking a three-month medical leave. (Photos by the writer.)

Items not on the agenda took up much of the meeting time. As he has in the past, commissioner Wes Prater raised concerns over a countywide transit plan being developed by the Ann Arbor Transportation Authority. It’s expected that the county board will eventually be asked to authorize a four-party agreement with the AATA and the cities of Ann Arbor and Ypsilanti, but that agreement has not yet been formally presented to the board. [The Ann Arbor city council has postponed its ratification of the four-party agreement twice, and has been asked by the AATA to postpone the issue again at the council's Feb. 6 meeting. That postponement would be until March 5.]

Also at Wednesday’s meeting, county administrator Verna McDaniel introduced local attorney Stefani Carter, who’ll be filling in while corporation counsel Curtis Hedger is on medical leave. Carter has been doing contract work for the county, and previously spent 15 years with the Ann Arbor city attorney’s office.

Speaking at the time for public commentary, Billy Salamey – owner of three towing companies in the county – defended accusations that have been levied against his business during a recent bidding process for towing services with the sheriff’s office. Salamey’s commentary in turn prompted board chair Conan Smith to defend the county’s bidding process, which Smith described as transparent and fair.

Among the formal actions taken during Wednesday’s meeting, commissioners authorized a five-year, $460,000 extension to a project aimed at improving conditions at Whitmore Lake. They also gave final approval to a two-year collective bargaining agreement with AFSCME Local 3052, representing 52 general supervisors.

Medical Leave for County Attorney

Toward the beginning of Wednesday’s meeting, county administrator Verna McDaniel reported that Curtis Hedger, Washtenaw County’s corporation counsel, was taking medical leave. McDaniel introduced local attorney Stefani Carter, who will be handling Hedger’s responsibilities in his absence.

The three-month, part-time medical leave follows a diagnosis of congestive heart failure in January. Hedger told The Chronicle that he plans to work a limited number of hours per week, and will help Carter transition into her role with the county. Carter has been serving as “of counsel” with the county on a contract basis, and Hedger recommended her for this new role. Early in her career Carter worked in the county prosecuting attorney’s office, and later spent 15 years as an assistant city attorney for Ann Arbor.

At the Feb. 1 meeting, Carter told commissioners that she was happy to be there, but ”I hope my term of service will be short, as we hope Curtis comes back as soon as possible.”

Toward the end of the three-month leave, Hedger said he’ll undergo additional testing that could determine whether he’ll return to his job on a full-time basis, continue part-time work, or retire.

Later in the meeting, commissioner Rolland Sizemore Jr. said that the situation would be a good time to examine the county’s legal expenses and to make sure there’s a fair distribution of work around the county.

In addition to Hedger’s salary of about $117,000 $112,321, the county contracts with other attorneys to handle its legal work. Documents provided in response to a Freedom of Information Act request made by The Chronicle in 2011 show that the county spent $4.83 million on outside legal counsel during the five-year period from 2006-2010. [.pdf of 2006-2010 itemized legal expenses]

During that five-year period, the county used 19 firms. But the bulk of the expenses – $4.152 million – were paid to just five firms: Dykema Gossett ($1.45 million), Reach Law Firm ($1.38 million), Miller Johnson ($869,824), Gallagher & Gallagher ($246,645) and Timothy McDaniel ($203,635). (McDaniel is the husband of county administrator Verna McDaniel.)

Much of Dykema’s work related to its role as outside counsel for a lawsuit filed against the county in 2006 by the townships of Ypsilanti, Salem and Augusta over the cost of police services. The county board voted to accept a settlement in mid-2011, but the settlement did not include recovery of the county’s legal expenses. Other legal expenses handled by the 19 law firms relate to real estate, litigation, bond issues and a range of other matters.

The response to a Chronicle FOIA request for 2011 legal expenses, filed last week, will be forthcoming.

Countywide Transit

During one of the opportunities for commissioners to bring up items for current or future discussion, Wes Prater said he wanted to address the issue of a four-party agreement for countywide transit. It’s a topic he has raised at previous meetings as well, most recently at the board’s Jan. 18, 2012 meeting, where he expressed concerns about the county’s role.

WEMU reporter Andy Cluley interviews county commissioner Wes Prater.

On Wednesday, Prater observed that the project seems to be stalled. He then read a statement outlining some of his concerns. [.pdf of Prater's statement] He highlighted the Ann Arbor  Transportation Authority’s cost per passenger ride, which he calculated to be about $5 per rider – based on a $30 million budget and about 6 million riders. Prater also claimed that fewer than 1.25 average passengers are riding per route for each hour of service provided.

By way of explanation, Prater arrives at his artificially low number by starting with the AATA’s systemwide average: 32 passengers per service hour. He then divides that number by the number of routes – 26.

However, the “passengers per service hour” statistic is in concept already finer-grained than an individual route. A “service hour” is an hour of operation for an individual revenue-producing vehicle. And a single route can have more than one vehicle operating on it at the same time. It’s not clear how insight can be gained into route-wise performance by dividing the systemwide average by the number of routes – as Prater has done. That would be akin to trying to learn about household income levels by dividing average personal income by the number of households.

The AATA collects and maintains passenger-per-service-hour data for each route. And those numbers range from a high of nearly 46 passengers per service hour on Route 9 to a low of 11 passengers per service hour on Route 17 in the most recent year.

Prater went on to suggest that AATA discuss these issues with the county board, in light of the four-party agreement that the board will be asked to approve in the near future.

County commissioners were most recently briefed on the AATA’s countywide transit plan at the board’s Dec. 7, 2011 meeting. At that meeting, AATA CEO Michael Ford gave a presentation and answered questions, and addressed the county’s role in the process of forming a new countywide transit authority.

The four-party agreement – with the AATA, Washtenaw County, and the cities of Ann Arbor and Ypsilanti – has not yet been placed on the agenda for the county board. It is being considered by the Ann Arbor city council, which has postponed action on the agreement two times. At a public hearing on the issue at the council’s Jan. 23 meeting, county commissioner Rolland Sizemore Jr. spoke in support of the countywide plan. The Ann Arbor city council had planned to discuss the agreement at its Feb. 6 meeting. But in the most recent development, on Friday, Feb. 3, the AATA requested that the city council postpone a decision on the four-party transit agreement until March 5.

Later in the Feb. 1 meeting, Prater said his statement didn’t mean that he doesn’t support public transit. He’s just concerned about the process for forming a countywide transit authority. Prater said he didn’t think AATA had been forthcoming on all items related to the plan. He also said that a financial advisory group, which was expected to release a report on Friday, Jan. 27 with recommendations on funding a countywide transit system, decided against “turning it loose,” he said. “That’s unfortunate.”

The advisory group, co-chaired by former county administrator Bob Guenzel, postponed its Jan. 27 meeting in the wake of state legislation that had been introduced the previous day – on Jan. 26. The 17-bill package, if passed, would provide for the establishment and funding of a regional transit authority that would include Washtenaw, Wayne, Macomb and Oakland counties.

Whitmore Lake Improvement Project

On the Feb. 1 agenda was a resolution to give initial approval to a five-year, $460,000 project to study and improve conditions at Whitmore Lake. The lake is located in Washtenaw County’s Northfield Township and Livingston County’s Green Oak Township.

The effort – focusing on removal of invasive weeds – is a continuation of a project that began in 2003, and was renewed in 2007. It’s overseen by the county board of public works. The project’s cost will be recovered through special assessments on over 860 parcels near Whitmore Lake.

Rolland Sizemore Jr. asked for additional details of the project. Jeff Krcmarik, an environmental supervisor with the county’s office of the water resources commissioner, said the project began in 2003 after residents living near Whitmore Lake asked for the county’s help. Invasive weeds was inhibiting recreational activities, he said, and limiting the lake’s biodiversity. The assessments require renewal every five years.

Krcmarik pointed commissioners to the project’s website for more information and historical reports.

Outcome: Commissioners unanimously gave initial approval to the Whitemore Lake project. A final vote is expected at the board’s Feb. 15 meeting.

AFSCME Local 3052 Contract Approved

Without discussion, the board gave final approval to a two-year collective bargaining agreement with AFSCME Local 3052, representing 52 general supervisors. The agreement had been ratified by its membership, and had received initial approval from commissioners at their Jan. 18, 2012 meeting.

AFSCME Local 3052 was one of five bargaining units – out of 17 units representing county employees – that did not reach an agreement with the county by the end of 2011, when its previous contracts expired. Negotiations continue with the other four units – representing the prosecuting attorneys, the prosecuting attorney supervisors, attorneys in the public defenders office, supervisors of attorneys in the public defenders office.

The new agreement, which runs from Jan. 1, 2012 through Dec. 31, 2013, calls for a 10% retirement contribution from employees, and a 10-year vesting period for new hires. Employees will take 10 unpaid “bank leave” days in 2012 and 2013, with no furlough days imposed. Though bank leave and furlough days are similar – both are unpaid – the bank leave days do not affect calculations toward an employee’s retirement or longevity pay.

The default health care plan will comply with the state’s hard cap on costs. The cap limits the amount that public employers can contribute toward employee healthcare annually: $5,500 for single-person coverage, $11,000 for individual and spouse coverage, and $15,000 for family coverage. Employees have the option to upgrade their plans for additional annual costs of $2,724 or $1,772, based on the plan.

The agreement also eliminates longevity pay for new hires, and reduces longevity pay by 25% for current employees in 2012. Step increases will be frozen for 2013. The collective bargaining agreement stipulates that if county property tax revenues increase by at least 2% on or before Dec. 31, 2012, a 1% wage increase would become effective Jan. 1, 2013.

Outcome: Commissioners gave final approval to a new contract with AFSCME Local 3052.

Workers Comp Contracts Authorized

Commissioners were asked to approve a resolution authorizing two contracts: (1) for the third-party administration of claims services for the workers’ disability compensation program from 2012-2015; and (2) for excess workers’ disability compensation insurance coverage from Feb. 1, 2012 through May 1, 2013.

The agreement for third-party administration of claims services was awarded to Broadspire Services Inc., based in Atlanta. It calls for paying Broadspire $36,750 in each of the first and second years, and $37,565 in the third year of the contract. Broadspire is the county’s current vendor for these services.

The contract for excess insurance coverage above $500,000 was awarded to St. Louis-based Safety National. The agreement calls for paying the company $62,297 for the period of February 2012 through May 2013. The resolution approved by the board also authorizes the county administrator to negotiate one-year extensions through May 1, 2015. According to a staff memo, the insurance coverage will be used to protect the county from potential worker’s compensation losses over the next year. Safety National is the county’s current excess insurance vendor.

Outcome: The board unanimously approved the resolution related to two contracts for the workers compensation program.

Public Commentary: Towing Contract

One person spoke during the opportunity for public commentary. Billy Salamey introduced himself as a Superior Township resident and owner of three towing companies. [His businesses include Budget Towing, Stadium Towing and Glen Ann Towing.]

Billy Salamey, left, talks with Washtenaw County commissioner Conan Smith after the Feb. 1 meeting.

Salamey said he was there to talk about allegations that had been made against his company by a competitor. It was frustrating, he said, because he felt that his character had been defamed. He said he conducts his business with integrity and honesty, and he cited several examples of work in the community to make his point.

By way of background, Salamey was referring to a letter sent to the board of commissioners on Jan. 25, 2012 from Ed Lee, towing manager of Aachen Auto in Ypsilanti. Lee objected to the process of choosing companies for towing contracts with the sheriff’s office, alleging that a company had submitted a fraudulent bid. Lee criticized the bidding process, stating that the contract extension process “has historically violated the rights of every towing company within Washtenaw County that didn’t currently have the contract.”

In his letter, Lee requested time at the Feb. 1 meeting to discuss the issue with the board. The letter did not refer to Salamey or his business by name. [.pdf of Lee's letter] However, no presentation on the issue was made at Wednesday’s meeting.

During his time at public commentary, Salamey thanked the county for conducting due diligence in responding to the allegations.

Bob Mossing, business manager for the sheriff’s office, had responded to Lee’s allegations in a Jan. 27 memo to Angela Perry, the county’s purchasing manager – the memo was also cc-ed to the county board. Mossing noted in the memo that “no official action has been taken relative to this RFP or awarding any areas to any tow companies.” [.pdf of memo from Mossing] [.pdf of original RFP, issued in June of 2011]

Public Commentary: Towing Contract – Commissioner Response

Conan Smith, chair of the board, responded to Salamey’s comments by saying that the county prides itself on the transparency of its processes. The bids were vetted by the county’s corporation counsel and sheriff’s office, he said, and the bids were found to be in compliance with the county’s policies. He said he appreciated that Salamey attended the meeting, and that the county has a fair, solid bidding process.

Present: Leah Gunn, Alicia Ping, Wes Prater, Yousef Rabhi, Rolland Sizemore Jr., Conan Smith, Dan Smith, Rob Turner.

Absent: Barbara Bergman, Felicia Brabec, Ronnie Peterson

Next regular board meeting: Wednesday, Feb. 15, 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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