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The Politics of Priorities: Firefighters, Police or Capital Improvements?

On Sunday February 7, 2010, citizens read in AnnArbor.com that our City’s General Fund is projected to come up $5.2 million dollars short due to falling property tax revenue. The bulk of the cuts proposed to close the fiscal gap will impact public safety. City officials informed taxpayers that, “On the chopping block are 20 positions in the Fire Department and 17 in the Police Department.”

Cutting emergency and other citizen services is an absolutely unacceptable and unnecessary solution to closing this projected gap in the budget. We should also remember that since 2003 City Administrator Roger Fraser has repeatedly predicted there will be losses in the General Fund, and when the actual numbers have come in, the city’s General Fund has registered surpluses. The only exception was 2009, when Fraser projected a $10.4 million dollar General Fund deficit related to the early retirement of 27 police officers, and the cost of the police/courts building. That projected loss was inflated by $2 million dollars. Such consistent inflation of losses brings into question the budgeting processes used, as well as the fiscal assumptions relied upon by the City Administrator when making budget predictions. This is a serious issue that needs to be resolved. Projecting loses

I have over 20 years of experience in finance as the CEO of a national higher education publishing group headquartered in Ann Arbor. I’ve studied the City’s budget, its audited financial statements, as well the Budget Impact document released to City Council members on Friday February 5th. There’s an obvious alternative to cutting services in order to close that budget gap.

Cut Capital Improvement Projects NOT Police and Firefighters

The City’s Economic Development Fund is slated to contribute over $5 million dollars for the Fuller Intermodal Trasportation Station (FITS). Thus far, the only source of revenue for the Economic Development Fund has been a $2.1 million dollar transfer from the General Fund. The City’s General Fund pays for our emergency services. FITS was described in the Ann Arbor Observer by the city’s Transportation Director, Eli Cooper, and by the Mayor, as a gamble. I’m not a gambling woman when the safety of our citizens and the jobs of our police and firefighters are on the line. At the moment, FITS is a proposed 1,000 car parking garage for U of M, bus stop, and parking for a few bikes. Our city doesn’t have the cash on hand to partner with the University on the FITS project. It’s irresponsible to lay off police and firefighters so that millions can be diverted from the General Fund to the Economic Development Fund to pay for a parking garage for U of M employees and visitors. The remaining money in the Economic Development Fund should be transferred back to the General Fund. 

When the current administration approved the police/court facility bonds in 2008, Ann Arborites were assured the projected expenditure wouldn’t impact the delivery of services. Today, thanks to the city’s inability to sell a parcel of land included in the project’s financing package, the project faces a $3 million dollar shortfall. In 2009, Ann Arbor lost 27 police officers through $6.7 million dollar early retirement offer—some of our most experienced police officers. It’s time to economize significantly, wherever possible, on the design, finishes and furnishings of the police/court facility, and to look for additional savings on that project. In addition, the downtown library underground garage project should be suspended. It represents an absolutely unnecessary capital expenditure.

In the recently released 2008-2013 Capital Improvements Plan, the plan calls for cuts to improvements in parks, street repair and the sanitary sewer system, and a $5 million dollar increase to alternative transportation, the FITS project. It’s called robbing Peter  to built the FITS for the University of Michigan.

We have 187 miles of roads that are classified as in poor condition. The Stadium bridges are, literally, falling down. Because the repairs of the bridges were put off, our city lost $750,000 in federal funding, and now must use its road repair money on the bridge. 

Here’s how we can clean up this mistake.

I’m in favor of halting the Library Lot underground parking garage project. According to officials from the SEC, those Library Lot bonds may be repurposed. We could, then, use half  of the Library Lot bonds to reconstruct the Stadium bridges. We could then invest the remaining bond money in Treasury bills for the mandatory five year waiting period before the bonds could be repaid early. There will be a penalty for early repayment ($4-$8 million dollars). The Downtown Development Authority has $14 million dollars, collectively, in its Parking and DDA Funds. The penalty not covered by the interest earned over the five years the bond money was invested in T-bills, would be made up by taking the money from the DDA’s funds. Taxpayers would save, approximately, $50 million dollars over 30 years.

The Stadium bridges would be reconstructed. Our street millage money would, then, be freed up to repair our crumbling streets. 

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Short URL: http://www.a2politico.com/?p=2941

17 Comments for “The Politics of Priorities: Firefighters, Police or Capital Improvements?”

  1. [...] By cutting over-allocations in the city’s budget that allow department to accumulate such large surpluses, we would have the money needed for payments on bonds to fix the Stadium Bridges—and then some. Better yet, Council could vote to halt the underground parking garage project and repurpose a portion of those bonds to fix the Stadium Bridges. SEC officials have said the garage bonds may be legally repurposed for use on any capital improvement project in the city. I wrote about a plan to do that, here. [...]

  2. @17 Asking a union to go to its members for a voluntary pay cut is very serious, indeed. Let me say that before doing so, I would expect the City to open its books to the union voluntarily, and to have looked for cuts in the cost of management and overhead first. With respect to Ann Arbor, frankly, as the budget for the General Fund has been (in every year except 2009) projected to be in deficit and then come out in the black, I would have serious reservations concerning a requested voluntary pay cut based on routinely inflated projected shortfalls in general fund budgeting.

    This would, of course, also be a question to ask your union’s leadership, as I’m sure Matt Schroeder is working very hard to get the necessary financial information from the City officials that the union’s leadership needs in order to make informed recommendations to the membership.

    We can’t however, divert funds from the General Fund for construction projects such as the Fuller Transportation Station (FITS), then make-up the “shortfall” in the General Fund by cutting services. City government exists to provide services, particularly public safety services.

    Right now, according to the City’s 2009 audited financial statement (http://www.a2gov.org/government/financeadminservices/accounting/Documents/CAFR%20Main%20FY2009.pdf) the assessed value of the capital assets of Ann Arbor rests at $929,000,000 dollars. 91 firefighters are expected to protect $929,000,000 worth of homes, shops, city buildings, and other property. At the moment, by cutting services below levels deemed safe by former Fire Chief Hopkins, our City Administrator, Mayor and Council are gambling with the lives of citizens and firefighters, as well as the capital assets of our city.

  3. If you were in the shoes of the union members would you take a pay cut? You look outside your window and see a new courts building being built, you go to fuel your police car and you have to go into pittsfield township and fuel at the new wheeler center complex, you go to a council meeting and you watch them bleed money.

    Then you see the FD take a voluntary pay cut. The deal save jobs for 6 months but after that Fraser tells them 14 will be laid off. Then 2 weeks after the deal is signed he announces 20 not 14 will be laid off.

    If you were in a union would you volunteer to take a pay cut?

  4. @15 In 2005, the current administration put together a blue ribbon panel to deal with just these issues. You might drop Mayor and City Council an email and ask what happened to the recommendations of the panel and why they haven’t been implemented over the past five years. I can’t answer that question.

    I can tell you that several of the recommendations deal with reshaping the employee retirement and health care plans for future employees. I would be prepared to bring those recommendations to Council for an immediate vote. One recommendation involves a change to the Charter—changing the composition of the Board that oversees the employee pension and retirement system, removing the City Administrator from the Board, for example.

    Unions are very leery of administrations that play games with money. Since 2003, City Administrator Roger Fraser’s budgeting methods have resulted in significantly inflated general fund loses. Then, when the actual numbers have come in, there have been surpluses. This is a problem. It creates mistrust between unions and their employer. Second, the City Administrator bargains using methods which I consider unprofessional and antagonistic. This must stop, and the relationship repaired. Then, we can work together with the unions to close what is a $13 million dollar gap, and to find other savings.

    It’s going to be a process, but it can be done providing Council is willing to oversee the process more closely. I toured the Midway Aircraft carrier two summers ago, and the tour guide said that if a sailor fell overboard, it took five miles to stop the carrier to turn it around. The sailor in the water now is our labor unions. Public policy can be changed, but it will take patience and time to rebuild the trust necessary to negotiate the contracts we need to negotiate, and determine how to stop balancing the general fund budget on the backs public safety workers.

    Thanks for the question.

  5. If the unions would sacrifice (look what Dave Bing is doing in Detroit), all these layoffs would not be necessary. Police getting $70,000/yr salary and then $100,000/yr pension? It’s ridiculous! This is the answer to curtailing layoffs. Unions have bankrupted every level of government. The country is finally waking up to this fact,ie the defeated school millage. What are you going to do about it?

  6. Tax rules require the bond money to be used for a city capitol project.

  7. @12 Or just give the money back to the tax payers and let the economic activity flow.

  8. Pat,

    Here is a suggestion on how to re-purpose the bond money for the parking garage. Use the money to make loans to families (not speculators) buying/fixing foreclosed homes in Ann Arbor. The banks aren’t making loans, so the city should. T-bills are “safe” but they do not generate much economic activity (which is not safe). Keeping foreclosed properties in use will preserve the city’s tax base.

  9. Pat, if the underground structure weren’t built, how would you see that affecting the value of the downtown parking system?

    What do you think about the at-grade design alternative to the rebuilding of the Stadium bridges? I don’t remember who suggested it directly to council (though I could probably find it with a little looking), but his description sounded interesting.

    • Steve, the Google parking agreement is set to expire, and will return 400 spaces to the system—400 spaces from which revenues may be earned. The Nelson/Nygaard survey (it wasn’t a study even though it is referred to as such), made clear that the garage use percentages indicated a healthy system that was being used well, but not in critical need of expansion. The N/N folks did have some specific recommendations about the city’s on street parking management. Short-term meters, for instance, were not placed correctly according to the N/N people. To my knowledge, these recommendations were never implemented.

      That underground garage was conceived as a perk to make building atop it more attractive to a particular kind of development project (convention center). FOIAed emails show this quite clearly. It was not a project driven by need as much as it was driven by a desire to develop that parcel in a certain way.

      Should it be completed, cash flow analyses for the DDA show a very, very slim margin of error. The public is, then, on the hook to make-up the difference between bond payments that parking revenues don’t cover.

      Repurposing the bonds will mean making payments on the total amount used. Those payments, however, will be significantly less than projected capital and interest payments should that underground garage be built.

      It will cost money to stop the project, but tens of millions of dollars less, overall, than finishing it. In addition, the city will save legal fees associated with the lawsuit filed against the project. Whether the Open Meetings Act violations portion of the lawsuit would proceed is, of course, open to debate.

  10. #8 Sorry, you’re just not right about this. The PFA program money would most surely be returned to the funds from which it was taken, including the General Fund. The GF amount is small, albeit, but the truth is that the money would be returned to the fund and the fund is used to pay for services.

  11. Yes, Mitch that is true, we cannot use any of the percent for art money to save the jobs of firefighters or to fund any of the general fund expenses. The percent for art money if eliminated must be returned to the buckets in which they came from; the general fund was not one of them.

    Buckets are there for a reason, to ensure that specific dollars are spent where they are supposed to be spent. Does the public actually want the council to be able to move all the dollars at whim to any project they want at any time? Be careful what you wish for.

    Pertaining to parks, when council wanted to cut all department budgets a year or so ago, some in the public accused council of the very thing you are proposing and called them corrupt (transferring monies from one bucket to another). They believed that since the parks millage passed, that this was a message to council that the public wanted to spend MORE on parks regardless of the circumstances. However, that happened before the current economic downturn was recognized IN Ann Arbor. Would we vote the same way now?

    I believe that some of them who insisted that parks are sacrosanct may be sorry now.

  12. There are tricks to move money from one fund to another. Some of the tricks are similar to money laundering schemes that rely on moving money through several entities to disguise the ultimate source of the funds. Using that analogy for the city, the funds become the entities. For example, the city has a risk fund. The risk fund charges “premiums” to the other funds. These premiums are set by city staff. If the premiums are accurate, the fund balance should be close to zero. If there is overcharging, the risk fund generates a cash balance.

    Several years ago Council amended the city ordinance to allow the risk fund money to be used for more purposes. Last year the risk fund transferred $2 million to the bucket to pay to construct the new municipal center. While it is permissible to use overcharges to the general fund to pay for the municipal center, it is not permissible to use overcharges to other funds. But once all the money is mixed up in the risk fund, who can tell where it came from? The IT fund is sitting on a pile of cash. Will some of that cash also end up in the municipal center construction fund to pay for technology?

  13. Regarding your idea for shutting down the underground parking lot project (which I support), who pays for the work that has already been done, and how does that affect the bond re-purposing?

    Regarding Chris Taylor’s comments, I have heard so many contradictory opinions about the various city funds and budgets, I wonder if anyone really understands the city’s finances? Whether by accident or by design, it seems like the city’s budgetary process is way too convoluted, and is in dire need of streamlining and simplification.

  14. Thanks for the very informative post. I’d love to hear your take on Christopher Taylor’s recent email on ‘buckets of money,’ http://www.annarbor.com/news/buckets-of-money-why-the-city-of-ann-arbor-cant-use-the-money-it-has-for-what-it-really-needs/

    I mean, is it true that the city “can’t use the nearly $750,000 budgeted for a new sculpture in front of city hall to save the jobs of firefighters”

    • Mitch, here’s what I posted to AnnArbor.com: “CM Taylor writes, “So, for example, we may appear well-funded with some ‘parks’ money by virtue of the Parks Improvement Millage, but because these are ‘improvements’ monies, we cannot use them for ‘operations’ – to mow the grass or groom the baseball fields,” he said. “Operations monies must come out of the general fund, where budget pressures are severe.” This is incorrect. He needs to go back and read the original millage document. There, he will find that, in fact, the money from that millage may be used for BOTH improvements, as well as operations. His explanation of how the money works is somewhat facile and betrays either a serious misunderstanding of how money is moved between funds, or the power of Council to, as another commenter pointed out, use resolutions to create and control funds. Had he voted to dissolve the Percent for Art Program, all of the money taken from the various funds from which it was diverted into the PFA would have been returned, including money to the General Fund. Mr. Taylor is on the Budget Committee and asks, I’ve heard, good questions. He should keep trying to inform himself, but as a novice not try to “teach” his constituents or anyone else.”

  15. [...] This post was mentioned on Twitter by Alan Pagliere and A2 Politico, Mick Hunt. Mick Hunt said: The Politics of Priorities: Firefighters, Police or Capital … http://bit.ly/bM2HTn [...]

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