Discussion of deficit brings out frustrations

March 22, 2019

A Bloomfield Township Board of Trustees study session held on Wednesday, March 20, to discuss how to address a $5 million to $7 million annual deficit tied to retirement benefits ended without any clear direction, after trustees aired frustrations over funding options and each other.

 

A new state law that went into effect last year requires local governments to disclose retiree health care and pension benefit information to the Michigan Department of Treasury to determine if those plans are adequately funded. The law, Public Act 202, known as the Protecting Local Government Retirement and Benefits Act, is intended to increase transparency of funding status, and came on the heels of Detroit's bankruptcy that lead many retirees in that city to lose pension benefits that had been promised.

 

 Under the new law, the township must fund pension and other post-employment benefits (OPEB), such as medical, dental, vision and life insurance for retirees, to at least 40 percent of costs. Prior to the change, municipalities were allowed to pay for those costs as they arose each year. While the township's pensions are about 97 percent funded, total OPEB liabilities are funded to only 6.7 percent. With total OPEB liabilities totaling about $164 million, a gap of about $65 million must be closed within 30 years. In December, the township announced the change would result in an annual budget deficit of $5 million to $7 million annually.

 

To address the issue, the township worked with financial advisors Plante Moran to devise a list of potential cost-cutting and revenue increasing measures. Those measures include, but aren't limited to, eliminating the township's animal welfare division ($170,000 to $200,00); outsourcing police and fire dispatch services ($375,000 to $700,000); reducing police patrols in the township ($1.3 to $1.6 million); ceasing fire services at the township Fire Station 4 ($800,000 to $900,000); instituting tax administration fees  of one percent ($1.5 million); contracting out property assessing services to the county ($140,000 to $400,000); cutting general fund support for the township's road division ($1.4 million); eliminating some township programs, such as gypsy moth control and hazardous waste disposal ($300,000 to $340,000); and other reductions in services and/or increased fees ($400,000 to $500,000). Advisors also included the possibility of a bond issue to bring the unfunded OPEB liabilities to the 40-percent funded mark.

 

In addition to the work with Plante Moran, the township contracted with the Glengariff Group, a professional survey and research firm, to conduct a formal resident survey to gauge the public's desire on how best to move forward. 

 

Wednesday's meeting began with a detailed presentation by Bloomfield Township Finance Director Jason Theis, who provided an overview of the structural deficit and township finances, survey results and 3 potential corrective action plans to address the issue. The presentation also included cost-saving measures the township has taken over the years, including a reduction of employees since 2008; a 5-year pay freeze starting in 2009; removal of longevity pay; closure of the defined benefit pension and health care plans; modified health care plans; modification of the defined benefit plan contract; previous contributions to OPEB funds; and additional efficiencies.

 

Theis said while the Plante Moran study showed the total possible savings from cuts could total between $4.9 million to $6 million, the study also recognized that services would have to be drastically reduced. Such a reduction, which would include cuts to public safety and roads, weren't supported by residents surveyed. Excluding public safety, roads and other services mentioned in the survey, remaining cuts would total between $560,000 to $850,000. The majority of those cuts would come from eliminating the township's animal control department and contracting assessing services. However, even those cuts were considered questionable by township administration, with about 55 and 56 percent of respondents supporting those options, respectively. The largest percent (54.8 percent) of residents surveyed favored a mix of budget cuts and increasing fees/taxes to close the deficit, with 27.8 percent supporting only budget cuts, and 8.3 percent supporting fees and taxes only.

 

Bloomfield Township Supervisor Leo Savoie said about two-thirds of the township's workforce, as well as its current and legacy costs, are related to public safety staff, which makes up about two-thirds of the township's workforce. He said a public safety SAD, replacing the township's public safety millage, would be preferable to selling OPEB bonds, as bonding would provide a one-time payment to the OPEB fund, rather than a long-term fix to fully fund the liabilities. In addition, repayment of bonds would include interest fees, while a SAD wouldn't. Further, a bonding millage would be subject to tax rollbacks tied to home values, making repayment a potential liability if a future recession impacted home values.

 

While special assessment districts can be approved by the township board without a vote from residents, Savoie and board members said they wouldn't authorize any version of a SAD without voter approval, which would most likely be included in the August primary ballot.

 

Funding scenarios presented included variations of a Public Safety Special Assessment District (SAD), selling OPEB bonds; and service reductions combined with a SAD.

 

The first funding scenario included different variations of a public safety SAD of 1.05 mills, 2.3 mills or to 8.29 mills, with the lowest amount considered a “bare minimum” solution. The scenario would include the renewal of the township's general millage, which includes school, SMART, Detroit Zoo and Detroit Institute of Art millages, and others. None of the three variations include any specific budget cuts.

 

The second scenario would involve the issuance of $60 million in OPEB bonds, which would be the maximum amount currently permitted for the township under state law. Bonds would require a debt millage of about 1.5 mills over the next 20 years, and the OPEB trust would run out of funds by 2033 without additional funding.

 

The third scenario includes cutting services by $560,000, as well as a public safety SAD of .9 mills. Cuts would include the elimination of part-time positions from the front reception desk; elimination of the township's gypsy moth program and annual open house; elimination of the township's animal control division; and contracting out assessing services.

 

Following the presentation, the meeting was opened to public comment, at which time about 6 individuals spoke, chastising the board.

 

Trustee Dani Walsh, referring to comments at a previous meeting, said she feels the issue shouldn't be presented as a public safety issue, but rather as a retirement benefit issue.

 

“When you say we have a public safety issue, we are slapping (police and fire) in the face,” she said. “It bothers me to say we have a public safety issue… this is the fault of many boards that didn't do anything about the liabilities that we had for years.”

 

Walsh also said the presentation seemed to be “skewed,” in an effort to present the best pitch to the public to support a tax increase. At one point in her comments, Walsh accused Theis of claiming that a cut in staff wages would make it harder for the township to attract and retain employees – a comment that was actually made by Savoie at a previous meeting, but was never suggested by Theis.

 

“I don't know what you're talking about,” Theis said.

 

Savoie, in an effort to correct the matter, said the comment was an unwarranted attack on Theis' credibility. He then recounted the loss of several firefighters who have left to go to other municipalities, and human resources studies conducted in the past that he said supported his own statements.

 

Trustee David Buckley, repeating a question he posed in a previous meeting, questioned whether the township should change to a part-time treasurer position, which had been suggested by the previous board of trustees in response to allegations that  previous township treasurer Dan Devine wasn't working a full-time schedule.

 

“If you want to re-run the election for treasurer, I won because we needed a treasurer that was here full time. Unfortunately, you weren't behind that then,” treasurer Brian Kepes said in response. “I didn't take this position for the compensation… on one hand you like the job being done, but on the other hand you voted for the compensation package when your friend was treasurer.”

 

While the board was able to return the discussion to the budget, none of the proposed funding scenarios were discussed. Rather, the issue of township vehicles provided to department heads as part of their compensation packages, which was discussed at a previous meeting, took center stage.

 

While the Plante Moran study didn't address township vehicles, Theis said it was discussed at a 2017 study session and it was determined that eliminating vehicles would save the township about $3,000 to $4,000 per year, per vehicle.

 

Savoie soon after ended the meeting, saying the discussion would continue at the board's scheduled meeting Monday, March 25, and would likely be up for discussion at future meetings.

 

“We've taken steps to stop the problem, and we should let the voters decide,” he said. “Once they decide, then we know how to go forward. I believe every one of us up here is doing what they believe is the right thing to do.”

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