Bloomfield Township voters this August will determine the fate of a proposed 2.3-mill tax intended to help fund retiree benefits over the next 15 years through the creation of a special assessment district (SAD) dedicated to public safety operations.
Billed as a public safety tax, the SAD would ultimately shore up unfunded liabilities in the township's Other Post-Employee Benefits (OPEB) trust fund related to retiree costs, such as medical, dental and life insurance costs. If approved, the SAD would provide about $9 million a year to police and fire operations, which would provide $1.5 million to OPEB liabilities. The township would also be required to let a 10-year general millage approved in 2010 which is set to expire at the end of 2019, thus eliminating $4.85 million in current tax revenues. The measure would provide an overall increase of 1.05 mills to public safety, decreasing the township's general fund contribution to police and fire by $1.9 million each year.
The SAD is being proposed in response to a 2018 Michigan law, Public Act 202, intended to ensure local retiree health care and pension plans are adequately funded. Under the new law, the township must provide at least 40 percent of the OPEB Trust is funded within 30 years. Previously, local municipalities were permitted to fund OPEB costs as they came due, called pay-as-you-go funding. With about $164 million in unfunded OPEB liabilities, the township must provide the state with a plan to fill a $65 million gap over the next three decades.
If approved, the board of trustees would hold a hearing on August 26, 2019, to pass a resolution approving the SAD. By law, the board would be required to hold public hearings each year to continue the assessment for up to 15 years. The board could also decide to lower the millage amount assessed each year, with the maximum amount set at 2.3 mills, or eliminate the SAD before it expires. By state law, charter townships can only levy up to 10 mills, which is part of the reason the township is seeking a higher amount through the SAD.
In December, the township announced the change in OPEB funding would result in a structural budget deficit of roughly $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 $200,000); 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's Fire Station 4 ($800,000 to $900,000); instituting tax administration fees ($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.
The proposed SAD was one of several funding plans presented to the Bloomfield Township Board of Trustees. Other plans considered included the issuance of OPEB bonds that would be paid directly into the OPEB Trust. However, that option failed to gain support with the board, as the maximum amount of bonds permitted to be sold would establish a one-time fix and fail to provide long-term funding for OPEB liabilities.
A third funding scenario, which included about $560,000 in service cuts and proposing a SAD of .9 mills, also failed to gain support from the board as a whole.
While the board as a whole supported requesting additional taxes from the public to close the gap, two of the seven board members were insistent that budget cuts be implemented prior to putting any tax increase before voters. Those in favor of putting the issue before voters prior to committing to any specific cuts said amendments could be made to the township's current budget after voters decide the SAD issue.
The board voted on Monday, April 8, to approve the ballot language for an August 6 special election by a vote of 5-2, with trustees David Buckley and Dani Walsh voting against the motion and trustees Neal Barnett, Michael Schostak, supervisor Leo Savoie, clerk Jan Roncelli and treasurer Brian Kepes voting in favor.
Monday's meeting followed several months of heated debates among board members, as well as vocal concern from about two dozen residents who oppose any tax increase. About 100 members of the public attended two different council meetings. The issue also drew support from Bloomfield Township Police Chief Scott McCanham and Bloomfield Township Fire Chief Mike Morin.
A motion to pass the ballot language in March was tabled by the board, following a long and contentious meeting. The issue was revisited at the board's April 8 meeting, which included a question and answer session with Scott Patton, of Plante Moran, who worked with the township to identify various cost cutting and revenue generating options to address OPEB liabilities. However, even permitting that discussion to move forward was a matter of contention, as trustee Walsh made a motion to adjourn the meeting before allowing Patton to answer questions. The motion, which was supported by Buckley, failed by a vote of 5-2.
“I find it sad that we have a room full of residents and people watching on television, and we have a representative who authored the study from Plante Moran, and there was a motion made by a trustee and seconded to adjourn the meeting,” Kepes said. “It's sad. We should want to hear from the paid professional and have a dialogue on this matter.”
The board then voted unanimously to bring Patton into the conversation with the board.
Patton, who previously addressed the board in December, said the unfunded liability issue is one that several municipalities in southeast Michigan are facing.
While residents surveyed were generally in support of eliminating the township's animal welfare department, township Supervisor Leo Savoie said he believes from calls he receives from residents that the department is highly valued. Roncelli also said the same service from the county is generally considered much slower than providing the service in-house.
“I would say that's an accurate description,” Patton said.
“All of these cuts change services to people,” Roncelli said. “Cutting the person who does vehicle repairs in the road division would effect fleet services. Roads wouldn't be plowed as soon as they are if we didn't have a road department. Roads wouldn't be repaired as quickly.”
Buckley, who indicated he didn't oppose asking residents for a tax increase, said that measure should only be done after making cuts.
“Clearly, as indicated by public comments and the survey, budget reductions are expected before the SAD,” he said. “Let's start by looking at 20-percent of what the ask is. Let's find a million in cuts and ask for $4 million, that's if we ask for $5 million.”
Among possible cuts, Buckley suggested all township staff, other than police and fire, take cuts in compensation, including elected officials.
Township attorney Derk Beckerleg said state law prohibits reducing the compensation of any elected official during their current term in office.
Following additional discussion, the board voted 5-2 to remove the proposed SAD language from the table for discussion, with trustees Walsh and Buckley opposing.
Opening the discussion, Walsh questioned Kepes about previous statements he made about $600,000 in savings and $600,000 in additional revenues made at the township as part of an ongoing culture of value engineering at the township. Regardless of who had the floor, Walsh continually interrupted in attempts to prevent them from speaking and making their points and clarifications.
“But you didn't make cuts to your department,” Walsh asked.
“Actually, we did,” Kepes said.
“Did your department go up or go down in what you asked for in the budget,” Walsh questioned.
“There are two full-time —” Kepes said.
“No, just the up or down,” Walsh said interrupting as she turned to the audience and smiled.
“I'm answering your question,” Kepes said. “There were two full-time treasury clerks. We now have one full-time clerk and one part-time clerk. On that position, we have saved both salary and benefits. In terms of the budget, it still is budgeted for two (full time), but we haven't incurred it. When you look at the budget and compare it to prior years, there were additional items put into the budget this year for all the departments because of the Central Service Cost Allocation Study. So, if you're just looking at bottom line budgets of all the departments, you're going to see them increase because they aren't applicable to the prior year.”
“So, something was taken away, but it's still there to possibly spend?” Walsh asked. “You're saying you don't have these people, but you're leaving the line item there to possibly bring them back in, so it wasn't a cut-savings, it's a, 'right now we are not doing it, but we might do it.'”
“Do you want me to answer the question,” Kepes said before explaining that the full-time positions were retained in the budget to evaluate the cut before making it permanent.
“That's a good way of doing business, rather than just cutting to cut,” he said. “What we've seen in a lot of these cuts is that they weren't just cuts. In some of them we are saving money and we are actually providing better service and getting better value to our residents and to the employees.
“That I think is the goal of what we are trying to achieve. It's not just a cut here and a slash there, it's thoroughly thinking it through and making sure we get the best value for every dollar we spend, and I think that's what the residents expect us to do.”
Others board members also took time to address statements Walsh had made both in public meetings and online. For instance, Walsh said the cost of the proposed SAD was being misstated by the township, going so far as give a specific estimate on social media to a specific resident. However, the amount was about twice as much as the actual millage would cost the resident, as the estimate was based on the home's market value instead of its taxable value, something she repeated several times. Walsh said after a board meeting in March that she didn't actually calculate the estimate herself, but instead claimed she provided the address to a realtor, who then passed the information back to her.
For residential millages, one mill is equal to $1 for every $1,000 dollars of a home's taxable value, which is generally about half as much as a home's market value.
Schostak at the April 8 meeting noted the information posted on social media was incorrect. Further, he provided a detailed breakdown of taxable values and estimated assessments under the proposed SAD.
The average parcel's taxable value in the township is $215,234, which would equate to $226 per year, while the median taxable (or middle point) is $158,220, which would be assessed at $166 per year, according to Schostak, who said the higher average value than median value is due to so many commercial properties in the township that have higher taxable values, which skew the average higher.
Schostak went further and broke down the percent of properties in the township by category. For instance, about 24 percent of parcels have a taxable value less than $100,000; 41 percent are between $100,000 and 199,999; 17 percent are between $200,000 and $299,999; seven percent are between $300,000 and $399,999; and four percent are between $400,000 and $499,999.
“We have a $4 to $5 million bogie that we have to make each year, or roughly 10 percent of our governmental funds' budget,” he said. “There is no feasible option to reach that without some kind of revenue increase and when we look at cutting services that people use and like, we should see what the marginal cost of those items are and decide if it's worth it.”
Savoie also addressed what he deemed misinformation that has been stated, indirectly pointing to Walsh's statements.
“I expect that from a local watchdog group, but not from one of our trustees,” he said.
Savoie clarified that the board was not voting to raise taxes that evening, but rather to put the issue on the ballot and allow voters to determine the issue. He said the issue is clearly a public safety issue, as two-thirds of township staff are police and fire employees, with retiree benefits primarily coming from those employees, and the fact that both the fire and police chief supported sending the issue to voters. He also took issue with statements by some in the public that they believed SAD funds wouldn't be used to for what it was being proposed, which would be a violation of state law.
Walsh said she wouldn't respond to the comments, instead insisting that OPEB liabilities aren't related to police and fire funds.
Barnett motioned to pass the motion to approve the ballot language, with the motion being supported by Kepes. That motion passed 5-2 with Buckley and Walsh opposing.