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With the Defeat of the Tax Cap and the Public Safety Millage, What Are Saginaw's Options for the Future?
By Robert E. Martin While the West Side overwhelmingly defeated the proposals, the increase in margin against the proposals on the East Side of the city clocked in at levels 45% higher than the last time this issue was placed on the ballot. What this suggests is that regardless of the river that has divided Saginaw for so many years, taxpayers are united in the belief that accountability is the paramount issue at play in city government. In short, it isn't that the citizens of Saginaw are cheap or don't care about their community; it's more a question of growing sick at watching valuable resources being squandered, coupled with the fact that the majority of voters would not buy into the premise that it costs more money to run a city with a population of 59,000 people then it did back when it had 100,000 people. And of course, it didn't help supporters to have current City Manager Cecil Collins request a $20,000 salary hike days before the election.
Indeed, a realtor I
know commented to me it wasn't for fear of police or fire cutbacks that a
potential sale of a West Side city home fell through, but because the
buyers did not want to live in a city that could consider spending money
so irresponsibly when it was financially strapped.
The lesson? In the
future, anybody buying property within the City of Saginaw will know that
it now demands fiscal responsibility, which frankly is not a bad selling
point these days.
Are all the dire predictions of service cutbacks going to occur? Is my homeowners insurance going to skyrocket?
Frankly, I do not
have a crystal ball. But for those that fear the sky is falling, allow me
to submit a few suggestions on ways that Saginaw can alleviate its fiscal
woes without having to face cutbacks of essential services. Placing a similar millage request on the County Ballot for all members of Saginaw County to consider would prove that supporters of public safety not only care, but also are willing to put their money where their mouths are. Saginaw County currently has 17 police departments that spend $33 million per year, yet the population of Saginaw County is 300,000 less than it was 10 years ago. And as Debbie Kimble and Veronica Horn pointed out last issue, the townships & villages of Saginaw County will be facing the same skyrocketing 'legacy' & pension costs in 10 years that the City is facing today. Putting this question on the County ballot would alleviate many of our problems. However, this may not be do-able at present. Why? Because when Goschka & Howell obtained their special assessment statute, they defined Saginaw out of the Home Rule City law into being a small town by redefining the size of a metro area & cities under 65,000 residents and counties under 235,000. There is only one city that size, which is Saginaw. Therefore, the language may have to be modified again for the issue to be placed for countywide consideration. A more significant problem, however, is that the same statute has provisions that a city cannot spend more than 10 mills of its total valuation for a municipality for services covered by special assessment. This amounts to about $7 million for the city. However, the city already spends $12 million! Amazingly, even if this proposal would have passed voter approval on May 3rd, not one dime could have been collected because the statute limits collections to 10 mills on police. We already spend 12!
First, the City could contract with the Sheriff by engaging in a 2-year agreement with renewal options. This would require the Sheriff to provide patrolmen, equipment could be leased to the Sheriff, and in essence the city could contract with the county to run the city police department. With 60 officers currently in patrol cars in the city and 42 acting as administrators, it would be possible to save $2 million by giving the Sheriff a $10 million contract. In this manner the rest of the county would not need to be involved on a Public Service question. Moreover, if the city did this unilaterally, perhaps the rest of the dominoes would fall into place. The biggest problem with this approach is Public Act #378, which gives police unions their civil service rights to arbitration. If the city wants to pay a dollar and they want five dollars, the arbitrator has to pay either one or five. Nonetheless, according to several attorneys, the city can withdraw from Act #378 by voting itself in or out. At that point if the city opted to terminate the entire police department, officers unwilling to compromise in terms of salaries or pensions or overtime could either go work for the Sheriff or find a different job.
Perhaps this is not
as attractive an option as number one, but it is an option nonetheless.
However, in the
spirit of assessing options, let us examine what filing Chapter 9
would do. First, the city could sell everything and pay their debts,
or they could meet obligations as they come due. As one attorney commented to me, "If they didn't attach the stigmatization of bankruptcy to this, everybody would do it!" While Saginaw has the legacy costs of 1300 people that state receivership cannot touch, Federal law trumps state constitutions so these legacy costs could be adjusted downward, but the question then becomes who is going to touch it? What do you explain to the man or woman that has the pension? This is a similar problem to what United Airlines faced recently when they turned their pension fund over to a benefit guarantee that resulted in 25 percent reductions. Unfortunately, the bottom line on the pension issue is that these plans were all negotiated, much like Social Security, back when the average life expectancy was 65 or 70. Now people are living until they are 90 and businesses, along with governments, do not have the money to pay for them anymore. The harsh reality we all must face is that we have a pension crisis on our hands in America. Cities and companies are going to have to figure a way around it. So basically, there are two solutions: File Chapter 9 and get rid of the obligations, which is not a good solution; or, find out the amount of money needed to fund these plans, earmark some millage to pay that required amount of money, and then be done with it. An actuary could estimate how much the city needs to put in each year to pay these plans off; so for example, if one mill a year was earmarked for this over 30 years, it could sustain the system before it goes broke. One of the reasons Saginaw is in such bad shape is because it hasn't been putting any money into the system, so this would be a solution. As it now stands, if you have 60,000 people in the city with 30,000 earning a wage supporting 1,300 people on pensions at levels three times higher than the average city worker, approximately five percent of a person's income goes to the pensions of city employees.
In the end, these options need to be considered in order to avoid some game of 'chicken' between unions & taxpayers. Once the current pensions are allocated for, entering into fresh contracts would serve as a way out for the city without sacrificing services.
Essentially, this is
what was done with garbage disposal in the city. This individual would be very qualified with an MBA in accounting. The city could set his budget so he can't be put out of business for political purposes and he would have the power to say to each department that on January 1st of each year departments must submit their budgets. In July he could require detailed & descriptions of those budgets. Once submitted the ombudsman would have the authority to go out and ask for bids from any NGO (non-government organization) to obtain a bid to do what the city department says it will do for 'X' amount of dollars. If the ombudsman can get the service provided for 10% less than the city department, he can sign a contract for 5 years with a 5-year renewal. This would tie the vendor in so the price would not be jacked-up. If this were to occur with one department in the city, I guarantee you that next year every department within the city of Saginaw would have substantial reductions. The creation of 'soft competition' in this manner could possibly reduce the budget by $25 million dollars per year.
An interesting place
to start would be with the legal department. The city has threatened
eliminating it should the tax cap measure fail, so outsourcing might be a
good way to start. Saginaw Township with 2/3 the people of Saginaw County
have 1/10th the legal budget that the City of Saginaw does. The notion that insurance rates will skyrocket because of potential closures is somewhat erroneous. Vandalism and theft define these rates more than they are fire protection.
Some cities have opted to get out of the Home Rule City Act and contract out with private fire protection companies. In short, the same solutions exist with fire protection as they do with police.
Act 378 provisions
apply to both police & fire protection. Once unions understand this,
hopefully they will be willing to negotiate more than they are at present.
The purpose of this
article has not been to advocate, but rather to stimulate discussion and
thought on topics affecting us all as we progress through serious
challenges we all must share.
The outcome depends
on collective intelligence, compassion, and the willpower to forge true
solutions to our problems without overly jeopardizing any one segment of
our society.
Politics is
the 'art of compromise'. Divided we are conquered.
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