As the newly elected Chairman of the Saginaw County Board of Commissioners, Michael Hanley is taking his expansive experience working within the mechanism of government at all levels and bringing his energy to stabilizing the economics of government while channeling his focus on the goal of economic development in Saginaw County.
Hanley served on the Saginaw City Council in 1987 and was re-elected in 1991, serving as Mayor pro-tem. He was elected to the Michigan House of Representatives for two terms where he served as the Michigan House Minority Whip; and he also staffed a Congressman for two years at the national level. He is a 3-term County Commissioner and worked at Saginaw Division, General Motors; and is also the proud owner of one of Saginaw's premier taverns, The Big Ugly Fish.
Recently I had the opportunity to sit down with Hanley for an in-depth interview following his State of the County address to discuss a variety of topics populating the political landscape in Saginaw County as we move forward into 2013 and beyond.
Review: Presently all levels of government - state, local, federal - are caught in a no-growth situation economically, and for the last several years there's only been a 2-3% yield on most investment funds. Governmental consolidation is a pivotal focus at all these levels, so to begin, what is your general inclination about regional government for the Tri-Counties?
Hanley: I had some conversation a couple years ago and brought people together from Saginaw, Bay & Midland counties, and have spoken to the Midland County Board about getting back together again, because I believe its important to have those conversations. There's a number of collaborative activities, such as the Automatic Records Management System for the Sheriff Department, which is going to be taken over by the State and will service 60 counties in Michigan. So we're always looking for those kinds of opportunities.
I think its important but also interesting because I've always said that people love their High School football teams and mascots, which makes it hard to consolidate school systems; but they aren't as crazy about local elected officials. But it turns out they are wedded to the idea of local units of government. They like the immediate accountability involved. Counties have a lot of commonalities - all have roads, jails, solid waste management; but cities don't match up quite as well. I think there might be better opportunities between the counties.
Review: What is your opinion of the functional integration of government services across different municipal lines? An obvious area is that of policing, with the city recently laying off another 25 officers. The notion of the city outsourcing policing to the county hasn't achieved any resolution yet, so what are your thoughts on that?
Hanley: I think in a perfect world consolidation of dedicated resources under a central command makes sense, because you put more boots on the ground. But we're not in a perfect world. With the city & county situation right now, there are a number of concerns within the citizenry. And although I believe that political courage is important to the process, you can take that courage so far as foolhardiness. If we made a decision so far out of sync with the public wishes we would be recalled or elected out of office and replaced by people to repeal our decision-making.
I think right now we need to continue to talk and the county needs to be concerned with crime in the city and the fiscal health of the city, but we need to be sensitive to the citizenry, too. There are bargaining issues we need to be concerned with that don't involve us as county officials directly, but hopefully the city and unions will continue to talk and work out differences.
Review: Right now the city is pushing for 80 officers and Sheriff Federspiel thinks we need slightly over 100 officers. The city doesn't have the money supposedly, so now we have a funding gap. If public safety is a critical issue, how do you close that gap?
Hanley: Where things currently stand there is a distance between the two proposals, and the Sheriff has other concerns as well. I think the city has a big problem with legacy costs and their budget gap is projected to go up one million dollars per year for several years. If they could take advantage of the same legacy bond system that the county is instituting, they would be in a better position.
Review: What about other areas such as the county sharing bus lines with other counties, or the prosecutor's office serving different municipalities?
Hanley: We just did approve a proposal that offers municipal ticketing services that the City of Saginaw is embracing. No city or township has to join, but they can come and request enforcement for traffic citations. As for public transit, that falls under STARS, which is a stand-alone authority operating under a separate millage. They did come to us a couple years ago and attempted to get us to adopt a countywide transportation plan by joining them, but it was defeated because some of the out-city commissioners didn't see the value in it. But there is a value. It's important for seniors and critical for economic development. If we have a major factory build outside the population center, people need transportation to get there to work.
Review: Let's shift the focus to medical marijuana. Voters have approved it yet the legislator and courts are creating all variety of statutory roadblocks. How much money is spent by the county for marijuana interdiction by the Sheriff & Prosecutor's office; and what are your thoughts about the medical marijuana law?
Hanley: I think we should respect the voter's decision and with the exception of high profile situations I really think that law enforcement resources shouldn't have a big focus on low level drug charges when there is so much high profile crime going on in the community.
(Editor's Note: Hanley requested the financial information from Saginaw Prosecutor John McColgan whom issued this statement to 'The Review':
“Unfortunately, I'm not going to be able to tell you how much money is spent on drug prosecutions as generally there will be other charges that are being dealt with simultaneously necessitating our involvement whether or not there was a drug charge.”
Review: Let's move to some fiscal issues. Do you believe that county government financial resources will shrink by 20% in the next 15 years?
Hanley: No, I don't think so. We're seeing more increased activity in real estate and I just talked to the head of one of the realtor agencies that said sales last year were the best since 2008. We're looking at a bottoming out in 2014 because of the property tax elimination that the governor signed, but we can replace that with an 80% replacement revenue for essential services tax that I'm not prepared to talk about right now. But in 2015, we think property values will start to grow again. We've got 325 new jobs coming at Nexteer and 250 new jobs at Morley Companies, so there are positive signs out there. We have a 5-year revenue forecast and even if we do bond for legacy costs and get health care in line through unified bidding, we'll be in tough shape in 5 years. But that doesn't project any property tax growth. I'd like to be able to keep revenue sharing in place, as we've taken some tough hits on it. That's one of the problems the City of Saginaw is facing. Revenue sharing was cut by $2 million dollars in a single year. The last time I remember that happening I was sitting on the council and we lost federal revenue sharing and went to voters, who approved a new tax.
Review: If you had the power how would you restructure state and local government funding in Michigan?
Hanley: I'd have a graduated income tax. 28 states do. There's also talk about adding an additional 2-cent per gallon gas tax for roads, but I'm not sure that I like that idea.
Review: We have 27 bridges in Saginaw County that are in really bad shape. The Feds aren't making any money forthcoming for their repair, so how do we address our crumbling infrastructure?
Hanley: We need more than the Governor proposing to raise the gas tax; we need more national help for certain. It's tragic to see places like China investing in their infrastructure. Honestly, I was surprised that all the focus in the last Presidential election was on the '1 percent', whom I think should pay proportionally more in taxes than the other 99 percent; but we had unprecedented economic prosperity during the Clinton Administration when huge deficits were rung up by prior administrations. I would think everybody could step up and live under that tax code again, as it resulted in prosperity. If you give the markets an indication that as a government you're going to be paying your bills, that's going to encourage the investment community.
Review: Let's talk about the job outlook in Saginaw County. In your State of the County address and here you've mentioned the new jobs at Nexteer & Morley, yet as mentioned earlier, we're in a rather flat economy right now, with Hemlock Semi-Conductor laying off workers and other anchor companies moving to more part-time employees and laying off full-time workers. What should we be doing?
Hanley: What happened to Michigan & Saginaw County is what happened to the nation in terms of loss of manufacturing jobs. I read a book last year by Andrew Liveris, Chairman & CEO of Dow called Make It in America, and he gives a prescription for bringing jobs back. Republicans and Laissez Faire advocates that say leave the markets alone and let them do their thing are just plain wrong; because that's not the way the world works anymore.
Where jobs are growing are in countries where their governments are doing market intervention. In fact, Nexteer is an example of that because it's an arm of the Chinese government that bought that company. They're in Saginaw and serve the American market, but because of their government's involvement, they are witnessing tremendous growth potential. In the next five years the Chinese car market is going to expand by 57%. So there's great opportunities there, because when the Chinese come to a company and say 'We'll build your plant, we'll go this long without taxes, we'll train workers and get them to the job site', this is a result of government involvement. You can't just throw your hands up and say the economy will fix itself. Government fixes economies now. The U.S. is not playing on the real field right now. The President is trying to, but its tragic how the renewable energy grants got a bad reputation because of a few defaults and fraud, because that's exactly what foreign countries are doing to succeed. We need to be willing to take some risks.
Review: Let's move on to this entire arena of Legacy costs, which includes retiree pension & health care costs. The general fund budget for 2013 is at $44.7 million dollars, with property tax revenues coming at $23 million of that figure; and legacy costs are logging around $11 million per year, or approximately 50% of the revenue derived from property tax. That's a lot of money.
A friend of mine that handles retirement funds says the only people with decent retirement funds and money to invest in retirement are either part of the 1 percent or people with government jobs that sign the back of the check instead of the front. That's because, as mentioned earlier, with a flat economy and a majority of market returns around 2-3%, it would take $1 million from a person in the private sector to derive a $20,000 to $30,000 income from their investment should they retire.
Philosophical differences aside, tell me about this new law that the Governor signed that Saginaw County is taking advantage of that will address rising legacy costs.
Hanley: Under a new amendment of Public Act 34, the County can issue Pension Obligation Bonds and use the proceeds to pay all or part of the costs of the Unfunded Pension Liability. Because of our good credit rating, along with the fact Saginaw County has satisfied other requirements of the law, we are the first county in the State of Michigan to take advantage of this new law.
Between 1996 and 2005, with union cooperation, the County put an end to these benefits for new hires. And these bonding plans are the equivalent of moving from a land contract to a bank mortgage. We're going from owing our retirees to owing the bondholders, at a very low interest. Actuaries expect the Pension Bond savings to be nearly $18 million over the next 20 years, and we hope to save an equivalent amount with the Health Insurance Bond.
The county's defined benefit pension plan liability is $138,842,567 and the current unfunded accrued liability is $66,035,016. The annual payment for the County's defined benefit pension plan has increased by 53% and is expected to continue to increase. Unions had the foresight years ago to know we couldn't continue to afford this, so they've made concessions that enable us to adopt this plan.
As noted, right now we're experiencing historic low interest rates, so if we make an annual bond payment rather than an annual unfunded accrued liability payment, more money is raised because the Michigan Employee Retirement System (MERS) can pay out more money to the people that buy the bonds. They can do much better leveraging the money because they have different investment rules. Local governments have really restricted investment policies.
Review: Another huge problem is the issue of 'double dipping' that occurs when a government employee retires and accepts their pension benefit, only to go and hire in at a different government job.
There isn't a lot of data that governments are required to keep on the topic, but a recent investigation by The Associated Press showed that in five states alone - California, New York, Texas, Florida & Michigan - at least 66,000 government retirees also receive taxpayer-funded paychecks. At one state agency in Michigan, the executive director is receiving a $123,000 per year salary and also drawing 80% of a prior salary, as he has for the past 8 years.
What are your thoughts about this and how is the county addressing it?
Hanley: Right now there are 70 people involved with County government that have two jobs. Saginaw County adopted a policy that double dipping can't happen anymore with county employees - you can't retire and then get another job with Saginaw County government. But this doesn't apply to the legal or law enforcement divisions. The number of people that have retired from the county and are now working somewhere else is probably around 100.
Review: In your State of the County address you said that the County is going to be stronger without reducing services or increasing taxes. How is that going to happen?
Hanley: We're going to be able to meet all our obligations to employees and the citizens and save that kind of money. This year we'll have to borrow $1.8 million from the general fund to cover the shortfall, but we don't believe we'll have to do that next year. I think everything will be stable for the next four or fie years and that property taxes will come back to help us with the resurgence of the real estate market.
But we're kind of in a bind with Proposal A, because when the values can drop on homes 20% in one year and then come back, taxes can only raise 5% or the rate of inflation, whichever is less; so you can see properties selling for big money and the tax would not be able to directly follow.
Review: In closing out, what are apart from the new bonding deal do you feel most optimistic about?
Hanley: What I found out when I became the Democratic House leader is that I loved team building. I think that I'm working with a great Commission in a bi-partisan way. Our newcomers are tremendous and have intelligence and integrity and they all feel welcome coming in. One of my jobs as a Chairman is to gather their goals and thoughts, whether they are Democrat or Republican - I want to help them succeed with their goals. Actually, 90 percent of this job is about monitoring and oversight on the budget; but my own big goal is economic development.
I'm excited about the investment in the Bancroft & Eddy buildings in Downtown Saginaw and would like to see more investment in the downtown. If we can get the lights turned on and more people coming downtown to go to restaurants or retail shops, it changes perceptions. Perception is a big problem in Saginaw. We have less success in imagining our success.