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PONTIAC - After failing to abide by an agreement with the state to address its financial disarray, Gov. Jennifer Granholm appointed an Emergency Financial Manager for the city of Pontiac. Fred Leeb, a nonprofit consultant, was put in charge.
The state cited a number of facts when declaring that the city was in a financial emergency. The city's cash decreased from more than $60 million in 2003 to less than $20 million in 2007 and it has a general fund deficit of $6 million. Pontiac is one of the few cities in Michigan to have an income tax, but it is late in providing tax returns.
The mandatory personnel requirements of the city are also cited as problematic. The state's letter states that they pose "a significant limitation upon the ability of City officials to weigh competing budgetary needs from one year to the next and to allocate scarce financial resources accordingly."
The Mackinac Center covered Pontiac's finances in its winter 2007 issue of Michigan Privatization Report. It highlighted a number of issues that an EFM may have to address including its then-decreasing cash position and a general fund that spent 68 percent on police and fire expenses — meaning that addressing these major expenses would result in a lengthy and uncertain binding arbitration process. The issue argued that structural reforms were necessary, including selling city assets, privatizing city public works services and contracting out with local governments for police and fire services.
References:
"Financial manager faces difficult task," The Oakland Press, Feb. 27, 2009
Correspondence between Mich. Governor Granholm and Pontiac Mayor Clarence Phillips, Feb. 20, 2009
CADILLAC - In order to decrease spending by the necessary $350,000 to $1 million to keep its books balanced, Wexford County commissioners are looking at a number of privatization opportunities and other cost-saving ideas, including contracting for management of its Civic Center.
The county issued a request for proposals for management of the Civic Center's buildings and grounds. It expects to make a decision on bids "on or before May 21, 2009".
The county contracted out its payroll to a private company for a savings of $70,000 according to The Cadillac News. It received bids for the service from three vendors, including one of its own employees. The employee's bid was the lowest of the three, but she did not have a Certified Public Accountant's license, which was a requirement of the bid, according to The News.
The county also voted to end its general accounting office at its Feb. 25 meeting.
References:
"Accounting firm recommended for Wexford payroll," The Cadillac News, Feb. 25, 2009
"County axes three positions, accounting office," The Cadillac News, Feb. 26, 2009
http://www.wexfordcounty.org/Portals/122/Administration/Mgmt% 20Firm%20RFP.pdf
GARDEN CITY - Trying to remove the need for a general fund subsidy, Garden City would like to contract out its building department, according to the Garden City Observer.
The city's building department issues permits for all new residential and commercial construction projects in its jurisdiction. Fees for permitting are used to defray the costs, but the department still needs $100,000 from the city's general fund to operate, according to the Observer.
The city also issued a request for proposals to administer its Community Development Block Grant program. Work the city requires would include working with Wayne County in preparing application materials, vouchers and activity reports and monitoring projects.
Reference:
"Reorganization, privatization: Council looks to save money," The Garden City Observer, Feb. 19, 2009
MANISTEE - The city of Manistee may reduce taxes for property holders and voted to eliminate its public refuse collection millage, according to meeting minutes.
The city uses a private contractor to collect trash and eliminating the millage means that the company will be compensated by user fees. Residents may purchase one of three sizes of receptacles — 95-gallon, 65-gallon, or 30-gallon, with different fees for each.
"It's not going to be based on how many taxes you pay, or how many windows you have or how many pets. It's going to be strictly how much you are throwing away. Which is fair," Councilwoman Ilona Haydon told The Manistee News Advocate.
A point of contention is an interfund transfer to the city's general fund. The city transfers $80,000 from its refuse fund to pay for general city services. This transfer is 17 percent of the city's total trash collection expenses. Changing the service to a more fully privatized system may mean other general fund cuts.
However, according to draft minutes for its April 21 meeting, the city's budget is planning on keeping the full 1.5 mill refuse millage.
References:
"City council talks trash," The Manistee News Advocate, March 12, 2009
http://www.ci.manistee.mi.us/Minutes/2009/03-17-09.pdf
http://www.ci.manistee.mi.us/Documents/2010-2012%20Financial %20Projections.pdf
ROCHESTER - Rochester Community Schools accepted concessions from its support service union after it sought bids from outside vendors for its custodial and transportation services. The concessions are expected to save the district $2.2 million in its first year, according to The Detroit News.
The bids for custodial and transportation services were expected to save $3.4 million through contracting out custodial and transportation services, according to The Rochester Eccentric. The district reported that the functions cost the district $12 million.
Prior to savings strategies, the district was expecting to pay $7.5 million more than its revenues for its upcoming fiscal year.
The district created a "Budget Deficit Reduction Memo" that listed 87 cost savings opportunities, including contracting. It also listed what was necessary to implement the proposals, its impact on education and operations, secondary and unintended consequences, and obstacles to the proposal.
For custodial services, the report states "Many of the employees are resident, which could have a negative impact on bond votes."
References:
"Rochester Schools won't outsource jobs," The Detroit News, April 21, 2009
"School board briefed on privatization progress," The Rochester Eccentric, March 12, 2009
http://www.rochester.k12.mi.us/download.aspx?ft=NTY5OTB8fHwwLjAuM C4wfHw0LzIwLzIwMDkgMToyMDoyOSBQTQ%3d%3d
HIGHLAND - A 19-month contract negotiation process ended in Huron Valley after district officials looked to contract out services, according to the White Lake Spinal Column. Without finding ways to save money, the district expects to spend $6 million more in 2010 than it receives in revenues, according to the Spinal Column. The concessions offered cover $1.1 million of the deficit.
The district began seeking bids for transportation and food services in February.
"It's either this or lose your job, but we're putting the focus on what we're keeping rather than what we're giving up," union President Beth Reaume told the Spinal Column.
References:
"District, support personnel close to finalizing contract," The White Lake Spinal Column, Jan. 10, 2009
"Transportation, food service staff yet to OK contract," The White Lake Spinal Column, Feb. 18, 2009
TROY - The Troy School District has started looking for bids to provide food, custodial and transportation services to the district. The district expects to spend $8 million more than revenues for the rest of its current fiscal year and $5 million for next. It has $21.9 banked in its reserves, according to the Troy Eccentric. Administrators believe that the district can save 30 percent of their costs in providing these services — about $3 million overall.
The district received bids from Durham School Services and First Student for its transportation services. A bid analysis by the district estimated that they may save the district $193,000 to $470,000 in the first year and up to $733,000 annually afterwards.
While labor costs are a factor in contracting decisions, according to a Questions and Answers document on the district's Web site, "Companies bidding for transportation services indicated they would retain employees at their current wages or an increased rate."
The president of the union covering the transportation employees calculated that the move would provide savings equivalent to an across-the-board pay cut of 5 percent, according to the Troy Eccentric. The district's superintendent had already accepted a pay cut.
The district expects to make a final decision on these services at its May school board meeting.
References:
"TESPA seeks districtwide pay cut," The Troy Eccentric, March 9, 2009
"Cuts likely beyond privatization in Troy district," The Troy Eccentric, Feb. 26, 2009
"Uncertainty adds to school deficit worries," The Troy Eccentric, Feb. 22, 2009
http://www.troy.k12.mi.us/about/finance/transrfpreport.pdf
http://www.troy.k12.mi.us/finance/qandaupdated.htm
MECOSTA - Chippewa Hills School District is seeking companies to provide its custodial services to save money, according to The Big Rapids Pioneer. The district needs to save $400,000 to $500,000, The Pioneer reported.
The district discussed closing a school to meet its savings, but the move was rejected in the board's March meeting.
Reference:
"Chip Hills looks to cut its costs," The Big Rapids Pioneer, March 10, 2009
MARQUETTE - Marquette schools needs to cut its budget by $3.7 million to be balanced for the coming fiscal year. One of its plans to save money is to contract out its custodial services, which may save the district $136,000, according to The Marquette Mining Journal.
The district may also cut 8.7 teaching positions, reduce construction and maintenance, alter contracts and reduce textbook purchases, The Mining Journal reported.
Districts in the Upper Peninsula have a lower rate of contracting out for support services. Only 25 percent of the 60 districts contract out compared to 42 percent for the state as a whole. But districts like Gwinn Area Community Schools and L'Anse Area Schools have contracted out in recent years.
Reference:
"MAPS holds second budget work session," The Marquette Mining Journal, March 9, 2009
PORTAGE - Portage Public School's attrition contract for custodial services is expiring this year and the district may opt for a more comprehensive contract, according to The Kalamazoo Gazette. The district already has an arrangement with a private firm to replace night-time custodians that leave with contractors. The district is seeking bids for the entire second and third shift services.
The district expects a $600,000 deficit for its current fiscal year and expects one for the following year, according to The Gazette. The amount is unknown as the quantity of federal stimulus is uncertain.
Reference:
"Portage schools to privatize some custodial work," The Kalamazoo Gazette, April 14, 2009
A map of whether your local school district contracts out for one or more of these services is available from the Mackinac Center at www.mackinac.org/ 10461
Michigan Privatization Digest is a service of the Michigan Privatization Report, a twice-yearly publication of the Mackinac Center for Public Policy with a circulation of more than 22,000. The Mackinac Center for Public Policy is an independent, non-profit research institute located in Midland, Michigan.
The Mackinac Center for Public Policy is a nonprofit research and educational institute that advances the principles of free markets and limited government. Through our research and education programs, we challenge government overreach and advocate for a free-market approach to public policy that frees people to realize their potential and dreams.
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