City Council Minutes

PRESIDING OFFICER:              MAYOR JOHN C.M. DAVIS

OPENING PRAYER:                 REV. NORMAN BECKWITH

                                                TRINITY UNITED METHODIST CHURCH

PLEDGE OF ALLEGIANCE:      ED URBAN

PRESENT:                               Mayor John C.M. Davis, Mayor Pro-Tem Susan J. Osika, Councilpersons Joane E. Ford, Justin R. Horvath, Mark D. Owen, Linda L. Robertson, and Charles J. Sumrack.

ABSENT:                                  None.

APPROVE AGENDA

Motion by Councilperson Ford to approve the agenda as revised.  Motion supported by Councilperson Robertson and concurred in by unanimous vote.

APPROVE MINUTES - REGULAR MEETING OF DECEMBER 20, 2004

Motion by Mayor Pro-Tem Osika to approve the Minutes of the Regular Meeting of December 20, 2004 as presented.  Motion supported by Councilperson Sumrack and concurred in by unanimous vote.

MAYOR DAVIS COMMENTED REGARDING THE RULES FOR ADDRESSING THE CITY COUNCIL.

CITIZEN COMMENTS

Tom Klockziem, 221 South Cedar Street, commented regarding the use of South Cedar Street by Main Beverage Company trucks.  He commented that he felt that Main Beverage Company should pay for any necessary street repair or replacement.

ITEMS OF BUSINESS

STRATEGIC FINANCIAL PLAN

Motion by Councilperson Robertson to adopt the Strategic Financial Plan as follows:

CITY OF OWOSSO

STRATEGIC FINANCIAL PLAN

DECEMBER 2004

Overview. This plan highlights current and future financial circumstances faced by the City and describes responses intended to result in achievement of the strategies specifically related to the financial goals of the organization. This plan does not address that aspect of the City’s finances related to funding major capital investments. These will be addressed in an infrastructure and capital improvements plan to be adopted later. The financial implications of the infrastructure and capital improvements plan might necessitate modifications to the desired outcomes the strategic financial plan seeks to achieve.

Strategic Focus. The fourth of the City’s four current strategies speaks directly to the focus for the management of the City’s finances: “Maintain a strong financial system that uses public resources effectively and pursue initiatives that will generate resources necessary to accomplish City goals.” Several elements of this statement are important to note. First, by referencing a strong financial system, the strategy reflects a tradition of management practices and policies that have emphasized maintenance of reserves adequate to meet ongoing operational needs, to invest in infrastructure, to cover emergencies and to permit investing in community development initiatives with long-term payback potential. Second, the strategy highlights effectiveness. While it is often the case that governments emphasize efficiency – and this remains one of our key organizational values – the strategy recognizes that the success of the organization is tied as well to the use of resources in a manner that maximizes the potential for accomplishing desired ends.

Finally, the strategy notes the intent to undertake endeavors that will produce new revenues for the City. This focus is not a new one for the City but its inclusion in this strategy statement is intended to recognize that community development initiatives directed toward brownfield redevelopment and new housing opportunities, among others, are important to the long-term financial health of the City, in part because Owosso is older and fully built-out.

As is the case with all of the City’s strategies, strategy 4 is essential to accomplishing the City’s mission: “To contribute to the framework of community life in Owosso by providing vital municipal programs, services and infrastructure.” It is important in evaluating the strategic significance of proposed outcomes to direct attention to the word “vital.” The previous strategic plan focused on essential services. The subtle shift from “essential” to “vital” is purposely designed to recognize that city government’s role in a healthy Owosso goes beyond the provision of basic municipal services to include those activities helpful to community rejuvenation. In this conception, then, community development activities are of equal importance as public safety, streets and utilities and must, therefore, garner financial support while, it is hoped, contributing to the development of renewed sources of revenues for other services.

Trends. Several environmental factors have combined over the past several years to contribute to a general fund revenue picture that is more challenging than has been experienced following past recessions. Changes in the state’s tax structure failed to account for shifts in the nature of the state’s economy away from traditional manufacturing and toward services. The increased costs associated with Medicaid and prisons has led the state to balance its budget in part by reducing revenue sharing allocations to local government without respect for the relative stability of the source of those allocations, the state sales tax.

Other state policies contribute to a general lack of flexibility on the part of cities to compensate for revenue sharing reductions through increases in other revenue sources. Proposal A implementing legislation has resulted in a situation in which property tax revenues grow at a rate less than the rate of inflation, particularly for those communities with little land available for new construction. Another statute limits building permit fees to not more than the actual cost of the inspection service. Further, the inter-community competition for new industrial development essentially requires the granting of real and personal property tax abatements.

This revenue environment is most evident in the general fund. Utility funds are generally able to meet increased costs through rate increases. In addition, funds available through state revenue sources dedicated to street maintenance have remained relatively stable.

The instability of general fund revenues affects those services least able to find other means of securing funding. The major elements of general fund expenditures are related to public safety and general administrative services. While the City has increased revenues from ambulance charges beginning a few years ago, actual receipts are dependent upon rates set by Medicare, Medicaid and other insurers.

Roughly 80% of general fund costs are related to personnel. The majority of these personnel costs are in public safety. City control over these costs is significantly limited by recourse to binding arbitration available to public safety bargaining units. Little further can be done to achieve significant cost reductions in the general fund without reducing staffing. On the positive side, however, it appears that cost increases for health insurance are moderating from those experienced in recent years.

The state of Michigan’s economy, because of its impact on state revenues, significantly influences that portion of the City’s revenues that flow from the state. At present, and for the next few years, little improvement is forecast in the state’s economic fortunes. As a result, uncertainty remains with regard to state shared revenue. Further complicating the City’s revenue picture is the desire on the part of state officials to create a competitive business climate by reducing taxes. While much of this activity has been at the state level, some efforts in the past have been directed toward limiting local property taxes and reducing or eliminating the personal property tax. It seems reasonable to expect that local revenue flexibility will not increase, and might decrease, over the next few years.

Current policies. A variety of policies influence the City’s financial practices and performance. At the highest level, the Charter, statutes and accounting regulations mandate specific budgeting practices. Of significance with regard to the current revenue environment, the City is limited in its ability to transfer resources from one fund type to another, thus limiting flexibility with regard to financing general fund activities.

In addition to annual appropriation resolutions, City Councils in the past have adopted policies related to the use of reserves. Funds have been set aside to create a budget stabilization fund and to finance economic development activities. Further, current policy mandates maintaining a 20% general fund fund balance to cover emergencies.

Policy direction is also evident in practices that have been continuously pursued over a long period of time. The current local revenue structure, for example, relies heavily on property taxes and utility charges. Income taxes are not used and fees for services are quite limited with the exception of ambulance charges and building permit fees. The City has been able to moderate use of its revenues by limiting the governmental functions that it undertakes. Economic development initiatives have been financed utilizing grants and future tax captures as a means of avoiding the use of general fund revenues on projects in which some risk is inherent. Future pension obligations are fully funded in accordance with accept actuarial principles. General obligation debt has been little used, particularly in recent years in which a pay-as-you-go approach to street reconstruction has been used.

Plan outcomes. City Council has identified the following four outcomes as essential to achieving the City’s mission in light of the trends described above:

1. Increase the tax base. Despite its being a built-out community, opportunities exist in Owosso to increase the base of the property tax. In the past, these efforts have concentrated most heavily on industrial development. More recently, a broader approach has been taken that includes the Osburn Lakes residential development, residential development in the central business district and an aggressive program of brownfield redevelopment. This broader approach reflects the recognition that tax abatements for industrial development, while important to local efforts to compete for jobs, negatively affects revenue benefits from new development. In addition, new developments in the central business district have the effect of stabilizing revenues from several taxing jurisdictions that are captured and used both for promotional activities, extraordinary maintenance requirements and ongoing infrastructure needs that would otherwise be dependent solely on City taxes. Finally, this approach reflects a strategy of promoting quality of life as the primary attractor for local residents with the expectation that business development will follow people.
    

2. Reduce operational costs while maintaining current levels of vital services. Despite efforts in the past to control the cost of municipal operations, opportunities might exist to further reduce costs without adversely affecting the level or quality of services considered vital to the City’s mission. This might require further considering some services that the City provides in light of the City’s mission in order to determine whether those services should be reduced or discontinued. In addition, it is possible that cost to the general fund for some services might be reduced by shifting funding responsibility to other organizations or by limiting the use of overtime to accomplish non-essential tasks. Further, it is possible that some services might be performed in cooperation with other units of government in order to reduce costs for all parties.
    

3. Explore alternate sources of revenue. In general, Council seems reluctant to impose new taxes or fees for existing services. Exploring alternate sources of revenue, then, contemplates creative endeavors to utilize organizational capabilities to generate additional funds. Such endeavors might involve the production of a product or service based on unique strengths that might be in demand by others outside Owosso’s jurisdictional boundaries. To be of value, these sources of revenue must exceed the City’s costs of producing the revenue.
    

4. Reduce current employee benefit costs and the risk of future cost increases. Employee benefits constitute a significant component of the City’s personnel costs. With regard to health insurance in particular, cost increases over the past several years have increased at a rate significantly greater than the rate of inflation. Historically, benefits were provided to local government employees as an alternative to more costly wage increases. These costs now constitute a significant portion of the budget, exceed benefits that these employees might earn from many private sector employees and, to a large extent, represent costs that are outside the control of local managers and policy makers. Efforts are to be undertaken to rebalance wage and benefit costs both internally and with respect to public and private market comparables. Further, the risk of future significant costs increases, particularly with regard to pension funding, is to be evaluated and steps taken to reduce that risk. Among the methods to be considered in achieving this outcome is the development of two-tier compensation systems that offer alternatives to new employees.

Plan policies and measures. Policies and performance measures are grouped according to the outcomes described above:

Increase the tax base.

1. Identify contiguous vacant land for future acquisition.

As a built-out community, limited opportunities exist within the City boundaries for additional tax base growth. As was the case with Osburn Lakes, however, some properties adjacent to the City remains undeveloped which represent logical extensions of the City’s boundaries, particularly for additional residential development. These resources should be identified and presented to Council for concurrence in preparation for acquisition when opportunities present themselves.

Outcome measure. Presentation to Council of a list of land adjacent to the City for possible future acquisition.

2. Identify surplus City-owned land suitable for immediate sale.

Over the years, the City has acquired a number of parcels of land. Some of these are intended to be reserved for future industrial or commercial development. Others, however, are truly surplus and suitable for immediate sale. These will be identified and Council approval sought for a process of disposing of the land.

Outcome measure.  Presentation to Council of a list of all City-owned surplus lands with recommendations for those that are suitable for immediate sale.

3. Develop criteria for identifying properties suitable for redevelopment into more highly-valued uses.

The logic of the City’s brown field redevelopment efforts has been to provide for the removal of blighted conditions in order to pave the way for reuse of properties in a manner that will generate higher taxes. It is proposed that the City extend its capabilities by identifying deteriorating and obsolete commercial and residential properties that are also candidates for redevelopment into more highly-valued uses.

Outcome measure. Presentation to Council of a set of criteria for identifying existing properties that might be suitable for redevelopment.

4. Review and revise criteria used for the granting of tax abatements.

The policy currently employed to grant tax abatements to industry has been in place for a number of years. Granting tax abatements has the effect of reducing the tax based for a specific number of years. While it is likely that a policy of granting tax abatements will be necessary in order to remain competitive with other Michigan municipalities, the granting of these abatements should be considered in light of the City’s strategic plan.

Outcome measure. Presentation to Council of revised criteria for the granting of tax abatements.

Reduce operational costs while maintaining current levels of vital services.

5. Review and categorize services in light of their strategic significance.

The focus of the outcome to which this policy relates is on vital services. A means of reducing operational costs is to reduce funding for non-vital services. Whether a service is vital or non-vital is a choice that Council should make. This choice is more easily debated apart from specific budgetary actions.

Outcome measure. Presentation to Council of a detailed list of City services and programs and a mechanism for ranking them relative to their strategic significance.

6. Explore consolidation of services with other area municipalities.

Most Michigan cities are experiencing the same fiscal challenges. Opportunities should be to reduce costs by consolidating services with one or more municipalities. In the mid-county area, Corunna, because of its proximity and the similarity of services provided, represents a logical first choice for discussions.

Outcome measure. Arrange meeting with Corunna officials to begin discussions regarding service consolidation.

Explore alternate sources of revenue.

7. Identify areas of strength that are marketable as revenue-generating services.

The objective of this policy is to develop additional sources of revenue outside those that focus on current residents and taxpayers. To that end, it is necessary to evaluate the organization’s capabilities for the purpose of identifying strengths that could be developed into services marketable outside the community. The development of an entrepreneurial approach to revenue generation is likely to require considerable study. The first step in this approach is to identify those areas of strength for which markets likely exist.

Outcome measure. Presentation to Council of an analysis of organizational strengths and the identification of those for which external markets are likely to exist.

Reduce current employee benefit costs and the risk of future cost increases.

8. Establish benefit cost and risk targets.

The City as employer is unable to unilaterally change employee benefits. The majority of its employees is unionized and the majority of these are guaranteed binding arbitration. Accordingly, it is wise to establish targets for cost and risk reduction in preparation for upcoming negotiations.

Outcome measure. Present to Council proposed targets to be achieved in future collective bargaining negotiations for the reduction of employee benefit costs and for the reduction of the risk of future increases in those costs.

CITY OF OWOSSO

STRATEGIC INITIATIVES

Mission: To contribute to the framework of community life in Owosso by providing vital municipal programs, services and infrastructure.

Motion supported by Mayor Pro-Tem Osika.

Roll Call Vote.

AYES:              Mayor Pro-Tem Osika, Councilpersons Horvath, Owen, Ford, Robertson, Sumrack, and Mayor Davis.

NAYS:              None.

BID AWARD CORRECTION

Motion by Councilperson Ford to rescind prior bid award for one 1991 Dodge truck (VIN# 1B7JE26Y3MS353633) approved at the December 20, 2004 meeting and approve the corrected bidder and bid as follows: Fuoss Gravel Company at $512.00.

Motion supported by Councilperson Owen.

Roll Call Vote.

AYES:              Councilpersons Owen, Robertson, Sumrack, Ford, Horvath, Mayor Pro-Tem Osika, and Mayor Davis.

NAYS:              None.

LEASE OF REAL PROPERTY -             LOTS 5 AND 6 AND PART OF LOTS 4 AND 7 IN BLOCK 6 OF LUCY L. COMSTOCK’S ADDITION TO THE VILLAGE OF OWOSSO

Motion by Councilperson Robertson to approve a lease agreement with Shiawassee Arts Council for city-owned property described as Lots 5 and 6 and part of Lots 4 and 7 in Block 6 of Lucy L. Comstock’s Addition to the Village of Owosso according to the Plat thereof as recorded in Liber 4 of Deeds on page 639, Shiawassee County Records and further authorize the City Clerk to execute the appropriate documents.

Motion supported by Councilperson Sumrack.

Roll Call Vote.

AYES:              Councilpersons Sumrack, Robertson, Ford, Horvath, Owen, Mayor Pro-Tem Osika, and Mayor Davis.

NAYS:              None.

Clerk’s Note:  The lease agreement as executed will be on file in the Owosso City Clerk’s office.

PROPERTY SALE -      NORTH 12 FEET OF EAST 48 FEET LOT 8 & NORTH 12 FEET OF WEST 24 FEET LOT 5 SUBDIVISION OF RESERVE 1 OF A.L. WILLIAMS ADDITION

Motion by Councilperson Ford to approve the transfer of city-owned property described as North 12 feet of East 48 feet Lot 8 & North 12 feet of West 24 feet Lot 5 Subdivision of Reserve 1 of A.L. Williams Addition and further authorize the Mayor and City Clerk execute the appropriate documents as follows:

To:       Tracy Ade and Mary Ade

            420 Cass Street

            Owosso, MI 48867

Subdivision Reserve 1 of A.L. Williams Addition to the Village (now City) of Owosso, according to the recorded plat thereof, described as the North 12 feet of the East 12 feet of Lot 8 and North 12 feet of the West 24 feet of Lot 5, for the sum of One and No/100 ($1.00) Dollar; and

To:       Sally A. Barry

            424 Cass Street

            Owosso, MI 48867

Part of Lot 8, Subdivision Reserve 1 of A.L. Williams Addition to the Village (now City) of Owosso, according to the recorded plat thereof, commencing at a point which is 209 feet West and 120 feet North of the Southeast corner of said Reserve 1, thence North 12 feet, West 36 feet, South 12 feet and East 36 feet to the point of beginning, for the sum of One and No/100 ($1.00) Dollar.

Motion supported by Councilperson Robertson.

Roll Call Vote.

AYES:              Councilpersons Ford, Robertson, Owen, Horvath, Mayor Pro-Tem Osika, Councilperson Sumrack, and Mayor Davis.

NAYS:              None.

COMMUNICATIONS

Stanley P. Jelinek, Director of Public Works.  Mr. Jelinek gave an oral report to the City Council on sidewalk snow removal at 615 Cass Street.  Councilperson Horvath asked that the property owner be informed of the report.

Michael T. Compeau, Director of Public Safety.  Review of Traffic Control Order No. 1138.

Councilperson Owen commented regarding South Cedar Street use by Main Beverage Company trucks.

Councilperson Sumrack inquired about the wording in Items of Business#3 “Village” versus “City”.  

CITIZEN COMMENTS

Eddie Urban, 601 Glenwood Avenue, commented that it was good to live in Owosso because of the open burning and the leaf pickup program.

Tom Klockziem, 221 South Cedar Street, commented further regarding Main Beverage Company trucks use of South Cedar Street.

Burton Fox, 216 East Oliver Street commented that he is proud of this city and that all of the departments involved in the recent fire fighting activities should be commended for the job they did.

Councilperson Ford praised the DPW for their snow removal process.  Mayor Pro-Tem Osika agreed with Councilperson Ford.  She also commented regarding the recent fires and working together.

Mayor Davis commented regarding the Indian Ocean disaster and the need for donations of aid.  He commented in support of the American Red Cross activities.

ADJOURNMENT

Motion by Councilperson Owen for adjournment at 7:55 p.m., supported by Councilperson Sumrack and concurred in by unanimous vote.  

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John C.M. Davis, Mayor

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Gail L. Schultz, City Clerk