Dear Neighbor,

The millage renewal election coming up on Tuesday March 10 should be straightforward. The Township has been operating based on a certain level of tax revenue in providing its services to its residents. As the 1.24 mill 10-year millage expires on March 31st, the end of our fiscal year, a new one ought to take its place – assuming residents are satisfied with the job that the township has been doing. Well, according to a poll completed in January of 2019 by professional research firm Glengariff Group [1], 87% of respondents felt Bloomfield Township is “on the right track”. When asked if township taxes were too high, only 32% answered that taxes are too high.

With those results, why is this millage renewal vote so controversial?

As I often say, let’s dig into the numbers.

Poll respondents were then asked about the $4 million hole in the budget due to our legacy costs (retiree pension and healthcare). Specifically, they were asked if all $4 million should be cut out of the General,Road, and Public Safety budgets and only 24% said yes. The remaining 76% wanted to see some mixture of revenue increases and spending cuts.

The Board hired accounting firm Plante Moran to help identify such cost savings opportunities. They presented 9 options: 8 cuts and 1 revenue increase [2]. But before these impactful actions were to be taken, the Board wanted to give the residents an opportunity to keep services intact. This question became the dedicated public safety special assessment district (“S.A.D.”) voted on last August.

Please note that the rate of 2.3 mills proposed in the S.A.D. would have included the 1.24 mills currently being voted on. So when opponents say that the Board asked for $9 million in August, that’s true, but $5 million of it was already being levied by this 1.24 mill general millage. So the ask was only a net increase of $4 million per year (1.05 mills).

After the S.A.D. did not pass, the Board implemented several of the Plante Moran cost savings and found some additional ones. For example, we refinanced our pension obligation bonds, which will result in interest savings of over $300,000 per year. The total cost savings implemented in late 2019 is $4 million per year.

Then there is still the matter of the other $5 million which had been in place for the last 10 years. To keep the budget intact, the Board has unanimously decided to ask for a renewal of the 1.24 mill general millage, which is $5 million per year, and represents 10% of the General, Road, and Public Safety budgets.

This shouldn’t be so controversial since 87% of residents think the township is on the “right track”, right?

Well, a group formed over the summer which has been challenging that assertion by saying things like the township suffers from “runaway spending”, “financial mismanagement”, and even worse, accusations of “corruption”. This group’s accusations have stoked a distrust in the administration resulting in the uncertainty surrounding this millage renewal. But do these arguments have merit?

As I say, let’s dig into the numbers.

First, the administration has been accused of “runaway spending”. Well, if you look at the aggregate expenditures of the General, Road, and Public Safety funds from 2005 to 2020, here’s what you’ll find:

In total, spending increased $15 million or 44% over the 2005 baseline. When you look at each fund individually and on an annualized basis, the General fund grew at a 1.2% compounded annual rate of growth (CAGR), while the Road fund increased 2.2% annually, and the Public Safety fund increased 3% annually. Given how much certain costs have been increasing over time (think labor, utilities, healthcare, etc.) those numbers don’t seem so unreasonable. But let’s dig into them further.

If you separate out the actual cost of operations of each fund from the legacy costs, here’s what you find:

The cost of general operations of the township have only increased $400,000 over the last 15 years, for annualized growth of 0.3%. The actual operations of the Road fund have increased at a CAGR of 1.7% and the operations of the Public Safety fund have also increased by 1.7% per year. I think it is fair to say that the township has shown tremendous spending discipline: the cost of each of these township operations has grown at roughly the rate of inflation over the last 15 years.

Where the growth seems out of line is in the legacy costs, which grew at CAGR’s of 7.5%, 5.3%, and 7.0% respectively. Why such a sharp increase? Well, the township sold Pension Obligation Bonds (POB’s) in 2014 to fully fund the pension plan; though due to rock-bottom fixed-income yields we still have to make some annual payments to keep it fully funded. Then, state law was changed (Public Act 202 of 2017) which now requires municipalities to fund its retiree healthcare liability to at least 40% within the next 30 years. For Bloomfield Township, this necessitates a $2 million annual payment into the OPEB trust fund. This is on top of the annual cost of the retiree healthcare premiums that were already being paid.

So the sharp growth in legacy costs is due to (1) the issuance of POB’s in 2014, and (2) the new OPEB trust payments in response to PA 202. Both of these were structural changes to our legacy cost structure, which explains the dramatic increase in cost; but they will be fixed going forward. In fact, the POB payments will end in 2033 and that will free up $6 million in cash to support operations, to fund the OPEB trust more quickly, or to reduce taxes.

Increase in Township Budget by Source 2005 to 2020, dollars in millions.

As this chart summarizes, and expressing this analysis in dollar terms, the total increase in spending for all three funds’ actual operations over the last 15 years has been $6 million, or 1.3% per year. The total increase in spending on legacy costs over the same time period has been $9 million, or 7% per year. This adds up to the total increase of $15 million described above.

Given this data, which demonstrates that spending on township operations has increased in line with the rate of inflation, there is no merit to the contention that this administration has brought about “runaway spending”.

As to the claim of “financial mismanagement”, I would again say, let’s dig into the numbers.

I refer back to the above data which shows that the exact opposite is true: Township administration has been able to keep its costs down such that the limited increases in tax revenue each year are sufficient to cover the township’s costs. And that includes managing new pension and OPEB obligations of $7 million.

Our staff gets it. The township’s Finance Director is a Certified Public Finance Officer, one of less than 20 in the entire State of Michigan, and the only one to work at a municipal level. Our Treasurer is a Certified Public Accountant, and we have a Financial Sustainability Committee with three experts in financial planning and markets advising our Treasurer and Finance Director. We have exceptionally qualified people overseeing our finances.

Our auditors get it, they give us a fully “unqualified” opinion (which despite how it sounds) is the highest and best opinion an organization can receive from its auditors. One of the members of our auditing team from UHY is a Certified Fraud Examiner. During their annual presentation to the Board on October 16, 2019, I asked her point blank if there was anything in her analysis of the township and its books and records that concerned her; she said unequivocally “no”. [3]

The ratings agencies get it, Standard & Poor’s rates us AAA, their highest rating, while Moody’s rates us Aa1, their second highest rating. These agencies analyze every major company and municipal, county, and state governments, so they know what to look for and how to analyze it. The point of a rating is to set a basis of comparison across like entities and provide a measure of risk to that entity’s securities. The AAA and Aa1 ratings indicate Bloomfield Township is considered among the lowest risk relative to its comparable governmental entities.

Given the excellent spending control, the high caliber of our financial leadership team, the findings of the auditors, and the ratings from the credit rating agencies, I think it would be impossible to credibly claim that the township is financially “mismanaged”.

So again I ask, why is this millage renewal so controversial?

Perhaps it comes down to political motivations (this is a township board election year) or just personality conflicts with incumbent board members. But for all the red herrings that the naysayers can dangle out there, this vote comes down to this:

Are you happy with the services you receive from your township government?

If the answer is no, then think about this: is slashing its budget by 10% going to improve the services you receive – or make them worse? Is cutting the budget the best way to get you the service delivery you want – or is replacing the leadership that provides those services? Your opportunity to do just that will come in August and November. And once the administration is replaced, what will they have to work with if 10% of the budget is not there?

If the answer is yes, you are happy with the township’s services, then would cutting 10% of its budget improve those services, or even maintain the status quo?

I’ll conclude with these thoughts.

The website Niche named Bloomfield Township as the #1 place to live in Metro Detroit [4]. For Niche and other sites like it, in addition to the schools, the quality of our services are regularly cited as the reason for our high rankings. These types of rankings impact the desirability of our community, which directly impacts property values.

There’s a reason that our property values are so stable and a Bloomfield address is so sought after. We have the best, most responsive, public safety and overall the best employees who deliver the highest level of services to all residents.

Defeating this millage renewal will send a signal of “no confidence” to our staff - public safety, public works, and others - who have worked so hard and dedicated their careers to our quality of life. If we cut the budget by 10% and/or force draconian cuts to their compensation, what do we expect them to do in response? What would you do if you worked for the township?

Lastly, I ask simply this. How much money do you stand to save if this renewal is defeated? Take your new taxable value (assessments came out a few weeks ago) divide by 1,000 and the multiply by 1.2401. This is how much each year you would save from your tax bill if the renewal is not successful. Is it worth it to cause such a dramatic impact on the community? If response times go up for either police or fire because we have fewer in uniform, would it be worth investing that amount to keep our police and fire force at its current strength?

Thank you for your time,