SPECIAL REPORT: Old law ensures less bang for taxpayers' buck

By Susan J. Demas

When it comes to providing government services and promoting economic development, the Grand Rapids area has found there’s strength in numbers.

Five years ago, Urban Metro Mayors and Managers (“Affectionately known as ‘UMMM,’” laughs Grand Rapids Mayor George Heartwell) was born. It’s a partnership between Kent County and six cities — Grand Rapids, Wyoming, Grandville, Kentwood, Walker and East Grand Rapids. The locals work together on everything from drinking water to wastewater, from transportation to regional planning, letting the unit with the most expertise and efficiency take the lead. The goal is to provide better services and build up the region.

They also lobby Lansing on issues such as revenue sharing, local collaboration and urban issues.

“As we’re trying to rebuild a strong Michigan, we simply can’t do it without strong cities,” Heartwell said.

But despite municipalities’ creativity, there’s a limit to what the consortium and other locals can do under current Michigan law. There’s no shortage of advocates for collaboration and consolidation, including Senate Majority Leader Mike Bishop (R-Rochester) and former state Superintendent of Public Instruction Tom Watkins.

It’s an easy case to make. The Great Lakes State has 83 counties, 1,242 townships, 274 cities of less than 10,000 population, 259 villages, 553 local school districts, 230 charter schools and 57 intermediate school districts, as Center for Michigan founder Phil Power noted in a 2007 column.
So what’s stopping us from trimming local government bureaucracy?

There are about 70 to 80 laws on intergovernmental collaboration, said Michigan State University State and Local Government Professor Eric Scorsone. But the main barrier is the Urban Cooperation Act of 1967. Groups that want to give the 42-year-old law a facelift include the Southeast Michigan Council of Governments (SEMCOG), the Michigan Municipal League (MML), the Governor’s Commission on Local Government of 2005 and the Governor’s Emergency Financial Advisory Panel of 2007.

The primary problem with how the act works is the employee held-harmless provision, reform advocates say. Here’s how it works, according to Scorsone. Say two cities want to form a joint police force. City A pays officers a starting salary of $50,000 per year, and City B only pays $40,000. City B offers three weeks of vacation and City A provides two weeks. Under the Urban Cooperation Act, the joint department will have to pay the highest wages and benefits – which would mean City A’s salary and City B’s vacation time plan.

“It forces everyone to the higher level, which isn’t very ideal in a merger to save money,” Scorsone said. “It’s hard enough to merge one function, let alone merge completely in Michigan.”

This provision was put in place to protect unions, said Heartwell. It also means that a lot of mergers, particularly fire authorities, go the way of the dodo.

Another sticking point is that locals can’t renegotiate union contracts, said Samantha Jones Harkins, legislative associate for the Michigan Municipal League. The goal is not to take away collective bargaining, she said, but to hammer out details for a reasonable new wage and benefit package. Cities A and B could, for instance, offer a $45,000 salary and two weeks’ vacation, if the Urban Cooperation Act were rejiggered.

Not surprisingly, there’s union opposition to these ideas. Michigan’s eight-year trend of job loss has led to government layoffs at every level. Just last week, Gov. Jennifer Granholm issued an executive order for the Fiscal 2009 budget pink-slipping more than 300 state workers, 100 of them state troopers. And thousands will be furloughed for up to six days this summer as part of the $349 million in budget cuts. A case can be made that state and local employees have already paid a big price in government restructuring.

The strongest opposition is from the Michigan Professional Fire Fighters Union. President Paul Hufnagel said the union doesn’t oppose fire authorities or mergers. The issue, he said, isn’t that firefighters could see lower wage and benefit packages. He argues that the reforms being considered to the act mean layoffs and “dumping contracts,” whether employees are represented by a union or not.

“It means some employees won’t have jobs,” Hufnagel said. “If you can’t ensure jobs, it doesn’t mean anything. It’s taking away everything they’ve worked for.”

Budget crisis pressure

With another state budget crisis, reform advocates argue there’s no time like the present to revisit the Urban Cooperation Act. After all, Granholm just stripped away $41 million in state revenue sharing. That wasn’t the first time funding was cut; it’s been the pattern for the last eight years, Heartwell notes.

For many locals, it’s a double whammy where their two primary sources of revenue have been slashed. Rep. Paul Opsommer (R-DeWitt), a former mayor, notes that property values have been going down and municipalities’ tax revenue has followed suits. That means a lot of cities and townships across the state are drowning in red ink – and not just Detroit, Flint and Highland Park.

“It’s an important thing because of the economic situation we’re going to experience in Michigan,” Opsommer said. “You know it’s going to get a lot worse. The time to act is now.”

It will take about a year for locals to get agreements, he notes, so ideally, legislation should be passed right away. Last session, Opsommer and former Rep. Glenn Steil (R-Grand Rapids) sponsored legislation reshaping the act. Opsommer has reintroduced part of the package this session and is trying to persuade a member of the Democratic majority to sponsor other parts of the package to increase the chance of passage.

The firefighters’ union wasn’t on board last time, and Hufnagel said it won’t be this session if the legislation doesn’t undergo major changes. He argues that Opsommer’s legislation “stripped employees of their rights” and could harm public safety by having fewer firefighters and police officers in communities. The union chief said he’s worked with Democratic House leadership about his concerns.

Harkins acknowledges that without support from the firefighters union, chances of passage are dicey – even with intense pressure from local governments after revenue sharing cuts.

“Going against the firefighters is very hard in the Legislature politically,” she said. “But if there’s watered-down legislation, it makes it far less likely that the (Republican-controlled) Senate will pass it.”

Secrets of success

Before the wrangling over the $1.8 million budget deficit, the brief state shutdown and the tax increases, the governor did try to make it easier for locals to work together.

In her 2007 State of the State address, Granholm offered the carrot of an additional $25 million to $30 million in revenue sharing to encourage communities to engage in more intergovernmental collaboration. That plan, however, quickly got lost in the shuffle as tense budget negotiations stretched through the summer and into the fall.

Scorsone helped her administration fashion the idea, although he doesn’t think it was the most effective approach. As long as the locals documented their efforts, they would get the money.

“I think that would have helped, but I’m not sure it would have amounted to much savings,” Scorsone said. “Under the circumstances, however, I think it was the best she could do.”

New York has a competitive bid structure that Scorsone and other regional policy experts favor. Under that framework, locals present competing plans to policymakers. Those with the most innovative and effective collaborative solutions would receive grants. Scorsone said the Empire State has “definitely shown some success,” although he’d like to see a more stringent evaluation of its program.

Another model Scorsone and national urban policy consultant David Rusk would like to see Michigan adopt is regional government, particularly for metro Detroit. This would go beyond mere intergovernmental cooperation to setting up a metropolitan council overseeing services and planning in the region. Scorsone doesn’t favor the Toronto model, where all services were streamlined at the metro level and the transition has been rocky. Vancouver, British Columbia, got it right, he said, with a hybrid approach where locals maintained some functions they excelled at.

“It’s not a magic bullet,” Scorsone said. “It won’t solve every problem. But in my mind, it’s the solution for metro Detroit.”

The argument for greater Detroit – Oakland, Wayne and Macomb, and possibly Genesee, Washtenaw, St. Clair, Monroe and Livingston – banding together is that their economies and populations are intricately interwoven already. While it would ostensibly help the crumbling city of Detroit the most, the idea is that a rising tide would lift all boats, since the Motown is a drag on everyone in the region. Oakland County Executive L. Brooks Patterson had been resistant and has long charted an economic development course without Detroit, last week forming the Economic Growth Alliance with Oakland, Genesee, Livingston and St. Clair counties.

Rusk argues that it’s naïve to think that the region can prosper without its core city. In March, the seasonally unadjusted jobless rate was 14 percent for Wayne, Oakland, Macomb, Lapeer, Livingston and St. Clair counties. Detroit’s unemployment rate has hovered at 20 percent for months. Oakland County is faring better, although its March rate is still high at almost 12 percent.

Regional government could be adopted in smaller areas, as well, Rusk argues, such as Battle Creek, Flint and Saginaw. But Rusk, who has worked on Michigan planning issues, said at a Battle Creek planning meeting in 2007 that there is a lot of resistance.

“It’s the third rail of Michigan politics, and it leads to lower economic growth,” he said. “For transportation, infrastructure, workforce and societal issues, communities are trapped in little boxes in this state.”

Economic development tool

One of the biggest arguments for reforming the act is that intergovernmental cooperation will save gobs of money. But Heartwell, the Grand Rapids mayor, said this isn’t a short-term fix for municipalities.

“I’m very fretful about saying there will be major cost savings,” he said. “Over time, there are savings to be enjoyed through consolidation. There are tremendous efficiencies that will eventually be very cost-effective.”

Scorsone concurs.

“Stuff goes wrong in mergers. There’s Murphy’s Law – everything costs far more than you think it will,” he said. “It can take many years to see savings. Anyone who thinks that this will fix the fiscal problem is off-base.”

Instead, Scorsone argues that reforms should be viewed as a powerful tool for economic development. He notes that global corporations look at regions, not municipalities, in terms of infrastructure, tax incentives, education, workforce and quality of life. Rusk said regions that work together on economic development, like Minneapolis/St. Paul and Chicago, are successful.

“The mentality there is, ‘We’ve stopped eating each other’s lunch, and now we’re eating your lunch,’” Rusk said.

Currently, Michigan locals often cannibalize each other in terms of economic development. It’s not uncommon for a company to move from a city to a nearby township offering greener tax pastures. No new jobs are created and local revenue is lost by both governments.

“In our winner-take-all system of tax incentives, you don’t develop the region,” Scorsone said.

The six cities in greater Grand Rapids are trying to stop this cycle and build up their region’s brand together. Collaborating on services and planning is important, Scorsone said. There are many other steps beyond reforming the act – the Portland and Minneapolis metro areas share the same tax formula, for instance. And there’s revisiting the controversial Public Act 312 of 1969, which prohibits police officers and firefighters from striking over contract issues.

But reform advocates argue that when it comes to modernizing and reimagining Michigan, the Urban Cooperation Act is a good place to start.