1 CITY OF HUNTINGTON WOODS Discuss Fire and Police Pension Millage and Road Improvement Plan February 2020 V ettraino C onsulting , LLC
2 Consultants • Jaymes Vettraino • Founded Vettraino Consulting, focused on a wide range of municipal consulting in Michigan • Specializing in facilitation, financial planning, organizational management and human resources • 17 years as a City Manager in Michigan and Pennsylvania • Faculty member, School of Business, Rochester University • Cheryl Gregory, P.E. • Senior Project Manager, Rowe Professional Services Company • Over 32 years’ experience in civil engineering, specializing in transportation infrastructure • Management positions with MDOT, Spalding DeDecker Associates and Rowe Professional Services • Lawrence Tech University Civil Engineering Advisory Board - Chair
3 Goals of the project: (1) Develop a comprehensive road improvement strategy (2) Review the potential of redirecting public safety pension funding to a new road strategy
4 (1) Develop a comprehensive road improvement strategy • Working with the engineering firm Spalding DeDecker, the City’s roads were rated using the State standard PASER system • An important concept in the report is the overall condition of the pavement network represented by an “Overall Condition Index” (OCI) rating • As of November 2018, the City’s OCI rating was a 5.093 • Asphalt Roads: 4.721 • Concrete Roads: 6.760
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6 The engineer expressed an opinion that an average OCI score higher than 5.70 produces a pavement network that has satisfactory driving conditions and allows for efficient use of resources to maintain the pavement.
7 (1) Develop a comprehensive road improvement strategy • Target: achieve an OCI rating above the “critical condition point” and to have more sustainable “good” & “fair” roads • Models were created to evaluate OCI rating of 5.70 as quickly as possible and to maintain the rating at year 20 • Multiple street infrastructure funding scenarios were tested to optimize the balance between investment, timing and sustained OCI improvement. • Models were reviewed to evaluate the current streets maintenance spending, additional capital spending and additional maintenance spending
8 (1) Develop a comprehensive road improvement strategy • More than nine scenarios were reviewed by the Committee. Below are the five streets infrastructure funding scenarios reviewed in detail by the Committee:
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10 Subcommittee Recommends A-9 • A-9 positions the City well at the end of the 20 years • Above the 5.70 target • Slope of the graph shows that continuing to spend at a consistent and manageable rate would maintain more roads in good condition. • The strategy invests an additional $1.734 million in each of the first 3 years • This will significantly improve the OCI of the City road network immediately. These results will be viewed favorably by the residents. • Capital investment of $4,500,000 over the first three years is a feasible investment • 20-year capital improvement bonds • Annual debt cost of $331,000 • Maintenance investment of $400,000 for road maintenance in years 1 – 20 • An increase of $234,000 per year from the City’s current road spending. The Subcommittee thought it might be practical to identify this level of increase in spending.
11 Subcommittee Recommends A-9 • The Subcommittee reviewed a theoretical scenario of how many roads would be impacted by construction in these first three years and opined that the amount of construction would not overly burden the community nor jeopardize access for emergency vehicles. • The Subcommittee recommends an educational campaign be developed to inform residents of the need for a different strategy for sustainable street infrastructure. • The information should focus on the current condition of the pavement network and the goal of improving the average condition of the entire network, focusing both on the ride quality of the streets and the future financial savings by investing in the network before the average condition deteriorates further.
12 (2) PA 345 pension for public safety • Public Act 345 • “Fire Fighters and Police Offices Retirement Act” • The act establishes specific legislative authority to create a pension system for public safety officers and authorizes a funding source • The act requires two actions: • A referendum vote adopting an Act 345 pension system • A referendum vote establishing a maximum levy • Huntington Woods is currently at its maximum General Fund Millage, and it is subject to Headlee. • PA 345 has no ceiling and is not restricted by the Headlee Amendment • This act is intended to actually fund the City’s public safety pension • It is one of the only ways a municipality can establish a new revenue stream that matches its obligations http://www.legislature.mi.gov/(S(4gabekio1jf3ymwdzawzglqg))/mileg.aspx?page=GetObject&objectname=mcl-Act-345-of-1937 https://www.canr.msu.edu/news/act_345_a_viable_tool_for_your_community https://www.canr.msu.edu/news/fire_fighters_police_officer_retirement_act_345
13 (2) PA 345 pension for public safety • The City currently has a public safety pension plan. The plan is funded by the General Fund and administered by MERS • The City also has non-public safety pension liabilities, these can not be paid for with PA 345 funds • The cost to the General Fund of the public safety pension plan annual contribution is approximately $800,000 • This cost will continue to grow in the future years • The General Fund savings is “locked” at $800,000 (available for funding other items) • The PA 345 millage can be adjusted to meet the annual public safety pension plan contribution
14 (2) PA 345 pension for public safety • Actions needed – voter approved: • Establish an Act 345 compliant pension board • Set a maximum levy for funding public pensions • Action needed – non-voter approved: • Set the actual levy for funding public safety pension annually during budget adoption • Selection of an investment administrator (recommended to be MERS, the same plan administrator)
15 (2) Plan to implement the road improvement strategy
16 (2) Plan to implement the road improvement strategy • It is recommended the City consider allocating funds available ($800,000) from the PA 345 proposal for two specific priorities: road improvements and long-term liability (pension and OPEB) reduction. • The Subcommittee recommends $565,000 of the $800,000 available General Fund money be allocated for road improvements, as outlined in Scenario A-9 • The remaining $235,000 is recommended to be allocated to fund long-term liabilities (non-public safety pensions and OPEB obligations) or other infrastructure priorities 800,000
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