The Washington Township Board of Trustees met in Special Session on February 25, 2008, at 6:00 p.m. at the Washington Township Government Center, 8200 McEwen Road. President Young opened the meeting and led the Pledge of Allegiance.
STEEN & COMPANY REPORT
Mrs. Young thanked everyone for coming. She indicated this is a Special meeting with the purpose of presenting a report from Steen & Company from Columbus, Ohio. Washington Township has a long history of providing a vast array of services to residents in a cost-effective manner. Washington Township is also committed to providing our residents with full, comprehensive information relevant to our finances. The Trustees are proud to report that our current financial standing is stable and healthy. As many of you are aware, the City of Centerville was not only invited to hear the study results from Wade Steen, but to hear the presentation from the University of Toledo. Initially, it appeared that City officials would be joining us this evening; however, the Mayor later declined the offer, expressing concern about both reports being discussed together at one meeting.
As a point of background information, the City and Township asked the University of Toledo to determine if potential cost savings could result from combining any functions of the two local governments, and to examine positive and negative consequences to merging departments. The City and Township had a joint meeting about a year ago. At that meeting, it was decided that if either entity wanted more information over and beyond the agreed upon scope, the entity could contract individually for that work.
The Trustees were concerned that the University of Toledo report was too narrow in scope as it did not evaluate the financial standing of each entity. So, in June, 2007, when the Trustees authorized the University of Toledo study, they decided to contract with Steen & Company for a more comprehensive evaluation of the City of Centerville and Washington Township finances. Their report provides a balance sheet of City and Township assets and liabilities. It was their intent that the Steen report would supplement the University of Toledo report. Mrs. Young thanked the City of Centerville and the Mayor and the City Manager for their cooperation as Wade Steen prepared his report.
Mrs. Young asked Township Administrator Jesse Lightle to introduce Wade Steen. Before that, however, she recognized the Boy Scouts in attendance for their citizenship badge. She introduced the Trustees and asked Administrator Lightle to introduce staff members. Mrs. Lightle did so and then, at Mrs. Young’s request, introduced Wade Steen.
Administrator Lightle indicated that Mr. Steen has vast experience with both city and township governments. Mr. Steen has served as Deputy State Auditor and President of the Ohio Government Finance Officers Association (GFOA). He is a long-time member of the GFOA Education Committee and is an elected city council member in Upper Arlington, Ohio. Staff was asked to video tape Mr. Steen’s presentation so that the tape can be used later. She introduced Rich Palmer who will be video taping the presentation. Following Mr. Steen’s report, Trustees will have the opportunity to ask questions and then the floor will be opened to the residents. Mrs. Young will be facilitating a question and answer period. Everyone was asked to come up to the microphone and state their name and address for the record and to ask one question at a time. Since there is a large crowd, she wanted to give everyone the opportunity to participate in the question and answer period.
Wade Steen thanked the Trustees for the opportunity to discuss the financial study they performed. He acknowledged the following individuals who assisted: Fiscal Officer Tom Zobrist, Township Administrator Jesse Lightle, former Township Administrator Gary Huff, Finance Director Michael Barlow, and Accounting Supervisor Jim Boehmer, as well as officials from the City of Centerville including City Manager Greg Horn and Finance Director Mark Schlagheck. He gave a PowerPoint presentation. This presentation as well as the complete report will be available on the Township’s website sometime tomorrow. Before the presentation, he introduced Eric Richter, a consulting manager with Steen & Company. He is a former income tax administrator and was the Income Tax Administrator for the City of Chillicothe and was the Deputy Franklin County Treasurer. He has a vast background and knowledge in income tax collection, property tax collection and government finance. Also on their team, though not present at the meeting, were Greg Barwell, an attorney in Columbus whose main specialty is municipal law; and Roy Woodson- Levy, who is a staff consultant and did much of the compilation of the financial presentation.
Mr. Steen indicated that this was an agreed upon financial study and not an audit. The objective of a financial audit is to render an opinion on the fair presentation of an entity’s financial statements. That is not what they did.
There are four distinct sections to his report: 1) They look at community demographics and peer information; 2) They look at assets, liabilities and equity; 3) They made a review of potential income tax revenues; and 4) They looked at personnel and human resource functions.
They chose peer communities for comparison to use in their study. Mr. Steen talked about how peers are used in studies like this. There are various methodologies used to compiling peer data. One method is to take 25, 50, 100 or 200 cities or townships, put them all together, and come up with an average. Another way to evaluate peers is to specifically select entities that provide valuable comparative data. The peers chosen include: 1) The City of Dublin, which is a rapidly growing municipality in Franklin County. Its fire services are provided by another Washington Township, which is in Franklin County. It operates under a city manager form of government. It has a population of 31,392, based on the 2000 census. It’s governmental and business type expenditures were $80 million. 2) The City of Hilliard, which is also in Franklin County. It is a rapidly growing suburb of Columbus, but not as rapidly as Dublin. Fire services are provided by Norwich Township. Hilliard operates under a strong mayor form of government. The population from the 2000 census was 28,557. Governmental and business type expenditures were $29.8 million in 2006. 3) The City of Kettering, which is located five miles south of Dayton. Its fire services are provided by the City itself. It is operated under a council-manager form of government. Its population is 57,502. It is roughly the size of the Township and the City, should the two be combined. Its governmental and business type expenditures were $60.7 million in 2006. 4) The City of Upper Arlington, which is an older, established suburban community located in Franklin County. It operates under a city manager form of government. Its population in 2000 was 31,550. Total governmental and business type expenditures were $37 million. The City of Upper Arlington was very similar to the City of Centerville. These four communities were chosen for the above reasons. Dublin and Hilliard receive fire service that is provided by a township, similar to the City of Centerville. Kettering is located nearby. He noted that all entities are unique due to physical location, population and demographics, their history, major industries and businesses that employ people within the community.
One of the first tasks they performed was to do a balance sheet evaluation. He emphasized that this is an evaluation—not a balance sheet. Early in his career he did a lot of mergers and acquisition work in public accounting. They referred to it as M & A. Whenever a M & A study is done, there are two things that need to be looked at with the entities that you are looking at joining. 1) The skills of one entity. Does it have a unique expertise? Does that market share have a product that would complement the other entity? 2) The other thing that you have to look at is the net worth of both entities. What are their assets, liabilities and equity?
Their analysis of the balance sheets of both the City and the Township included the comprehensive annual financial reports (CAFR), popular annual financial reports (PAFR), audited financial statements, and information provided by the Township and City and other sources, such as the Montgomery County Auditor. None of this information was created by Steen & Company. Some adjustments were made to the balance sheet that they believed were important to raise up. The City has a special assessment receivable and payable for Yankee Trace. They did not consider that special assessment in this analysis since the City will be paid the assessment and will take the proceeds from the assessment and will pay off the debt. It will wash itself out. The Township has a taxes receivable amount at the end of 2006 for real estate taxes, because taxes are paid in arrears; but that receivable is offset by a liability. They did not want that to impact on their study because that tax receivable at the end of 2006 was to fund 2007 operations. Therefore, there is no net effect or benefit to the Township for that. The Township and City have jointly funded operations and related capital assets that are in the custody of the Township. These include fire stations, the recreation center and Hithergreen. They allocated the related assets for those particular joint operations between the Township and the City. As a basis for that, they used overall property tax valuation. The overall tax valuation allocation as of 2006-2007 was 61.6% Township and 38.4% City. To simplify their analysis, they took the approach of 60/40. Whenever they encountered a jointly-held asset, for example a fire station, they credited 60% to the Township and 40% to the City. They wanted both parties to receive equal benefit for what they have funded and paid. Likewise, when there is debt related to the building or fire station, 60% of the debt went to the Township and 40% went to the City. They also looked at land acquisition. Thirty individual parcels were analyzed as to the actual source of funds to purchase that land. Their detail in the balance sheet describes land that is jointly purchased and land that is purchased by the Township and how the allocation was made. There was also an adjustment made for Yankee Trace Golf Course. The adjustment and analysis is, in accounting terms, material and relevant to the report.
Mr. Steen summarized the balance sheet. In summary, the City and the Township both have over $19 million in cash and investments. These are sizable portfolios. Both have the anticipated receivables that you would expect. They have accrued interest and some deferred charges and some prepaid assets. On the capital assets side, both have sizable portfolios of capital assets. The Township has buildings valued at $16.9 million and the City has $6.9 million. Both have land improvements. Land owned exclusively by the Township is more than $8 million. Land owned jointly is: $1.2 million, Township and $750,000, City. Both have vehicles and equipment. The City of Centerville has Yankee Trace Golf Course valued at more than $8 million. When you make adjustments for jointly-funded operations, you have net capital assets for the Township in the amount of $24.7 million and $28.1 for the City. Both are very solid and strong, financially viable entities. Both entities have over $53 million in total assets. Next, Mr. Steen talked about liabilities. There is $7.3 million in unearned revenue for the Township. This is what Mr. Steen referred to earlier in his report. All of the other liabilities are what you would anticipate. The biggest difference on the balance sheet is the Township has general obligation debt in the amount of $3.5 million and the City has general obligation debt of more than $16 million. There is an adjustment of $1.4 million for debt of jointly-funded operations. This represents the City of Centerville’s 40% of the $3.5 million of the debt for the fire stations. Total liability for the Township is $10.7 million. Total liability for the City is $20.9 million. At the end of the balance sheet evaluation, the Township has equity of $42.3 million and the City has equity of $32.8 million. If some sort of consolidation or combination or merger would occur, that inequity would have to be rectified in some way since one equity is worth about $10 million more than the other.
Concerning Yankee Trace Golf Course, the City has a book value of $18.8 million. This comes out to $82,000 per acre. Five comparable golf courses were pulled. Champions Golf Course in Franklin County and New Albany Links in Franklin County are comparable golf courses. One has a per acre valuation of $18,890 and the other has a per acre valuation of $30,518. They also looked at Big Walnut Golf Club in Delaware County. Their per acre valuation is $10,844. Wooldridge Wood Golf Club in Richmond County was $15,723. Burning Tree Golf Course in Licking County was $18,786. If you drop the high and low golf courses, the per acre valuation of the three remaining golf courses is $17,500 - $18,000 per acre. This is only 21% of the value the City assigned to Yankee Trace Golf Course. This caused some concern when they did their analysis. They asked the City for historical documents substantiating this value, but the City did not provide this information.
They met with the staff of the Montgomery Auditors Office. The elected assessor of property values in this county carries the value of the Yankee Trace Golf Course at $8 million. That comes out to about $35,000 per acre and is a more reasonable estimate, in their opinion; but is still the highest valued golf course on the chart. At that point, Mr. Steen asked his staff for additional analysis on golf courses. They pulled a place called Country Club of the North. Its value per acre is $17,000. They also pulled a course called Moss Creek Golf Club. Its per acre value is $9,202. They also pulled Meadowbrook Country Club. Its per acre value is $21,120. He then became more comfortable with the $35,000 per acre assigned to Yankee Trace Golf Course. He took one final step to make sure, since they were taking an asset valued at $82,000 per acre and reporting it at $35,000 per acre for their analysis. The Scioto County Club in Upper Arlington, Franklin County, has a total value of $11.5 million on 165 acres. A per acre valuation is only $70,000 per acre and it is arguably one of the nicest courses in the State of Ohio. He was, therefore, very comfortable that $82,000 per acre was substantially high for the purposes of their evaluation. They determined to value it at the County Auditors value of $8 million or $35,000 per acre on their balance sheet.
Mr. Steen turned over the presentation to his colleague, Eric Richter, to talk about the analysis done on income tax.
Mr. Richter indicated that he served as a municipal income tax administrator for the City of Chillicothe for four and a half years. When this study was being done, the issue of income tax came up and they were asked to look at it from a very high level of analysis. It is a very complicated thing because of the challenges in estimating income tax. A lot of their source information came from the U.S. Census data from 2000. They focused on household incomes. A large number of the higher earning household incomes are located in Washington Township. There are a number of factors that go into whether or not someone is going to be subject to municipal income tax. You pay municipal income tax where you work first and where you live second. If you live and work in a location where it is not subject to a municipal income tax, then you do not pay it. They faced the following challenges: 1) They do not know the total number of Township residents with earned income that are not currently paying income tax to another municipality. 2) They do not know the total number of Township residents who are paying income tax to another municipality at a rate the same as or higher than the City of Centerville. If someone is paying income tax to another location at a higher rate, if they became subject to income tax in the Township, they would not pay any additional municipal income tax here. 3) They do not know the total number of Township residents who may be paying tax to another municipality at a rate lower than Centerville’s 1.75%. The way the City ordinance is written, if you live in Centerville and work in a location with the lower rate, you pay the difference to Centerville, based on your residency. 4) They do not know the total number of people working in the Township who also reside in the Township or another area not subject to municipal income tax. These people would not be paying income tax anywhere. 5) They do not know the total number of businesses located within the Township that would become subject to a tax on net profits. 6) The overall confidential nature of business and individual income. This is an IRS related thing and a person’s personal income is confidential. In conclusion to the income tax issue, the best estimate of potential income tax revenue would be to conduct a survey of residents and businesses in Washington Township; but a survey is still subject to overall participation, over/under reporting, errors and omissions.
Mr. Steen then focused on organizational structure, human resource operations, some metric analysis, spending analysis and conclusions.
Each entity’s organizational structure was analyzed. They discussed utilizing the organizational structure as a management tool. They found that both organizations have a flat, standard organizational chart. It is typically pyramidal in shape and lean. This is not uncommon; in fact, it is the most common organizational structure in medium-sized governments. Both the Township and the City did very well. It is a good organizational structure for both of the entities. It enhances communication, is lean, and is very effective. Should a combination of the two governments occur, a new organizational structure would be needed. It would need to be developed as a management tool that further achieves the new organization’s missions and goals. They would recommend developing an organizational chart that reflects where the new elected officials want that government to go, rather than how it is. Organizational charts provide the greatest value when they are used as a framework for managing change.
Mr. Steen then proceeded with his metric analysis. The first chart he provided was full-time equivalents (FTE’s) per 1,000 residents. Both the Township and the City have a lower ratio than the overall average. The average is 9.71. When they removed the City of Dublin from the comparison, the average FTE’s per 1,000 residents is 7.67. The Township and City are within ½ FTE of the average. It was concluded that both are reasonably staffed, given the ratio analysis and the services provided to their residents. Concerning spending per FTE, both the Township and the City have a lower ratio than the overall average of spending of $131,564 per FTE. Hilliard was somewhat of an anomaly; however, it was concluded that the Township and the City appear to have reasonable spending per FTE based on the analysis and their understanding of the services that each one provides. In fact, the Township is extremely low in this ratio analysis. Both, however, do a very good job. The last chart was spending per capita. This chart showed an anomaly in Dublin. The Township and the City have a lower ratio than the overall spending of $1,236 per capita. This is somewhat skewed by Dublin, which spends more than $2,500 per resident on city services. If Dublin is removed from the analysis, the average spending per capita is $974. The ratio in the Township and City are still below that average. Both are doing an extremely good job. The chart shows very efficiently run governments. They have reasonable spending ratios based on this analysis.
Conclusions drawn include: The largest entity in the peer group was Kettering. Kettering’s FTE and per capita spending was below average if you include Dublin, but was above average if you did not. Kettering was higher than the Township in both of the ratios, spending per capita and spending per FTE. Kettering was higher than the City in spending per capita. Mr. Steen indicated that they did not conclude that economical efficiencies would be gained just by increasing size or population. To demonstrate that, if increased size led to increased efficiency, it would be reasonable to assume that the City of Dayton then must be the most efficient government in this part of the State. As Deputy State Auditor in 1996-1997 when the performance audit of the Cleveland Schools was performed, the recommendation was that the Cleveland Schools actually take this large school district and cut it into four smaller districts with separate boards and superintendents to increase efficiency. They felt that operational efficiency and performance could improve by actually getting smaller as opposed to actually getting larger. One constant in the evaluation appears to be spending per FTE. If you remove the City of Hilliard, who has the lowest number of FTE’s and the highest spending per FTE, the average of the other five entities reasonably approximate each other. It can be concluded that as a government’s budget or expenditures increase, it also adds staff at a comparable rate. In almost every industry there is what is defined as a sweet spot in terms of size and complexity. As a staff, they evaluated both the City and the Township and are happy to report that they feel both are somewhere in that sweet spot when it comes to operational efficiencies when you look at ratios, organizational structure and how they do things.
In closing, in the final summary of findings, the analysis shows that both entities have sizable cash and investment balances of more than $19 million. Both entities have sizable inventories of capital assets--$24 million for the Township and $28 million for the City. It should be noted that capital assets are valued at book value, except for the discussion on Yankee Trace. Both entities have comparable amounts of accounts payable and other liabilities. The City has substantially more debt than the Township; when adjusted, $17.5 million to $2.1 million; but neither entity is near its debt capacity. The Township’s equity position is more than $9 million greater than the City’s as of December 31, 2006. The Montgomery County Auditor values jointly purchased Township land and holdings at approximately $19.9 million. There is an appreciation of more than $9.7 million in the land, primarily held by the Township, but also held by the Township and the City. This is a very positive thing. They have not incorporated the increase in appreciation in those assets in their analysis. If the two governments choose to combine, a remedy must be developed to balance the $9 million difference in overall equity as well as the $9.7 million appreciation in land holdings, which is sometimes held by the Township and the City. There are numerous other findings and other details in their report. This information will be provided to the residents on the Township’s website.
Mrs. Young thanked Mr. Steen for his presentation.
Mr. Zobrist asked Mr. Steen how they chose the various cities and golf courses on which they did their comparisons. Mr. Steen indicated they kept south of Columbus because they felt they were more comparable. They used the golf courses in the Franklin area because they could get values as established by the County Auditor. They also found a golf course that had recently sold, which gave them a good value. They also found two golf courses that were for sale. So, they were able to find out what they were asking for the golf courses. Also, after talking with Gary Huff and Jesse Lightle, they decided to look at Moss Creek and County Club of the North and others, so that they would have some in our geographical area, too. When you look at golf course values, they can be skewed by location. If you look at a golf course along Lake Erie, for example, the valuation would probably be higher than in this part of the State because of its geographical location being bordered by water.
Mrs. Young asked about the high level estimate of the income tax. In the report, they tried to do an estimate of the percentage of the population that would be subject to some kind of income tax. There were two figures, one for 10% of the population and one for 20% of the population. She asked if this was done in any other community and if he tried it in any other community. If it were 10%, the revenue generated was estimated at $1.5 million. If it were 20%, they estimated about $3.0 million generated in income tax. Mr. Steen indicated that they have used this approach before. They stratified the population in the Township along income bands. Then they stratified it by industry and made the assumption that if 20 percent of every band was not paying income tax and then applied the City’s 1.75 rate, what would that generate. If it was 20 percent, what would that generate? If it was 20%, it is about $3 million. So, if you do the quick math, and say if 50% of the people in the Township in every income band are not paying income tax anywhere and the City gets the full 1.75%, that generates $7.5 million. Mr. Richter indicated that in the interest of saving time with the presentation, some of the income tax slides were cut back. He added that there was a situation in the City of Chillicothe when they were doing an annexation, when they were trying to project the anticipated income, and another situation, at that point in time they were not doing mandatory filing and they were trying to get an estimate of what additional revenue would come from having everybody in the City mandatorily file their tax returns and determine how much additional revenue that would generate. There is no perfect science with this type of analysis and this is one of the areas in the report where they took a very conservative approach in how they did it. But because they were looking at things from hard and fast entrenched data, they tried to make legitimate assumptions. When they met with finance personnel from the Township and the City, they asked them if they ventured a guess, how many people that live in Washington Township aren’t paying City income tax anywhere. One of the finance people said as high as 50%. There is no exact science to it, but they tried to use empirical household income data. Mr. Steen indicated that another way at looking at estimating income tax revenue is on a per return basis. He also said that he is somewhat challenged by that because if someone has an income tax return and they make $200,000 and someone has an income tax return and makes $20,000 but you are still going to take a certain number of returns and apply this percentage at this average income. It does not always end up this way. Seeing the earners disparity, when you look at the demographics, the high wage earners by and large live in the Township. Their conclusion and recommendation is that if the Township and City decide to go forward, they need to have some kind of comprehensive survey done. Otherwise, whatever estimate you get will be a pretty wild guess. A survey is needed to get a really solid estimate.
In response to Mr. Blair’s question, it was indicated that the businesses would add on to the $7.5 million dollars. They would have to pay on a prorated share of all earnings and income. It would mean 100% of the businesses and anywhere between 10% - 50% of the people.
Mrs. Young opened the floor to questions. She asked each person to have only one question. If there is time, they will allow another round of questions.
b ob Kyvik, 2555 Goodfield Point, urged everyone to contact him if they wanted him to join in any conversations about this subject. He is involved with a committee that is pushing for this merger. He believes he can save tax dollars. He indicated that a committee needs to be elected. Petitions will be circulated using Centerville people and Washington Township people to analyze this issue. He saw the preliminary Toledo study. He indicated that there is enough data in this report to conclude there is a possibility of tax savings for him. He asked the Trustees if they are going to support this issue and help pass out petitions. Mrs. Young stated they are trying to gather information.
Jim Blakeney was previously the Fiscal Officer for Washington Township, for eight years, and has 42 years of experience in public accounting, and is a CPA. He received a copy of the preliminary Steen & Company report. He indicated that he would like to see more information in this report in the area of cash flow and how both entities are operating. Is the golf course a drain on Centerville’s finances? He stated that Washington Township does not have anything that is a drain and Washington Township is in very good shape. If this merger is successful, it has to be a win-win situation. It cannot be that one side materially benefits more than the other. From the report, there is no question that Washington Township has $9 million more in assets than Centerville. If you use the appraisal value, you add another $9 million, totaling $18 million. Centerville would benefit from this if there is a merger. He does not believe that there is a way to get a dividend back. He indicated that it does not work that way. He is very interested in knowing what the Township would gain monetarily by this merger.
Mrs. Young answered that both of the studies were commissioned to see if they could affect an economy by combining some departments.
Mr. Blakeney indicated that he also read the University of Toledo report. He asked if the Steen & Company report was commissioned because the University of Toledo report did not cover enough.
Mrs. Young indicated that the original agreement was that a report would be commissioned to look at how economies could be brought about by combining departments. When the agreement was made, the Township felt it was too narrow in scope. They wanted to see the financial standing of both entities. That is why the Steen & Company was commissioned.
Mr. Steen indicated that this scope was fairly narrow in terms of cash flow analysis. He did not want to duplicate the efforts of the University of Toledo. In answer to Mr. Blakeney’s question about the golf course, he responded that it was subsidized by the City’s general fund revenues in 2006, pursuant to their own audited financial statements. He does not know about 2007. He does not know that it is a drain, but he does know it is subsidized by other City resources.
Mr. Blakeney indicated that he would like more information about that in the Steen & Company report. Mr. Blakeney then asked, if a merger took place, what about all of the people that work in businesses that will now be paying income tax. He does not believe the flow of information is available, nor is it included in the report, so that they can see the real benefit of a merger.
Mr. Steen indicated that one of the challenges with that is that, theoretically, someone could be working in the Township, but living in Centerville, and then being subject to taxes based on residency, not whether they are working or not. There are a lot of open variables. To say that 100% of the people who are working for a business in Washington Township aren’t paying income tax somewhere else may not necessarily be correct. Mr. Blakeney then expressed his concern that there may be a lot of major expenses that are written off as ordinary business expenses, which does not make a difference on a cash basis system.
Mr. Steen indicated that the financial statements that were used were actually on an accrual basis. The City was audited by an outside independent auditor. So, they used the City’s audited financial statements. In the Township’s case, they took the Township’s audited financial statements and supplemented them with detailed information on all of the Township’s fixed assets held by the Township. They spent a lot of time going through all thirty parcels, all of the landholdings and all of the records when fire stations were built and taken down and when the new one was built, and when a park was acquired, when Hithergreen was done, when the Rec Center was purchased, when additions were made, etc. They have extensive records to make sure this area was covered.
Mr. Blakeney stressed that this needs to be a win-win situation to make it work.
Paul Bowell, 6515 Rosa Linda Drive, indicated his family has been very happy to live in the Township. They feel the Township government has done a super job. He believes the same is true for the City of Centerville. His question is where do we go from here?
Mrs. Young responded that the Township is trying to gather all of the information they can. Washington Township and Centerville want to implement as many cost saving measures as possible. They both want to be an economical form of government. She was pleased to hear from the reports that Washington Township’s spending is below the average. That is the way she wanted to keep it; and, if the Township can keep it by combining operations, that is what they would like to do.
Mr. Bowell indicated that he understood that, but his question is still, where do we go from here. What is the next step?
Mrs. Young indicated that if the information looks as if the Township can operate more economically by combining some departments, that is what they would try to do. There is another report from the University of Toledo that they have not had the opportunity to comment on, which they need to do. There are some significant differences from what she read between the University’s report and Steen’s report. If it looks like a committee is needed, this would be a long step that is laid out by law.
Walt Dickhaus, 917 Ashcreek Drive, complimented both the City and Township for doing an excellent job. He indicated that the devil is in the details. When one city has an income tax and a lower real estate tax and another entity has a higher real estate tax and no income tax, how that plays out and impacts various people is difficult to understand. His question concerned the time frame things would happen in and when the residents will be given a chance to vote on it.
Mrs. Young did not believe she could give him an answer. If the Township Trustees find ways to economize, they will. If the citizens look at the information presented and see that they want to move in the direction of a merger, this is also something they can do.
Mr. Dickhaus then surmised that this would be driven by someone getting a petition together, rather than by the Trustees. He heard a gentleman talk earlier about getting a petition going and putting things on the ballot. That worried him since the Trustees and maybe the City of Centerville have not made a thorough analysis as yet.
Mrs. Young indicated that this is what they are trying to do.
Mr. Dickhaus indicated that this is why some kind of a time frame is needed to head off the petitions. He said that if the Trustees do not have a time frame, then someone will be driving the process for them. If someone is driving the process with a petition, the Trustees will lose control. He suggested that if a timeline is established, the Trustees will regain control of the process.
Mrs. Young responded that if the information presented does not present a compelling case, then the citizens will be able to make up their own minds about whether or not to sign a petition. Mr. Blair added that the University of Toledo’s study will be presented in the very near future and the citizens will have the chance to hear their findings and ask questions. He does not know when that will be, but believes it will be in March. He recognized that some people, including the Mayor, want this issue on the ballot this year; but it will all depend on the reception, the results, and whether they can get petitions signed. The results have to be reviewed first and all of the information has to be given to the public so that they can understand the cost of operations. It is their responsibility to see that the information given to the public is presented fairly. Both entities are being run efficiently and are two small operations that complement each other very well. He believes the lowest cost and form of government for this community is the way it is now.
Mr. Dickhaus is looking for the lowest cost for himself. Mr. Blair indicated that he is, too. As a representative of the citizens of Washington Township, it is his responsibility to honestly look at alternatives for the lowest cost and form of government for the community. Since the Toledo study has not yet been presented, it is still a question for him. He read the preliminary study from the University of Toledo and indicated that one of its conclusions was that both communities are financially solvent, will continue to be so in the future, that both provide excellent services, and there is no reason to change that. The status quo might be the way to go.
Jeanette Teller, 9092 Maral Trail, asked a question related to income tax. She saw an article in the February 20 th issue of the Centerville-Bellbrook Times where Kingseed explained the merger idea. She was troubled by that article because it indicated that the City of Centerville hopes to offer a web-based calculator that would allow each resident to calculate the property income tax changes that we would likely see following a merger. Her concern is that this information is confidential and she does not know how it is being done. She would feel more comfortable if Washington Township would have a separate survey from Centerville, rather than having Centerville getting the information, because she feels the information being published in the newspaper has been biased towards Centerville’s agenda of merger, which to her is more like an annexation. She is wondering if anyone knows how this web-based calculation would work and how it might be used and if this information could be available and helpful to Washington Township for making a good decision on this issue. Mrs. Young indicated that she does not receive the Centerville-Bellbrook Times.
Mark Kingseed, Mayor of Centerville, indicated that the web-based calculator had not been designed yet. “The idea is not for the City to store the information. It is not going to be maintained or anything like that. It would strictly be so that any individual could access it and put their own information in as to the value of their home and where they work, what city they work in, as to whether they are presently paying income tax. It is not a tool where the City is going to gather any information…The idea would be a tool for individuals to make their own determination based on the Toledo study whether financially there would be a benefit to you if there were a merger. So, that is what the concept is there. So, I didn’t want anyone to think that it was a source for anyone to gather information that would be used in surverys or anything like that and, quite honestly, my hope would be that we could…it would be something available and usable. There may actually be a handwritten piece of it, too—a form that we could make available on a website that you could just download and do it yourself, at home. It is supposed to be a tool to help people, not anything for any other purpose.”
Mr. Blair indicated that it is a very simple calculation. It is a percentage of your property taxes that gets paid to the Township that is roughly 15%. Out of every property tax dollar, 15 cents comes to Washington Township and park district, 16 or 17 cents goes to the County, a penny or two goes to the library, and the rest goes to the schools.
George Vawter, 971 Cedar Creek Circle, expressed a concern that the Township would inherit at least half of the debt for the golf course in Centerville should a merger occur. It is his understanding that their green fees do not cover the payments for this debt. He does not believe it is fair.
Mr. Steen indicated that on the golf course there are assessments that are paid for with a special assessment receivable, but there is also debt for other things that it has done over time. The adjustment per their balance sheet is $17.1 million for the City to $2.1 million for the Township. The real determiner is the difference in equity. He asked Greg Barwell, who has done mergers and acquisitions, what if the Township people do not pay income tax for 10 or 15 years in order to pay off the $9 million. After he stopped laughing, he said he never heard of it. He indicated that, in a merger, there is a coming together, similar to a marriage. You have to take the good with the bad. He looked at it from different aspects to make it fair. Unfortunately, he concluded there is no way. The entities, themselves, would have to work that out.
Mrs. Young pointed out to Mr. Vawter that the reason Mr. Vawter, a Township resident, would have to pay more green fees at the Yankee Trace Golf Course than would a Centerville resident is because he does not pay Centerville taxes.
Pat Crippen, 10219 Cherry Tree Terrance, asked, under Ohio law, can the City of Centerville, without approval of Washington Township residents who are not City residents, annex the Township. Mrs. Young and Mr. Blair responded, no. Mrs. Young informed him that she would need a lawyer to cite all of the annexation laws because several of them have been amended in the past couple of years. However, she believes the land has to be contiguous and the majority of the property owners have to give approval. When Mrs. Young asked Mr. Steen for his opinion, he asked her if he could contact Mr. Barwell later and ask him to send her an answer the next day. Mr. Barwell previously did an analysis of methods of annexation as well as mergers.
Wes Cleaves, 9146 Normandy, asked about retirement income. He asked to what extent the City, if any, taxed that income. Mrs. Young indicated that the estimates in the study were based on earned income. This does not include pensions. Mr. Steen added that, generally, in the municipal income tax ordinance earned income does not include pensions, annuities, royalties or anything like that. It includes just wage earned income.
Bob Corbin, retired City Councilman, 6388 Pebble Court, asked why this hearing was just on the one study. It appeared to him that the Township did not want to hear the facts on the other study. He did not believe it was fair to the people at the meeting to be presented one study and not the other. He believed he has heard statements that are completely false and are unintelligent because they do not know the facts.
Mrs. Young responded that an invitation was extended to the City on February 4 th to hear both studies. The City did not respond to the invitation for a long time. When they did respond, they said they did not want to hear both studies in the same evening. The University of Toledo was quite willing to come and present, but when they heard Centerville did not want to attend, they declined. She agrees with Mr. Corbin and wanted both studies on the same evening, since it is hard to for residents to attend twice for the same issue; but Centerville was the one who declined hearing both studies, not Washington Township. Mr. Corbin stated that it was unfortunate that the two bodies couldn’t get together on how to present this issue. He believes it is unfair for the people to listen to half a loaf and not be able to understand what the whole loaf was all about. Mrs. Young agreed and indicated that she did express this to Mark Kingseed.
b ob Kyvik, 2555 Goodfield Point, assumed that there would be another public meeting with the Toledo study. He asked if afterwards there will be a positive consensus and a vote yes by the City and Township that there will be a vote on the ballot for an advisory committee this November, if possible. He said that the study, by non-biased, non-partisan Centerville and Washington Township residents, will take two years. An unidentified person informed him it would take up to two years.
Mr. Kyvik pointed out that this is not going to be a decision by the City or the Township. This will be a decision made by the residents and the first vote will be to form a committee. He asked if this would be done at the conclusion of this meeting.
Mrs. Young indicated that there are several conclusions. One of the findings from Steen & Company pointed out some of the difficulties that would occur with a merger. Also, the University of Toledo’s study said that one of their conclusions was that both are operating very well and that the status quo is one way to go, in that both entities have the luxury to really make an informed decision as to what our future should be. At this point, Mrs. Young informed him that she cannot predict anything.
Mr. Kyvik then asked about his property tax. He asked when any political subdivision ever came to them and said that they could reduce our property tax. He indicated that the property tax pays for a lot of services they receive in Washington Township. He also pointed out the people working in the Township are not paying property taxes but are enjoying the services provided. This will stop if the merger occurs.
Paul Bowell, 6515 Rosa Linda Drive, asked when they could expect the University of Toledo meeting. Jesse Lightle indicated that she will proposing several dates to the City of Centerville. She will be in touch with their City Manager to try to set something up. It looks like it will be late in March. It will also depend on the University of Toledo’s schedule. It is hoped that it will be on a Monday night, which is a regular meeting night for both sets of elected officials. As soon as it is known, it will be placed on the Township’s website and it will also be submitted to the newspapers. Mr. Bowell encouraged the City of Centerville to cooperate in getting a meeting scheduled.
Mayor Mark Kingseed indicated that the City will cooperate and very much wants to have a session to go over the Toledo study. He indicated that the reason for the two meetings is because the University of Toledo was not willing to present at the same time of the Steen study. Their point was that they have a 141 page report. They believe it will take approximately three hours to go through it. The City of Centerville wants to get out all of the facts as well. He believes it is very crucial for the people to have all of the information—the financial information—they need so that they can make their own judgments. He was pleased that a potential meeting date was set up for March. He encouraged the Trustees in advance of that meeting to put together questions in writing and to send them to the University of Toledo before they present so that they have that information and can address all concerns. He believes it is important that this issue move forward. He believes it is important and may lead to significant tax savings for people. He indicated that it is very easy to say that things are basically okay right now so let’s just let it sit, but he believes everyone in leadership has an obligation to get the facts in front of people and to push it forward in a reasoned way, with plenty of time to consider it and to analyze it. He does not want to be in a situation where months and months drive by. He believes they have all of the data or will have it once they have the meeting with Toledo. He wants everyone to get together and a judgment made on the record as to whether the formation of a merger committee is supported. He understands that the Township may have a different point of view than what the City does, but he believes they should talk about it openly, take a vote on it, have petitions go out to see if there is enough support, and see what the people want to do. They are more than willing to work with the Township every step of the way and will cooperate fully because he believes that it is in people’s interest to do that.
Mrs. Young indicated that a draft of questions for the University of Toledo is ready but has not yet been submitted. She added that the University of Toledo was willing to come and a hotel reservation was made for them; but when they heard Centerville would not attend, they declined. Also, she pointed out that there are a number of recommendations in the University of Toledo study and it will take another evening. She appreciated everyone coming out. She assured everyone that it is the Township’s endeavor to bring forth all of the information they can so that every resident can make an informed decision.
Greg Horn, Centerville City Manager, indicated that their Finance Director had a chance to look over the study that was done and had a few comments. He indicated that a lot of emphasis was placed on the fact that there appears to be a $9 million difference between their net positions. He indicated that there was about a $6.6 million swing found. In the Steen study, it was noted that if cash investments were shown as of December 31, 2006, the Township would be $3.4 million lower per their audited financial statements and the City would be $1.1 million higher, a net swing of $4.5 million. In a comment made by his Finance Director, also a CPA, if you are doing a balance sheet or even attempting a balance sheet type of scenario, which is what he believed Gary Huff always wanted to do, he said you have got to capture the same sequence in time. He said that you cannot do your revenues with a June 30 th cutoff and do your expenses with a December 31 st cutoff. You have to match them up. Mr. Schlagheck, his Finance Director, matched the numbers up and said that there is a $5 million swing, just based on how the numbers were captured. Again he stressed that, had they waited until the end of year, there would have been a net change of $3.4 million lower for the Township and $1.1 million higher for the City. He indicated that the Township receives its tax revenues at a different time of the year because it is property based. Again, he stated that this accounts for $5 million of the $9 million. He realized that golf courses are unique and that this was a big subject. He indicated that he was proud of the golf course and thinks it is a tremendous asset to the community, but everyone knows that the golf course business has been tough over the last few years and golf courses have had a lot of issues. He knows that a lot of prices have dropped in terms of selling prices. He indicated that when they do a CAFR, it is an accrual basis. All of their assets are accounted for and book values are established, depreciation values, etc. It is a whole different level of accounting than what townships and villages in the State of Ohio have to go through. His Finance Director mentioned to him that, Steen has chosen to reevaluate only one capital asset in the entire study. Everything else stayed in at book value, but Yankee Trace was pulled out to try to deal with it differently, rightly or wrongly. Yankee Trace has a historical cost value, which is how everything else is accounted for at $18.8 million per the 2006 CAFR. In the comprehensive financial report, Mr. Steen has decreased the value of Yankee Trace to $8 million, which equates to $35,000 per acre for 229 acres. The study fails to recognize, according to Mr. Horn, that the City actually has a contract to sell ten acres, the commercial ground at Austin and Social Row Road, for $2 million. This would increase the assets of the City, a net of $1.66 million. Just these two things would reduce the $9 million by $6.66 million. These figures were arrived at by their Finance Director with just a quick review. The last comment he had was that Yankee Trace has always met one hundred percent of its operational costs since it opened. What it hasn’t always met, is its debt service. The debt service is about $900,000 a year. If they have a good year, they are at or really close to that. They had a good year this year. With a $3.7 million budget that included $900,000 in debt services and all operational costs, they were only $19,000 short this year. He did not want people to walk out of the room thinking that somehow Yankee Trace is a liability. He believes it is a tremendous asset and has improved the values of homes nearby. He has been in cities that operate recreation centers and that operate swimming pools. He has never seen a recreation center yet that has paid for its capital improvements. He has never yet seen a swimming pool in a city that has paid for its building or capital items. Normally, those facilities are lucky if they can pay 45 or 50 percent of their operational costs. He suggested that if you want to throw stones at Yankee Trace, look at rec centers, swimming pools, and all other public-type recreational facilities. He did not believe you would find one that covers any greater percentage of its operating and capital costs than Yankee Trace does.
Mr. Steen indicated that the quick analysis of the cash balance would have shown the footnote at the bottom that says the balance is as of July 1 st. He believes it is important for the audience to understand his rationale. December 31 st for most governments is a unique time. By waiting until June 30 th or July 1 st, the City has now collected all of its income tax. The Township has gotten its first half of property tax settlement. Steen thought it was a much better indicator, besides both entities had reconciled cash and investment statements as of July 1 st. They could not get their hands on receivables, payables, and things like that, but they would not have resulted in a material swing. If you look at cash as of the end of September, that would change, too. At both entities, they looked at the cash balances reconciled as of June 30, 2007. All other numbers were right off the audited financial statements. He also addressed Yankee Trace. The numbers they used were from Karl Keith, the Montgomery County Auditor who is in charge of assessing everybody’s property. Another thing that he wanted to say publicly is that, one of the things they asked for in doing this study was, when they saw $18 million on the balance sheet, they asked for the ordinances and all of the purchase documents related to this property so that they could assess historical cost. The City never provided any of this historical documentation related to the purchase or development of Yankee Trace that was requested. If necessary, he would provide the written request copies, but he wanted to know if $18 million was a good number to use in their analysis. When they could not get accurate, factual, historical information, they defaulted to the County Auditor at $8 million, which he thinks is a good number, but may even be a little higher. At $35,000 an acre, it is the highest valued golf course in the entire study.
Trustee Comments
Mr. Blair indicated that he believes it is a long process and that there is a lot of information that needs to be gone through. It is not a quick decision. It’s very difficult for Mr. Blair to understand how the decision was made to put it on the ballot this year, because there is a lot of information to go through. He wanted to emphasize that this is a draft that they are waiting for from the University of Toledo. He greatly anticipates it and believes they have an obligation, fiduciary and otherwise, to be open to ways to provide the best services with the lowest cost. Mr. Blair said that if he can be shown, as an individual, that there is a form of government that is a combination between these two that will be a lower cost in total and provide the same level of services, then they have an obligation to look at it and maybe an obligation to pursue it. If there isn’t, and the thing is how do we raise more money, then he does not believe it is a valid reason to look at this study. One of the things that Mr. Kyvik said that stuck in his mind was that there are plenty of people who work in Washington Township that get the value of services that do not have to pay for it. There are plenty of people who pay taxes somewhere else and do not get any value for it. There are people who live in Centerville who do not pay taxes in Centerville and, therefore, get a free ride. If you work in the City of Dayton, you pay all of your taxes to the City of Dayton. You come back to Centerville and you don’t pay any tax, but you get all of the services from those who are paying taxes. He concluded that there are a combination of things they have to look at. He emphasized that although it may seem like a very venomous fight, it isn’t. They both hold different views. They both, however, want to work together to make this community good.
Mr. Snyder asked Mr. Steen: “Based on your study, this is the bottom line, do you see any reason that we would want to merge with the City of Centerville?”
Mr. Steen responded: “You would want to take a look at various functions. If you can gain economies, I talked about that earlier, maybe I can use the example of a finance department. If the two governments were to join, both of you have a finance director now. So, you would only
probably need one. But you also don’t have enough staff in the income tax department to handle all of the new income tax returns that are going to be filed by Township residents. So, you are going to add staff to process those income tax returns.
Without going through department by department and looking at what you could gain or lose, I think one of the things we came up with in the study is that the cost per FTE and the number of FTE’s per government tends to grow with the revenue base. That is the one constant that we had talked about.
I think you may be able to find some efficiencies in the City or the Township without merging. I think most governments have some ways to save some money.
Now I am going to come to the answer to your question. I think Trustee Blair touched on this. You are both very well-run governments. I am not here to say either government is not doing well. When you look at the ratios, the City of Centerville and Washington Township are at the low end. The question is, how much lower can you go and what can you gain by putting the two together?
The one area that we didn’t touch on in revenues -- and we keep talking about savings -- is that the bottom line is if there is one person that saves some taxes, someone else is going to pay. If you roll back a property tax, someone else will pay income tax. There is a cost to government in this country, whatever services you get, and someone is going to pay them. So, you want to make sure you analyze the effect of rolling back a property tax and putting on an income tax. Because at the end of the process, you’ve got a wonderful community, great school district, great township, great city. And for these services to continue, someone is going to pay for them.
To answer your question, I would, I think, defer to Trustee Young’s comment and that is you still need to get information. You’ve commissioned a study and I think you need to evaluate it in great detail and combine that with this, and then consult your residents if you should move forward or not.”
Mrs. Young thanked Mr. Steen for coming and making his presentation. She stated that, again, as elected officials, representing 53,000 residents, they are committed to providing as much information as possible. This is a complex and serious topic that requires thorough study and discussion. The more they discuss it, the more they study it, the better off they will be and the more answers they will be able to come up with. She indicated that they will do everything in their power to share pertinent information with everyone in the coming months. She indicated that staff is working on a website page that will have the current information plus the study. When the University of Toledo study is presented, they will have that as well. She indicated that they will use this as a tool to provide residents with up-to-date information. There will be a link to the home page. She thanked everyone for coming.
ADJOURNMENT: 7:45 P.M.
All formal actions of the Board of Trustees of Washington Township concerning and relating to the adoption of resolutions and/or motions passed at this meeting were adopted in an open meeting; and of any of its committees resulting in such formal action, were in meetings open to the public, in compliance with the law, including Section 121.22 of the Ohio Revised Code.
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President
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Fiscal Officer