Special Editorial
January 18, 2013
Eight suggestions for Douglas
to get the most from its consolidation study
We recently congratulated the Douglas city council for at last deciding to study the cost-savings potential inherent in consolidation. Since the Consolidated Government Committee is the only local organization which has experience with studies of this kind—including two such efforts through the Michigan-based accounting firm, Plante Moran—we wanted to share some of our learning and offer a few suggestions for the coming Douglas effort. Our hope is the city manager and the city council will accept these suggestions in the constructive spirit we offer them. This advice will save the city money and time while helping produce the best possible study. And we would like to volunteer to work alongside the Douglas consultants on this project, if they so desired.
1. As to professional resources to conduct a study for Douglas: It’s best to use an outside supplier. “Insiders” —such as the current auditor, for example—will have a vested interest (some would call it a conflict of interest) in keeping things exactly as they are, lest they ultimately find themselves “outsiders” without their current taxpayer-paid revenue stream. A professionally competent, objective consultant that cannot be accused of bias is best. (Should the consultants Douglas chooses want to take advantage of the Plante Moran consultants’ experience as background, the CGC would be happy to immediately suspend our confidentiality agreement to allow it.)
2. The specifics of the new study should be informed by the established norm (from the 2010 United States Census) that local units of government across the country on average govern 7700 citizens living within a 93 square-mile area. This compares to the Saugatuck Douglas citizen count of about 2,195 living within just 3.5 square miles. Clearly, with two governments presently in operation here, reductions in operating expense should be significant, and easily identified.
3. As a “baseline,” begin your calculations with the elimination of roughly 50% of the combined municipal overhead in the two municipalities (or 100% of one, if Saugatuck is not included in the study). This includes the $100,000 salary and benefits paid to one city manager (as after consolidation, we’ll only need one, not two). Similarly, one clerk, not two; one city council, not two, etc.
4. Don’t fall into the “doubling” trap. Simply because the workload of an individual or department might be doubled (as, say, in the case of a contract employee like an assessor going from 1,100 properties before consolidation to 2,200 after), do not assume the resulting cost (or even time demand) will be twice the pre-consolidation level. Instead, look to several other municipalities of a similar 2,200-resident size, and compare what they pay for the function, and use that as a benchmark for projecting realistic expense.
5. Be sure to factor in the reduction of computer, phone, internet, printing, website design and maintenance, and similar “miscellaneous” expenses now being paid separately by the municipalities. The result is probably not exactly a 50% savings, but it will still be a sizable number. Sales of excess office-furniture, computers, and phone systems should be calculated, too. After unearthing all the cost-savings in the currently duplicated municipal overhead expense area, move on to all the other potentially large areas of savings.
6. This is critical: Literally every expense line in the city budget, every salaried or contracted position, and every current asset in the city inventory will have to be evaluated for the study to be complete. We at the CGC will be very interested in this expanded part of the study, since the two Plante Moran studies focused only on city-overhead savings. The $500,000 savings per-year Plante Moran arrived at was a minimum figure. Since it never reflected savings beyond municipal overhead, your more comprehensive effort should reveal a substantially higher number.
2. The specifics of the new study should be informed by the established norm (from the 2010 United States Census) that local units of government across the country on average govern 7700 citizens living within a 93 square-mile area. This compares to the Saugatuck Douglas citizen count of about 2,195 living within just 3.5 square miles. Clearly, with two governments presently in operation here, reductions in operating expense should be significant, and easily identified.
3. As a “baseline,” begin your calculations with the elimination of roughly 50% of the combined municipal overhead in the two municipalities (or 100% of one, if Saugatuck is not included in the study). This includes the $100,000 salary and benefits paid to one city manager (as after consolidation, we’ll only need one, not two). Similarly, one clerk, not two; one city council, not two, etc.
4. Don’t fall into the “doubling” trap. Simply because the workload of an individual or department might be doubled (as, say, in the case of a contract employee like an assessor going from 1,100 properties before consolidation to 2,200 after), do not assume the resulting cost (or even time demand) will be twice the pre-consolidation level. Instead, look to several other municipalities of a similar 2,200-resident size, and compare what they pay for the function, and use that as a benchmark for projecting realistic expense.
5. Be sure to factor in the reduction of computer, phone, internet, printing, website design and maintenance, and similar “miscellaneous” expenses now being paid separately by the municipalities. The result is probably not exactly a 50% savings, but it will still be a sizable number. Sales of excess office-furniture, computers, and phone systems should be calculated, too. After unearthing all the cost-savings in the currently duplicated municipal overhead expense area, move on to all the other potentially large areas of savings.
6. This is critical: Literally every expense line in the city budget, every salaried or contracted position, and every current asset in the city inventory will have to be evaluated for the study to be complete. We at the CGC will be very interested in this expanded part of the study, since the two Plante Moran studies focused only on city-overhead savings. The $500,000 savings per-year Plante Moran arrived at was a minimum figure. Since it never reflected savings beyond municipal overhead, your more comprehensive effort should reveal a substantially higher number.
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7. The new Douglas study consultants should have the expertise—and the challenge—to really dig into expense areas like public works garages (where, for example, each $45,000 dump truck or $60,000 backhoe can be carefully looked at to determine whether it would be needed after consolidation, or could be sold). And of course, one entire public works facility and real estate will be excess and available for sale or lease. The consultants, no doubt, will discover some significant cost savings as they carefully look these into these as-yet-never-analyzed expense centers.
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(Note: We continue to hope that the City of Saugatuck will quickly join the Douglas effort, since a two-city study will have a far better chance of representing the totality of the savings available from consolidation.)
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8. A biggie: Determine the one-time gain from selling (or the ongoing revenue gain from leasing) at least one city hall, with provisions that would keep the buildings in their historic condition. After consolidation, at least one city hall would be excess, so if the study only evaluates Douglas, make an assumption (for the purposes of the study) that it would be the Douglas building. As an alternative, conceivably both city halls could be deemed excess if a better facility could be secured at significantly lower cost. For its part, the CGC is looking into conducting our own new study to monitor the current level of resident-use of the two city halls, and based on this, determine whether doubling the resident-demand would in any way strain a single such resource. If our study is undertaken, we would make it available to the cities to help better gauge realistic facilities needs after consolidation.
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Any cost-consultant study that does not address all eight potential cost-savings opportunities in detail—and others it is bound to discover in its work—will be a study that itself will have been a waste of your time, and worse, of taxpayer dollars.
In the spirit of the promise of consolidation cost-savings, let’s have none of that!
In the spirit of the promise of consolidation cost-savings, let’s have none of that!
