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October 3, 2012

AG opinion comes days after Rochester OKs OPC budget

By Mary Beth Almond
C & G Staff Writer

ROCHESTER — Approximately four days after the Rochester City Council approved the 2013 operating budget for the Older Persons’ Commission, the state Attorney General’s Office sent a response to council’s inquiry on whether the OPC has the authority to spend money without a budget approved by all three entities named in the OPC interlocal agreement.

Each year, the elected officials in each of the three communities — Rochester, Rochester Hills and Oakland Township — are required to review the OPC budget as part of the interlocal agreement, but Rochester City Manager Jaymes Vettraino said the level of review required is not clear. Last year, the three municipalities failed to pass the 2012 OPC operating budget, which was to take effect Jan. 1. While the OPC Governing Board, as well as both the Rochester Hills City Council and the Oakland Township Board of Trustees, approved the proposed 2012 operating budget, the Rochester City Council rejected it due to concerns over salary increases, a new pension plan and a payment in lieu of an increase in health care benefits.

After months of waiting, Rochester Mayor Stuart Bikson said, the office of Rep. Tom McMillin, R-Rochester, informed him that the council would likely not hear back from the Attorney General’s Office. But on Sept. 14, four days after the council approved the OPC’s 2013 operating budget, Rochester City Attorney Jeffrey Kragt received a letter from Chief Legal Council Richard Bandstra, dated Sept. 5, on behalf of the Attorney General’s Office.

In the letter, Bandstra says Attorney General Bill Schuette asked him to respond to the letter sent to the Attorney General’s Office by McMillin on the city’s behalf as to whether the OPC may have violated state law by continuing to operate without a budget approved by all three municipalities.

Bandstra said he asked staff in the State Operations Division to review the letter and included commentary on their findings. The letter said the Uniform Budgeting and Accounting Act “prohibits an expenditure of a local unit of government in the absence of a lawful appropriation in an approved budget.” It said the definition of a local unit that is subject to the requirements of the UBAA includes an entity, such as the OPC, that is “an authority or organization of government established by law that may expend the funds of the authority or organization.” It went on to say the “governing body of a unit subject to the UBAA is required by that act to adopt a budget approving the authorized expenditures for each fiscal year,” and “without such an approved budget and its appropriations, there would be no basis for the expenditure of the funds of a unit that is subject to the requirements of the UBAA.”

As to the ramifications of UBAA violations, the letter said they “include the potential for exceptions in the audits required under the UBAA that are to be filed with the Michigan Department of Treasury, the potential for a special audit being conducted by the state treasurer, and enforcement action against the unit and the unit’s officials and employees under section 40 of the UBAA.” The letter also said that those who violate the UBAA by systematically expending funds in violation of its requirements could “lead to the dissolution of the entity.”

Mayor Pro Tem Jeffrey Cuthbertson — who is also an attorney — said the letter is not an official opinion of the Attorney General’s Office, published with a reference number, cross-indexed and placed in the archives.

“Let’s understand here that our request hasn’t been answered,” he said. “This is not what we asked for, but it’s better than nothing, and I think it presents what most people, applying common sense, would have expected.”

Kragt, who agreed that the letter is not an official attorney general opinion, said the letter is “as close to a direct response” as the council can probably expect on the matter.

“While I thought it was a fair analysis and gave, maybe, the limits of what they were comfortable doing in the abstract. I didn’t really see any surprises in the letter,” he said. “Now mind you, there is a difference of opinion as to whether there was a budget in fact in place, but there are a number of fair assumptions. For instance, he does make the conclusion that such an entity is required to adopt a budget. … And I think of interest is the fact that they did elect to make comment on the ramifications if a violation did exist.”

Although Cuthbertson said the response was tailored to the facts that gave rise to the request, he feels the letter was obviously “very carefully written.”

“At least in the opinion of chief legal counsel, as forwarded to him by the State Operations Division of the Attorney General’s Office, lo and behold, the Uniform Budgeting and Accounting Act rules do apply to organizations formed subject to the Urban Cooperation Act of 1967, so that is to say that those rules do apply to the OPC,” he said. “I hope that this will be a reminder in future years that publically funded organizations, subject to the Uniform Budgeting and Accounting Act, simply can’t spend money without a budget, and that the community as a whole, as it relates to the OPC, will take the responsibility of trying to come to an agreement on a budget much more seriously. I think there was an awfully cavalier approach from some of the other bodies in not taking our concern seriously and not listening. It’s unfortunate that it requires letters like these to say, ‘Geez, the law does apply.’ Like I said, better than nothing, but I hope we won’t need to use this letter in the future.”

OPC officials say they didn’t violate anything because they say they did have an approved budget — the OPC Governing Board approved the budget. The city says they did not have an approved budget because all three communities did not approve it. And the letter basically just restates the overall UBAA policy. In order for anything further to happen, the city would have to press charges, which it does not plan to do, and the decision would be up to the court to decide which interpretation is correct.

As of Oct. 2, OPC Executive Director Marye Miller said she had not received a copy of the letter from the city of Rochester, but she said the OPC’s attorney did respond to the letter, which was included in the OPC Governing Board packet for the Oct. 4 meeting. In the response, OPC attorney Robert Charles Davis said, “The attorney general makes no findings with regard to the facts and events surrounding the OPC and ongoing budget dispute. Most importantly, the attorney general letter makes no findings with regard to whether the OPC approved the budget at issue. As noted in our July correspondence to Rep. Tom McMillin and Sen. Jim Marleau, the OPC itself did, in our opinion, approve its budget properly. Thus, the law on what happens if you fail to get an approved budget is, in our opinion, not applicable because the budget was approved.”

While the majority of the council was pleased to finally receive some feedback on the issue, many felt the timing was a bit off.

Cuthbertson said the letter could have been a lot more valuable to the decision making process earlier on — especially in the last couple of council meetings.

“It really comes as no surprise that we’re receiving it after the fact, quite candidly,” Cuthbertson said.

Council member Ben Giovanelli shared Cuthbertson’s concerns.

“We were presented with a 2013 budget, which we passed on (Sept.) 10, and then, lo and behold, this letter appears — which we were told we weren’t going to get — four days later,” he said.

Council member Kim Russell, whose mother Marye Miller serves at executive director of the OPC, she said too was “disappointed” with the timing.

“This could have been taken care of months ago, but it was not,” she said.

Council member Steve Sage said he was actually “thankful” to receive the document.

“For me, it’s going to provide guidance if we do ever enter into a discussion regarding revisions to the interlocal agreement. I would have a hard time relinquishing any budget authority from our standpoint, with regards to those proposed changes to the interlocal agreement,” he said.

During the Sept. 24 council meeting, the council officially received the letter and agreed to send a copy on to the OPC Governing Board, the Oakland Township Board of Trustees and the Rochester Hills City Council.

A copy of the letter can be found in the Sept. 24 Rochester City Council Agenda Packet at www.ci.rochester.mi.us.

You can reach C & G Staff Writer Mary Beth Almond at malmond@candgnews.com or at (586)498-1060.