Stewart Nelson

I would like to speak tonight to the possible impact of the mortgage crisis on municipal finance.  In case you have been off the planet for the past two weeks, you no doubt have your fill of the details of the meltdown on Wall Street in the residential mortgage and commercial credit market and the potential ramifications for Main Street (you and I) and our economy.  As U.S. credit markets ground to a halt last week and the resulting shockwave blasted through world financial capitals it became apparent that:

·        A U.S. and maybe a global recession is unavoidable.

·        Businesses are already cutting back capital projects and payrolls.What you may not have noticed is that 80-90% of the municipal bond sales were suspended due to uncertainty in the market. In my forty years as an investor, this is only the second time that I can remember such an event taking place.  Closer to home, in the first nine months of the year 1103 homes were foreclosed on in Washtenaw County compared to 741 in 2007.   Simply put a bad economy is now turning into a terrible economy and the end is not in sight yet.  This  uncertainty in the credit markets convey some negative implications for Ann Arbor, Washtenaw County and the State of Michigan:

1.     The cost of municipal borrowing will certainly increase and with large capital projects already budgeted for 2009-2010 we can expect some nasty surprises in finance costs.   

2.     We also can predict large stock and bond losses in our pension and VEBA plans.   These losses should be made up within the next budget cycle or we run the risk of dropping below recommended funding ratios.  How many CDO’s are in our retirement portfolios?  The City Bank law suit implies at least some.    

3.     Lastly, there is an increased chance of lower revenue sharing with the state as the state’s ability to borrow disappears and lower tax revenues force further budgetary concessions. At the risk of sounding like Chicken Little, as a student of the financial markets I have some suggestions for your consideration:

1.     Like every prudent business is currently doing we should ”hunker down” and examine every expense for necessity.   

2.     Increase the targets on the unallocated reserve for the General Fund to 12-15% from 8-12%.  

3.     Adopt a budget stabilization reserve of 1%. 

4.     Monitor budgets more closely with at least a semi-annual review and possibly monthly review.  You can ignore your personal brokerage account statements as they arrive to put off learning the bad news, but please don’t put your “heads in the sand” and hope and pray that we as a city are going to be immune to the economic “hurricane” that is certainly heading our way.  There is still time to prepare.   Clearly these are extraordinary times.  Please don’t just assume it will be business as usual for the next two years. 

I’m still amused by the fact that the Mayor appears so anxious to put my opponent on council.  Simply put, I’m seeking this vacant council seat to be responsive to you, the voter, not to any “establishment.”   Entrenched bureaucrats are detrimental to efficient government - or any government for that matter - because they are prone to “group think.”  The “clique,” that appears to be running the City is fighting very hard to keep me and other qualified candidates off the council.  It is clearly time to “reshuffle” the deck. 

I am very concerned about our sluggish economy and the impact that it will have on our future budgets.  With very few exceptions, we cannot influence revenue in the short run. Cost control is our only real short term fiscal tool.  We must be very prudent and not spend money we don’t have.  Successful businesses learn this very quickly and act accordingly in tough times.  In dire times, businesses limit new expenditures and typically don’t spend on new programs without a cost offset.  Our city should act in the same way.

In the long run we can influence future revenue outside of the Headlee and Prop “A” caps, as new construction does not full under the Headlee caps.  We need to stimulate “smart growth” by working more effectively with our entrepreneurs, business owners, and developers.  I want to stay very active to make sure that our growth respects the past, but also respects the financial commitment that business owners and developers make to our community when they embark upon a project.  Implementing the new Downtown Design Guidelines will help, but there are still parts that I disagree with — like the proposed changes to setbacks.  These would be devastating to the Second Ward. 

Did you know that new tax revenue from projects in the Downtown Development Authority, DDA,  does not increase City revenue?   This is a myth that we need to understand before we push for growth at any cost.  We need smart growth. The DDA is a”City within a City” that has their own revenue sources from Tax Increment Financing, TIF, and parking revenue.  A new building in the DDA will NOT lower your property taxes.

We also can help on the job front.  We need jobs!!  SPARK can help.  We provide very little support to them now.   I am pleased that we have started to install LED traffic lights downtown, but I would rather make the announcement that we are building an LED factory here.  My goal is to help find new industries that will replace the automobile industry that was the economic engine of the 20^th century. 

My blog has additional information about me and my positions.  For instance, I was recently awarded the endorsement of the Huron Valley Group of the Sierra Club.  This endorsement came from the State Chapter, not the local Chapter as our local newspaper tried to insinuate.  I am proud to accept this endorsement, and will work to earn the trust they placed in me. 

I would be happy to sit and discuss the issues with anyone in our ward willing to listen.  In preparation for my role a councilman, I have interviewed almost 100 local government and business leaders, academics, city managers, non-profit leaders as well as other stakeholders in our community.  I have gone “door to door” on almost every street in Ward 2 to personally hear out what your concerns are.   My campaign slogan is “Your Voice, Your Ann Arbor” and I mean it.  I have put my cell phone number and or e-mail address on every piece of literature that I hand out.  I am prepared to listen even more than I speak - and I look forward to hearing from you.  

~Stew

734-972-6003 Cell

www.svnelson.com

Stewart@svnelson.com        

I am pleased to announce that the Sierra Club-Huron Valley Group has endorsed my candidacy for councilman of the Second Ward.

This is a great honor for me and I will try my best to live up to the expectations of the Sierra Club. I first joined the Sierra Club in the mid 70’s when I became interested in environmental and ecological issues while serving in the U.S. Air Force in Northern California.

In accepting the endorsement of the Sierra Club, I will embrace its philosophy that is the responsibility of each of us to find a way to leave this world a little better than we found it. Thankfully we have the Sierra Clubs to awaken us when we forget how connected the world really is.

I am an announced candidate for City Council for Ward 2 on a platform of fiscal responsibility and community involvement. Toward that end, I have spent much time analyzing the arguments for and against the proposed $47,000,000 renovation of the Guy Larcom Jr. Municipal Building objectively.  I have personally interviewed the Police and Fire Chiefs, Planning and Zoning officials, the County Administrator , County Treasurer and a County Commissioner, current and former City Council members, Waste Water Treatment officials, DDA, Main Street Area Association, The Ann Arbor Chamber, The State Street Area Association, University of Michigan officials, business and community leaders and hundreds of residents in my Ward. I also have exchanged e-mails with Tom Crawford the City Chief Financial Officer. I thank everyone for their input.

My conclusion is that the Mayor and a group of City Council members and City Administration have already decided that they are willing to spend $47M of our money unnecessarily to correct a $4M problem while they ignore a $100M problem to fix our crumbling waste treatment infrastructure and an even greater $140M financial and moral obligation to our city worker’s retiree medical benefits.  Both of these obligations will have to be dealt with in the next two to three years, at a time when our City will be facing other significant financial obligations related to core services. 

Therefore, I believe the City should permanently table the current plans for the police-court building financing and place the decision to fund this project to the voters in the form of a referendum on the next ballot.   

In light of an economy that saw 2200 homeowners go into foreclosure in 2007and more on the way, shelving the $47 million plans to renovate Larcom is the only logical decision we can make now.  We can finish drawing the plans for the complete renovation so we will have them on hand if the economy starts to show signs of improvement in 2009 or 2010 and other more cost effective solutions cannot be found. 

What do we do in the interim?

• One, we should proceed with the much needed but more modest renovation to the police space.
• Two, start negotiations with the County to build a combined Court Facility that would accommodate all City and County Courts.  There is a substantial cost saving available to us in construction and operational costs if we can accomplish that. 
• Let the citizens of Ann Arbor decide on a ballot initiative if there is support to invest a substantial portion of our current “rainy day” funds and bond capacity in a flashy display of civic pride. 

I would hope that as a City we will recognize our moral obligations to our public retirees and invest our money in the only “real assets” the City has, its employees,  then core infrastructure before we invest in bricks and mortar that really is only a superficial display for visitors to our city. 

Every time I attend the college graduation of one of my son’s friends or the son or daughter of family friends, I am reminded of the somber folk tale read to us when we were children “The Pied Piper of Hamlin”. You all remember the story of how the children of Hamlin were mysteriously lead away by the piper when the residents of Hamlin, Germany failed to make good on their promise to “Pay the Piper” after he cured a rat infestation. The Brother’s Grimm never revealed the ultimate fate of the children but one theory is that they were lured away by the 13^th century equivalent of a “head hunter” to help colonize parts of Eastern Europe. [1] The grim reality is that like the children of Hamlin, our children and other young professionals are leaving Michigan in droves for greater opportunity in cities like Chicago, Washington DC, Atlanta, Denver and Boston. My most recent reminder was after a recent MBA graduate and new client of my office informed me that he was the only graduate from the University of Michigan MBA Class of 2008 that was staying in Ann Arbor. What a tragedy!

Why should we be concerned about this modern day brain drain? Several weeks ago I was lucky enough to have coffee with a local expert, Lou Glazer of Michigan Future, a local nonpartisan think tank. Lou started me thinking (I guess that is what ‘think tanks” are supposed to do!) about what we as a city can do to “pay the piper” to keep our young professionals from being lured to greener pastures. Some of what we discussed disturbed me more than the Brother’s Grimm. We all understand that it is foolish to expect a recovery in the Big Three that will restore the Michigan economy to the “Good Old Days” of job security, 30 years and out, defined benefit pension plans and lifetime medical insurance. Lou maintains that the best hope for Michigan is for us to transform our economy from a manufacturing base to a “knowledge based economy”. Management Guru, Gary Hamel said it best in his recent best seller about the transition from “bolts and rivets” to “bits and bites” when he points out the inscription on the back of the Apple iPod, “Designed in California, made in China”. [2] Now you can begin to see the problem of losing all our college graduates…. who is left to design the next iPod?

Consider also…if we are lucky enough as a city to attract a dozen more “Google’s” to Ann Arbor, how will they find qualified employees? If our pool of talented young professionals dries up completely, why would the next “Google” even want to locate here to begin with? Finding the answers to these questions is the key to keeping Ann Arbor as the “World Class” city we are accustomed to and to position ourselves as the economic wind that will help propel the rest of the state out of the financial “Horse Latitudes” and into the “Trade Winds”.

My personal thoughts are that we need to revitalize downtown Ann Arbor to better accommodate these young professionals. Providing a “hipper” downtown with affordable housing suitable for the “Millennials” as they are sometimes referred to with plenty of parks, arts and public transit is a good place to start. Sounds like a place even a baby boomer would be proud of! How would you suggest we “stir the pot” to get things started? Let me know.

[1] Die Rattenfängersage aus namenkundlicher Sicht, in: Niedersächsisches Jahrbuch für Landesgeschichte 69 (1997), pp125–183 courtesy of Wikipedia.

[2] Hamel, Gary with Bill Breen, The Future of Management, (Harvard Business School Press, 2007) Pg. 60.

I have announced my candidacy for Ann Arbor City Council for Ward 2.

But first let me express my personal thank you to Joan Lowenstein, our current councilwoman. Joan has tirelessly served our ward for 6 years and deserves our appreciation. Joan is running for 15^th District judge and I wish her the best of luck in her new endeavor. She is open-minded, fair, and deliberate and will make an outstanding judge.

Many of you have asked me why I want to get involved with politics, especially Ann Arbor politics. That is very good question and I would like to address it because it gets right to the heart of what I plan to do if I am elected.

For much of the past half-century, it has been Ann Arbor’s good fortune to have two large and stable employers in the area. As a result, Ann Arbor has been isolated from the devastating effects of the Michigan and to a lesser extent the national business cycle that have inflicted considerable economic hardship on most of our great state. Over the past two years however there are a number of secular changes that have taken place in our economy that have created a “Perfect Storm” of events that have brought the current recession inside the boundaries of Washtenaw County and to the doors of our city.

Evidence of the sea change of economic events has become obvious to most of us but many of our residents and elected officials are still trying to do business as usual. Unfortunately, this time “it is different” and with the synergistic effects of the departure of Pfizer, the continued restructuring of our automobile industry and consequent job losses, the mortgage liquidity problem, declining real estate values, escalating health care costs and an already high tax structure, it is no wonder that many residents are finding it hard to make ends meet.

I love Ann Arbor and have made it home for myself and my family for 45 of my 60 years. So consider:

• How can I sit by and watch and listen to City Council debate spending $47M on a renovation for our municipal building while 2200 residents of Washtenaw County lost their homes in 2007?
• How can I watch a number of restaurants in our community struggle or close while an inexpensive liquor license is selfishly awarded to our municipal golf course?
• How can I not do something when our kids are all leaving, maybe for good, when we have solid developers that want to invest millions in downtown buildings, some that have been vacant for years and the City Council votes it down?
  

I am certain you have many of your own concerns and I would love to hear them. That is how participatory democracy works.

Rather than leaving the future of Ann Arbor to the whims of the politics as usual mindset, I would like to test my leadership skills, honed by military service and business building, to help Ann Arborites articulate a vision of where we would like to be in ten years, begin to put a world class team together to help get us there and then start to create an environment that will allow dedicated men and women to deliver on that promise.

Over the next few months, I will put together the specifics of my plans to keep Ann Arbor a great place to live work and raise a family. I welcome your ideas and suggestion and promise I will do my best to make sure that we all have a say in how we are going to get there.

Paid For by The Stewart Nelson For City Council Committee