June 15 2010 12:00 AM

A budget amendment, and a funding misuse allegation by the internal auditor

Ready for some fuzzy, or at least confusing, municipal math?

A part of Monday’s City Council agenda was a budget amendment from the Finance Department. It’s needed because the city’s revenues are anticipated to be less than expenditures for the current fiscal year, which ends June 30.

The math is a little hard to follow, but here goes:

The city will use $3.4 million from the general fund reserves. They will use $1.7 million to offset a projected shortfall resulting from $1 million less in income tax revenues, $300,000 less in state revenue sharing and $400,000 less in interest income. That leaves $1.7 million.

The city will then whack $73,300 out of the city clerk’s budget, $57,700 out of the Planning and Neighborhood Development budget, $89,400 out of the Finance Department budget, $60,000 out of the Fire Department and $369,600 out of the Parks and Recreation budget. That adds up to $650,000.

If you subtract the $650,000 from the $1.2 million the city expects to save from a “vacancy factor” — or, the savings from employees retiring, quitting or being fired and their positions not being filled — you get $550,000.

Now — here’s where it gets tricky — as part of this amendment, the city will add $20,000 to the city attorney’s budget, $530,000 to the police personnel budget and $600,000 to the building safety fund. Add that up, you get $1.15 million. Add the $550,000 left over from the vacancy factor, and, voila, you get $1.7 million.

And that’s how the city is spending $3.4 million of reserves to amend the budget.

But there are still two other pieces. One is that the $600,000 going to the building safety fund is because of a shortfall in that same amount in that fund. The $530,000 going to police personnel is because of a legal opinion that found the city could not take $430,000 out of drug forfeitures to pay for police special operations. So, essentially, $430,000 has to be returned to the drug forfeiture account.

The essence of this is that the city is spending $3.4 million in reserves. Reserves are for emergency situations, and the amount the city has proportional to the total budget can affect the city’s credit rating. According to the memo on the budget amendment, the use of funds was done to “avoid further financial burden to employees, to avoid layoffs, and because structural programmatic/service changes were reserved for deliberation in context of the FY 2011 budget.”

The Council will take up the amendment at a future meeting.

Also part of the Council agenda was an allegation from the internal auditor that the mayor’s office erred in giving health insurance to a part-time, contract employee of the mayor’s and recommends that the city be refunded $2,548.68. But Mayor Virg Bernero’s chief of staff says that expenditures was within budget and Bernero’s purview.

The tidbit was buried deep in the agenda for Monday night’s City Council meeting, in a section where Council members are given reports from city departments, the mayor’s office or any of the numerous city boards and commissions.

The report written by Internal Auditor Arnie Yerxa and was spurred by a discussion during a recent budget hearing. The gist of Yerxa’s findings is this: On Feb. 1, a part-time contract employee in the mayor’s office, who was being paid $19.64 per hour, enrolled in a health care plan that costs the city $424.78 per month (with an employee pay-in of about $10 per month for the plan).

The first problem, Yerxa wrote in the audit, is that the employee enrolled in one health plan, but was paying the rate for another health plan. He also found, based on minutes from an April 10 Council budget hearing, that temporary employees do not normally receive paid holidays or benefits, that no contract employees were using health coverage at that time, and that under some union contracts, part time — but not contract — employees can receive dental benefits.

Yerxa also referred to discussions in meetings last year’s of the Elected Officer’s Compensation Committee meetings, which stripped Council of free health benefits. During the meetings, members discussed whether it’s fair that Council members, who are part time, get 100 percent health care coverage when regular part-time city employees don’t.

“Since the issue of part-time employee status appears to be a major influence in making the determination to not allow health care to Council members, shouldn’t the same rationale be used for all part-time employees in all departments,” Yerxa wrote.

Yerxa recommended that the city be refunded $2,548.68, which is the cost of six months of health insurance for the employee, who was terminated in April.

But Jerry Ambrose, Bernero’s chief of staff, says that if Yerxa had checked with the city’s Human Resources Department, the City Attorney’s Office and the Mayor’s Office, he would have seen the expenditure approved.

“With respect to the employee in question, the mayor determined that the employee would be provided health insurance in the same manner as other full-time employees in the mayor’s office, subject to the limitations of the insurance carrier contract,” Ambrose wrote. “The employee’s contract was approved as to form by the City Attorney’s Office. There are sufficient funds within the personnel appropriation for the mayor’s office.”

Ambrose said that the employee was a “special assistant” to the mayor, who would deal with things like “neighborhood issues.” A few months ago Yerxa found that the mayor’s office had improperly charged the Parks and Recreation department for a mayoral press conference. The mayor’s office paid back the Parks department.

On Monday night, the Council had before it four public hearings on various development issues: the Abundant Grace Faith Church’s request for a special land use to turn the old Farmer Jack supermarket on South Cedar Street into a mega-church; the city’s sale of the Comfort Station building in Old Town; a brownfield plan for the redevelopment of the Holmes Street School; and an obsolete property rehabilitation act (OPRA) for a printing company looking to move into a building on North Martin Luther King Jr. Boulevard.

There were a few grumblings about Abundant Grace’s proposal, mostly because a church does not pay property taxes.

Since July 4 is coming up, the Council also had before it a host of approvals for the sale of fireworks. An approval for an application to sell fireworks that are illegal in Michigan to non-residents. The application was sought by Janet Stamos, a co-owner of the American Eagle Superstores in Lansing. Council President A’Lynne Robinson was against the wholesale business because she says residents complain of too much noise and fire in the sky around July 4 caused by illegal fireworks. First Ward Councilman Eric Hewitt, too, was against the wholesaler, saying that he has heard “vehemently” from constituents who cannot stand the fireworks’ cacophony near and on the nation’s birthday. The measured passed 5-2 (Fourth Ward Councilwoman Jessica Yorko was absent from Monday’s meeting).