How Your Property Taxes Support County Government

Prepared By: Ottawa County

Administrator’s Office

August 2015

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OTTAWA COUNTY BOARD OF COMMISSIONERS

Back Row (Left to Right): Donald G. Disselkoen ‐ District 3; Mike Haverdink ‐ District 5;

Matthew R. Fenske ‐ District 11; Dennis L. Van Dam ‐ District 6; Roger A. Bergman ‐ District 10; Stuart P. Visser – District 1; James H. Holtvluwer ‐ District 7

Front Row (Left to Right):

Philip D. Kuyers ‐ District 9; Chair Joseph S. Baumann ‐ District 2; Vice‐Chair Greg J. De Jong – District 8;

Allen Dannenberg ‐ District 4

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TABLE OF CONTENTS

Executive Summary ___________________________________________________________ 4

I. Introduction _____________________________________________________________ 5

II. Property Tax Basics ________________________________________________________ 6

III. County Millage Rates ____________________________________________________ 9

IV. Funding the County: Basic Funding Structure ________________________________ 12

V. General Fund Revenues _________________________________________________ 14

VI. General Fund Expenditures_______________________________________________ 15

VII. What are “Benefits”? ___________________________________________________ 17

VIII. Methodology and Discussion _____________________________________________ 18

Legislative ________________________________________________________________ 21

Judicial ___________________________________________________________________ 22

General Government ________________________________________________________ 24

Public Safety ______________________________________________________________ 26

Health and Welfare _________________________________________________________ 30

Community and Economic Development ________________________________________ 32

Culture and Recreation ______________________________________________________ 33

Other Governmental Functions _______________________________________________ 35

IX. Conclusion ____________________________________________________________ 37

X. Appendix _____________________________________________________________ 39

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EXECUTIVE SUMMARY The property tax is a basic funding source for many local government activities, including those of the County. Taxpayers entrust a portion of their money with governmental institutions to be used for public purposes. Because it values good stewardship of public money and desires to maintain open communication with citizens, the County, under the direction of the Board of Commissioners, has chosen to issue this report. Questions have arisen as to whether citizens benefit from County services in proportion to what they pay in taxes. This cannot be easily answered because different meanings of “benefit” exist. However, the report will seek to provide a brief description of major services provided, whether they are accessible to all citizens, and what the net cost is to taxpayers. After offering some educational information about the property tax system and the County’s funding structure, the report enters into a discussion that includes responses to the aforementioned questions. The services provided by the County are examined by governmental function (e.g. legislative, judicial, general government, public safety, etc.) and department/agency. We conclude five key findings from this analysis:

1. With respect to funding for all governmental activities, property taxes compose only 32% of total revenue. A majority of funding (52%) comes from intergovernmental revenue. While the property tax is a significant revenue source, the County relies greatly upon intergovernmental revenue.

2. The amount and proportion of property taxes (net cost to taxpayers) that support various County services varies by governmental function. In absolute terms, public safety, health and welfare, and judicial activities receive the greatest amount of property tax funding.

3. In aggregate, townships and cities have tax liabilities that are proportional to their

populations. Differences in individual units that are greater than or less than 0% can be explained due to a variety of factors.

4. Nearly all County services are available and accessible to all County residents. Those that

are not receive minimal support from the General Fund.

5. Community policing contracts between the Sheriff’s Office and local units for additional public safety services are paid for mostly by local units. These units financially support the delivery of “frontline” services (e.g. deputies and vehicle costs) and additional supervisors as requested (beyond those included in the contract), while the County is responsible for providing the supervisory and administrative staff. In order to minimize costs, these personnel manage multiple contracts. The County welcomes any interested, non‐contracting unit to engage in discussions about potential contracting options.

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I. INTRODUCTION The Board of Commissioners annually reviews and revises the County’s Strategic and Business Plans. These documents provide guidance and describe the goals, objectives, and desired outcomes which will direct the County towards its vision and mission. The Strategic Plan contains four specific goals that are used to orient the County towards its commitment to excellence and the delivery of cost‐effective public services. The goals are as follows:

1. To maintain and improve the strong financial position of the County. 2. To maintain and enhance communication with citizens, employees, and other

stakeholders. 3. To contribute to the long‐term social, economic, and environmental health of the

County. 4. To continually improve the County’s organization and services.

The Commissioners and the County are committed to maximizing communication with citizens. We recognize the importance of stewardship of public money in the accomplishment of our mission. We hold it as a basic value to perform our stewardship in a responsible, cost‐effective manner, always remembering and respecting the sources of County funding. In this spirit, the property tax report is intended to examine the funding for County services, mainly those supported by the County Operating Property Tax of 3.6000 mills. This tax is the primary source of funding for the provision of General Fund services. Other sources of funding are utilized, especially in areas where the County serves as an agent of the State to deliver mandated services. Over the years, some local unit officials have questioned the benefit of County services received by their residents in relation to taxes and services provided by the local units themselves. This report will:

• Review basic information about the property tax. • Compare the County’s property tax levy with other Michigan counties. • Describe the various funding sources of the County and its component units. • Detail the revenues and expenditures of the County’s General Fund, the fund that

accounts for all revenues and expenditures applicable to the general operations of the County.

• Calculate net costs to taxpayers for various County functions. • Describe the benefits associated with these functions, as well as assess the level of

availability to all County residents.

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II. PROPERTY TAX BASICS The property tax is one of the most important revenue sources for local units of government. In 2014, $338 million was collected in property taxes within Ottawa County alone to support the County; cities, villages and townships; intermediate school districts; local school districts; the State Education Tax; and other entities with taxing authority. Because it is an ad valorem tax, an owner’s tax liability is determined according to the value of the property. The total for a parcel is determined by two factors: the taxable value of the parcel (one‐half the market value) and the combined tax rates of the various taxing entities. The following equation demonstrates how one’s property taxes are calculated:

𝑇𝑇𝑇𝑇𝑇𝑇 𝐿𝐿𝐿𝐿𝑇𝑇𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 = 𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀 𝑅𝑅𝑀𝑀𝑅𝑅𝑀𝑀1,000

× 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝐿𝐿𝐿𝐿𝑇𝑇 𝑉𝑉𝑇𝑇𝐿𝐿𝑙𝑙𝑇𝑇 ($)

Value Taxable property is divided into two categories: real property and personal property. Real property includes land and any improvements that have been made, such as buildings. There are six classes of real property: agricultural, commercial, developmental, industrial, residential, and timber cutover. Personal property applies exclusively to businesses. This includes tangible items such as equipment and furnishings. Figure 1 shows the 2015 distribution of property within the County by category. The chart reveals that the residential class represents 69% of the County’s tax base.

Figure 1. Distribution of Total Taxable Value by Property (2015)

Agricultural3.0% Commercial

10.9%

Industrial7.1%

Residential69.4%

Personal Property

9.5%

Total Taxable Value = $10.3 billion

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Proposal A, enacted by Michigan voters in 1994, changed the method of property tax value calculation. As a result of the referendum, each parcel now possesses two values: the assessed value and the taxable value. The taxable value was created in response to rapidly increasing assessed values, which was one factor previously used to calculate an owner’s property tax liability. Under Proposal A, the taxable value can only increase annually by the rate of inflation or 5%, whichever is less. Using taxable value as opposed to assessed value will save Ottawa County citizens $5.5 million in levies for the 2015 tax year. Figure 2 demonstrates Proposal A’s savings to taxpayers, as evidenced by the gap between the assessed and taxable values. In 2008, assessed values peaked, while taxable value has rebounded from the Great Recession, peaking in 2015.

Figure 2. Effect of Proposal A, 1995-2015

Rate Property tax rates are traditionally expressed in mills. One mill is equal to $1 for every $1,000 in taxable valuation. Different entities (schools, county, cities, townships, villages, and others) have the authority to raise revenue through property taxes. The total millage rate for a parcel depends on its location within these various jurisdictions. As was mentioned above, a total of $338 million was collected in property taxes throughout Ottawa County in 2014. Only an estimated $42.3 million (12.5%) was received by the County for County purposes. This amount includes the County’s general and special millages. Figure 3 shows the average distribution of the property tax collected from property owners. In reality, this distribution will differ among property owners due to the variation in millage rates.

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1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Billio

ns o

f Dol

lars

($)

Taxable Value Assessed Value

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Over two‐thirds (69%) of the amount collected in property taxes supports the state and local education systems. Cities, townships, and villages receive 16%, while the County collects 13%. Other jurisdictions compose the remaining 2%.

To make this more tangible, imagine a residential property with a taxable valuation of $100,000.1 This hypothetical parcel is located in the West Ottawa school district in Olive Township and qualifies for the Principal Residence Exemption.2 Table 1 shows the distribution of this property owner’s taxes, in both proportional and absolute terms.

1 The taxable valuation amount approximates half that of the market value amount through the property assessment process. City and township assessors are responsible for determining these values. 2 The Principal Residence Exemption (PRE) exempts a principal residence, defined by the State as “[an owner’s] permanent home and any unoccupied adjoining or contiguous properties that are classified residential or timber‐cutover,” from the tax levied by a local school district for school operating purposes up to 18 mills. In order to qualify for the PRE, a parcel’s owner must be a Michigan resident who owns and occupies the property as his or her principal residence.

County 13%

Schools 36%

Intermediate School Districts

16%

Local Governments 16%

State Education Tax 17%

Other 2%

Figure 3. Average Property Tax Distribution

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Table 1. Property Tax Levy Example

PRE Residential Parcel with Taxable Value of $100,000 in Olive Township (West Ottawa Schools)

Entity Jurisdiction Millage Rate

Example Amount

% of Total Tax Liability

County Ottawa 4.3565 $ 436 15% Township Olive 4.9784 $ 498 17% School District West Ottawa 8.0500 $ 805 28% Intermediate School District Ottawa 5.5234 $ 552 19% State Education Michigan 6.0000 $ 600 21% Total 28.9083 $ 2,891 100%

III. COUNTY MILLAGE RATES The total millage rate of 4.3565 mills that the County levied in 2013 provided $41.1 million in property tax revenue. It is important to note that this rate is actually a combination of three sub‐rates, all levied for different purposes. Table 2 shows this breakdown and provides an example of how these millage rates translate into real dollars for property owners.

Table 2. County Tax Levy by Purpose

Purpose Millage Rate

Example Amount*

2013 County Amount Description

Operating 3.6000 $ 360 $034.1 million For the general operations of the County E‐911 0.4400 $ 44 $004.1 million For the operations of the centralized dispatch system Parks 0.3165 $ 32 $002.9 million For the purchase and operations of the park system Total 4.3565 $ 436 $ 41.1 million * Note: These values are calculated based upon a property with a taxable value of $100,000. ** Note: As additionally explained in Table 4, amounts raised for operating are different in Tables 2 and 4. This is due to different sources used, variation in levy and collection years, and differences in law related to unpaid IFT’s. The County is authorized to levy up to 4.2650 mills for general operations rather than the 3.6000 mills that it currently levies. For the past 16 consecutive years, the actual levy has been less than its maximum. Taxpayers benefit from a 16% savings between what the County could levy and what it actually levies. How Ottawa County Compares… The County periodically monitors how our operating levy compares to other counties in Michigan. Table 3 shows that Ottawa County had the lowest operating millage in a comparison of both neighboring counties and counties of similar size in 2014. Even if it were to levy the authorized maximum, the County would still be the lowest. In addition, the County also has the fifth lowest operating levy among all Michigan counties.

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Table 3. County Operating Levy Comparisons, 2014

NEIGHBORING COUNTIES COUNTIES OF SIMILAR SIZE

Ottawa 3.6000 Ottawa 3.6000

Kent 4.2803

Washtenaw 4.5493

Allegan 4.6577

Kalamazoo 4.6871

Muskegon 5.6984

Genesee 5.5072

Ingham 6.3512

Distribution among Cities and Townships Some have questioned whether the distribution of property taxes between cities and townships is proportional. To answer this, the absolute and relative values for each unit’s levy (with and without the Industrial Facility Tax, or IFT) and population have been calculated in Table 4. The biggest driver that determines the distribution of the County’s general operating levy, found in the third and fifth column (entitled “% of County Levy”) in Table 4, is the total taxable values of all properties within their respective jurisdictions. Georgetown and Holland Townships have the highest total taxable values in the County, but they are also the most populous local units. To summarize the findings, townships contain 78.41% of the county’s total population. Property owners in the townships pay 78.36% of the total property tax revenue without IFT’s, and 76.99% with IFT’s. This implies that, in the aggregate, properties in townships raise a similar share of the property tax revenue received by the County relative to the proportion of citizens who reside in townships. Over 1 in 5 County residents (21.59%) live in cities (including the Village of Spring Lake). Property owners in these jurisdictions pay 21.64% of the total property taxes collected without IFT’s, and 23.01% with IFT’s. This signifies that, in the aggregate, properties in cities raise a similar share of the property tax revenue received by the County relative to the proportion of citizens who reside in cities. A majority of units have differences between ‐1% and 1% with either method of comparison (with or without IFT’s). Reasonable explanations can be offered for the units that fall outside these bounds. For example, a unit’s demography, property class composition, or value of and lost revenue due to Renaissance Zones can influence the data. For example, the percentage of the County’s population that lives in Allendale Township and the City of Holland is higher than its share of total property tax revenue. This can be explained in part by the presence of Grand Valley State and Hope College respectively. To mitigate

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confusion for non‐resident students at these institutions, the 2010 Census stated that individuals should use their current address as of April 1, 2010, when filling out Census forms. Because of this methodology, the populations of these units are higher than if this group was not included in the units’ population counts. The distribution amongst a unit’s different property classes can also skew the data. For example, Georgetown and Park Townships have a disproportionate amount of residential properties, while the City of Zeeland and Port Sheldon Township have a higher proportion of

Table 4. Estimated Levies and Population by Local Units (2014)

Note: Due to different sources used, the amount for general operations in Table 2 and Table 4 (this table) are different. Table 2 uses actual numbers from the 2013 Comprehensive Annual Financial Report, but this table uses estimated numbers from the 2014 Apportionment Report. Sources: 2014 Apportionment Report; 2014 Projected Census

LocalUnit

EstimatedCounty Levy for General Operations

(without IFT)

% ofCounty Levy

(without IFT)

EstimatedCounty Levy for

General Operations (with IFT)

% ofCounty Levy (with IFT)

Population% of Total

Population

Difference% County

Levy -% Population (without IFT)

Difference% County

Levy -% Population

(with IFT)

TOWNSHIPSAllendale 1,443,582$ 4.12% 1,499,099$ 4.14% 21,655 7.78% -3.66% -3.64%Blendon 774,689$ 2.21% 774,689$ 2.14% 6,147 2.21% 0.00% -0.07%Chester 285,619$ 0.81% 285,619$ 0.79% 2,058 0.74% 0.08% 0.05%Crockery 503,227$ 1.44% 503,381$ 1.39% 4,297 1.54% -0.11% -0.15%Georgetown 5,025,531$ 14.34% 5,036,402$ 13.90% 49,646 17.83% -3.49% -3.92%Grand Haven 2,443,028$ 6.97% 2,458,280$ 6.79% 15,990 5.74% 1.23% 1.05%Holland 3,955,745$ 11.28% 4,129,555$ 11.40% 37,433 13.44% -2.16% -2.04%Jamestown 1,065,300$ 3.04% 1,091,518$ 3.01% 7,694 2.76% 0.28% 0.25%Olive 549,955$ 1.57% 593,393$ 1.64% 4,957 1.78% -0.21% -0.14%Park 3,332,578$ 9.51% 3,332,578$ 9.20% 18,537 6.66% 2.85% 2.54%Polkton 374,858$ 1.07% 374,858$ 1.03% 2,529 0.91% 0.16% 0.13%Port Sheldon 2,148,898$ 6.13% 2,148,898$ 5.93% 4,443 1.60% 4.53% 4.34%Robinson 750,351$ 2.14% 750,351$ 2.07% 6,389 2.29% -0.15% -0.22%Spring Lake 1,972,455$ 5.63% 2,011,969$ 5.55% 14,887 5.35% 0.28% 0.21%Tallmadge 985,093$ 2.81% 1,003,137$ 2.77% 7,881 2.83% -0.02% -0.06%Wright 389,574$ 1.11% 394,027$ 1.09% 3,146 1.13% -0.02% -0.04%Zeeland 1,470,559$ 4.19% 1,501,467$ 4.15% 10,690 3.84% 0.36% 0.31%Subtotal 27,471,042$ 78.36% 27,889,222$ 76.99% 218,379 78.41% -0.05% -1.41%CITIESCoopersville 355,282$ 1.01% 385,711$ 1.06% 4,344 1.56% -0.55% -0.49%Ferrysburg 568,661$ 1.62% 568,780$ 1.57% 2,984 1.07% 0.55% 0.50%Grand Haven 1,929,040$ 5.50% 1,953,470$ 5.39% 10,965 3.94% 1.57% 1.46%Holland 2,306,898$ 6.58% 2,328,008$ 6.43% 26,571 9.54% -2.96% -3.11%Hudsonville 758,275$ 2.16% 774,008$ 2.14% 7,323 2.63% -0.47% -0.49%Spring Lake (Village) 390,576$ 1.11% 390,576$ 1.08% 2,323 0.83% 0.28% 0.24%Zeeland 1,277,478$ 3.64% 1,932,516$ 5.34% 5,626 2.02% 1.62% 3.32%Subtotal 7,586,210$ 21.64% 8,333,068$ 23.01% 60,136 21.59% 0.05% 1.41%TOTAL 35,057,253$ 36,222,290$ 278,515

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Industrial properties, including the J.H. Campbell Generating Complex power plant. This helps explain the larger “difference” percentages found in the rightmost columns in Table 4 on the previous page. In summary, we conclude that there is little difference in aggregate between townships and cities when it comes to the distribution of property tax revenue raised.

IV. FUNDING THE COUNTY: BASIC FUND STRUCTURE Before digging further into where property taxes go, it is important to have a basic understanding how the County’s fund structure works. As will be demonstrated in the following pages, property taxes only provide funding for a portion of the activities of the County. In accordance with the State Chart of Accounts, the County maintains 66 different funds to help finance its various functions and services. Figure 4 summarizes how the County’s funds are broadly categorized.

Figure 4. County Funds, by Type

*Note: All property tax dollars are received into either the General Fund or the Parks and Recreation Fund; however, transfers can be made from the General Fund to other funds.

All County Funds

Proprietary Funds

GovernmentalFunds

GeneralFund

Special Revenue Funds

Parks and Recreation

PublicHealth

Mental Health

Nonmajor Funds

Fiduciary Funds

Property Tax

Dollars*

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The bulleted points below offer a more detailed description of the governmental funds highlighted in Figure 4 (above):

• General Fund – used to account for all revenues and expenditures applicable to the general operations of the County.

• Special Revenue Funds – used to account for revenue from specific revenue sources (other than major capital projects) and related expenditures which are restricted for specific purposes by administrative action or law.

o Major Special Revenue Funds – includes Parks and Recreation Fund, Public Health Fund, and Community Mental Health Fund.

o Non-Major Special Revenue Funds – includes 25 funds, largely representing grant revenue and other non‐property tax revenues that are in some way restricted in their use.

In 2013, the County collected $129 million in revenue for governmental funds. As Figure 5 shows, 32% came from property taxes; however, intergovernmental revenue from federal, state, and local units of governments is the largest source for the County’s governmental funds.

Figure 5. Revenue Sources for Governmental Funds, 2013

52%

32%

9%

4% 2% 1%

Intergovernmental Revenue

Property Taxes

Charges for Services

Rental Income

Interest, Rent, and Other

Licenses and Permits

Total Revenue in Governmental Funds

=$129 million

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V. GENERAL FUND REVENUES Total governmental fund revenue (excluding transfers in) amounted to $129 million in 2013. The General Fund, which is a governmental fund, is the chief operating fund of the County and provides baseline support for the provision of Countywide services. It accounts for all financial resources of the general government, except those required to be accounted for in other funds. In 2013, General Fund revenue composed 46.1% ($59.5 million) of all governmental fund revenue.

Table 5. Governmental Funds and General Fund Revenue by Source (2013)

REVENUE SOURCE ALL GOVERNMENTAL FUNDS GENERAL FUND

AMOUNT % OF TOTAL AMOUNT % OF TOTAL Taxes3 $ 41,102,695 31.9% $ 38,152,623 64.2% Intergovernmental Revenues $ 67,009,472 52.0% $ 7,952,614 13.4% Charges for Services $ 11,581,189 9.0% $ 8,883,002 14.9% Licenses and Permits $ 1,193,107 0.9% $ 423,144 0.7% Rental Income $ 5,273,139 4.1% $ 3,442,554 5.8% Fines and Forfeits $ 60,548 0.0% $ 60,548 0.1% Interest on Investments $ (77,480) ‐0.1% $ (91,289) ‐0.2% Other $ 2,832,192 2.2% $ 641,421 1.1% Subtotal $ 128,974,862 $ 59,460,329 Add: Transfers In $ 10,149,065 $ 49,356 TOTAL: $ 139,123,927 $ 59,509,685 Table 5 states that 64% of General Fund revenue came from taxes in 2013. Among all governmental funds, this proportion dropped to 32% due to an increased reliance on intergovernmental revenue in funds other than the General Fund. Figure 6 shows the different possible revenue sources for all governmental funds, including the General Fund. The General Fund has the same revenue sources as other governmental funds; however, the distribution among these sources is different.

3 Note: The total amount collected in property taxes in 2013 was $41,102,695. Revenue ($2,941,638) from the special levy dedicated exclusively to the Parks and Recreation fund is not collected in the General Fund and has subsequently not been included in the row detailing tax revenue in the table above.

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Figure 6. Revenue Sources for General Fund

The County’s total millage rate in 2013 was 4.3565, resulting in revenue of $41.1 million. $38.2 million went to the General Fund. The remaining $2.9 million went directly to the Parks and Recreation Fund because of the 0.3165 mill levy approved by voters for parks and recreation activities. Out of the $38.2 million in County tax revenue to the General Fund, $4.1 million was collected for the Ottawa County Central Dispatch Authority due to the 0.4400 mill special levy for the Authority’s operations. The remaining $34.1 million was collected for general operating purposes. This is a key figure to remember throughout the remainder of this report.

VI. GENERAL FUND EXPENDITURES The General Fund supports, in part or in whole, a wide variety of County services. Figure 7 exhibits the different functions that the General Fund provides for.

GENERAL FUND

(REVENUE)Taxes

Intergovernmental Revenue

Charges for Services

Licenses and Permits

Rental Income Fines and

Forfeits

Interest on Investments

Other Revenue

Transfers In

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Figure 7. Expenditure Categories for General Fund

Expenditures come in two forms: traditional expenditures and transfers out. Figure 8 shows the distribution of expenditures among different governmental functions and transfers out. Out of the $59.3 million expended, 41% was attributable to public safety activities, 18% to general government activities, and 20% to judicial activities. Almost three‐quarters of the amount transferred out went to support health and welfare activities.

Figure 8. General Fund Expenditures and Transfers Out, 2013

GENERAL FUND

(EXPENDITURES)

Legislative

Judicial

General Government

Public Safety

Public Works Health and

Welfare

Community and Econ. Development

Other Governmental

Functions

Transfers Out

Judicial21%

General Government

18%

Public Safety42%

Public Works1%

Health and Welfare

1%

Community Development

1%

Transfers Out16%

Total Expenditures and Transfer Out

= $59.3

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VII. WHAT ARE “BENEFITS”? Having looked at General Fund revenues and expenditures, it is time to begin the discussion of the overarching question that gave rise to this report: to what extent do citizens benefit from the services they pay for in taxes? To answer that question, it is necessary to further define what “benefit” means. In private sector transactions, we often use the phrases “we get what we pay for” or “we want to get our money’s worth.” We exchange our money for goods and services that we directly and personally enjoy. Public sector (i.e. governmental) services are different. We sometimes pay for services that we will seldom or never utilize, but they are available if we need them. Many County services are mandated by law; others are discretionary, provided for the enjoyment and well‐being of residents at the pleasure of the Board of Commissioners. Most services supported in part or in whole by property taxes are equally available and accessible to all residents. It is important to make a few distinctions among the services that the County provides to citizens. The first distinction that needs to be made is between services that provide observed benefits to citizens and those that provide unobserved benefits. Most of the time, citizens go about their daily lives unconcerned with how well government is functioning. While they may not be observing any benefits, they are experiencing benefits. Only in times when there is a noticeable absence, notable controversy, or poor management will most citizens pay close attention to and ask questions of their respective governing units. The Sheriff’s Office is an excellent example for this distinction. While most people do not interact with the Office on a regular basis, they still expect public safety officers to ensure their safety and that of their communities. Often these services are taken for granted. Criminal incidents, tragedies or disasters quickly remind citizens of the presence and importance of public safety services. Another distinction can be made between services that provide actual benefits and potential benefits. Unlike some local units, the County does not directly provide services such as public utilities (e.g. electricity, water, etc.). These utilities deliver actual benefits, because citizens use electricity and water daily. Many of the services the County provides do not benefit citizens until they need them. As an example, services provided by the County Clerk, such as vital records, business registration, and concealed weapons permits are not experienced by citizens as benefits on a regular basis. It is only when individuals find these necessary that they actually benefit from the services provided. Another salient example is the Ottawa County Central Dispatch Authority. Hopefully, citizens do not have the use the 911 system on a regular basis; however, citizens can rest assured that the service is always there should it be needed in an emergency. A whole host

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of services provided by the County have potential benefits but are not actualized until an actual service is rendered. The third and final distinction is between direct benefits and indirect benefits. Direct benefits are those services from which citizens benefit directly. These could be any services that a citizen has direct access to (e.g. services provided by County Clerk, recreational locations maintained by Parks and Recreation, etc.). However, other entities such as the courts and the County jail provide indirect benefits to all citizens. Many individuals will never set foot in a courtroom or a jail cell, but they indirectly benefit from the safety and security that these entities provide. Other examples of indirect benefits include those internal services provided by departments such as Information Technology and Facilities Maintenance to various departments that offer services directly to patrons. All citizens benefit indirectly, because without these departments the County could not provide high quality services.

VIII. METHODOLOGY AND DISCUSSION This report began by providing an overview of the structure of the property tax system and County funds. In order to trace property taxes from the point of collection through their expensing, it is necessary to develop a methodology that will allow us to provide a means of accurately estimating what citizens’ property taxes support. Using County financial documents (i.e. audits and budgets), it was possible to develop a means of estimating how much and in what proportion a government function receives property tax funding. The County has a reputation for excellent financial transparency and accurate reporting. This report utilizes data from 2013. This is the most recent year for which actual revenue and expenditure amounts have been audited. Data from the 2013 Comprehensive Annual Financial Report (CAFR) for the revenues and expenditures in the General Fund were matched to comparable data (also from 2013) provided in the 2015 budget. More detailed information is available in budgets than in audits. However, due to this and to ensure the integrity of the data, both financial documents were utilized in the formation of a methodology. Table 6 provides a review of the categories used in reporting on the revenue and expenditure sides of financial documents. Revenue is accounted for as taxes, intergovernmental revenue, charges for services, rental income, fines and forfeits, licenses and permits, interest on investments, and other revenue. Expenses (when categorized by function) are accounted for as legislative, judicial, general government, public safety, public works, health and welfare, community and economic development, or culture and recreation expenses.

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Unlike the audit (CAFR), the budget takes apart each of these functional categories and separates them by department and, in some cases, divisions. Revenues and expenditures are included for each of these departments and divisions. These entities can then be combined and categorized according to their governmental function (e.g. legislative, judicial, etc.).

Table 6. Financial Reporting Categories of Revenues and Expenditures

Except for the Treasurer’s Office and the Central Dispatch Authority in the General Fund and the Parks and Recreation Fund in the Special Revenue Funds, taxes are not included in revenue sources for other entities. Additionally, the Treasurer’s Office, the County Clerk’s Office, and Fiscal Services serve as recipients of revenues that are either attributable to other departments (e.g. reimbursements for judge’s salaries) or can be allocated corporately (i.e. state revenue sharing, formally known as the Economic Vitality Incentive Program [EVIP]). In order to estimate the amount and proportion of tax dollars used by each governmental function (e.g. legislative, judicial, general government, etc.), the methodology aggregates General Fund expenditures and transfers out by category and subtracts that number from each category’s respective net revenue amount to determine the net remaining cost. The County receives a substantial amount of revenue sharing (EVIP) from the State annually. In addition, some departments or funds collect non‐tax revenue that is greater than their expenses. If this surplus is not restricted in any way, it can be used to support activities for other departments or funds. For example, the General Fund receives revenue from the State’s Convention Facility Development Tax. Public Act 2 of 1986 requires that 50% of the amount received by a County be used to reduce property taxes, unless the funds are used for substance abuse programs. Ottawa County annually receives enough to do both of these activities. The net cost to taxpayers is then determined by adding the sum of the revenue sharing and other unrestricted monies and distributing them proportionately among the various governmental functions. Once this aggregated net cost has been calculated, we can add the net

Revenues(Sources)

•Taxes•Intergovernmental revenue•Charges for services•Rental income•Fines and forfeits•Licenses and permits•Interest on investments•Other

Expenditures(Government Functions)

•Legislative•Judicial•General Government•Public Safety•Public Works•Health and Welfare•Community and Economic Development•Culture and Recreation

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change in the General Fund balance. Because of the way in which the methodology is structured, this total should be equal to the amount of taxes subtracted from total General Fund revenue. Figure 9 provides a chart showing the flow of the methodology detailed above. For more detailed data, please see the appendix.

Figure 9. Description of Methodology

General Fund Revenue(Subtract): Taxes(Subtract): Revenue SharingAdd/(Subtract): Attributable RevenueNet Revenue

General Fund ExpendituresAdd: Transfers OutTotal Expenditures (+ Transfers Out)

Net Revenue(Subtract): Total Expenditures (+ Transfers Out)Net RemainingAdd: Distribution of Revenue Sharing, Excess Unrestricted FundsNet Cost to TaxpayersAdd/(Subtract): Net Change in Fund BalanceTotal

In addition to including a “net cost to taxpayer” figure, each governmental function section also contains a percentage of expenses paid for through property taxes. This amount is calculated using the following equation:

% 𝑜𝑜𝑜𝑜 𝑇𝑇𝑜𝑜𝐿𝐿𝑇𝑇𝐿𝐿 𝐹𝐹𝑙𝑙𝐹𝐹𝐹𝐹𝐿𝐿𝐿𝐿𝑜𝑜𝐹𝐹′𝑠𝑠 𝐸𝐸𝑇𝑇𝐸𝐸𝑇𝑇𝐹𝐹𝑠𝑠𝑇𝑇𝑠𝑠 =

𝐹𝐹𝑙𝑙𝐹𝐹𝐹𝐹𝐿𝐿𝐿𝐿𝑜𝑜𝐹𝐹′𝑠𝑠 𝑁𝑁𝑇𝑇𝐿𝐿 𝐶𝐶𝑜𝑜𝑠𝑠𝐿𝐿 𝐿𝐿𝑜𝑜 𝑇𝑇𝑇𝑇𝑇𝑇𝐸𝐸𝑇𝑇𝐿𝐿𝑇𝑇𝑇𝑇𝑠𝑠(𝐺𝐺𝑇𝑇𝐹𝐹𝑇𝑇𝑇𝑇𝑇𝑇𝐿𝐿 𝐹𝐹𝑙𝑙𝐹𝐹𝐹𝐹 𝐹𝐹𝑙𝑙𝐹𝐹𝐹𝐹𝐿𝐿𝐿𝐿𝑜𝑜𝐹𝐹𝑇𝑇𝐿𝐿 𝐸𝐸𝑇𝑇𝐸𝐸𝑇𝑇𝐹𝐹𝑠𝑠𝑇𝑇𝑠𝑠 + 𝑅𝑅𝑇𝑇𝐿𝐿𝑇𝑇𝑅𝑅𝑇𝑇𝐹𝐹𝐿𝐿 𝑆𝑆𝐸𝐸𝑇𝑇𝐹𝐹𝐿𝐿𝑇𝑇𝐿𝐿 𝑅𝑅𝑇𝑇𝑅𝑅𝑇𝑇𝐹𝐹𝑙𝑙𝑇𝑇 𝐹𝐹𝑙𝑙𝐹𝐹𝐹𝐹 𝐸𝐸𝑇𝑇𝐸𝐸𝑇𝑇𝐹𝐹𝑠𝑠𝑇𝑇𝑠𝑠)

× 100

In the following section that examines each functional area, the function’s net cost to taxpayers and percentage of the function’s expenses paid by property taxes will be bolded and underlined. Having described the methodology this report will use, this section will look at answering three different questions:

• What services does the County provide? • What is the cost to taxpayers? • Are the services provided accessible to all?

Should correspond to one another

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Legislative

Figure 11. Legislative Entities

Table 7. Major Legislative Services Provided, by Entity

MAJOR SERVICES PROVIDED Board of Commissioners Represents all citizens

Provides leadership and policy direction for the County Reapportionment Commission Ensures equal representation for all citizens

Tax Allocation Board Examines budgets of local units and determines millage rate distribution

Cost to Taxpayers Expenditures in 2013 amounted to $395,500. After adjustments, the net cost to taxpayers was $356,000. This means that 90% of legislative expenditures were supported through property taxes. Summary of Findings In a representative democracy, citizens elect and entrust representatives to communicate their interests. At the county level, the Board of Commissioners is elected to fulfill these duties. All citizens are equally represented by their respective commissioners because the Reapportionment Commission ensures that all districts are equally populated. The Tax Allocation Board exists to ensure that property taxes are levied equitably and proportionately.

LEGISLATIVE

Board of Commissioners

ReapportionmentCommission

Tax Allocation Board

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Judici al Figure 12. Judicial Entities

Table 8. Major Judicial Services Provided, by Entity

MAJOR SERVICES PROVIDED 20th Circuit Court

Trial Division Handles felony criminal, civil, and appellate cases Family Division Handles domestic relations and delinquency cases

Friend of the Court

Protects the rights and interests of the children in domestic relations matters Enforces court orders issued through the Family Division

Juvenile Services Provides services for delinquent youth, including detention, intensive supervision, community probation, and treatment program.

Probate Court Handles cases involving estates and trusts, guardianships, and conservatorships and mental commitment proceedings

58th District Court Traffic Division Handles traffic‐related cases, including drunk driving

cases Criminal Division Handles misdemeanor criminal cases

Civil Division Handles civil cases, including small claims and summary proceedings

Probation Division Provides or refer offenders to rehabilitative services Promotes accountability and reduce recidivism

Community Corrections

Develops alternative sentencing programs to reduce jail commitments

Legal Self-Help Center Provides legal assistance in non‐criminal cases without the assistance of an attorney

JUDICIAL

Probate Court 20th Circuit Court

Friend of the Court

Juvenile Services

58th District Court

Community Corrections

Legal Self-Help Center

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Cost to Taxpayers Judicial‐related expenditures amounted to $15.7 million in 2013. After adjustments, the net cost to taxpayers was $6.0 million. This means that 38% of judicial expenses were supported by property taxes. Summary of Findings The judicial system of Ottawa County aims to administer justice with fairness, equality, and integrity. Its functions are carried out largely by the 20th Circuit Court, the 58th District Court, and the Probate Court. Unlike some counties, the jurisdiction of these courts is the same as the area within the County’s borders. This means that the County possesses only one Circuit Court, one District Court, and one Probate Court, which is unlike other more populous counties in the State. The county currently maintains three district court locations. Each court derives revenue from different sources. Because it is part of the State Court system, the 20th Circuit Court receives funding from the State General Fund. This source supports judges’ salaries and benefits and covers a portion of the operating costs for the Court’s Trial Division. The County General Fund provides the majority of funding for the Court. It supports employee salaries and benefits, as well as general operating needs such as facilities and technological infrastructure. The third source is the state Department of Human Services, which provides partial reimbursement for activities such as those provided by Juvenile Services and Friend of the Court. The 58th District Court is funded mostly through court fees and fines and the County’s General Fund. Activities of the Probate Court are supported largely by the General Fund. The County does receive reimbursement for the District and Probate Judges’ salaries and FICA taxes (i.e. Social Security and Medicare). The Legal Self‐Help Center is fully funded through intergovernmental revenue, charges for services, and other revenue. A majority of funding for the operations of the Friend of the Court comes from intergovernmental revenue, while another large portion comes from a General Fund transfer. Community Corrections is supported almost equally through a transfer from the General Fund and intergovernmental revenue and charges for services. Most citizens will rarely, if ever, use the court system; however, it exists to ensure the proper functioning of and provide security for all residents. A well‐functioning judicial system is vital to maintaining a safe environment. This is something from which all citizens benefit.

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Genera l Gove rnme nt Figure 13. General Government Entities

Table 9. Major General Government Services Provided, by Entity

MAJOR SERVICES PROVIDED County Clerk/Register of Deeds

County Clerk Maintains vital records and Circuit/Family Court records Handles applications for business registration, passports, concealed weapons permits

Register of Deeds

Keeps record of all documents related to land and property in the County

Fiscal Services Provides centralized financial services for all accounting and financial matters, budget, purchasing and risk management

Corporation Counsel

Represents the County in all legal matters Prepares legal opinions, drafts and reviews contracts, policies, and resolutions

Administration Oversees general operations Provides leadership and management of Board initiatives

Equalization Examines assessment rolls and determines whether property has been equally and uniformly assessed at true cash value

GENERAL GOVERNMENTNon-Elected

Officials

Administration Human Resources

Facilities Maintenance

Information Technology

Corporation Counsel

Fiscal Services

Equalization/GIS

MSU Extension

Elected Officials

Clerk/Register of

DeedsTreasurer

Prosecuting Attorney

Water Resources

Commissioner

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Geographic Information Systems Manages mapping system which provides geographic data

Information Technology Oversees and provides support for technological infrastructure

Human Resources Responsible for recruiting, hiring, retaining, and releasing of employees

Prosecuting Attorney Represents the people of Ottawa County in legal matters Assists victims, including victims of domestic violence

Treasurer Manages County funds, record revenue, collect delinquent taxes, conduct tax foreclosures, manages dog licenses

MSU Extension Provides education and tools to help citizens live and work better

Facilities and Maintenance Maintains all County assets, including facilities and equipment

Water Resources Commissioner Responsible for the construction, operation, and maintenance of storm water management systems

Cost to Taxpayers General Government expenditures amounted to $11 million in 2013. After adjustments, the net cost to taxpayers was $3.6 million. This means that only 33% of general government expenses were supported through property taxes. Summary of Findings General Government activities are undertaken by various departments to deliver services that are State‐mandated or help support the broad operations of the County. Some departments are headed by elected officials: the Clerk/Register of Deeds, the Treasurer, the Prosecuting Attorney, and the Water Resources Commissioner. Each of these offices provides different services to citizens and other stakeholders. A general overview of these services can be found in Table 9 above. About half of the General Government departments provide internal services for County activities—that is, they provide support services for the County as an organization. Human Resources, Corporation Counsel, and Facilities and Maintenance are a few examples of departments that perform essential, behind‐the‐scenes services. While citizens do not interact directly with these “hidden” units, these departments play an indispensable role in maintaining a well‐run organization. They enable those that do interact with the public to provide excellent services to citizens. Of those departments that provide services to the public, all are equally accessible to citizens.

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Public Safety

Figure 14. Public Safety Entities

Table 10. Major Public Safety Service Provided, by Entity

MAJOR SERVICES PROVIDED Sheriff's Office

Law Enforcement Division

Enforces laws and ensure safety throughout the County Operates general road patrol, traffic services, K‐9 units, investigative units, marine units, dive team, animal control units Provides court building security

Jail‐Corrections Division Houses inmates safely and with integrity Emergency Management Division Ensures preparedness in emergency situations

West Michigan Enforcement Team Investigates drug cases and enforce drug laws Ottawa County Central Dispatch Authority Operates 911 system for all emergency situations

Cost to Taxpayers Expenditures for public safety activities amounted to $24.5 million in 2013. After adjustments and excluding the revenue and expenditures associated with OCCDA, the net cost to taxpayers (from the general operating levy) was $16.6 million. This means that 68% of public safety expenses were supported through property taxes. The revenues and expenditures for the OCCDA are excluded from this report, because the Authority is a component unit and does its own financial reporting. It should be noted, however, that the County accounts for the revenues and expenditures associated with tax revenue raised through the voter‐approved special millage.

PUBLIC SAFETY

West Michigan Enforcement

Team (WEMET)

Sheriff's Office

Law Enforcement

Jail (Corrections)

Emergency Management

Central Dispatch Authority

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Figure 15 shows that of the $16.6 million, nearly half (47%) went to law enforcement activities. These include the various activities of the Sheriff’s Office (general law enforcement services), Marine Safety, and Animal Control. Another 47% went to support the operations of the County correctional facility. The remaining amount provided funding for WEMET, Community Policing Contracts with local units of government and school districts, and Emergency Preparedness and Response.

Figure 15. Net Cost to Taxpayers for Public Safety

* Note: This does not include the special levy for Central Dispatch Authority (E‐911). ** This only reflects the cost of the County’s contribution to WEMET.

Summary of Findings Public safety is the County’s second largest activity following health and welfare. Because this is such a large activity within County government, the County takes very seriously its responsibility to ensure the safety of its citizens and their communities. It does this through enforcing traffic laws, by housing inmates in the County’s correctional facility, and by responding to and preparing for emergencies. Community Policing Contracts There has been some discussion regarding whether residents of cities and townships are doubly taxed through the County tax for public safety services. The County currently provides contracted services to 14 of 17 townships and two cities; Hudsonville and Coopersville (In 2014, Ottawa County also began providing contracted services to the City of Ferrysburg and the Village of Spring Lake). Cities and townships have the opportunity to discuss and consider

Law Enforcement47%

Corrections47%

WEMET**4%

EmergencyPreparedness

2%

Total = $16.6 million*

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contracted community policing services from the County, thereby minimizing real or perceived duplicated policing services/general law enforcement and potentially reducing such costs. While the detailed provisions within contracts vary, the general idea is that local units and the County share responsibility for covering the costs of delivering law enforcement services. A basic level of service is available Countywide, including but not limited to such services as patrol, K‐9, marine, and detective services. The General Fund has historically provided funding for 28 deputies, including 4 K‐9 deputies, spread throughout four quadrants. These officers provide 24‐hour patrolling. The base staffing also includes WEMET officers (which will be discussed later), captains, sergeants, detectives, clerks, and other support staff. Cities, village, and townships benefit from K‐9 and detective services. If local units desire additional services, they can contract with the County. Under this arrangement, the County and local units work together to determine an appropriate level of service. In 2015, 60 Deputies and 8 Sergeants in the Sheriff’s Office are involved with these contracts and paid for by local units. In order to provide appropriate supervisory and administrative personnel and to control costs for which the County is responsible, a formula is used to determine the amount of supervisory, clerical, and investigative staff that is needed for a given number of law enforcement officers. As has been said before, the County is responsible for the basic level of supervisory and administrative staff needed to support the contracts. The major benefit to local units comes in a reduction of costs. They are only responsible for paying for the cost of delivering the “frontline” law enforcement services and, in some cases, voluntarily supporting some or all of the cost of additional supervisory positions beyond those included in the contracts. These arrangements allow units to forgo hiring their own administrative and supervisory structure traditionally needed to maintain their own public safety departments. In addition, local units’ costs can also be reduced by taking advantage of the County’s purchasing power. The County can benefit from receiving discounts on large‐scale items that are typically not available to smaller units. The County respects local units’ decisions to retain their own police departments; however, it is willing to enter into discussions with interested units about potential contracts with the Sheriff’s Office. Law Enforcement As was highlighted above, the General Fund supports a basic level of public safety services for the entire County. Additional services are provided by local police departments or local unit contracts with the Sheriff’s Office. It can be concluded that this base level benefits all who live in, work in, or pass through Ottawa County.

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WEMET WEMET is a multijurisdictional drug enforcement task force, which consists of five teams and an administrative unit responsible for investigations in Muskegon, Ottawa, and Allegan Counties. The jurisdictions serviced by WEMET are Muskegon, Ottawa, and Allegan Counties. Participating agencies are: Michigan State Police, Ottawa County Sheriff’s Department, Allegan County Sheriff’s Department, Muskegon County Sheriff’s Department, Holland Police Department, Muskegon Police Department, Norton Shores Police Department, and Grand Haven Department of Public Safety. Corrections The County’s Correctional Facility (Jail) is the second largest public safety expense. It houses offenders securely, keeping the general public safe and secure. The protection provided through this facility benefits all citizens. Emergency Response and Preparedness The Emergency Management division of the Sheriff’s Office and OCCDA are combined under this subheading. Emergencies are usually unexpected and require appropriate responses. In the case of the OCCDA, dispatchers contact the proper emergency responders. Responses to some emergencies can be planned ahead for, in the event that they do occur—for example, the widespread flooding that occurred throughout the County in 2013. The Emergency Management division undertakes this enormous task. While they cannot prepare for every possible emergency, they have developed established procedures that provide guidance in the event that a public safety response is needed. Citizens benefit from both of these emergency services.

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Health and We lfa re Figure 16. Health and Welfare Entities

Table 11. Major Health and Welfare Services Provided, by Entity

MAJOR SERVICES PROVIDED

Community Mental Health Provides services to people with developmental disabilities and/or serious mental illness

Public Health

Epidemiology Division Analyzes disease in order to control their course and protect the community Prepares for public health emergencies

Clinical Division Provides family planning, communicable disease, and immunizations

Community Health Division Provides support, education, and prevention programs to families, children, and pregnant women

Health Promotion Division Educates and encourages citizens to make healthy choices

Environmental Health Division Identifies, responds and eliminates, and prevents risks to human health and safety Inspects various establishments for potential risks

Community Action Agency Assists individuals and families who struggle with financial self‐sufficiency

Circuit Court-Child Care Fund Provides programming for minors in delinquent and/or neglect/abuse cases

HEALTH AND WELFARECommunity

Action AgencyPublicHealth

Administrative/Epidemiology

Medical Examiner

Environmental Health

Clincal Health

Community Health

Health Promotion

Child Care Fund

Community Mental Health

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Cost to Taxpayers Health and welfare expenditures amounted to $63.3 million in 2013. After adjustments, the net cost to taxpayers was $6.3 million. This means that 10% of the cost of undertaking health and welfare‐related activities was supported through property taxes. Summary of Findings Health and welfare is the County’s largest functional expense. These activities are heavily dependent upon intergovernmental revenue for their continued operations. For example, intergovernmental revenue (particularly Medicaid) and charges for services provide a majority of the funding for Public Health and Community Mental Health. The General Fund directly supports the activities of the Substance Abuse department, the Medical Examiner, and Veterans’ Affairs. Revenue from the State’s Convention Facility Development Tax fully funds the Substance Abuse program. Transfers from the General Fund are also made to other special revenue funds that support health and welfare‐related activities. Public Health annually receives a large transfer, but Community Mental Health (CMH) also received a small transfer. The transfer to Public Health amounted to $3.56 million in 2013. CMH received a transfer in the amount of $593,000. Because almost 43% of funding for Public Health comes from the General Fund, it is worth stating that most services provided are accessible to all citizens. For example, the Department provides immunization services, food service inspections, hearing and vision screenings for students, well and septic services, and various programs aimed at improving and ensuring each County resident’s health and well‐being. Most funding for services to specific population groups is provided through intergovernmental revenue in the form of state assistance programs and Medicaid. Community Mental Health and the Community Action Agency provide assistance to targeted, eligible recipients. The General Fund provides only minimal support to Community Mental Health. In fact, only 1.5% of expenditures in this agency were funded by a General Fund transfer. For accounting purposes, expenditures from the Child Care Fund (CCF) are categorized as a health and welfare activity. The fund receives almost an equal amount of revenue in the form of a transfer from the General Fund and reimbursement from the State Child Care Fund. By law, the state reimburses the County for 50% of all staff and program expenditures in the CCF. In 2013, the Child Care Fund received $3.8 million in support from the General Fund. While the services provided by the Child Care Fund are only available to a specific population, the County is legally obligated to provide financial support as required by State law and Department of Human Services rules and regulations.

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Community and Economic Development Figure 17. Community and Economic Development Entities

Table 12. Major Community and Economic Development Services Provided

MAJOR SERVICES PROVIDED

Planning and Performance Improvement

Responsible for analyzing and improving organizational performance and maximizing the use of financial resources Obtains and processes federal and state grant awards and allocations Attracts new economic development into the County Responsible for land‐use planning

Cost to Taxpayers Planning and Performance Improvement (also referred to as Planning and Performance) activities are supported largely through the General Fund. Community and Economic Development expenditures amounted to $705,000 in 2013. The net cost to taxpayers was $600,000. This means that 85% of the department’s expenses were supported through property taxes. Summary of Findings While citizens do not directly receive benefits from Planning and Performance, the department plays an essential role in supporting and improving the operations of the County. The many and varied services the department provides internally to other County departments help to improve the operations and delivery of services to citizens. Planning and Performance plays an essential role in wisely planning for the future. This in itself makes the department’s existence valuable to all County residents.

COMMUNITY AND ECONOMIC DEVELOPMENT

Planning and Performance Improvement

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Culture and Recreation

Figure 18. Culture and Recreation Entities

Table 13. Major Culture and Recreation Services Provided

MAJOR SERVICES PROVIDED

Parks and Recreation

Acquires, develops, operates, and maintains the County Parks and Open Space system Provides natural resource‐based recreation and education opportunities

Cost to Taxpayers Parks and Recreation activities are accounted for in the Parks and Recreation major special revenue fund. This fund receives revenue from the voter‐approved special levy for parks operations. A large majority of Parks funding comes from property taxes, with the remaining amount coming from intergovernmental revenue, charges for services (e.g. reservation and park entrance fees), private donations, and other revenue. Voters first approved a ten‐year special millage in 1996 for Parks and Recreation activities. Strong support in 2006 resulted in the levy being renewed for another ten years. The current millage will expire in 2016. Prior to the Commissioners’ decision in 2008 to discontinue support from the General Fund, the County made an annual transfer of $530,000 to the Parks and Recreation fund. Since 2010, the goal has been to have this fund rely entirely on sources other than the General Fund. During times of buying and developing land, expenditures in the Parks and Recreation fund generally exceed the revenues received by the department. The expectation is to fund this deficit through means other than General Fund transfers. It should be emphasized that Parks will not always engage in purchasing land. During these non‐purchasing times, the only expense will be park development and maintenance costs and a matching of revenues to expenses within the Parks and Recreation Fund.

CULTURE AND RECREATION

Parks and Recreation

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Parks and Recreation expenditures amounted to $3.1 million in 2013. The special levy raised $2.94 million in revenue for operations and activities. Summary of Findings One of the County’s greatest assets is its natural resources. The County is known statewide for its beautiful parks and abundant opportunities for recreation. The Parks and Recreation department is in charge of overseeing the Park and Open Space system. Their goal, as taken from their mission statement, is to “enhance [the] quality of life for residents and visitors, by preserving parks and open spaces and providing natural resource‐based recreation and education opportunities.” It is also concerned with maintaining and improving the County’s water quality, as exemplified in the Upper Macatawa Wetland Restoration Project. Regardless of whether citizens use them or not, County parks and open spaces benefit all citizens. In addition to residents who visit and enjoy the beauty of the parks, thousands of non‐residents visit these parks each year, contributing to the local economy and supporting the activities of the Parks and Recreation department through fees collected. It can be concluded that the facilities, services, and activities that the Parks and Recreation department provides are equally available to all residents if they choose to utilize them.

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Other Governmental Functions Keeping in mind that the County received $34.1 million in property tax revenue for general operations, perceptive readers will notice that the cost to taxpayers of the governmental functions discussed thus far falls short at $33.45 million. The difference that has not yet been accounted for is equal to $650,000. The following information will explain where this amount was expended. Public Works One of the major governmental functions that have not yet been described is that of public works. Total expenditures amounted to $916,000 in 2013. General Fund expenses amounted to $347,000, which went to support the maintenance and repair of drains throughout the County. After adjustments, the net cost to taxpayers was $311,000. This means that 34% of public works expenditures were supported through property taxes. Other General liability insurance cost the County $130,000 from the General Fund. This reflects those insurance costs not directly applied to departments. The net cost to taxpayers was $116,000. Fund Balance The remaining amount ($223,000) is attributable to the net change in the General Fund balance. The fund balance is used to help finance County activities when other sources of funding are reduced, as was experienced during the Great Recession of 2008‐2009, or to finance one‐time expenditures such as capital construction or improvement projects (i.e. non‐operational costs). A healthy fund balance helps preserve County operations in the midst of economic challenges and subsequent decreased revenue by not having to reduce the quality or quantity of services delivered to citizens. The continued General Fund surplus that the County experiences year after year is the result of conservative budgeting, in which those responsible for budgeting pay close attention to the costs their departments are incurring. Fiscal conservatism is a significant feature of the Ottawa County culture, and the County as an organization is committed to maintaining and improving its strong financial position through prudent budgeting and fiscal practices (2015 Ottawa County Business Plan, Goal 1). Summary Table 14 totals all “net cost to taxpayer” amounts reported in the previous pages. Readers will notice that this estimation ($34,063,000) is almost identical to the amount collected ($34,062,688) by the County through the general property tax levy.

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From this data, we can conclude that over three‐quarters (83%) of the amount of taxes collected for general operations ($34.1 million) in 2013 was associated with the public safety, health and welfare, and judicial activities of County government. This is expected, as these are the major responsibilities of County governments statewide.

Table 14. Reconciliation of Tax Revenue and Net Taxpayer Cost, by Governmental Activity

*Note: Figures are estimated and rounded.

Function Total Tax Dollars % of Total

Legislative 354,000$ 1.0%Judicial 6,060,000$ 17.8%General Government 3,500,000$ 10.3%Public Safety 16,200,000$ 47.6%Health and Welfare 6,195,000$ 18.2%Community and Economic Development 630,000$ 1.8%Public Works 311,000$ 0.9%Insurance 130,000$ 0.4%Fund Balance 683,000$ 2.0%

34,063,000$ 100.0%TOTAL

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IX. CONCLUSION The Board of Commissioners is committed to maintaining and increasing communication with citizens. Whereas property taxes provide a substantial amount of funding to the County and because the Board places high importance on good stewardship of public money, this report has been created and issued to provide local unit officials and citizens an analysis of how their tax dollars support County government. Sections 2 and 3 of this report provide basic information about the property tax system and how the County compares with other counties and how cities and townships compare with one another. Property taxes are one of the most important revenue sources for local governments. In Ottawa County alone in 2014, an estimated $338 million was levied to support the County, local units (cities, villages, and townships), schools, and other taxing authorities. The County receives only 13% of what a taxpayer pays in property taxes on average. Furthermore, this amount includes a special levy for the Central Dispatch Authority and Parks and Recreation. The remaining amount supports the general operations of the County. This report focuses exclusively on this figure, which amounted to $34.1 million in 2013. It is worth highlighting that Ottawa County has the lowest operating levy in comparison to neighboring counties and counties of similar size throughout the state. Additionally, the County also has the fifth lowest operating millage in the State. For the past 18 years, the County has levied less than its allowed maximum. This has resulted in a savings to taxpayers each year. Section 4 through 6 offers basic information about the County’s funding structure. Property taxes provide funding for less than one‐third of all governmental fund revenue, with intergovernmental revenue providing a majority of the funding. In 2013, total revenue for governmental funds amounted to $129 million. Most expenditures were associated with health and welfare, public safety, general government, and judicial activities. The General Fund, which is the County’s chief operating fund and a governmental fund, is supported largely (64%) through property taxes. Public safety, general government, and judicial activities are its largest expenditures. In 2013, the General Fund received $59.5 million in revenue and expended $59.3 million, increasing the fund balance by $223,000. Special revenue funds have been set up to support the activities of Public Health, Community Mental Health, Parks and Recreation, and others. These funds do not receive tax revenue but often do receive transfers from the General Fund. The impetus behind this report has been to look at the value or benefit in services citizens receive relative to the taxes raised. Of course, the term “benefit” can have many meanings. Section 7 looked at different types of benefits (observed vs. unobserved, actual vs. potential, and direct vs. indirect).

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Section 8 begins by briefly explaining the methodology used in this report and then moves into a discussion about the net cost and benefits to taxpayers according to government functions. Many of the services provided by the County are accessible to all citizens. Some departments and agencies provide direct services to citizens, while others provide support for the County’s organizational infrastructure, thus allowing those entities that do interact with citizens to provide their services well. Some agencies only offer services to eligible populations, yet receive some funding from the County. Overall, this has historically been limited and County funds only provide a small portion of these agencies’ total revenue. With respect to public safety, discussions about the perceived duplicity of services in some communities have been common for years now. Some local units have voluntarily entered into partnerships with the County in the form of community policing contracts. These units pay for “frontline” law enforcement services, as well as any additional supervisory staff they request beyond what is provided for by the County. The only expenses associated with these contracts, for which the County is responsible, are the personnel costs for supervisory and administrative staff. These community policing contracts provide positive benefits for and create strong, cooperative partnerships between the County and local units. Ottawa County is willing to enter into a discussion with local units that might be interested in receiving these types of contracted services. A key figure mentioned in various locations throughout this report is the amount raised in property taxes for the general operations of the County ($34.1 million). At the end of Section 8, Table 14 provides an estimate of how taxpayer dollars were used according to governmental function. As expected, public safety, health and welfare, and judicial activities composed almost three‐quarters (77%) of this net cost amount. In conclusion, most services provided by the County are universally accessible. Citizens may not always observe, utilize, or directly benefit from the services that the County provides, but they are there in the event that they are needed. This report has sought to provide an accurate analysis of how the County uses property tax revenue. The County hopes that this has been an informative guide to its general operations. It will continue in its commitment to be good stewards of and transparent with the financial resources with which citizens have entrusted it.

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X. APPENDIX

Legislative JudicialGeneral

GovernmentPublic Safety

PublicWorks

Health and Welfare

Community and Economic

DevelopmentOther Subtotal

General Fund (1010) Expenditures (395,483) (12,119,288) (15,408,992) (20,398,744) (347,456) (695,298) (703,272) (130,386) (50,198,919) Transfers Out (from General Fund) ‐ (903,214) ‐ (459,657) ‐ (7,971,898) ‐ (40,000) (9,374,769) Total Expenditures (395,483) (13,022,502) (15,408,992) (20,858,401) (347,456) (8,667,196) (703,272) (170,386) (59,573,688)

General Fund (1010) Revenue ‐ 4,483,968 51,536,934 5,988,522 ‐ 1,770,807 35,830 ‐ 63,816,061 Less: Taxes ‐ ‐ (34,062,835) (4,068,889) ‐ ‐ ‐ ‐ (38,131,724) Less: Revenue Sharing ‐ ‐ (3,750,000) ‐ ‐ ‐ ‐ ‐ (3,750,000) Add (Less): Attributable (Non‐Attributable) Revenue

‐ 1,755,400 (2,308,800) 553,400 ‐ ‐ ‐ ‐ ‐

Adjustments ‐ 1,755,400 (40,121,635) (3,515,489) ‐ ‐ ‐ ‐ General Fund (1010) Revenue (without Taxes) ‐ 6,239,368 11,415,299 2,473,033 ‐ 1,770,807 35,830 ‐ 21,934,337

Net Remaining (395,483) (6,783,134) (3,993,693) (18,385,368) (347,456) (6,896,389) (667,442) (170,386) (37,639,351) Percent (%) of Net Remaining 1.1% 18.0% 10.6% 48.8% 0.9% 18.3% 1.8% 0.5%

State Revenue Sharing (estimated) 3,750,000 Transfers into General Fund 49,356 Total Available for Distribution 3,799,356

Add: Distribution of Revenue Sharing and Excess Funds 39,920 684,697 403,128 1,855,839 35,073 696,129 67,372 17,199 3,799,356 Total Remaining (355,563) (6,098,437) (3,590,565) (16,529,529) (312,383) (6,200,260) (600,070) (153,187) (33,839,995)

NET COST TO TAXPAYER 355,563$ 6,098,437$ 3,590,565$ 16,529,529$ 312,383$ 6,200,260$ 600,070$ 153,187$ 33,839,995$

Add: Fund Balance Change

222,693$

Total 34,062,688$