Consolidation Issues Associated with the Proposed Merger of the City of the Village of Douglas and the City of Saugatuck
Report 384 Version 2, July 2013
The Citizens Research Council of Michigan (CRC) was commissioned by the cities of Douglas and Saugatuck to shed light on the many issues associated with the proposed merger of their two cities. Because of the politically charged atmosphere in these two communities around the issue of consolidation, the two cities preferred to keep a hands-off approach while CRC conducted its analysis. To avoid accusations that the elected or appointed city officials were steering or swaying the analysis, it was agreed that those people would see the results of the analysis at the same time as everyone else — when it was posted to the CRC website.
This approach created a few issues and inconsistencies that were identified when the city officials had the opportunity to review the paper. On Wednesday, July 24, 2013, CRC met with administrative and finance officials from the two cities to review several points. CRC agreed to amend the paper with the words and numbers that had been amended clearly identified with red font.
These revisions have reduced the amount of projected savings that could result from a merger of the two cities, but CRC’s estimate remains at about $500,000 per year.
Independence is a valued asset for the Citizens Research Council of Michigan. The approach of amending this paper was adopted because of our mission to provide trusted information to policy makers. In this case, the policy makers are the residents of Douglas and Saugatuck that will be called on to vote on the proposed merger moving forward at the November, 2013, election.
In anticipation of the pending referendum on the proposed merger of Saugatuck and Douglas, those two cities governments have asked the Citizens Research Council of Michigan to investigate issues brought about by consolidation and describe how the finances of a merged city would differ from that of the two cities operating independently. Saugatuck and Douglas are two small cities in Allegan County adjoined by a common border. They are located along Lake Michigan about 10 miles south of the City of Holland and about 20 miles north of the City of South Haven. Douglas and Saugatuck stand out as cities with very small populations. With a population of 1,232 in 2010, Douglas ranks 251st in population size among the 275 Michigan cities. Saugatuck ranks 259th, with a population of 925 residents in 2010.
A. Planning and Zoning
Governmental functions that benefit from being done over larger geographic areas include land use planning, zoning, and stewardship of natural resources. These are functions inherent in the fundamental roles of government for which it is difficult to show evidence of tangible monetary or operational savings to two small, relatively stable communities such as Saugatuck and Douglas that would result from consolidation.
The City of Saugatuck, the City of the Village of Douglas, and Saugatuck Township have some history of working together and collaborating to jointly produce area-wide master plans. The first effort to create a joint plan occurred from 1987 to 1989. That document was updated in a multi-year process that culminated with adoption of a revised plan in 2005.
Given the existence of this working plan, the proposed merger of the cities of Saugatuck and Douglas can bring only marginal improvement to land use planning and coordination of zoning in the region. It is foreseeable that a merged city would continue to respect the independent identities of what is currently Saugatuck and what is currently Douglas, at least in the short term. It also is foreseeable that a merged city will continue to collaborate with, maintain a joint master plan with, and take efforts to support Saugatuck Township. To that end, it could be expected that a master plan adopted after the merger of Saugatuck and Douglas would still have fewer specific details than if such a document were written independently for the new merged city.
The proposed merger of Douglas and Saugatuck also can marginally improve stewardship of the Kalamazoo River and Kalamazoo Lake. Merger will provide a clearer line of responsibility and simplify procedures when coordinating actions with the federal, state, county governments or when working with neighboring local governments. Because the Harbor Authority is relatively new, it is difficult to quantify how much difference merger would make compared to the status quo of working through the authority.
Efforts such as joint master planning and a multi-jurisdictional harbor authority reflect efforts to artificially create what would exist if a community was governed by one government instead of two or three entities. A merger of Saugatuck and Douglas would not likely result in much land use change that is noticeable to the average resident, but it could straighten the lines of accountability for carrying out these functions.
B. City Charters and Ordinances
If the electors in each city vote in the affirmative at the November referendum on a merger of the two cities, the next step will be election or appointment of charter commissioners for purposes of drafting a charter for a combined city. That proposed charter will have to come before the electors for approval before a merger of the two cities can proceed.
Voters and potential charter commissioners will find that the existing city charters for Saugatuck and Douglas are very similar.
The Codes of Ordinances adopted by the cities of Saugatuck and Douglas are very much alike. Only about twenty percent of the ordinances are unique to one city or the other or differ in substance. The relative importance of these sections can only be judged by those affected by them.
C. Payment of Indebtedness
The cities of Saugatuck and Douglas each have long-term debt obligations that will carry over if the two cities decide to consolidate. Douglas’ debt comes from two loan agreements, capital improvement bonds, a litigation settlement, and compensated absences. By the end of this year the city should have paid off the remaining balance on the litigation settlement. The two loan agreements relate to amounts borrowed for upgrades to the Douglas City Hall. Its total debt amounts to $954,651 and is scheduled to be paid off by 2021.
Saugatuck has much more debt, mostly in the form of general obligation tax bonds. By 2014 the city will pay the last of its debt that was issued for the Allegan Sanitary Sewer System. The city’s remaining obligations thereafter are for compensated absences and an unlimited general obligation tax bond for city street and infrastructure projects. The city street and infrastructure bond debt is currently over $3.4 million and is scheduled to be paid off by 2028.
Case law and statutory law provides conflicting guidance on the question of whether a newly consolidated city could, or should spread the voted debt millage across all taxable property or should only be spread on those properties that were located within the boundaries of the current City of Saugatuck.
D. Disposition of Real and Personal Property
A primary issue in the event of a merger of two governmental entities is the oversupply of such properties and assets. Clearly a merged city will need only one city hall. Examination of the two facilities leaves little doubt that the present Douglas city hall would be adopted as the home of a consolidated government. It is not expected that the location or size of the police station will need to change. Both Douglas’ and Saugatuck’s public works facilities would be needed to meet the needs of a merged city. Finally, it is assumed that the cities offer the amount of park and beach acreage desired to serve residents and guests. It is not assumed that any park space should be sold off nor any beaches closed. Combining the current vehicle fleet of Saugatuck Douglas would result in an excess supply of vehicles relative to peer cities.