Grand Rapids creates virtual city with Livonia

July 29, 2012
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The city of Grand Rapids entered into a first-ever service-sharing agreement last week with Livonia, a city of nearly 96,000 residents in the northwest corner of Wayne County.

“This is the brainchild of our (state) treasurer, Andy Dillon. This is a very, very exciting element,” said Mayor George Heartwell. “This will make the city more cost effective and efficient.”

The agreement creates what is known as a Municipal Services Authority, a state-empowered entity that promotes and authorizes inter-governmental collaborations between cities. It is hoped the MSA can be sustained for generations and will interest other municipalities in joining.

Key functions such as accounting and payroll services and the management of health care benefits are examples of the everyday practices that are to be shared and improved upon in a virtual realm.

“One of the first projects is anticipated to be the development of a cloud-based financial management system that could be engaged by any community in the state,” said Deputy City Manager Eric DeLong, who co-developed the agreement with city CFO Scott Buhrer.

“Grand Rapids will take the lead on this project with (the state) Treasury (Department) for the MSA, and it is anticipated that state Economic Vitality Incentive Project Program funds will assist with selection, acquisition and implementation costs,” added DeLong.

“One of the first steps is to get high-quality software tools with best practices built into them,” said Buhrer.

Dillon told commissioners last week that his MSA idea came about when he learned that seven of every 10 problems that Michigan cities were experiencing were the same. “So we came up with this idea that creates a virtual city. The beauty of this for you is you decide how aggressive you get and how involved you get with the MSA,” he said.

Dillon explained that creating the virtual cloud and then inserting the cities’ payroll functions into it would likely be the first two steps for the new MSA. He also said the next step would involve issuing an RFP for a health-insurance policy that would cover the municipal employees of the cities in the MSA. He envisions that eventually the policy could cover up to 100,000 workers as more cities join the MSA and the pooling of employees would lower the cities’ insurance costs.

The MSA agreement is for 15 years and can automatically renew in 10-year intervals if both cities agree. Other cities can join the MSA, or can subscribe to the services it will offer.

“The MSA, I want to be clear, is not going to be another bureaucracy,” said Dillon.

A board of directors will govern the authority. Both cities will appoint two members to the governing board and Gov. Rick Snyder can appoint two members for each member the cities assign to the board. So the initial board can have up to 12 members.

However, an executive committee will manage the MSA. The committee will consist of five members of the governing board, with one coming from each city and three coming from the governor’s appointments. Grand Rapids will make its appointments known Aug. 14. The MSA is not a taxing authority.

“We think the governance model is set up in a great way. It has lots of promise for the state and for us,” said DeLong. “It gives large and small cities a context to work together,” said Heartwell.

City Manager Greg Sundstrom said the city completed its EVIP application so it will be in the pipeline for state dollars to get the MSA going. The EVIP money replaced the cities’ allocation of statutory revenue sharing after Snyder took office. “The state will support (the MSA) on the front end and once it gets up and running, it should be self-sustaining,” said Dillon.

Livonia is the ninth largest city in Michigan; recently the Federal Bureau of Investigation named it the second-safest city in the Midwest with a population over 75,000. Dillon called Livonia a “well-run city” and said he chose Grand Rapids to lead the MSA effort.

After approving the MSA agreement, commissioners set Aug. 14 as the public hearing date for an industrial tax exemption requested by Jedco Inc. at 1615 Broadway Ave. NW. Jedco, which makes performance component assemblies for such high-precision markets as the aerospace and defense industries, plans to invest $1.5 million into real and personal property over the next two years and is seeking a 50 percent property-tax reduction for eight years from its investment.

“The company is doing very well and we want to be able to keep them,” said Kara Wood, city economic development director. “Jedco has exceeded the investment and job creation requirements of their most recent abatement and has fulfilled the requirements of their Renaissance Zone agreement, the benefits of which have expired.”

The firm, which has 154 employees, wants to invest $100,000 into property improvements and $1.4 million into equipment, including a 700-ton press. Jedco will add five new jobs from its investment.

“Jedco is currently in the process of a categorical determination to define whether they are regulated under the federal metal-finishing standards,” said Wood. “An affirmative determination would require permitting by the city’s Environmental Services Department.”

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