mmta connect - september 2012

Ca l e n da r o f ev e n t sImportant Dates to Remember

Ca l e n da r o f ev e n t sImportant Dates to Remember

2012

34th Annual Fall Conference • Boyne Mountain Boyne Falls, MI OctOber7-10,2012

2013

Spring Seminar• Lansing Best Western Plus Lansing, MI March22,2013

MMTI Basic• Comfort Inn and Conference Center Mount Pleasant, MI april21-26,2013

MMTI Advanced• Comfort Inn and Conference Center Mount Pleasant, MI May15-17,2013

35th Annual Fall Conference • Grand Traverse Resort Traverse City, MI OctOber20-23,2013

2014

36th Annual Fall Conference • Bavarian Inn Frankenmuth, MI OctOber5-8,2014

From the PresidentAutumn is almost upon us and if the Farmer’s Almanac prediction is true, winter is going to be snowy and cold, so enjoy whatever sun and warmth you can find right now. Perhaps you’ll find that sun and warmth at our annual Fall

Conference if the last two years are any indicator. It should be a wonderfully sunny, mild week in Boyne Mountain, right? But don’t forget to pack that warm jacket!

Jan Steggerda and her Committee have worked very hard to put together an interesting, educational agenda for us. If you have not registered, please take a moment to look over the sessions and think

about attending. If you are under financial constraints at your municipality, think about applying for a scholarship. The MMTA has set aside funds to help its members and we would love to be able to offer

you this opportunity. Barb Fandell, the Education Chair is the person to contact for more information. If you are considering applying, it would be to your advantage to contact her very soon. If you haven’t reserved your room, make sure you do that soon, too. We have a limited amount of rooms set aside for the conference at a special rate and you don’t want to miss out on those savings. This will be our first conference at Boyne Mountain and we are anticipating it to be a wonderful event (NO early snowstorms allowed).

As usual, during the Fall Conference we will have our Annual Meeting. This year we have changed the meeting from the normal Monday afternoon to Tuesday morning (October 9th). During that time we will vote on amendments to our existing MMTA bylaws. There is an article in this newsletter regarding those changes and how they came about. Of course, as usual, if you have questions on this action, please don’t hesitate to contact any Board Member. We would be happy to address your concerns.

If you would like to consider serving on the MMTA Board of Directors we will have one new Director’s position open this year. If you believe this may be something you’re interested in pursuing, feel free to contact me or Rose Dillon. We would be happy to answer your questions and concerns and give

you insight into how rewarding serving on the Board of Directors can truly be.

If you are interested in serving on any Committee during the upcoming year, you will need to fill out the MMTA committee sign up form. If you served on a committee last year, we would

still like you to send in a new request. Some committees will begin work right after the Fall Conference and we would love to have as much participation as possible, so please

consider serving. A lot of committee work is now done by email without requiring travel or time out of the office. Of course, we still need volunteers to work at our various

t h e q u a r t e r l y n e w s l e t t e r

Connectm i c h i g a n m u n i c i p a l t r e a s u r e r s a s s o c i a t i o n

S e p t e m b e r 2 0 1 2 w w w. m m t a - m i . o r g V o l u m e 6 6

Continued on page 2.

http://www.aptusc.org/common/conferences/index.php



http://mmta-mi.org/Websites/mmta/images/Fall_Conference_2012_registration.pdf

mailto:[email protected]



http://mmta-mi.org/Websites/mmta/images/committee_sign_up_form.pdf

September 2012 page 2

workshops, Institutes and Conference, but it’s always rewarding and a great way to connect with new people.

This is my last letter as President. I want to take this opportunity to thank every member who has supported me through the years; who offered me good advice; who helped with events I coordinated; who have been fantastic fellow Board members and who have been the very dearest, wonderful friends I have been lucky enough to know. You are all fantastic and will always hold a special place in my heart. It almost goes without saying (but, then again, you can’t say it enough), I could not have done this without all of you! Serving as President on the MMTA Board has been a great experience for me and I’m amazed that the year went by so fast (well, maybe, truly not that fast). Thank you so very much for everything and I will leave you with one thought:

”You make a living by what you get. You make a life by what you give.” Winston Churchill

Kim McKay, MiCPTMMTA President

Continued from Cover.

PRESIDENTKim McKay, MiCPT

City of Rockford(616) 825-5005

PRESIDENT-ELECTJan Steggerda, MiCPT

Park Township(616) 738-4236

VICE PRESIDENTMary Ann Kornexl, CPFA, MiCPT

City of Mount Pleasant(989) 779-5381

TREASURERCheryl Rhein-O’Neill, CPFA, MiCPT

Oregon Township(810) 664-5971

SECRETARYAnnge Horning, CPFA, CMC, MiCPT

City of Tawas City(989) 362-8688

DIRECTORS

NEWSLETTERMatthew Horning, CPFA, CPFIM, MiCPT

City of Ann Arbor(734) 794-6541

EDUCATIONBarbara Fandell, CPFA, MiCPT

City of Ithaca(989) 875-3200

LEGISLATIONJanice Zuhlke, CPFA, CMC, MiCPT

City of Saginaw(989) 759-1440

MEMBERSHIPMargaret Birch, CPFA, CPFIM, MiCPT

Waterford Charter Township(248) 674-6217

PARLIAMENTARIANRachel Piner, MiCPTVillage of Webberville

(517) 521-3984

IMMEDIATE PAST PRESIDENTRose Dillon, CPFA, MiCPT

Fruitport Township(231) 865-3151

ASSOCIATE LIAISONSKimberly Goethe, FVP, CTP

Flagstar Bank(248) 312-6964

Maxine Kauffold

Future APT US&C CONFERENCES

the Board of directors of the association of public treasurers of the united States and Canada has announced the following sites for future

apt uS&C conferences:

2013Houston, texas

2014 Salt Lake City, utah

2015 Chicago, illinois50th Anniversary of APT US&C

Kim McKay

MMTA will be having an exhibit

at the

2013 MTA 60Th AnnuAl

Educational Conference & Expo

Join us!















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As of December, 2011, Associate membership in the MMTA consisted of 82 (grand total of members was 832) dedicated and highly involved members of the Association.

Associate members include bankers, lawyers, investment advisors, financial advisors, tax service companies and auditors, all of whom are involved with local units of government in their careers. Many associate members have had varied career experiences including teaching, small business ownership, former government employment (including County Treasurer positions), accounting and various other backgrounds , and therefore bring a valued perspective to the organization.

Additionally, a large majority of our members are homeowners which can bring the viewpoint of being your ‘customers’ to the association. Some are or have also been actively involved as local elected officials or have served on committees or boards for their local communities.

Associate members are involved in the MMTA for very similar reasons as Active Members; those are to network with individuals we work with and for education opportunities. Because our reasons for belonging are so very similar to those of the Active Members, we have an equally high desire to contribute to the Association and make it better and a thriving organization for all of the members.

We are pleased to serve on committees, contribute to the newsletter and to provide countless hours preparing for and conducting many of the training sessions for the MMTA at no cost to the Association.

The result of our service to our customers and clients is that we are knowledgeable about industry best practices and willingly

share our thoughts and suggestions with the membership.Our group includes several very long standing members. Many have been associate members significantly longer than a large portion of Active Members.Associate members provide significant financial support to the MMTA through our dues and conference fees. Higher numbers of participants generally mean lower per person costs so all members benefit financially from the Associate Member participation.

We feel that we are an important and contributing group within an organization for which we care dearly about. We donate our time and expertise and want to continue to make the Association an ever improving group of professionals.For those reasons, we respectfully request the Board and the Active Members to consider an amendment to the By Laws to allow our Associate Member Liaison to the Board the ability to participate with their vote on Board actions.

With only one vote there should be no concern that the direction of the Active Members could in any way be overridden as the Active Members of the Board would still have 10 votes to the Associate Member’s 1 vote.

We believe that we have earned the respect and recognition as contributing members of the MMTA and the members’ consideration and ratification of a voting associate member would be a symbol of the groups’ respect of our contributions.

This request was prepared by the Ad Hoc Committee of Pam Hardy (member since 1985), Tom Bush (member since 1990), Les Pulver (member since 1990), Annette Devereaux (member since 1997) and Nancy Robinson (member since 1998). Collectively we have over 95 years of experience serving the MMTA.

MICHIGAN MUNICIPAL TREASURERS ASSOCIATIONASSOCIATE MEMBERSHIP REqUEST FOR VOTING PRIVILEGESLes Pulver, Plante Moran

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Julie M. GustManaging Director, Public Funds

[email protected]: 248.498.2882

2301 West Big Beaver Road | Suite 525 | Troy, MI 48084 p: 800.456.1500 | www.talmerbank.com

Don JensenManaging Director, Public Funds

[email protected]: 810.989.2604

Dear MMTA Membership:

MMTA is very excited to offer a new venue for the Association’s 34th Annual Fall Conference. Boyne Mountain Grand Lodge and Spa offers a setting reminiscent of famed Swiss and Austrian mountain lodges nestled in the rolling hills of Northern Michigan. We invite your family to come along with you as Boyne offers the ultimate family adventure with Michigan’s largest indoor waterpark, Avalanche Bay. There are miles of cross country trails to hike, horseback riding and much more for your family to enjoy.

The heart of the MMTA’s Mission Statement is to provide its members with the tools needed to meet the diversified challenges facing them by offering education, services, continuing professional development and ethical standards. With that in mind, we felt it was important to offer relevant educational sessions that will help guide all of us in our current job responsibilities and decisions.

Some of the sessions we are pleased to offer include Counterfeiting, Internal Controls, Risk Management, Bankruptcy, Basics of the Treasurer, BS&A Report Writing and .NET tips, Banking Topics, Legislative Updates and the Economic Outlook. Our keynote speaker this year will be Judy Urquhart. Judy has never spoken to our group and is very excited to join us.

Networking opportunities will begin with the Past President’s Welcoming Reception on Sunday evening serving a Fajita Bar. If you know of any past members, they are invited to register and join us for the evening.

All meals and activities will be held on site again this year due to the location of the conference. Tuesday evening, following the banquet, we will be having entertainment featuring “Dueling Pianos”.

While you’re learning and getting new ideas from your peers, I hope you will take the time to relax and enjoy Northern Michigan and returnto your workplace better informed and re-energized.

To view the registration information you can logon to the MMTA website. The early registration deadline is 9-7-12. The hotel reservation deadline for the group rate is 9-15-12.

Jan Steggerda MiCPTFall Conference Chairperson

http://mmta-mi.org/Websites/mmta/images/Fall_Conference_2012_registration.pdf


Page 14 July 2012 | michigan township news

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We’ve all seen the headlines. Public official arrested for embezzlement.

Outcry over misuse of public funds. Complaints of nepotism. Tales of back-

room deals for municipal projects and services.

No township official runs for public office thinking that he or she—or

someone from the township—will be embroiled in a public battle or

accusation over charges of ethics violations or wrongdoing. But how can

a township board ensure that its township—including every elected and

appointed official, board and commission member, staff and volunteer—

acts ethically and properly?

Townships need to function with the very highest of ethics at all times.

If everyone agrees that building and maintaining a culture of ethics is

essential, then why is it often so hard to do?

There are some simple—if not always easy—ways to assure that your

township government is, in fact, functioning with the necessary eye on

ethics and values.

Developing—and maintaining— a culture of ethics in your township

This continuing education article and accompanying self-assessment is worth 2.0 elective credits in MTA’s Township Governance Academy. See page 20 for details.

OBJECTIVES• Explore the need for, and barriers to,

establishing an ethical environment in the township

• Inspire the next steps to securing an ethical culture through adoption of tools and training

CORE COMPETENCIES• Works effectively with individuals,

departments and committees to achieve desired outcomes

• Possesses knowledge of what constitutes ethical behavior

• Demonstrates behavior that results in

public trust


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WHAT DOES A CULTURE OF ETHICS LOOK LIKE?Ironically, most of what happens differently in local governments that have successfully built a culture of ethics and values is actually invisible because it’s the absence of ethical and legal problems that is the most significant highlight of their efforts. Still, there are some things that you’ll see on close inspection. These include:

• Decisions are made consistently and effectively by a process that includes reasoning whether or not those decisions align with the stated ethics and values of that township. Those that do not align are either discarded or reshaped to conform to the ethical aspirations of the community and the values they espouse.

• Because of the above, citizens routinely express their trust that—whether or not they agree with a certain decision—they understand how and why it was made.

• Township officials, employees and volunteers all show reasonable skills at both recognizing and appropriately responding to ethical concerns, which unfortunately can go unrecognized or ignored in many communities. These issues can range from fiscal wrongdoing to hostile or coercive relationships to discriminatory comments and actions, to ignorance of laws or regulations, etc.

• Appropriate behavior is both modeled and conspicuously reinforced while any type of inappropriate behavior is effectively and efficiently rooted out.

Each of the above can go a very long way to assuring the organizational, financial and reputational soundness and health of your township—all areas for which township officials, employees and volunteers are given explicit stewardship.

COMMON BARRIERS TO BUILDING A CULTURE OF ETHICS AND VALUESIf everyone agrees that a culture of ethics and values is essential, then why do they so rarely want to do much to make it happen? Here are some barriers often seen in local governments struggling to develop and maintain a culture of ethics:

“I am an ethical person, and we are an ethical township!” The awkward reality is that every one of us is certain that we are an ethical person and we typically believe that our organizations are in great ethical shape as well. In other words, ethics are always a problem or potential problem for everyone else—but not ourselves. Because of that, we are rarely interested in engaging in training or other systemic solutions, simply because we feel that they aren’t necessary for us.

However, the reality is that each of us carries a large number of risk factors for ethical lapses, and learning to recognize and mitigate those risks is critical for every one of us. There is no one kind of person who engages in unethical behavior, and, in fact, virtually all who do so are otherwise good people—just like you and me. Pretending that this is not the case is a dangerous but all-too-common trap.

State laws address numerous ethical issuesAll township officials should be well aware of the provisions of two of the better-known ethics statutes: the Open Meetings Act (MCL 15.261, et seq) and Freedom of Information Act (MCL 15.231, et seq). However, there are ethical underpinnings to a variety of other state laws. Some of these statutes include:

• Neglect of duty, Penal Code (MCL 750.478)

• Fiduciary duty, Penal Code (MCL 750.489)

• Embezzlement, Penal Code (MCL 21.154)

• Commingling funds illegal expenditures, Penal Code (MCL 750.490)

• Extension of credit, nonpublic use of funds, Penal Code (MCL 750.490a)

• Custody of Records, Penal Code (MCL 750.492)

• Whistleblower Protection Act (MCL 15.362)

• Political Activities of Public Employees (MCL 15.403(1), et seq)

• Incompatible Office of Public Officials (MCL 15.181(b), et seq)

• Contracts of Public Servants With Public Entities (MCL 15.322(1), et seq)

• Standards of Conduct for Public Officers and Employees (MCL 15.341, et seq)

michigan township news | July 2012 Page 15



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“We don’t need an ethics code, code of conduct or values statement; that’s why we have laws and oversight.” Many laws have been adopted to require adherence to various ethical principles (see sidebar on page 15). Such laws and oversight are necessary—but are not always sufficient in terms of ethics. Otherwise, why would we hear about ethical and legal problems of all shapes and sizes in local government day after day? After all, those other townships have laws and oversight as well. Your township needs to do the hard work to nail down exactly what it means to work in an ethical manner and then be sure that every official, employee and volunteer is fully aware of what you have decided.

Remember two key issues here. First, townships need an ethics code, code of conduct and, ideally, a values statement to cover those activities for which there are no other guidelines. Second, as important as formal oversight programs are—and they are hugely important—only a fraction of legal and ethical lapses are caught by them; most are, in fact, caught by the happenstance observation of coworkers—they have to know what to look for and what to do if they notice something that doesn’t seem right.

“Ethics training is too complicated/expensive/boring.” Ethical and legal lapses are estimated to cost most local governments between 3 to 5 percent of their bottom line each year—and that’s before the costs and feelings associated with reputational damage. For that amount of money, you simply cannot afford to not bring in the training needed to help build and maintain a culture of ethics and values in your township.

WHAT NEEDS TO BE IN YOUR TOOLBOX?An Ethics Code. It’s tough to enforce an ethics code that you don’t have and, frankly, it’s almost as tough to enforce one you do have if it’s poorly written. There are innumerable models for ethics codes, and you will need to develop one that suits your township’s objectives. As with any policies and procedures, don’t assume that the great-looking ethics code of the township next door ought to be yours as well. To risk stating the obvious, townships are as different as individuals are. Consequently, an ethics code that works well for one township may well be a rousing flop for another. You really have to make it right for your specific township.

In writing (or re-writing) your code of ethics, there are two essential, fundamental decisions you will need to make. The first is whether your code is going to be aspirational (i.e., “We will do our best to always…”) or rule-bound (i.e., “It will be our duty to…”). The second is whether to make your ethics code enforceable or simply a suggested guideline.

Though there are likely to be strong opinions, it ultimately comes down to your township’s objectives and operational style. There are significant pros and cons to any style of ethics code. For example, a code that does not have a method of enforcement is far easier to implement, but citizens may bridle that it has no teeth. An aspirational code may feel better to most folks, but cannot likely be enforced.

Meanwhile, a rule-bound one may feel overly confining to some officials and employees. Plus, if it is rule-bound, it must have clearly stated policies and procedures for investigating and responding to any alleged conflict with the code.

For better or worse, it ultimately comes down to “picking your poison.” Yet, having an ethics code as a center for your culture of ethics is critical. Regardless of the type of code you develop, there are some essential do’s and don’ts:

1. Don’t simply make it a list of rules. That’s what you already have policies and procedures for!

2. Don’t settle for strictly self-evident admonitions. Presumably everyone already knows that they are not supposed to lie, cheat, steal, or do anything dishonorable. Dig deeper.

3. Don’t turn it into some kind of risk management document. Written well, it can help manage risk. However, its purpose is to help guide decision-making, not simply be a contract to protect your township from some official’s or employee’s behavior.

4. Do make it short and easy to both understand and memorize. Remember, this is a tool to help guide behavior. The less easily understood and remembered it is, the less useful it is going to be.

5. Do be sure that you can come up with clear, behavioral examples of what it does—and does not—mean to follow the ethics code. Every official, employee and volunteer needs to understand how the code applies to his or her specific job or role. This will dramatically help with training and in helping the code become a part of everyone’s thinking in your township. Unless you can make this step work, the code is destined to become an essentially academic exercise—and there’s no value in that whatsoever!

A Code of Conduct. Not every township feels the need to have a code of conduct because officials often feel that their policies and procedures cover everything needed. There is certainly no harm in that belief, as long as the rules that everyone needs to follow are at least written down somewhere! At a minimum,

We make every effort to be transparent in everything we do as township officials. If our residents do not understand what we're doing, or suspect we are hiding something—[nothing] in the world will convince them we are truly operating ethically.

—Sharon Churchill, TrusteeGrant Township (Cheboygan Co.)


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townships should consider the value of a code of conduct.While there are a wide variety of models, codes of conduct broadly fall into two categories. The first is, essentially, a renamed book of policies and procedures. The second—and the one townships may wish to consider—is essentially an abstract of the policies and procedures highlighting the most essential rules governing those who are covered by the code. This might be the place to talk about no lying, cheating, stealing, etc. but it is the document to list out the do’s and don’ts for other matters that your township sees as being of the greatest importance to your community. It is, in essence, a shorthand version of your policies and procedures written in such a way that it can be easily digested and used as a reference.

Obviously, everyone in your township needs to be responsible for acting in accordance with everything in your policies and procedures manual, but having a “highlights” code can help focus their attention on whatever you feel most deserves the most emphasis. (See sidebar at right for MTA’s sample code of conduct for township board members.)

A Values Statement. Few townships have created a values statement. However, when written and implemented correctly, a values statement will not only help drive a culture of ethics and values but will also help drive better management, leadership and customer service—all of which are vital to an effective township.

Here’s what a well-written value statement is and what it does: It is a very short, concise statement of the most important priorities for everyone in your township when they are making a decision. In other words, this very short list of values—six to 10 at the absolute most—will tell every person in your township what he or she is to consider when making a decision for which there is no rule or other guideline. Not only will this streamline a wide variety of decisions, it will also allow individuals to evaluate the appropriateness of their behavior—or someone else’s—by allowing each to determine whether that decision or behavior is aligned with the values your township has stated as paramount.

Sample board member code of conductBoard members shall:

• Attend as many board meetings as possible and become informed concerning issues to be discussed, and shall inform the supervisor of any impending absences from a board meeting

• Exercise his or her obligation to vote upon the question unless a conflict of interest is present

• Adopt policy only after full discussion of the issues at public board meetings

• Encourage the free expression of opinion by all board members, and seek systematic communications between the board and the community

• Work with other board members to establish effective policy and (if applicable) to delegate authority for the administration of the township to the superintendent/manager

• Communicate to other board members and (if applicable) the superintendent/manager public reaction to board policy and township programs

• Become informed about current township government issues by individual study and through participation in programs providing needed information, such as those sponsored by the Michigan Townships Association

• Support the employment of those persons best qualified to serve as township staff and insist on a regular impartial evaluation of all staff

• Avoid being placed in a position of conflict of interest and refrain from using the board position for personal or partisan gain

• Take no action that will compromise the board or the township staff and respect the confidentiality of information that is privileged under applicable law

For more ethics information, visit MTA’s Ethics and Conduct Web page, www.michigantownships.org/ethics.asp, which offers member township officials links to statutes, samples and additional online resources.



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With minimal training, officials, staff and volunteers will know the appropriate way to respond to any decisions or actions that are not aligned with your values statement. Done right, this is as close to a “silver bullet” as is possible for assuring the maintenance of a culture of ethics and values.

A Review Policy. Ethics codes, codes of conduct and values statements are like any other government or business documents—they need to be reviewed, and updated or refreshed periodically. Things will be missed the first time these documents are put together, and community needs and priorities shift over time. Unless you make it a policy to review these documents every few years—just like your township policies and procedures—you run the risk of them becoming irrelevant.

Building in a review time policy to these documents allows everyone in the township to know that they will be getting a good once-over often enough to assure that they are working the way that they should. If they aren’t, don’t be afraid to update them. The greater risk is that they live on as severely hobbled efforts to maintain your culture of ethics and values. These documents—along with all township policies and procedures—should be formally reviewed not less than every five years, and possibly more frequently, as determined by the township board.

MAKING TRAINING AS EFFECTIVE AS POSSIBLEOnce your toolbox is complete, your ethics and values training can begin. Unfortunately, ethics training has developed a

reputation as being boring, expensive and ineffective. (And, of course, one can’t really train on values at all if one doesn’t actually know—with clarity—what one’s values are.) At the risk of sounding annoyingly parental, however, if your ethics and values training is boring, expensive or ineffective, you simply haven’t done your homework. Training needn’t—and shouldn’t—be any of these.

If your training is, in fact, boring—not just on ethics but on anything else your officials and employees need to know—you have shot yourself in the foot. Try to liven it up by building in comments on meaningful ways in which what you are teaching directly impacts those you are training. In what ways can their learning be a tool for their personal success? If you can’t think of ways to make that case, maybe it isn’t something they really need to know.

Also, make your training interactive in any way you can. After all, active, engaged learning will always be more appealing and effective than sitting passively and listening to someone or watching yet another mind-numbing PowerPoint presentation. If you need to bring in an outsider to help you create or deliver your training, that’s fine. However, don’t underestimate your abilities to come up with a training program on your own that will be both interesting and effective.

Provide an opportunity for those being trained to discuss the barriers they see to putting their training to use. One of the most persistent forms of “push-back” in ethics training, besides individuals inevitably feeling that they don’t actually need it, is that they can’t really do what you are asking because of “this or that” in their lives, job descriptions or communities. Providing the opportunity to “de-bug” those issues is often a critical component to ethics training. That is why online training can

Township officials are the most visible of local leaders and set a ready example. Township government is the “base foundation” of county, state and national government. This base must be solid, principled, and ethical beyond reproach, for the good of the country. Township government often becomes the recruiting and development ground for future, higher elected office holders. If their entry into elected politics ingrains in them the highest ethics, principles and integrity, they carry that practice with them as they advance. A better county, state, and nation will result.

—James A. LaPeer, TreasurerCannon Township (Kent Co.)



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Chris Bauer, PhD, HSP, CFS, Bauer Ethics Seminars, Nashville, Tenn.

Contact Bauer at (800) 884-1569 or email [email protected], or visit

www.bauerethicsseminars.com.

See page 20 for a continuing education self-assessment, worth 2.0 elective credits in MTA’s Township Governance Academy.

be ineffective—it doesn’t allow the discussion necessary to assure that any real or perceived barriers to implementation of the training material are managed appropriately and effectively. That doesn’t mean that online training might not be a terrific component of your training program—just don’t settle for that being all that you do.

As to whether ethics and values training is too costly, consider this: if your township is losing 3 to 5 percent of its bottom line each year to ethical and legal problems—and most research suggests that most local governments are—wouldn’t it be worth a lot to your township to be able to reduce that? Research by both the Association of Certified Fraud Examiners and the Ethics Resource Center has independently found that organizations that develop an effective ethics training program reduce their losses by as much as 50 percent. If you could see those types of savings year after year, that would be considerably more than you would spend on developing and implementing an effective ethics and values training program for your officials, employees and volunteers.

Remember, training is critical for any newly elected or appointed officials in your township, as well as new staff members. If your township is low on cash to bring someone in to help, why not do it collaboratively with neighboring townships? The Michigan Townships Association also frequently offers ethics training at its Annual Educational Conference (held Jan. 22-25, 2013, in Detroit), as well as other avenues, such as its Professional Development Retreats (slated for next June).

If individuals in your township see investing in the development of a culture of ethics as simply being some kind of “feel-good” exercise, let them know that the process is far more than that—the bottom-line savings can be huge.

WHERE TO STARTGetting started may be the simplest part of the process. You just have to decide, as a township, to start. Once you have a commitment, you’ll need to have some tough discussions about how you want your culture of ethics and values to look and act.

Once those decisions are made, there isn’t much that is complicated. Difficult at times? Absolutely—because there will always be differences in opinion as to what your township’s most important, most persistent values really are. However, with a clear vision in mind and your “toolbox” filled with the best tools you can create, you’ll be well on your way. ■


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Chris Bauer, PhD, HSP, CFS, Bauer Ethics Seminars, Nashville, Tenn.

Contact Bauer at (800) 884-1569 or email [email protected], or visit

www.bauerethicsseminars.com.

See page 20 for a continuing education self-assessment, worth 2.0 elective credits in MTA’s Township Governance Academy.

be ineffective—it doesn’t allow the discussion necessary to assure that any real or perceived barriers to implementation of the training material are managed appropriately and effectively. That doesn’t mean that online training might not be a terrific component of your training program—just don’t settle for that being all that you do.

As to whether ethics and values training is too costly, consider this: if your township is losing 3 to 5 percent of its bottom line each year to ethical and legal problems—and most research suggests that most local governments are—wouldn’t it be worth a lot to your township to be able to reduce that? Research by both the Association of Certified Fraud Examiners and the Ethics Resource Center has independently found that organizations that develop an effective ethics training program reduce their losses by as much as 50 percent. If you could see those types of savings year after year, that would be considerably more than you would spend on developing and implementing an effective ethics and values training program for your officials, employees and volunteers.

Remember, training is critical for any newly elected or appointed officials in your township, as well as new staff members. If your township is low on cash to bring someone in to help, why not do it collaboratively with neighboring townships? The Michigan Townships Association also frequently offers ethics training at its Annual Educational Conference (held Jan. 22-25, 2013, in Detroit), as well as other avenues, such as its Professional Development Retreats (slated for next June).

If individuals in your township see investing in the development of a culture of ethics as simply being some kind of “feel-good” exercise, let them know that the process is far more than that—the bottom-line savings can be huge.

WHERE TO STARTGetting started may be the simplest part of the process. You just have to decide, as a township, to start. Once you have a commitment, you’ll need to have some tough discussions about how you want your culture of ethics and values to look and act.

Once those decisions are made, there isn’t much that is complicated. Difficult at times? Absolutely—because there will always be differences in opinion as to what your township’s most important, most persistent values really are. However, with a clear vision in mind and your “toolbox” filled with the best tools you can create, you’ll be well on your way. ■

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Economic PerspectivesRussell T. Price, CFA® Senior Economist August 24, 2012

This month we diverge from our normal format in order to take a deeper look at the pending “fiscal cliff” and the status of debt in America. THE FISCAL CLIFF AND AMERICAN DEBT Here’s an idea for stimulating the economy: A credible long-term budget plan. The U.S. economy remains mired in the slowest post-recession recovery of our time; and normal avenues of relief, monetary policy (i.e. interest rates) and fiscal policy (government spending), are in no position to help. In fact, politicians could make the situation even worse if they act irresponsibly over the intermediate-term. The U.S. economy is all but certain to enter a new recession in 2013 without some rational action from Washington. Under current law, federal tax rates are scheduled to jump and spending set to drop on January 1, 2013 – i.e. the oft-termed “fiscal cliff”. Democrats and Republicans have pledged their desire to avoid such negative near-term economic consequences. However, the dilemma for policy makers is that without some of these adjustments, U.S. government debt continues to rise, and could soon embark on a very dangerous path.

Source: Congressional Budget Office

Time to choose our course. The chart below shows U.S. federal government debt as a percentage of gross domestic product (GDP) on a historical basis, as well as two potential paths as projected by the nonpartisan U.S. Congressional Budget Office (CBO). Under the Extended Baseline

Scenario (EBS), federal government debt is projected to stabilize over the near-term and start on a downward sloping path beginning in 2015. This path is based on current law – that is, the assumption that all of the tax hikes and spending cuts currently scheduled to start in 2013 are actually implemented.

The Extended Alternative

Fiscal Scenario (EAFS), meanwhile, represents the projected debt path if no tax hikes or spending cuts occur (i.e. the path of least resistance for short-term focused politicians looking to get re-elected). Under this scenario, U.S. Federal debt rises ever higher before reaching 200% of GDP in 2037 and breaching 250% just 5 years later. Under this scenario, more than half of government revenue could be required just to cover interest expense by the end of the projection period. Clearly, changes are needed.

FOR IMPORTANT DISCLOSURES, INCLUDING POSSIBLE CONFLICTS OF INTEREST, PLEASE SEE THE LAST PAGE OF THIS DOCUMENT.


Economic Perspectives August 24, 2012

© 2012 Ameriprise Financial, Inc. All rights reserved. - Page 2 of 7

The most likely path ahead is somewhere between the CBO’s two projections. Over the intermediate-term (the sooner the better) elected officials must

develop a rational long-term budget plan whereby the debt burden eventually embarks on a declining path. However, the difficulty is doing so with as little harm to economic growth as possible, as growth can be a very powerful part of the solution. Stronger economic growth generates higher tax receipts (all else remaining equal), thus lowering deficits for any given level of spending.

Forecasters have long warned of a day of reckoning for the U.S. federal government, and it seems the time for hard decisions has finally come. If politicians wait until interest rates start to rise due to concern over the nation’s debt burden, it will likely be too late. Currently, the federal government enjoys historically low borrowing costs. This is largely due to a lack of available alternatives at a time when Europe is suffering under its own government debt crisis. Central banks have also been pumping-up liquidity and there is a glut of global capital looking for safe havens amidst an uncertain economic environment. However, even a modest one percentage point rise in average government borrowing costs would cost the U.S. Treasury an additional $120 billion annually (based on the CBO’s projection of U.S. federal debt at the end of fiscal 2012). For fiscal 2012, CBO projects interest expense will consume about 9% of government revenue. Thus, if average borrowing costs were to rise by just one percentage point, interest expense would grow to consume 13.5% of government revenue. A two percentage point hike would lift interest expense to over 18% of revenue. This story gets very ugly, very quickly. Clearly, the challenges of the U.S. federal budget are significant, and these challenges bring us back to that chart on page one. If we, as a nation, raise taxes sharply, and cut spending with equal fortitude, future budget deficits can be controlled and our debt burden reduced over time. This is exactly what current law calls for beginning in 2013 (i.e. the CBO’s “Baseline scenario”). However, such changes bring a significant cost to economic growth and paying down the government credit card could mean significant economic hardship. Really, the only question is whether we endure the hardship of these necessary changes all at once or slowly over time. This brings us to the “fiscal cliff”. The term “fiscal cliff” refers to the multitude of tax hikes and spending cuts scheduled to start in 2013 under current federal law. The term implies that the economy could “go over a cliff” if all these fiscal changes are implemented at once. Among the most pronounced changes, the personal income tax cuts enacted during the George W. Bush presidential term expire, the payroll tax cuts that working Americans have enjoyed over the last two years (from 6.2% to

4.2%) end, many more Americans would see their tax burden rise as they fall under the Alternative Minimum Tax (AMT), extended unemployment benefits run out, and the spending cuts negotiated under last year’s debt ceiling agreement are automatically implemented. In total, these and other scheduled adjustments could subtract nearly $800 billion from the U.S. economy next year, or about 5.5% of U.S. Gross Domestic Product (GDP). (Note: the projections in the table below, as sourced from the CBO, are for the federal government’s 2013 fiscal

year which runs from October 1, 2012 to September 30, 2013.)


Fortunately, we believe the odds of these changes all occurring as currently scheduled is slim. Both major political parties have voiced their strong desire to seek an alternative path as to avoid the negative economic consequences of these sudden adjustments, and there do appear to be many areas of common ground. For instance, Democrats and Republicans both support maintaining marginal income tax rates at 2012 levels for most income brackets. Republicans, however, want to keep current rates for all income brackets while Democrats propose allowing rates for upper-income groups to revert to prior levels. The chart at the top of the next page shows a comparison of 2012 tax rates to the 2013 rates as currently scheduled.

The Fiscal Cliff: $$ Valuein billions

Higher taxes:Expiration of certain income tax and estate and gift tax $221 provisions (1) as well as the indexing of the alternative

minimum tax (AMT) for inflation.

Expiration of 2% cut in payroll tax for workers $95Other expiring provisions $65New taxes associated with the Affordable Care Act $18

Subtotal $399

Lower spending:Automatic spending cuts specified under the Budget $65 Control Act of 2011.

Expiration of emergency unemployment benefits $26Reduced Medicare reimbursement for physicians $11

Subtotal $103

Other scheduled changes in Revenue or Spending $105

Total Value of changes in federal government taxation $607 or spending in fiscal 2013 before economic consideration




Source: Wall Street Journal, Congressional Budget Office

While we believe most if not all of the marginal income rates may be extended, the Wall Street Journal recently reported there seems to be some consensus building for allowing the payroll tax cuts to expire. We believe extended unemployment benefits are also unlikely to be renewed. Automatic Spending Cuts: The Budget Control Act of 2011 (the compromise agreement that finally ended last year’s debt ceiling debate), requires automatic government spending cuts amounting to approximately $1.0 trillion over the next 9 years. The cuts are split evenly between defense and non-discretionary programs (including constraints on Medicare spending growth) and are set to begin January 2013. For fiscal 2013, defense spending is slated to be cut by $55 billion, or about 9%, and another $55 billion will be culled from other non-defense programs. If fiscal cliff concerns were not enough, the Federal government is also closing in on its statutory debt ceiling once again. A recent Treasury Department statement noted that the debt limit will likely be reached by year-end but "extraordinary measures" would be used to fund the government through early next year. Overall, we believe the debt ceiling issue is much less likely to become the “crisis event” it was last year, at least not as a singular issue. Why? Primarily because resolving the myriad of challenges that make up the fiscal cliff will already require some sort of grand long-term budget plan. If a compromise is reached, the debt ceiling will likely be adjusted accordingly as part of any such deal.

Currently, we believe Congress will act before year-end to provide a temporary extension of most fiscal cliff related issues into the first half of 2013 (June maybe?). A temporary extension would provide time for a more rational discussion of these very important long-term issues, but it would also likely delay improvements in consumer and business confidence. Near-term Economic Implications: U.S. economic activity could fall by 3% to 4% in 2013 if Congress were to take no action and all of the fiscal cliff related issues were allowed to proceed as scheduled. Businesses are understandably concerned about their future business prospects under such a threat – and confidence in Washington to fix the problem in a timely manner is understandably questioned. As such, we believe job growth is unlikely to improve much until businesses see greater clarity on the fiscal front. Currently, we see economic growth for the second half of 2012 as being no better than the first half’s anemic pace. For 2013, we are currently assuming the payroll tax cuts are allowed to expire and that some level of spending cuts (~$50- $100 billion) are indeed implemented. Adjustments of this magnitude should still enable the U.S. economy to continue on its path of modest economic recovery while allowing greater budget rationalization to be implemented over time. Additionally, U.S. economic activity is clearly not dictated by government tax and spending policies alone. While the government sector struggles, consumer and corporate fundamentals are much improved. The recession in Europe should also largely have run its course by the end of this year, and many of the world’s developing economies should see the benefit of the economic stimulus programs currently being implemented. Source: Commerce Department, Ameriprise Financial Services, Inc.

Major tax rates slated to change in 2013 - under current law.

2012 2013Marginal Income Tax Rates: rates rates

Over $388,350 35.0% 39.6%

$217,450-388,350 33.0% 36.0%

$142,700-217,450 28.0% 31.0%

$70,700-142,700 25.0% 28.0%

$17,400-70,700 15.0% 15.0%

Investment income tax rates:

Top dividend personaltax rate 15.0% income rate

Top capital gains 15.0% 20.0%tax rate

Payroll Taxes 4.2% 6.2%

Note: Investment income above $200,000 for individuals and $250,000

for couples will also be subject to a 3.8% tax under provisions of the

Affordable Care Act starting in 2013.




Long-term View: The chart below shows U.S. government revenue and spending as a percentage of GDP since 1950. The grey shaded area depicts revenue and spending as projected by the CBO under its Alternative Fiscal Scenario. The tremendous budget gap projected under this scenario is simply incompatible with the long-held American assumption of a sound economy. Source: Congressional Budget Office

Over the last six decades, federal government revenue has generally run in a range of 18% -20% of GDP. Spending, meanwhile, has generally been in a range of 19%-21%, albeit for a few temporary, recession related spikes. In our view, targeting a return to these historical averages over the intermediate-term is the most responsible course of action. This would likely require a 20/80 split between higher taxation and spending cuts. Source: Congressional Budget Office


Democrats and Republicans have different views on how best to manage the federal government’s role in the American economy. Either side, however, will find their policy desires significantly constrained by budget realities over the next decade and beyond. The unfunded promises made to the American people by past legislators are now coming due. Did you know? Federal government debt is sometimes referred to as being approximately $10-$11 trillion, and other times referred to as being about $14-$15 trillion. Which is right? Actually both are. At the end of Q1-2012, the U.S. federal government had issued and outstanding

Treasury securities amounting to $10.9 trillion. However, the federal government has also “borrowed” approximately $4 trillion from the Social Security Trust Fund and other inter-government sources.

In evaluating the government’s debt position, analysts typically use the $10.9 trillion figure. Why this one? Most notably because this is the amount of debt that is actually issued and outstanding. The Social Security Trust Fund is, functionally, little more than an accounting entry. In reality, the federal government treats Social Security income taxes as revenue and makes payments to recipients out of incoming revenue – a process often referred to as a “pay as you go” system.




DEBT IN AMERICA: A BROADER PERSPECTIVE The news on American debt is not all bad. At the end of 2011, total U.S. debt, for all sectors of the economy, stood at $38.1 trillion, according to Federal Reserve data. The break-out of where that debt stood is shown in the chart below. The dollar figures are certainly huge, but we believe a closer examination supports our view that consumer and business debt loads are actually quite manageable, and even in a position to support economic growth going forward. Source: Federal Reserve, Ameriprise Financial Services, Inc.

The total dollar figure of debt does not tell us the whole story needed to make a proper evaluation. The first order of business should be to look at the total debt in relation to the underlying economy that it supports. As a ratio of nominal U.S. GDP, total debt currently stands at a historically high 250%. Debt levels started the 1980’s with a ratio of about 140%, a level that had basically been maintained consistently since the mid-50’s. Source: Federal Reserve, Ameriprise Financial Services, Inc.

Debt levels jumped in the early 1980’s as the Federal Reserve began lowering interest rates from their historic highs (in July 1981 the average 30-year mortgage came with an interest rate of 16.8% according to Freddie Mac) and government spending on Defense was sharply expanded. Federal debt as a percentage of GDP ended 1981 at 25% and closed the decade at 40%. The total debt ratio then held fairly steady at around 180% of GDP through most of the 1990’s. But beginning in 2001, a combination of rising federal deficits and a sharp expansion of mortgage debt due to the “housing bubble,” the debt ratio progressed to its current lofty levels. The debt ratio, however, does not tell us the whole story either. If we look at the absolute financial health of each economic segment, it shows sharp differences in exactly who is too deeply in debt, and who holds what could be considered efficient leverage. Most notably, the U.S. business sector appears to be in strong financial shape despite its large dollar value of debt. As shown in the chart below, corporate debt in relation to corporate financial assets is currently at its best levels since the Federal Reserve began tracking the data in the early 1950’s. Source: Federal Reserve, Ameriprise Financial Services, Inc.

Consumers have also done a fairly good job over the last several years in deleveraging. Of course, current debt burdens are softened by today’s record low interest rates, but the dollar value of consumer debt has also declined. In the first quarter of 2012, consumer credit card borrowings were 16% below their 2008 peak. The improved consumer balance sheet is also evident in the Fed’s Consumer Financial Obligations Ratio (see chart at top of next page).

Mortgage, $9.8

Consumer Credit, $2.5

Business sector, $11.6

Federal govt, $10.5

State and Local gov't,

$3.1

Total: $38.1 trillion

All figures in trillions $Numbers may not add up due to rounding

0.4

0.5

0.6

0.7

0.8

0.9

1

1.1

1.2

1952

Q1

1956

Q1

1960

Q1

1964

Q1

1968

Q1

1972

Q1

1976

Q1

1980

Q1

1984

Q1

1988

Q1

1992

Q1

1996

Q1

2000

Q1

2004

Q1

2008

Q1

2012

Q1

Ratio of financial assets to total liabilities for U.S. corporations

0%

50%

100%

150%

200%

250%

300%

Tota

l deb

t /

Nom

inal

GD

P

Total U.S. debt ratio




Source: Thomson Baseline

The Federal Reserve’s Financial Obligations Ratio measures required consumer debt payments (principal and interest) associated with mortgage payments, rent, auto leases, homeowners insurance, property taxes and credit card payments; all as a combined percentage of disposable income. As shown, the ratio has declined sharply over the last few years and is close to matching the 20-year low set after the last financial crisis induced recession (the Savings and Loan crisis) in the early 1990’s.

Additionally, according to the credit rating agency TransUnion, the number of auto loans with a past-due payment fell to its lowest level in over a decade during the second quarter. The company has been tracking such data since 1999 and the 0.33% of loans with a payment at least 60 days past due was the lowest ever recorded. More broadly, in the first quarter (second quarter data not yet available) the percentage of consumer loans and credit card payments considered delinquent fell to its lowest levels since the Federal Reserve began keeping track of the data in 1991. Source: Thomson Baseline

SUMMARY How Washington handles the “fiscal cliff” will be very important to determining America’s near-term economic path. However, we believe there is political consensus for allowing tax hikes and spending cuts to ease into the economy over time as to cushion the economic impact. Additionally, we believe fundamentals within the consumer and corporate sectors of the economy are in much stronger position to support economic growth and thus offset our necessary government austerity. Currently, we expect the U.S. economy should grow at an approximate pace of 1.5% to 2.0% over the first half of 2013 and ultimately achieve a full-year growth rate of 2.0% to 2.5%. Regardless of who wins in November, elected officials face very stark budgetary decisions. The Federal government simply cannot pay the promised level of benefits with the promised level of taxes. This has long been the case, but the shortfall was obscured by easy borrowing. Without rational adjustment, borrowing could become an untenable proposition - as currently evidenced in Europe.

RISKS

Though we have confidence in our forecast of a slow, continuing economic recovery, we recognize that a number of serious economic and financial market challenges remain. The European Sovereign Debt crisis remains very dynamic and subject to market sentiment. Should this situation actually come to a “make-or-break” crisis momentum, we are somewhat confident the European Central Bank would step in as a lender of last resort, but such support is far from guaranteed.

Government debt loads are exceptionally high in many of the world’s developed economies. The hard choices associated with correcting these imbalances is likely to weigh on economic performance for some time; but allowing debt levels to continue higher would ultimately be much worse.

Additionally, we are in unchartered territory in terms of potential policy response should the economic recovery falter. Monetary and fiscal policy, the traditional levers of stimulus employed to counter a downturn, are largely exhausted. Interest rates have very little room to go lower and government debts are already on an unsustainable path. Should another adverse global economic shock occur over the intermediate-term, there is little government officials could do to directly counteract the results.

Oil and other commodity prices also pose a risk to the economic outlook. Crude oil prices have the potential to place a ceiling on global growth prospects as prices seem to rise with every sign of economic life, as would potential spikes related to tensions with Iran.




DIRECTOR OF RESEARCH Lyle B. Schonberger - Vice President

SECTOR ANALYSTS Consumer Goods and Services Patrick Diedrickson, CFA

Energy/Utilities Leze Thaqi

Financial Services Lori Wilking

Health Care E. Eugene Robinson

Industrials/Materials Frederick M. Schultz

Technology/Telecommunication Justin H. Burgin

STRATEGISTS Senior Economist Russell T. Price, CFA

Senior Market Strategist Marc A. Zabicki, CFA

PACKAGED PRODUCT ANALYST (Open-End, Closed-End, & Exchange Traded Funds (ETFs))

Anthony M. Saglimbene

FIXED INCOME RESEARCH Brian M. Erickson, CFA - Director

ADMINISTRATIVE ASSISTANT Annie M. Kosek

IMPORTANT DISCLOSURES The views expressed in this publication reflect the personal views of the Ameriprise Financial Services, Inc. analyst(s) authoring the publication. Further, Ameriprise Financial Services, Inc. analyst compensation is neither directly nor indirectly related to the specific recommendations or views contained in this publication. For important disclosures on securities mentioned in this analysis, please review available third party research reports and charts with applicable disclosures on our website at ameriprise.com, or through your financial advisor, or by submitting a written request to Ameriprise Financial Services, Inc., 1441 West Long Lake Road, Suite 250, Troy, MI, 48098.

Standard & Poor's 500® Index (S&P 500®) is comprised of 500 stocks representing major U.S. industrial sectors. Performance figures are inclusive of dividends reinvested. S&P 500 is a registered service mark of The McGraw-Hill Companies, Inc. It is not possible to invest directly in an index.

International investing involves increased risk and volatility due to political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets.

DISCLAIMER SECTION Except for the historical information contained herein, certain matters in this report are forward-looking statements or projections that are dependent upon certain risks and uncertainties, including but not limited to, such factors and considerations as general market volatility, global economic and geopolitical impacts, fiscal and monetary policy, liquidity, the level of interest rates, and historical sector performance relationships as they relate to the business and economic cycle.

This summary is based upon financial information and statistical data obtained from sources deemed reliable, but in no way is warranted by Ameriprise Financial Services, Inc. as to accuracy or completeness. This is not a solicitation by Ameriprise Financial Services, Inc. of any order to buy or sell securities. This Summary is based exclusively on an analysis of general current market conditions, rather than the suitability of a specific proposed securities transaction. We will not advise you as to any change in figures or our views.

Past performance is no guarantee of future performance.

Brokerage, investment and financial advisory services are made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC. Additional information on the securities mentioned is available upon written request. Some products and services described may not be available in all jurisdictions or to all clients.

Investment products are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. Neither Ameriprise Financial, nor any of its advisors or representatives, provides tax advice.

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