I used to assume that city manager Jonathan Smith made a lot of honest mistakes. I question that assumption now, because there are far too many examples of Smith doing something first and then asking the city council for permission – after he got what he wanted. Acting this way conveniently allows him to sidestep legitimate questions and any risk of being told “no” by the city council. We learned about the latest example of city manager’s overreach at the April 24, 2023, city council meeting.
The city charges $200 to reserve all or part of Depot Park for an event, even though there isn’t a published fee schedule or any specific instructions on the city’s website explaining how one goes about making such a reservation. (There is a form to apply for “special events” approval, but that shows a $25 “admin fee” and an hourly fee for DPW.) The city council will sometimes waive the park use fee, but it needs to be formally asked to do so at a meeting open to the public. At that time, council members can question the person requesting the waiver, and the public gets to see how our money is being spent – because fee waivers are essentially a give-away of revenue the city would otherwise receive that could be used for things that would directly benefit the taxpayers.
At the August 8, 2022, city council meeting, Smith told the council that the organizers for larger events, such as the Taste of Clarkston, Concerts in the Park, and Art in the Village, also make a “donation” toward Department of Public Works (DPW) employee wages associated with the events, but no one tracks the labor hours when considering the amount of the donation. (Informal city council meeting transcript linked here.) Gosh, that’s odd, considering that taxpayers are required to pay all the wages (and taxes) associated with DPW work hours, work hours would easily be available by looking at the daily time records of our two DPW employees, and the city obviously knows how much we pay in wage-related matches (such as the employer contribution toward the employee’s social security benefits). In addition, the city park ordinance requires fees for “special event use of the park … per the schedule adopted by the City Council.” § 92.07(H). The fee schedule on the city web site provides for a $25 administrative fee and $25 per hour per DPW worker “for events if needed.” So, this “donation” stuff is some kind of alternative to actually enforcing the park ordinance and another instance of the city manager just doing what he wants. Such a lackadaisical attitude toward taxpayer reimbursement is consistent with the city’s penchant for freely spending taxpayer dollars on unnecessary things at the expense of the necessary ones.
Keep in mind that any time the city doesn’t collect a user fee, or doesn’t get reimbursed for actual city wages, this amounts to a donation that the city is forcing you as a taxpayer to make to these organizations. Whether you think these forced donations are worth it or not, you should also remember that the city constantly whines it doesn’t have enough revenue for basic city operations and plans to ask you for boatloads of millage and/or bond money this coming November.
At the April 24th meeting, the city council was asked to consider a Depot Park user fee waiver in connection with a planned event by the Milo Project. The Milo Project is a self-funded program created by local resident Jeff Chamberlain, and its focus is to help elementary school children with self-confidence and bullying issues. Chamberlain told the city council that the Milo Project is not a “501(c)(3)” organization. (A 501(c)(3) organization receives special tax breaks not given to other organizations – or to you.) Toward the end of the discussion, after the city council granted the $200 Depot Park user fee waiver, councilmember Amanda Forte asked the city manager how often the city council waives Depot Park user fees. In response, the city manager said:
Well, the 501(c)(3)s, that’s the pattern or the agreement we’ve previously had with councils that we do that, and since Smith has a $500 approval authorization, if they ask Smith for it, he will give that automatically. Chamberlain was a little different, because he’s not a 501(c)(3), so Smith said if you want this, you’re going to have to come to council. But people who are going to have their wedding, Smith doesn’t even entertain that, he doesn’t even tell them that [the possibility of a $200 fee waiver is] an option.
(Informal city council meeting transcript linked here, bracketed comment inserted by Clarkston Secrets.)
A “pattern or agreement” that allows the city manager to make revenue-related decisions? Horse manure. The city manager knows full well that he does not have carte blanche authority to decline any revenue stream on behalf of city taxpayers. I’m unaware of any city council resolution that grants him such authority (but of course we wouldn’t be able to find one even if it existed, since the city has never codified its resolutions as required by the charter and they are not otherwise easily available on the city’s website). Even if city council approved such a resolution, I would question its legitimacy under the city charter. (FYI, I sent a FOIA request to the city for a list of all the times that the city manager waived Depot Park usage fees over the last two years without city council consent.)
So, what does it mean to be a “501(c)(3)”? A 501(c)(3) organization, sometimes called a “non-profit” or a “501(c)(3) non-profit,” simply refers to certain privileged organizations that are excused from paying federal taxes. “501(c)(3)” is a reference to the United States Code, more fully cited as 26 USC § 501. “501” is the section, and “(c)(3)” is the subsection. (I’ve linked the code section here.) If you’re interested, the Internal Revenue Service’s website has a page devoted to non-profit organizations that I’ve linked here. Essentially, entities that are organized for the purpose of “charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals” are eligible to apply for this very lucrative benefit.
The extremely favorable treatment given to non-profits doesn’t stop with the avoidance of federal tax; it also extends to State of Michigan tax avoidance as well. As the Michigan Nonprofit Association’s (MNA’s) website explains in its step-by-step guidance, once an organization receives 501(c)(3) status from the federal government, they are allowed to avoid not only Michigan income tax, but they are also able to skip out of paying Michigan sales and use taxes that other organizations (and you) have to pay. (I’ve linked to the MNA’s website here and the Michigan statute here.) Dang, just imagine how sweet your life would be if you didn’t have to pay any state income tax, federal income tax, and no Michigan sales or use taxes.
Oh, and don’t make the mistake of confusing the phrase “non-profit” with the word “poor.” While there are some non-profit organizations that are poor in the sense that they budget on a shoestring and operate only with volunteers, that’s not a requirement. In fact, many non-profits rake in billions of dollars each year, all tax free, and when you look at the “charitable commitment” column in the Forbes listing of the top 100 nonprofits for the year 2022, you’ll see that some of these organizations are keeping a significant part of the proceeds for other uses.
Since the $200 Depot Park user fee waivers are essentially a forced gift from taxpayers to the non-profit, I think the non-profit should be required to submit their publicly filed tax forms to the city council along with their fee waiver request. This will demonstrate that the organization actually, financially needs the $200 gift (as opposed to just greedily asking for it because of their special little snowflake status that already saves them tons of money in tax avoidance).
Let’s get back to Smith’s claim that his “$500 approval authority” somehow gives him authorization to make decisions about the city’s revenue streams. Section 4.2 of the Clarkston Charter states that raising revenue is the responsibility of the city council, not the city manager. The city manager’s duties are described in section 5.3 of the Clarkston Charter, and there’s nothing in there that gives the city manager the authority to go around the city council and make independent revenue-related decisions. (The Charter is linked here).
Smith’s reference to his “$500 approval authority” undoubtedly comes from Chapter 30 of the Clarkston ordinances. Under the heading “Purchases and Sales,” Section 30-15(A)(1), the ordinance states: “The Council must approve all purchases and sales except that: (a) The City Manager may make purchases and sales up to $500 without prior Council approval . . .” (I’ve linked to Chapter 30 of the Clarkston ordinances here.)
Let’s look to the Cambridge dictionary for the meaning of “purchase” and “sale.” To “purchase” something means to buy it. A “sale” is “an act of exchanging something for money.” Clearly, Section 30-15(A)(1) is intended to pertain to procurement issues, not revenue waivers. When the city manager claims the authority to waive Depot Park user fees for a certain special few, he’s not buying or selling anything for the benefit of the city. In fact, he’s doing the opposite, because he’s giving away valuable city revenue – without city council authorization and outside of the public’s view – for the benefit of a private entity without regard to whether such a taxpayer-funded gift is financially needed or wise.
Is there a basis for the city manager’s claim that he’s entitled to give away revenue based on some sort of “pattern or agreement” with “past councils”? Let’s take a brief walk down memory lane for the last year and a half to see if that claim is supported by the facts. (Spoiler alert – it’s not.)
On November 22, 2021, the city council was asked to approve a $200 banner fee waiver for Team RUSH (the robotics team for Clarkston schools). There was no discussion to support a claim that the city manager could have independently waived this fee if he’d wanted to. (Informal city council meeting transcript linked here.)
On May 23, 2022, Smith was called on the carpet by former Councilmember Al Avery for doing exactly what he now claims he is entitled to do – waiving user fees without asking for council’s permission. Specifically, Avery was reacting to the city manager’s announcement that he’d unilaterally decided to waive paid parking fees in the Washington and Main parking lot for an entire week due to milling and repaving work on Main Street. I think it’s important to point out exactly why Avery said the city manager’s conduct was inappropriate (bolding is mine):
Avery said he had more of a procedural complaint. We have free parking for the week of May 23rd. He gets why, because we are losing spots while they’re doing the [construction], but technically, shouldn’t that come before the council to get a formal approval? Because we’re talking about money that’s coming to the city that we’re basically waiving our ability to get that. It wouldn’t be any different than Smith coming before the council because someone wants to use the park and we waive whatever the fee is for people to use that. That usually comes before us. Avery said that he thinks that in the future, if Smith wants to turn off the parking for a week, bring it before them so they can formally (gestured). Smith said all right, fair point.
(Informal city council meeting transcript linked here.)
Defenders of the errant city manager might say that waiving a banner fee for Team RUSH (who do not have 501(c)(3) status) and waiving paid parking in the Washington and Main lot for an entire week (which is more than $500 in lost revenue) is different than waiving a $200 Depot Park use fee for a non-profit. Fair enough. Fortunately, we have a recent example that is exactly on point.
On March 27, 2023, less than two months ago, the president of the Clarkston Arts group came to the city council to ask the city to waive the $200 Depot Park user fee for its planned August Harmony in the Park event. Clarkston Arts is a 501(c)(3), and the city council approved the fee waiver after discussion. (Informal city council meeting transcript linked here.) If the city manager really believed that there was some sort of “pattern or agreement” with the city council allowing him to use his “up to $500” authority to waive park use fees, why didn’t he just go ahead and do that for the Harmony in the Park event? Frankly, I think he didn’t do it because he is fully aware that waiving a source of revenue for the city goes beyond the scope of his authority, and he no doubt remembers councilmember Avery’s express admonition about doing exactly that.
So, what’s Smith really getting at? Well, I suspect that this is all about the Clarkston Community Historical Society (CCHS). City manager Smith is also the CCHS president, and his wife is CCHS’ sole employee. Last year, at the same meeting that someone else was told she would have to pay $200 to use the park for a movie night that would be free to participants, the city manager asked the city council to waive the Depot Park user fee for CCHS in connection with its huge “Art in the Village” fundraiser (sometimes referred to as “Art in the Park”), an event that occupies almost all of Depot Park for an entire weekend and renders it unusable to everyday visitors. At the July 25, 2022, city council meeting, Smith claimed that because the city council had “almost universally” waived fees for non-profits, he was now asking for a piece of that same consideration for his own non-profit. Councilmember Sue Wylie pointed out the obvious difference between the city manager’s non-profit and the others who’d come to the city council to ask for a user fee waiver:
Wylie said she would like to make a comment and doesn’t want to be the bad guy here. So, one of the reasons that she thinks they’ve waived the $200 fee for the other groups is it’s not a money-making opportunity for them and they probably don’t have much money. But you guys are making money. Smith said we don’t make money at the end of the year. We reinvest all of our money. Wylie said she means this event is a money-maker for you. Smith said well, yeah, sure, but it funds the museum for an entire year. Wylie said she understands, but to her, it is different. It’s a different kind of event, it’s not just a hot dog party, or a movie night. [Mayor] Haven said Wylie gets a chance to vote. Wylie said it’s there for a different purpose. [Former councilmember] Luginski said when it comes back next time as a resolution – interrupting Luginski, Haven said you get a chance to vote one way or the other (unintelligible crosstalk). Wylie said she understands, but Smith wanted a little feedback and there’s some feedback.
(Informal city council meeting transcript linked here, bracketed comments inserted by Clarkston Secrets.)
As it turns out, Wylie was right about CCHS. Since they are a non-profit, they must file a tax return that is available to the public. I looked at their 2019 tax return (the last time they’d held an “Art in the Village” before COVID shut everything down) and learned that for that year, the CCHS had:
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- $175,488 in net assets;
- $27,132 in investment income;
- $18,203 in net profits from Art in the Village; and
- $52,073 in total revenue.
Oh, and CCHS paid the city manager’s wife a salary of $16,356, which accounted for more than half of its $30,907 in reported expenses. CCHS’s program service accomplishments consisted of spending $16,926 to change the exhibits in a small area of the Clarkston Independence District Library two to three times and $1,834 on public education expenses. (If you’d like more details and to see the 2019 tax return for yourself, you can find it here.)
Clearly, the city manager and his non-profit didn’t need a $200 fee waiver courtesy of Clarkston taxpayers and in fact, Smith admitted that CCHS had paid the $200 fee in previous years. Smith told the city council that he was asking for the fee waiver simply because it had been given to others – even though Smith said that CCHS anticipated that its 2022 Art in the Village would be filled to maximum capacity with 120 vendors. (FYI, I’ll be asking for their 2022 tax return so I can learn just how profitable the 2022 event was, and I will continue to ask for their tax return every year that the city manager and CCHS take advantage of the taxpayers by asking for a $200 fee waiver that they clearly do not financially need.) Of course, the city manager got his fee waiver at the August 8, 2022, city council meeting. (Informal city council meeting transcript linked here.)
As I said, I think the city manager knows that he has no right to waive revenue-generating user fees. If I had to guess the reason why Smith made his comments at the April 24, 2023, city council meeting, I think that it was deliberately intended to lay the groundwork to allow Smith to claim the council was aware he was waiving Depot Park fees for non-profits should the question come up in the future. And it will be oh so convenient when it’s time for his own non-profit to get a waiver for its 2023 event, because he can just rubber stamp it using his “up to $500” purchase and sale ability.
If the public doesn’t see it, the public can’t complain about it, right?