Public hearing March 7, 2012
On January 31, 2012 the Clinton County Board of Commissioners voted to set a public hearing date to consider merging the County Clerk and Register of Deeds offices. The public hearing is scheduled Wednesday, March 7, 2012, 7:00 p.m. in the Board of Commissioners Room, County Courthouse, 100 E. State Street, St. Johns, MI.
The Register of Deeds is the elected official responsible for maintaining all of the land and property records of the county, Uniform Commercial Code filings, passport processing, and serves as Chair of the Plat Board. The County Clerk is the elected official who serves as the Clerk of the Court, Registrar of Vital Records, Jury Board, Gun Board, Board of Canvassers, Board of Commissioners, Apportionment Commission, County Election Commission and is a member of the Plat Board.
Under consolidation, one elected official would be responsible for all of the duties of both offices.
In August 2011, the County Administrator issued a report, “Review of Consolidation of the Offices of County Clerk and Register of Deeds”. The report concluded that consolidation may result in an annual cost savings of between $10,000 and $16,000 dollars. No other benefits were cited in the report. Accountability of the offices, impacts on performance, quality, service and operations of the Clerk and Register of Deeds offices were not considered in the report.
The acting Register of Deeds, Michelle Wilsey explained to the board that management decisions made in the Register of Deeds office in the past and since her appointment in July have resulted in lower costs and increased revenue greater than the possible cost savings from consolidation. Eliminating the post may actually hurt, not help the bottom line.
According to Wilsey, “Consolidation may make sense if there are clear benefits – significant cost savings, performance improvements, service quality…something. In this case, there are no clear benefits and citizens lose direct accountability of the office.”
Of Michigan’s 83 counties, 30 have combined offices, 4 have voted to combine in 2013, 3 have recently decided not to combine and 2 others considered it but let the issue drop.
Public input on the matter will be taken up at the meeting scheduled Wednesday, March 7, 2012, 7:00 p.m. at the Clinton County Courthouse.
Merger Analysis Clerk / Register Of Deeds Clinton County Discussion Paper
The Clinton County Board of Commissioners is considering the combination of the Clerk and Register of Deeds Offices. This is legally permissible under the Michigan Constitution and compiled law. It is a strategy other communities have studied and acted upon at various points in time.
Some counties have proceeded with combination, some have considered it and decided not to combine, some have combined and later separated the offices, while others have not considered the issue at all. The economic downturn has spurred many communities to revisit this, among many other issues, as a possible means to achieve cost savings. This is a legitimate area of inquiry for Clinton County as this county faces its own fiscal challenges.
The purpose of this discussion paper is to provide information to support the Board’s due diligence in determining whether the potential merger sufficiently benefits Clinton County.
An examination of merger should be based on an understanding and analysis of the mission, performance and cost efficiency of each of the target units and whether there would be gains and/or losses as a result of the merger.
My comments and observations are based on my experience with the Register of Deeds office since my appointment in July 2011.
Register Of Deeds Mission / Relevancy
Questions for the county board are: Is the current structure/unit achieving the mission? Would a combined unit or restructured office continue to achieve the mission?
I think it is fair to assume the mission of the Register of Deeds could be met in any number of ways – as a stand-alone unit, combined with the Clerk’s Office or combined with another related department like equalization, or, if industry has its way, as a privatized or federalized function removed from county jurisdiction.
The question is: What works best for Clinton County?
The Register of Deeds is responsible for building and maintaining the land records infrastructure for the county. What we do impacts the real estate, banking, mortgage, and title industries and every citizen who owns or has an interest in property. The public land records system underpins all financial and economic transactions dealing with land and property. It is relied on for major financial decisions (every single real estate transaction, development, commercial transactions, mortgages, foreclosures, liens, etc.) and adjudication of disputes and discrepancies over property and land by the courts. There is no dispute that our economy will continue to rely on a land records system. The mission of the Register of Deeds is well-defined and remains relevant.
If the Register of Deeds unit is relevant then the issues deal with function, performance and costs/revenue.
Function
The primary function of the Register of Deeds is to build, manage, and make a land records system available to the public. Recording in the Register of Deeds is a function, system and process distinct from filing of documents with the County Clerk. Recording is a legal process, directed and influenced by a large body of statutes, and includes multiple steps, processes, systems and technology.
Recording involves: receipt of legally executed documents, maintaining those documents in order of receipt, reviewing those documents to determine whether they meet statutory recording requirements, verifying certain information contained within or referenced by the document is valid and correct, returning documents for correction, making sure recording order of related documents is correct, interpreting and securing (or verifying) certain necessary verifications are present on certain documents (notarizations, tax certificates, seals, wet signatures, electronic signatures, etc.), verifying fees and payments are correct, tracking of fees for distribution to multiple entities, correctly indexing information contained within documents, verifying indexed information before releasing originals, maintaining secure custody of all original documents (and attachments) throughout the process, executing accurate return of original documents.
After recording, it is necessary to make all of those records available to the public (forever – all documents from the time of initial land patents from the federal government) and to decide in what forms documents will be available. Systems of access are built and maintained to meet this statutory requirement and also to accelerate the ease of executing business and land transactions in the county (and by extension, the country). These systems include physical access – binding and organization of historical and current records, transfer of these records to new technology (e.g., paper – microfilm- microfiche-digital images), and now to electronic platforms accessible from any location. Technology will continue to transform over time, pressured by the financial, real estate and commercial industries, and the land records infrastructure will have to keep pace through careful management and migration from technology to technology. Security of physical and digital records and information will be an increasing challenge and pressure going forward as this environment continues to evolve.
In addition to all land records, the Register is responsible for recording documents related to the Uniform Commercial Code (UCC) and Chairing the Plat Board. Pressures and demands in these areas have shifted with the economy and legal framework. UCC activity, ROD function, has remained consistent with land records. Plat Board is a shared function with the Clerk and Treasurer. This function is a Peak function and varies substantially with the economy.
All ROD tasks have to be accomplished in a complex and changing legal, regulatory, and industry framework. Since I started in July I have dealt with state and federal policy and legal issues and litigation related to foreclosures, Mortgage Electronic Registration Systems, transfer tax, pricing and fees, etc. Some changes the industry has imposed or challenged. Decisions have and will continue to be made through very uncertain legal territory.
The Register of Deeds office routinely receives, assesses, and processes approximately 70-80 different conveyances and document types. Approximately 30 additional document types are received less frequently. Clients of the Register of Deeds office include title companies, lending institutions, attorneys, credit bureaus, insurance companies, realtors, project managers, developers, surveyors, business owners, numerous federal and state agencies, county offices (drain, sheriff, equalization, treasurer), local assessors, and every resident who owns or has an interest in property in Clinton County. Examples of large industry clients we interact with daily include ReconTrust/Bank of America, Wells Fargo, Chase, CitiMortgage/Verdugo, Fifth Third, Nationwide Title Clearing, ServiceLink, First American, Fidelity, PNC, CoreLogic, LSI Title. Examples of local clients include: Greenstone Farm Credit Services, Trinity Engineering, Midstate Title, MSU Federal Credit Union, Transnation Title, etc.
All of these clients rely on the integrity and efficiency of the recording system to secure their interests (or the interests of their clients), to make significant financial decisions, and to execute economic, legal and and business transactions. Each has the ability to hold Register of Deeds directly accountable if there are problems. In addition to statutory duties, the Register of Deeds Office also serves as a passport acceptance agency and provides governmental support services such as notarial acts, copies, information services, etc.
Performance
Since my appointment as Clinton County Register of Deeds, I have evaluated the performance of the office and infrastructure with the input of industry, staff, administration, and previous management.
In general, my findings are:
No major problems or deficiencies in the office existed, though there were some tensions and areas in need of improvement. The office was accomplishing its statutory task and generally had a positive reputation in the industry.
However, performance in some critical areas was below industry standards.
For example, certification dates of documents were up to 2 weeks despite relatively low volume, this in turn caused the return period for original documents to be excessively long, the percentage of same day recordings was not at the level it should be, back indexing was occurring at a nominal rate, migration to new technologies (routine office and specific infrastructure systems) was flat. Management, due to uncertainty, retirement, etc., had become passive in some respects.
Staff morale was relatively low. With active management, performance goals were set, measured and met, employees were engaged, and improvement in the areas mentioned has occurred. Certification is now consistently the previous business day, most recordings are accomplished the same day, there was only 1 report of a lost/mishandled original document (which later was found by the client), indexing of current documents is accurate, and we made significant improvements in the speed and efficiency of back-indexing during a pilot project.
There is more progress to be made and clients and citizens know their input directly impacts decisions of the Register.
Active, informed management is able to seek, evaluate and exploit opportunities and efficiencies for the benefit the infrastructure, industry, residents, staff and the county. To illustrate, input from clients prompted me to review current pricing, cost allocation and agreements. This review led to changes that decreased prices to industry, increased revenue to the county, while decreasing litigation risk. It was a complex, time consuming management task that may never have occurred under combined/indirect management.
This structural pricing change alone more than offsets any projected potential savings from merger or combination. Part of the management learning that leads to successful change comes from being involved in every step of the business process and not relying on the status quo.
Other recent examples of active management benefits include review of staff assessment of fees resulting in more consistent customer service and increased fee collection (related to searches, copies and general services). Improved efficiency (and lower costs) through implementation, coaching and use of general technologies, strategic assessment and implementation of major technologies (credit card acceptance, eRecording), improved communication with industry, staff and administration. Progress toward current performance goals continues and additional opportunities exist for improvement. These can most effectively be pursued under active, informed management.
Also, active management plays a role in meeting performance goals. Working, knowledgeable management can quickly shift to support staff functions during periods of peak demand and complete management responsibilities outside of regular business hours when necessary. In a combined scenario, this would either require overtime for staff or declines in performance during periods of increased demand and accountability could be deflected.
Revenues/Costs
Overall revenues in Register of Deeds are driven in large part by the economy. Under the same conditions however, direct management will nearly always improve overall performance relative to layered, indirect management. For example, when I evaluated the budget in July 2011, ROD was running 15-22% behind budget in all revenue categories. In the last two quarters ROD recovered the 15-22% and ended at or above budget projections for the year-end (105% or $18,602 above estimated revenue). ROD fees and tax, two areas directly related to the economy, exceeded budget by 2.6%, and 2.4% respectively. ROD service fees, which are more reliant on management, however were up by 3.7%. This demonstrates that while the economy picked up, management changes and attention in certain revenue categories – specifically services, searches, pricing – helped close the gap while improving overall performance.
Direct management also plays a role in managing costs. Careful assessment and attention to costs ROD costs lead to a 6.4% reduction in Regular ROD operating and salary/wages/fringe expenses ($17,335.60) and even larger reductions in expenses for Plat Board (91.8%) and tech fund (34.7%).
Direct management also provides more reliable information to county management (Board of Commissioners and Administration) to support budget, legal, management, policy, risk management and other decisions.
Conclusions
There is no evidence that the Register Of Deeds does not have a critical mission, would save money or would perform better under combined elected office. What is clear is that accountability and the benefits of direct management would be lost. Administration’s independent analysis of potential savings is nominal (range of 10-16k per year) and is more than offset by gains of direct management of the unit. No one has made the argument that there would be savings from reductions in the Clerk’s office. There are no compatible or integrated functions that would results in greater efficiency or lower costs.
Other counties have combined. Many of the combined offices are in the Upper Peninsula and Northern Michigan and have been combined since they became counties. Others were combined back in the economic downturn in the late 1970’s early 1980’s as a cost saving measure. If you consider only cost (not accountability, performance, etc) there is greater benefit for large counties as they tend to have larger staffs, higher salaries, pension costs, medical costs, etc. But even in those counties, there is no data or even anecdotal information exists that demonstrate actual savings.
For those counties who proceeded for expected cost savings, some have not made the structural choices that have been made in Clinton County. They have not shifted from defined benefit to defined contribution for retirement, they have not contained healthcare costs, they have not funded liabilities, they have not managed escalation in wages and salaries, they are facing significant budget deficits. Clinton County does not. That is why the potential cost savings is small.
As a result of this information and my direct experience in the office, I believe direct management of each office will yield better results (in terms of costs, performance, and accountability) for the county than combination.
Another issue that should be considered is more global. Industry is actively pursuing privatization and/or federalization of portions of the land records infrastructure.
The Mortgage Electronic Registration System (MERS) model is an example. MERS has undermined the integrity of the public land records system. Despite this, there are proposals to continue the expansion of MERS and to move toward federalization. It certainly won’t happen overnight, but already is occurring. The financial incentive is there for industry to pursue this. With each decision to subordinate the Register of Deeds position (which is for practical purposes what combination does) counties are lending strength to the movement to remove or minimize counties role with land records. Combined executives express that they have neither the time nor knowledge to push back.
Each individual county would not necessarily take this into consideration during their combination analysis. However, it is sort of a “can’t see the forest for the trees” situation. I have sent, under separate cover, a recent email and related paper that helps illustrate this issue. It is from The National Association of Independent Land Title Agents (NAILTA). They are rarely on the same page as Registers of Deeds, however, this is a situation where there are common interests.