Ann Arbor Politicos Dish Up Millions in Public Money & Give SPARK Pals A Pass On Public Accountability

by P.D. Lesko

I read a Tweet from Ann Arbor SPARK on November 17th: “Paul Krutko, Ann Arbor SPARK’s CEO, speaking at the VC breakfast in San Jose, California. http://twitpic.com/7felds.”

Krutko was the Chief Development Officer for the city of San Jose, California. He resigned from his job with two days notice after a breach of city policy that officials in San Jose refused to discuss. Emails and text messages ferreted out by the San Jose Mercury News indicated that Krutko did not resign his position “gladly.” Krutko presented some revisionist history to AnnArbor.com in March 2011. He said of his departure from San Jose: “It was mutually agreed that it was a good time that I would move on.”

So what is Ann Arbor SPARK’s CEO doing in San Jose, California? He was eating breakfast with venture capitalists in California on the Ann Arbor taxpayers’ dime. However, given that the San Jose Mercury News reported Krutko didn’t leave his job in San Jose “gladly,” it could be that he was showing those S.O.B.s in San Jose who forced him out of his $225,000 a year job that Paul Krutko had landed on his feet—a message delivered on the taxpayers’ dime.

In fact, Ann Arbor and Washtenaw County taxpayers fork over millions each year to fund Krutko’s salary ($250,000), car allowance ($30,000) and travel to California to have breakfast with his friends (and maybe even a few enemies).
According to the city’s online checkbook, Between July 1, 2010 and November 30, 2011, Ann Arbor taxpayers gave $1,928,553.29 to Ann Arbor SPARK—including money from the city’s General Fund. The General Fund pays for services, such as police and fire, both of which have been cut repeatedly over the course of the past 24 months.

Ann Arbor SPARK also diverts money from the Ann Arbor Public Schools through a TIF scheme, and has skimmed close to $3 million dollars from the local public schools over the past 4 years. In 2011, SPARK expects to skim around $1.4 million in tax money that would, otherwise, go to the AAPS.

Just in case you live in Dexter, Saline or Chelsea and might feel left out of funding Mr. Krutko’s breakfasts, in 2009 the Washtenaw County Board of Commissioners (BOC) imposed a new property tax on county residents to fund Ann Arbor SPARK. The Act 88 millage was imposed under the watchful eye of Robert Guenzel, then the Washtenaw County Administrator, now retired, and a member of the SPARK Board of Directors for the past several years. In its 2011 budget the BOC slashed human services funding from $1.46 million to $1.03 million forcing cuts to programs that deal with homelessness, domestic violence and child abuse. The BOC then renewed the Act 88 millage, and increased the annual amount county taxpayers are forced to give to Ann Arbor SPARK. The renewed Act 88 millage is expected to provide over half a million dollars in county tax money to SPARK.

In fact, Ann Arbor SPARK got over 10 times more money from Ann Arbor taxpayers than Food Gatherers ($171,177.50), and Habitat for Humanity ($116,050). The Shelter Association of Washtenaw County received $61,887.75 during the same time period. Perry Nursery School serves low-income and single-parent families. According to the group’s web site: “Perry Nursery School prepares at-risk preschool children for future academic and social success while providing their parents opportunities for professional, personal and parental growth.” Between July 1, 2010 and November 30, 2011, Perry Nursery School received $55,378 in funding from the City of Ann Arbor.

In response to a complaint from an Ann Arbor city employee concerned that public money is going to Ann Arbor SPARK without adequate financial controls and documentation, in May 2011, A2Politico requested copies of Ann Arbor SPARK’s 990 form filed with the IRS, as well as a copy of SPARK’s audited financial statement. Greg Fronzier, a SPARK employee, responded:

The financial statements that we make available are the 990’s.  Would you like me to send you an electronic copy of our 990 from 2009?  The 2010 990 is being completed by our CPA firm and should be available within the next 30 days or so. Our annual audit is only presented internally to our Finance Committee and our Board of Directors.

In short, Ann Arbor SPARK officials claimed that the official audit of their finances, including what they do with the money skimmed from the public schools, as well as close to $2 million dollars from the city’s taxpayers, is a secret that they won’t share with the public. A2Politico has learned that Ann Arbor SPARK hasn’t shared audited financial documents with city officials prior to receiving millions in public money. In response to requests from A2Politico, Ann Arbor SPARK was the only non-profit entity that received taxpayer money from the city of Ann Arbor in 2010 that refused to release a copy of its audited financial statements to the public.

Before nonprofit human services agencies may receive public money from the city of Ann Arbor, each organization must provide a bevy of financial documentation, including 990s, as well as up to date audited financial statements. Many of the human service agencies also provide documentation of the number of city and/or county residents served by the city’s allocation of funds. Going as far back as 2008, Ann Arbor SPARK has never provided any such documentation to city officials, and since its 2005 inception has never provided verification of its job creation claims made in Annual Reports.

In November 2011, A2Politico filed a Freedom of Information Act request with the City of Ann Arbor for the following materials:

1.  Copies of the 2008, 2009 and 2010 990 forms for Ann Arbor SPARK in the possession of the City of Ann Arbor

2.  Copies of the 2008, 2009 and 2010 audited financial statements for Ann Arbor SPARK in the possession of the City of Ann Arbor

The city’s response to the FOIA reveals a disturbing pattern of lack of oversight of Ann Arbor SPARK on the part of City Council, as well as former City Manager Roger Fraser, who is still listed as a member of SPARK’s Executive Committee:

…The city does not have these documents.  990s can be pulled from www.guidestar.org.  Audited financial reports are maintained by them, so they [Ann Arbor SPARK] would have to provide them to you.

Ann Arbor SPARK officials refused to release audited financial statements, prompting A2Politico to turn city officials, who, it turns out, have no financial documents from the group. This is a pattern of a disturbing lack of oversight of an organization that has a proven track record of embellishing its own accomplishments in order, perhaps, to justify its own existence and certainly the extremely generous salaries paid to SPARK executives.

For instance, in 2008, when Governor Rick Snyder was the CEO of Ann Arbor SPARK, Snyder signed SPARK’s 2008 Annual Report in which he claims SPARK created/retained over 12,000 jobs in Washtenaw County. It was a wild claim that was never verified (SPARK has never kept data on the actual number of jobs created by the companies it serves), and which the Detroit Free Press debunked in a 2010 investigative piece that revealed between 2006 and 2009 fewer than 1,000 permanent jobs total had been created in Michigan by the state’s job creation engines, including Ann Arbor SPARK.

SPARK’s 2010 Annual Report claims that 1,475 FTE jobs have been created. However, a May 2011 piece in AnnArbor.com presents a more clear-eyed interpretation: “In its annual report, SPARK says that 42 local companies in 2010 announced plans to create 1,425 new full-time jobs tied to expansions worth $151 million. Whether those companies will eventually add those jobs is unclear, though. Many times, companies fail to meet ambitious growth targets, and the number of jobs actually created turns out to be much lower.”

The response to A2Politico’s November 2011 FOIA by city officials reveals that while close to $2 million dollars in taxpayer money has been funneled to Ann Arbor SPARK over just the past 16 months (over $4 million dollars since 2008)—including money from the city’s General Fund—neither elected officials, nor city staffers, including former City Manager, Roger Fraser, required SPARK to submit 990 income tax statements, or audited financial statements to the city prior to allocating the money. Over the same time period, all other non-profits seeking funding from city coffers, including Food Gatherers, Habitat for Humanity, as well as the Shelter Association of Washtenaw County, were required to submit detailed financial documents and statements in order to receive just a fraction of the public money given to Ann Arbor SPARK.