Property values continue to decline. Overall, so is state revenue sharing.
Most local governments in Michigan rely on these two sources for a majority of their funding. Some depend heavily on the personal property tax, the repeal of which passed the state Senate in May.
All of this has left cities with the problem of what to do with declining revenues. Nearly all of them have turned to cutting and consolidating services.
Mike Vanderpool, city manager for Sterling Heights, said his city has lost more than $30 million in property tax revenues and expects to lose $2.5 million annually without the personal property tax. He attributes the city?s strong financial position to planning ahead as the financial meltdown hit in 2008 and a recession hit the country hard.
Through the city?s multiyear plan, it has been able to keep its AAA bond rating and avoid going into a deficit.
Though, that wasn?t without some changes.
?It?s a tough time to say the least for cities in Michigan and across the country,? Vanderpool said.
Reductions were made in staffing, wage and benefit concessions were negotiated with employees and services have been shared with neighboring communities whenever possible. In total, $27 million was cut out of the budget over the last five years.
?The effect on services has been minimal and that in large part is because we got a jump start on this back in 2007 and 2008,? Vanderpool said. ?We saw the storm clouds brewing and we made the multiyear financial plan.?
Police and firefighters were laid off for the first time in Sterling Heights? history. With 484 total employees after eliminating 106 positions since 2002, including 59 during this fiscal year, the city is at its lowest staffing level since 1977. Continued...
More public safety layoffs could be looming. A millage likely will be put to voters within the next year or two, Vanderpool said.
?Ultimately, the community is going to have to determine the services they desire and the level of funding they are willing to pay for,? he said.
Until then, he said, the city will hold public forums and invite residents to give their feedback and input about what is important to them.
Sterling Heights isn?t alone. Cities everywhere are feeling the pain as the economy struggles to recover.
Kalamazoo has lost almost $5 million in property tax revenue from 2009 to 2012 and a $4.9 million drop in statutory state-shared revenue during the same time.
The city of Detroit?s troubles are well documented, with its deficit at $197 million.
Mayor Dave Bing announced July 18 that a 10 percent pay cut and contract adjustments will go into effect that are expected to save the city $102 million annually. It was approved, 5-4, by the City Council.
Detroit?s deficit is due in part to decades of population loss and declining property values because of an abundance of vacant structures.
Michigan?s largest city has a population of 713,777, according to the 2010 U.S. Census Bureau?s count. That is down 25 percent from the previous census in 2000.
Grand Rapids, the state?s second-most populous city, has lost 5 percent of its residents over the 10 years and now is at 188,040. That change cost the city more than $195,000 in property tax revenue between the last fiscal year and the current one that began July 1, forcing cuts to some services, officials said. Continued...
Several cities and school districts are in receivership in the state. Benton Harbor, Detroit Public Schools, Ecorse, Flint, Highland Park Public Schools and Muskegon Heights Public Schools all have emergency managers. All but Ecorse still are running deficits.
Allen Park has a $4 million deficit for this fiscal year, which began July 1, and a $2 million deficit from past years. Two attempts to pass millages and a Headlee Amendment override that would have individually raised $2 million per year have all failed.
The city now is awaiting the findings of a state financial review team to find out what steps Gov. Rick Snyder will take.
Plante Moran representative Carl Johnson, who also serves as the city?s contract financial manager, explained to the City Council at a July 17 special meeting that the review team can have only three findings.
?One, the team decides there is no emergency and leaves,? he said. ?We know that?s not going to happen.
?Two, the state decides to go with a consent agreement; or, three, you get an emergency manager. So one way or another, this board will no longer have control.?
While property values have fallen about 50 percent in Allen Park over the last six years, the city also is in the hole because of $30 million in bonds it took out in 2009 to buy property for the failed Unity Studios project.
Consolidating services with nearby communities is one of the lynchpins of the governor?s Economic Vitality Incentive Program. As a part of EVIP, which is in its first year, local governments are expected to share services with others in order to get additional state-shared revenue.
Other cities in the state have been more fortunate. Mount Pleasant has had only one year in which property values have declined in the last six years, Finance Director Nancy Ridley said. With values staying flat, the loss of state-shared revenue is forcing the city to make adjustments to avoid a deficit.
?Everybody around us is struggling a bit, but not as much as the downstate area,? Ridley said. Continued...
Midland County also has had to downsize, eliminating 60 positions over the last three years, and has lost $5.7 million in tax revenue since 2007. Its general fund is $27 million.
Finance Director Tori Meyer said the city of Midland also has downsized and it and the county have not given employees raises in several years.
?One of my judges said it best,? Meyer said, ??We?re not doing more with less, we?re doing less with less.??
Contact Heritage Media Staff Writer Alan Burdziak at 1-734-246-0882 or aburdziak@heritage.com. Follow him on Facebook and @AlanBurdziak on Twitter.
Heritage Media Staff Writer David Herndon and intern Laura Clark contributed to this report.
Source: http://www.thenewsherald.com/articles/2012/08/06/news/doc50197bb279324100954185.txt
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