OKAY, I know this is not going to be the most exciting blog
in the world for you to read---please know that I’m working very hard on trying to make it exciting and fresh to maintain your interest! See what I did right there? I added an exclamation point! Woah there’s another one---maybe if I keep this up this budget blog will at least SEEM interesting and fresh.
According to our city charter, which is really
When I was a news reporter, covering the budget process was never my favorite part of the job.
Let’s face it—it is extremely dry information, all of these numbers getting moved around on a huge spreadsheet, with the elected officials looking haggard, eyes glazed over and exhausted, listening to the city administrator’s budget explanation for the next fiscal year.
Now that I am the mayor, my perspective drastically changed. I discovered that if we, as your elected officials are to effect any kind of change, those plans must be reflected in our budget.
When I first took office in January 2008 the city council, myself included, reviewed the goals and objectives of the previous mayor and council. Our priorities include maintaining and repairing our total infrastructure system--this includes fixing our streets and the water and sewer lines that run under them. We also must ensure that we have the funding available to pay back our general obligation debt for the waste water treatment expansion project completed a couple of years ago. This payment comes to nearly $1 million per year over the next 20 years, and because it is a general obligation debt, that means it must be paid before anything else, before payroll, before anything. The City of Milan also has another liability hanging over it with a pending lawsuit filed against it from the former Visteon plant, now known as Automotive Component Holdings, LLC, (ACH.) The ACH company is basically challenging two years worth of their taxes paid to the city which comes to a total of $1.8 million, that they would like paid back to them.
In short--our goals and objectives have made paying our debt, fixing our infrastructure and being prepared in the ACH, LLC lawsuit our biggest priorities for now.
The single most important way that the city council members and myself can chart our course for the future is by making decisions about how we are going to spend your hard earned tax dollars.
Our budget is our road map.
If we ( by “we” I mean me and the city council members) approve the budget without really knowing whether it reflects our defined goals and objectives for the city--then how can we possibly expect to accomplish our goals ?
Or anything for that matter ?????
Of all the important duties we are tasked with, the mayor and the city council MUST have a thorough understanding of this task, because the budget really is the key to getting anything done.
If we don’t know how we’re spending the money, then who will?
Last year I was not satisfied with the budget process. I’ve been pretty vocal with that opinion recently in the newspapers. Mainly I was not happy that last year there was an “institutional” culture in place which assumed that “the mayor,” was not supposed to be involved with or should not “interfere” with the budgeting process.
The only problem with THAT is: I was STILL expected to assume the responsibility if anything went wrong.
Last year I was in a paradoxical situation, for which I was extremely uncomfortable.
So, this year I made sure the whole process would be the complete opposite of last year. Thanks to the cooperation of our new city administrator and our department heads, our council felt empowered, I felt like I was fulfilling the duties assigned me by our charter and, despite the challenge of having to create a budget with about $400,000 less than last year---a balanced budget was accomplished.
What does it mean that we balanced our budget? It means that the amount of money coming in as revenue, equals the amount we have going out in expenditures.
It means we have planned for our savings, projects, purchases and plans for the next fiscal year by forecasting how much those things will cost, and have determined funding sources to pay for those savings, and plans, projects and purchases for the next year.
In short—we’ve practiced good stewardship over your tax dollars.
Our newly appointed City Administrator Ben Swayze wrote a very succinct and fairly easy to understand explanation of our budget which I’ve decided to include in this blog for your reading enjoyment!
May 18th, 2009
To the Honorable Mayor Muckler
And the Members of the City Council
The development of the 2009-2010 fiscal year budget has entered the final stages and is ready to be adopted by the City Council. The process, which begins in January with brainstorming sessions and concludes with adoption at the second Council meeting in May, has been a cumulative effort between the Mayor, City administrative staff, department heads, department managers, and City Council.
Each year, the process begins with each department head or manager reviewing their current year budget appropriation and preparing their budget request based on the predicted needs of their department. Each department head is then afforded an opportunity to sit down with the Mayor, City Administrator and Clerk/Treasurer to review their requests and concurrent justifications for each line item. Upon completion of the meetings with the department heads, the 09-10 fiscal year budget recommendations were compiled. Through a series of 5 work sessions with Mayor and Council, the proposed budget was reviewed in detail, and changes proposed by the Mayor and Council Members were reviewed for inclusion. That process has been completed, and I am transmitting to you the proposed budget for adoption.
The preparation of the 2009-2010 budget has been considerably harder than in years past. After many years of increasing tax revenues, the nationwide recession and collapsed housing market have significantly impacted the City of
1. The total taxable value of the City dropped nearly $21.5 million dollars. The resulting drop in tax revenues equaled $394 thousand dollars. The City saw significant reductions in real and personal property tax revenues, while it saw a significant increase in IFT tax revenues from the IFT abatement granted to the ACH plant.
2. State revenue sharing payments, which had remained steady the past two years, were recently cut by executive order of the governor. While the EO only called for cuts in the current State fiscal year, we are operating under the assumption that the cuts will continue into the next State fiscal year as well. The cut calls for a 1/3 reduction in the statutory payments. Based on the best information available, we are anticipating a cut of nearly $79,000 dollars.
3. The City is currently engaged in negotiations with its largest taxpayer, ACH, over its real and personal property values. While the tax tribunal process has begun, the City continues to negotiate. In anticipation of a worst case scenario, we have budgeted approximately $375,000 to be refunded to ACH pending a settlement or decision by the Michigan Tax Tribunal.
4. There are two union contracts currently open in the police department. The City has budgeted accordingly in anticipation of a reasonable worst case scenario in the event that the contract is settled in favor of the unions in 312 binding arbitration. We have concurrently budgeted for arbitration costs as well, but the City will continue to negotiate with the unions in hopes of reaching a settlement. It is the City’s stance that significant concessions are needed from the unions in order to preserve the financial viability of the department.
5. The budget was developed and balanced assuming a carry-over of the 08-09 tax rate, which was set at 15.50 mills. The budget was balanced using no general fund balance dollars, and we plan on adding approximately $30,000 to the fund balance. This will keep the fund balance in line with our goal of 15% of our operating expenditures. Our 09-10 expenditures are proposed at $4,510,094 and our estimated fund balance as of 6/30/09 exceeds $1,000,000.
Each year’s budget preparation provides its unique challenges, and the 09-10 fiscal year budget followed suit. Below is a list of significant issues and/or recommendations included in this year’s proposed budget. Each of these items was discussed in detail at budget work sessions as well:
1. Staffing Levels – The majority of the City general fund covers salaries and wages for the City staff. Therefore, significant reductions in operating expenditures can only be achieved by a reduction in staffing levels. The budget proposes the elimination of one department head position (Director of Parks and Recreation) at an annual savings of approximately $100,000. The duties of the position have been folded into the City Administrator’s duties. The budget also leaves vacant one officer position to be filled temporarily by a Temp. Officer. This was done strategically pending the results of a grant application to fill that position.
2. MERS Defined Benefit Plan Contributions – MERS has set a standard for the City of
3. Proper Allocation of Personnel – In previous years, the general fund has assumed the cost of personnel that should be allocated into special funds. This budget proposal remedies that situation as the following personnel were reallocated to the appropriate funds:
· MIS Director – Allocated 50% from General Fund (Administrative) to Cable Fund
· Utility Billing Clerk – Allocated 100% to Water/Sewer fund from General Fund (Clerk/Treasurer) (Was 75 -25%)
· DPW Roads Worker – Allocated 50% to Local Roads Fund and 50% Major Roads Fund from 100% General Fund (DPW)
· DPW Water Worker – Allocated 100% to Water/Sewer Fund from General Fund (DPW)
· DPW Sewer Worker – Allocated 100% to Water/Sewer Fund from General Fund (DPW)
· DPW Motor Pool Mechanic – Allocated 100% to Motor Pool Fund from General Fund (DPW)
4. Infrastructure Projects – The City Council has indicated that infrastructure is a top priority for the 09-10 budget. Per that direction, the budget proposal includes the following infrastructure improvements:
· County Street – Marvin to Dexter
· Water Tower rehabilitation
· Savings for
5. Capital Purchases in Motor Pool – The City has not made a significant capital purchase in the Motor Pool department in several years, and as so there are several fleet vehicles and pieces of equipment that need to be replaced. Purchases budgeted for include:
· Replacement of a Police Car
· Replacement of a Dump/Snowplow truck
· Replacement of a Work/Snowplow truck
· Replacement of the leaf vactor
While the City staff is presenting a balanced budget for the 09-10 fiscal year, we have also undertaken several initiatives to help reduce our operating costs in anticipation of another significant reduction in tax revenues during the 10-11 fiscal year. Those initiatives include:
1. Water/Sewer Rate – The Water/Sewer fund, which should theoretically operate as an enterprise fund, has been significantly supported by the general fund over the last 3 years. The rate study will propose a fee structure to make the water/sewer fund self supported without the use of general fund dollars. The idea behind this is that while all of your tax payers are generally rate payers, not all of your rate payers are taxpayers. The result is that your taxpayers subsidize the tax-exempt users, and nearly 40% of the City of
2. Health Care Reform - The City staff is working on a plan to self insure a portion of our health care premiums. With an implementation timeline of January 1, 2010, successful implementation could mean a minimum annual savings to the City of $50,000 with the possibility of saving significantly more based on the health of the City employees.
3. DPW Privatization – The City has initiated the RFP process for privatizing the remaining DPW functions, and is currently evaluating the proposals. It is unknown at this time if there will be any significant cost savings. If the Council decides to move forward with privatization, the contract will begin July 1st, and the budget will need to be amended accordingly.
4. Public/Private Partnership for Senior Programs - The Senior Program staff is currently researching the feasibility of creating a non-profit group to take over operations of the Milan Senior Program. If a significant cost savings can be achieved, it would be recommended the City enter into a public/private partnership with the organization to ensure the viability of the Senior program while lessening the financial burden on the City tax payers.
5. Recreation Consolidation with Milan Area Schools – The City is exploring opportunities to consolidate its recreation services with Milan Area Schools. A partnership may net significant cost reductions by eliminating redundancies in operating overhead typically found in a full-service recreation department.
6. Energy Efficiencies – Staff is currently exploring options to reduce the amount of money being spent on energy costs. Target areas include:
· Street Lighting Costs – The City is currently exploring a two step process. The first step, which will net an immediate energy cost savings with little capital improvement costs, is to retrofit the current street lighting for CFB technology. The second step, which will see significant capital outlay cost, will be to upgrade the street lighting to LED technology.
· Building Heating – The City will be installing programmable thermostats in all of the City buildings in order to significantly reduce heating costs.
· Building Electricity – The City will be auditing its electricity use in order to identify places to become more efficient. This will also include installation of motion-sensor lighting in key areas.
While budgeting in the face of significantly declining revenues is never an easy task, the Department Heads should be commended on the effort put forth to ensure the budget was balanced properly and the significant goals of the City Council were met. Instead of bickering over whose department received what, the Department Heads insight, wisdom and self sacrifice ensured the City will be able to continue to provide the high quality services that the residents of
Benjamin J. Swayze