Budget Season begins...

Well it’s that time again---budget season. The bane of every elected official’s existence in these troubled economic times.

For me, as the mayor, it is probably the most important duty I am tasked with according to our city charter.

For us city council members, this time of year represents the official setting of our agenda. What I mean by that is simply, everything the city government wishes to accomplish costs something. If we simply set our goals then don’t create a budget that reflects those goals then our goals are really nothing but empty wishes.

Last year we had to balance a budget with about 10 percent less revenue than the previous year---that represented more than $400,000 less money than the year before.

This year we have the same challenge---we have to balance our budget and accomplish our goals with a budget based on another 10 percent drop in revenue. Over the period of the past two years that amount comes to about $1 million less than three years ago.

Why is this happening?

I’m going to reference my “perfect storm” blog from earlier this year to explain it.

We are dealing with a financial crisis created by our tanked housing market, the long term affects of Proposal A, and the recession which all have converged into one tornado-like vacuum causing our overall economy to shrink rather than grow.

This means that the state government is dealing with the same challenges, so they are also making cuts which dramatically affect our city government. The significant change for us is the state of Michigan continues to cut our portion of revenue sharing.

What is State Revenue Sharing?
The State of Michigan Department of Treasury defines it as a program that distributes sales tax collected by the State of Michigan to local governments as unrestricted revenues. The distribution of funds is authorized by the State Revenue Sharing Act, Public Act 140 of 1971, as amended (MCL 141.901).
I’ll try to give you the TV GUIDE version of what that is. Whenever anybody buys something we pay sales tax on it. Every city and township in the state of Michigan is entitled to a share of the total sales tax collected. We have a statutory amount and a constitutional amount. For many years now the state doled out less and less of that revenue to the cities and townships.
City Administrator Ben Swayze and I have decided not to include state revenue sharing when creating our budget this year.
The other reason we are expecting another 10 percent drop in our revenue is because of declining home and property tax values.

As we all know, our market value is a fluid factor which will increase or decrease depending on the overall economic and market weather conditions.
We are also compiling our budget based on a lower millage. I know that might sound like crazy talk, when you consider that we have to make our budget do everything it did last year with even less money.
But there is a method to the “madness.” We removed the water and sewer fund from the general budget and made our water and sewer utility what is called, an “enterprise” fund.
That means that, while, YES we raised your water rates, you are now paying what it costs us to provide you that service. No tax dollars are going to subsidize the water and sewer anymore—therefore that entire multimillion dollar line item has been removed from our budget. We collect the money from your water and sewer bills, and it goes directly to the water and sewer enterprise fund.
To help offset the higher rates, we have lowered the millage by the same amount that we were previously subsidizing the water and sewer fund.
In short: we are lowering your taxes from 15.50 mills to 14.40 mills.
At the last city council worksession, we had a goal setting brainstorming session. From that meeting, our city administrator is compiling a list for us to prioritize at our next council meeting. From that meeting Ben and I will glean what is important and what is less important in our budget process and from there we will create a budget that reflects the direction we as a city council, together want to take the city for the next fiscal year.

It’s really not very exciting---it is probably the most strenuous and stressful part of this job, but it is also the most important. Over the next few months you will see a lot of budget talk at our council meetings. Hopefully this blog has given you a better understanding of what we’re doing with your tax dollars.

First the good news...

Taxes are going down

BUT…water rates are going up.

At our November 23 City Council Meeting, we unanimously voted to raise our water rates by some $12.50 per month. We plan to lower property taxes by about two-thirds of that same amount, or about $8.33 a month for a house with a $175,000 market value.

Our current millage of 15.5 mills will be reduced to 14.4 mills in May 2010.
This means that our water rates will be the highest, but our taxes will be the lowest for this region.

Here is a comparison of water rates based on an average residential monthly bill, with the millage rates for cities in our area:

Milan: $167.67 Millage: 14.4 mills
Ann Arbor: $152.42 Millage: 16.78 mills
Monroe: $109.75 Millage: 36.8249 mills (this is the whole tax bill, not just the city)
Ypsilanti: $142.51 Millage: 30.6016 mills
Brighton: $158.27 Millage: 15.2734 mills
Saline: $142.16 Millage: 15.53 mills

Now when you pay your water bill, you will pay what it costs us to provide your water service.

City administrator Ben Swayze and I are forecasting our Fiscal Year 2010/2011 Budget based on the lower millage rate of 14.4 mills.

This decision was made because for many years the City of Milan was not charging enough for water service. For several years our General Fund subsidized the Water Fund by as much as $550,000 in some years.

This past year it came to more than $290,000.

That subsidy ($290,000) means that our tax payers were financially supporting our biggest water customers who were not being billed their fair share.

Moreover, some of our biggest water consumers include the Milan School District and the Federal Correctional Institution, yet because of that General Fund subsidy, the Milan City taxpayers were financially supporting those tax exempt water consumers.

This is a move towards a more transparent and fair financial picture for everyone.

Please feel free to contact City Administrator Ben Swayze or me, at Milan City Hall 439-1501 or Email at: kymm@ci.milan.mi.us OR bens@ci.milan.mi.us