Southfield

Budget talks: ‘Layoffs continue to be a last resort’

By Jennie Miller
C & G Staff Writer

SOUTHFIELD — Members of the Southfield City Council had their first taste of budget talks on Jan. 30, when City Administrator Jim Scharret previewed what’s to come.

In the coming weeks and months, city staff, council members and the mayor will be heavily involved in budgetary matters. A finalized version of the budget will be submitted to the mayor April 1 and presented to council May 7, with a formal budget adoption meeting scheduled for June 18, just prior to the start of a new fiscal year on July 1.

Many challenges continue to befall the city, as they are in every other municipality in the state, Scharret said. But he maintained, as the city has for years, that layoffs are a very last resort.

“It goes without saying — we take no great joy in saying this — but concessions are an absolutely necessity,” Scharret said. “Everybody participates, case closed. Every layoff is a potential family disaster at this time. We have been consistently committed and continue to be committed to reducing the misery index, not adding to it, so if possible, layoffs continue to be a last resort.”

Technical work on the budget began several weeks ago, but Scharret’s presentation marked the start of policy discussions.

“(We’re) focusing on the long-term sustainability of the city of Southfield as a vibrant municipal entity,” he said, adding that they’re rolling up their sleeves. “No kicking the can down the road, no quick fixes, we will tackle our fiscal responsibilities head on.”

Uncertainty is the major factor as the city dissects the challenges to come, which includes tax base evaluation, commercial appeals and office vacancies, foreclosures, personal property taxes and unemployment.

“Our tax base in totality has dropped 31 percent in the last three years and is projected to drop next year, ‘12-‘13, and in the year beyond that, hopefully some stability or growth can begin,” Scharret said, adding that foreclosures were up 6 percent in the state of Michigan this past year.

“Commercial appeals and office vacancies remain a problem and remain a challenge. … There is a legislative push in many quarters that puts personal property at some substantial risk possibly. Personal property, of course, is the machinery and equipment that businesses use to boost income. That would involve for the city of Southfield $8.9 million annually across all funds, $392.4 million taxable value and (it) represents 14.6 percent of the total tax base.”

Regarding unemployment, Scharret reported that the state of Michigan is No. 41 on a recent ranking of states and their corresponding unemployment rate. Michigan’s rate is at 9.3 percent, compared to the No. 1 ranked state, North Dakota, which has 3.3 percent, and Nevada, which fell to the bottom with 12.6 percent.

“That is progress,” he said. “It’s getting lower but we all know that there are issues. We need to keep in mind that in general, recent history, the unemployment rate in the city of Southfield has been around one half percent higher than the state of as a whole. So, many of our residents are hurting.”

The bottom line is that several of the elements the city has been dealing with have not improved much, if at all, over the last year, and some have gotten worse, Scharret said. But despite all that, the city still has a lot going for it to assist in weathering the storm.

“We have proven our commitment and credibility,” he said. “We’ve demonstrated our commitment to long-term sustainability of the city by our strict adherence to the long-term financial plan. We’ve been on a diet since 2004-05 and basically a fruit plate has become our dessert. We have taken the advice of both our auditors as well as our independent counsel in matters of property tax appeals. We have funded what is believed to be our ultimate liability in the proper manner. When Standard & Poors was looking at us recently, that’s one of the things that they were impressed with. We have maintained service levels by reducing staff by over 200 full-time equivalent positions, or about 25 percent. Without layoffs, we have conducted a disciplined and managed attrition program achieved over the last eight years. Employees have stepped up and stepped up big time.”

City officials have offered high praise for Scharret despite their concern for the challenges facing the city.

“We’re kind of glad that Jim Scharret is on board as our budget man and city administrator because he sure knows the numbers, and right now he’s had to kind of do some guesswork on the numbers that aren’t really in place yet,” said longtime City Councilman Don Fracassi.

“He’s a numbers guru in all of this,” said City Councilman Jeremy Moss, adding that it’s almost a crapshoot right now. “As a city, we’re kind of holding our breath waiting to see what comes out of Lansing, especially with regards to the personal property tax — if that tax is repealed without a replacement, cities across the board are going to (suffer). That’s a huge concern of mine.”

Moss pointed out that Scharret predicted the economic storm long before other cities saw it coming, and as a result, Southfield has maintained a strong position.

“We budget for the worst-case scenario, which is why Southfield has been so successful compared to other cities,” he said, adding that they haven’t had to close the library or lay off any police officers or firefighters as others have. “We budget for the worst-case scenario, and we hope we’re proven wrong.”

Fracassi stood by Scharret’s assertion that layoffs are a last resort, but predicted that there will have to be an 11 percent cut in the city’s budget.

“We have a real philosophy — we have such an unemployment base in the state anyway, if we can do our part and keep people working, than that’s the route we should go and not contribute to the amount of unemployed,” Fracassi said. “That is the last resort, but things are getting harder, and it’s unbelievable when you see how far property values have dropped not just here but in the tri-county area. You’re going to see a lot of cities fail unless the state understands the predicament that people are in, and reconsiders (repealing) the personal property tax. There has to be an understanding by the state. There’s got to be some real deep searching at the state how they can make manufacturing come back, but they can’t do that at the expense of liquidating cities.”

While voters in Southfield approved a 4.9183 mill increase last May to provide additional monies for public safety, Fracassi said that with further declining property values — at nearly 50 percent — that revenue is almost “wiped away.”

“It’s going to be tough to do it, but we will be balanced,” he said.

You can reach C & G Staff Writer Jennie Miller at jmiller@candgnews.com or at (586)279-1108.