City Council adopts budget for FY 2014-15

Taxpayers will see slight tax increase, no service reductions

By: Andy Kozlowski | Madison - Park News | Published May 21, 2014

MADISON HEIGHTS — In fiscal year 2014-15, the average single-family home in Madison Heights can expect to pay about $15 more in city taxes (a 2.1 percent increase), due to an increase in taxable value and a slight increase of 1/20th of a mill  in the fire stations bond millage.

These numbers are based on the average home market value of $67,548, with a taxable value of $32,004. The city portion of the tax bill is about $735, which breaks down as follows:

• $320 for general operating costs (10 mills)
• $186 for police and fire pension (5.8155 mills)
• $85 for solid waste (2.6457 mills)
• $64 for neighborhood roads (2 mills)
• $32 for the library (1 mill)
• $18 for fire station bonds (0.5578 mill)
• $14 for senior citizens (0.449 mill)
• $8 for advanced life support (0.25 mill)
• $8 for vehicle replacement (0.25 mill)

The city gets $1 for every $1,000 of taxable value, times the millage rate.

The total millage rate for FY 2014-15 is 22.968 mills, up from 22.925 the year before. The increase comes from the fire station bonds, which increased 0.043 mill.

The budget was unanimously adopted by City Council at their meeting May 12. The overall budget weighs in at $43 million — a $2.1 million or 4.7 percent decrease from the prior year’s amended budget. The operating budget is dropping by $363,000 or 1 percent, while the capital budget is dropping $1.8 million, or 23.5 percent.

Of the overall budget, the general fund budget is $24.6 million — a $635,000 decrease from the previous year’s level of $25.2 million.

There is no planned use of fund balance — what others might call the rainy day fund. The budget meets council’s goal of maintaining a minimum 10 percent of operating expenditures in fund balance.

“We’re also pleased we’re not having any layoffs,” said Madison Heights City Manager Ben Myers in an interview prior to the budget’s adoption. “We’re not reducing the number of positions or the number of hours in those positions. So to that extent, we’re holding steady and maintaining core services.”

As noted, the average homeowner will see a $15 increase in city taxes. This reflects an improvement in the housing market. The last eight years had seen a 51 percent decline in market value, from $138,000 to $67,000, resulting in lower taxes in that time. Now, due to a slight rebound, city staff expects a net increase of 1.3 percent, or $204,000, in revenues from real and personal property taxes in FY 2014-15.

Changes at the state
Uncertainty remains about the future of the personal property tax (PPT) in Madison Heights and cities across Michigan, due to changes being made by the state legislature. The PPT is a tax on property owned by businesses, not individual persons.

In 2012 and 2014, Gov. Rick Snyder signed into law two packages of bills that phase out PPT, providing exemptions for small parcels with taxable value of $40,000, beginning Dec. 31, 2013. In addition, the bills provide exemptions for eligible new and existing manufacturing personal property, starting Dec. 31, 2015. In Madison Heights, this will affect 97 percent of all personal property in the city.

To make up for lost PPT revenues, a new Local Community Stabilization Authority will reimburse communities with a portion of the state use tax, not subject to annual state appropriation. The first reimbursement is only for debt losses; nondebt losses will be reimbursed in 2016, after the city has already taken two years of losses under the new exemptions.

The restructuring of PPT depends on voter approval in the August 2014 election. According to the Michigan Municipal League, if the measure were to fail, the state may repeal PPT with no replacement revenues to local government. However, there appears to be broad support for the proposal among cities, unions and businesses.

After property tax revenue, the largest source of general fund revenue for the city is state-shared revenue, which is about $3 million or 12 percent of the budget. This consists of the constitutional sales tax ($2.3 million) and the governor’s Economic Vitality Incentive Program, or EVIP, totalling $515,000 for the city.

The city’s FY 2014-15 budget includes a 5.4 percent increase in state shared revenue, assuming the city continues to meet the governor’s EVIP requirements, which include accountability and transparency measures, service consolidation, and more. Even so, state reductions in statutory revenue sharing will have cost the city $13.6 million in revenues over the last 14 years.

“Even with the slight increase, we still believe the funding model for cities in Michigan is broken,” Myers said. “There still needs to be a big-picture fix of how local governments are funded in Michigan. The Michigan Municipal League has been beating the drum on that issue, and rightly so.”

Work to be done
With all of this considered, the FY 2014-15 budget was prioritized as follows: 1) maintain fiscal responsibility to keep the city stable; 2) advance technology in daily operations to improve communication between the city, residents and businesses; 3) invest in attracting and retaining talented employees; 4) reinvest in the city’s infrastructure and equipment to protect resources and avoid higher costs in the future; and 5) engage residents to improve the image of Madison Heights.

Various projects are in the works, including a new employer-sponsored health and wellness center in the lower level of City Hall; heating and cooling improvements at the library and City Hall; a new fire suppression system at the Senior Citizen Center; the scheduled replacement of 16 city computers; and upgrades to city servers, including two new failover servers for disaster recovery.

Other upgrades include two new patrol vehicles; a pickup truck for the parks division; a sedan for the Community Development Department, funded by the Proposal V millage; a new “Jaws of Life” apparatus for the Fire Department; a new vehicle for the detective bureau; new video surveillance on the interior and exterior of the Police Department, using drug forfeiture funds; and an update of the courtroom video system, now obsolete.

Several park improvements are planned, including trail resurfacing at Civic Center and Ambassador Parks, and repairs to the cracked parking lot surface north of City Hall. The city also has several joint projects with Oakland County Parks and Recreation at the Red Oaks Nature Center and Friendship Woods.

Where road work is concerned, the Major Street fund is down $1.4 million or 53.8 percent in the FY 2014-15 budget, due in large part to the completion of John R Road work last year. A total $380,000 will pay for serious sectional repairs to 13 Mile, from Campbell to Dequindre; Whitcomb, from Barrington to Townley; and Girard, west of Stephenson. There will also be joint and crack sealing done, and a re-rating of the city’s road network, to help maintain the roads until more funding is available for a full rehabilitation.

The Local Street Fund, meanwhile, increases by $594,000 to a total $3.6 million, which includes the following 2015 Proposal “R-2” reconstruction projects: Palmer from 13 Mile to the north dead end; Blairmoor from 13 Mile to Manchester; the intersection at Manchester and Woodmont; and Barrington from 13 Mile to south of Horace Brown. There will also be sectional concrete repairs on Whittier and Chaucer, among several other areas.

Lower water consumption has resulted in a $573,000 (4.7 percent) decrease in the city’s Water and Sewer Fund budget, which includes a pass-through rate increase of roughly 6.2 percent.

The budget allocates $961,000 for replacing “R-2” road-related watermains; $15,000 for a new work order and timesheet system; and $25,000 for improvements, including a partial roof replacement at the DPS storage barn ($20,000) and renovating City Hall’s lower level for the new wellness center ($5,000).

In an interview prior to the budget’s adoption, Madison Heights City Councilman Robert Corbett said the overarching theme of the FY 2014-15 budget is staying steady.

“It’s a continuation of the same plans we’ve had. As I point out to folks, the key to me is, really, we can’t talk about this next year being a bounce-back year in any sense,” Corbett said. “We’re still a ways from being able to restore things like summer sports camps for kids, and different odds and ends like that. We eliminated years ago a swingman in the fire department; we’re not close to being able to restore that yet.

“So no, we’re not really making any more cuts, but more to the point, we’re not adding back, either,” he said. “We’ve got a few more years of careful budgeting ahead of us before we can even think of adding things back.”