City leaders respond to state’s new revenue sharing policy

By: Jeremy Selweski | Woodward Talk | Published September 27, 2011

Local officials have begun the process of meeting the requirements of Gov. Rick Snyder’s new state revenue sharing incentive program, but some are disappointed by the decline in funding that is expected for their city.

For the 2012 fiscal year, the state of Michigan has eliminated statutory revenue sharing in favor of its new Economic Vitality Incentive Program (EVIP). According to Ferndale City Manager April McGrath, EVIP comprises two main components: an incentive program and a grant program.

Containing the vast majority of the funding, the incentive portion amounts to about $202.3 million available for 270 eligible Michigan communities, including Ferndale, Berkley, Huntington Woods and Pleasant Ridge. However, municipalities are only entitled to collect as much as 67.8 percent of the statutory revenue that they received last year.

Ferndale, for instance, will be eligible to receive a maximum potential funding of just over $855,000, compared to the nearly $1.29 million that the city collected in 2011.

“We budgeted for $0 (in statutory revenue) this year, so we were definitely prepared for these cuts,” McGrath said. “This is a really big reduction for us to deal with, but we can’t say that we were surprised. We knew it was coming.”

EVIP provides three different deadlines for eligible cities to meet. For the Accountability and Transparency phase, which carries an Oct. 1 deadline, each community must provide a “dashboard” — a guide to all its important financial information, including unfunded liabilities — for residents to access easily online. The second component, Consolidation of Services, has a Jan. 1, 2012, deadline and requires cities to provide a plan with one or more proposals to collaborate with other communities as a way to reduce costs. For the final step, Employee Compensation, municipalities must show by May 1, 2012, that they intend to decrease their retirement and health care costs.

As each deadline and component is met, cities will receive one-third of their eligible funding. McGrath is confident that Ferndale can meet all three requirements. She noted that the city’s new dashboard computer program, Munetrix, is already up and running, and can be found on the home page of the city website.

“Munetrix is really interactive and easy to use,” McGrath said. “It’s a lot smaller than a budget book, and it allows the average resident to very quickly see what’s going on with the city’s finances.”

In addition to the incentive program, an extra $5 million will be available through the EVIP grant program. It will be distributed to municipalities and counties that elect to combine government operations. The grants are meant to offset the costs associated with mergers, inter-local agreements and other cooperative efforts for approved projects that get underway on or after Oct. 1.

Ferndale Mayor Dave Coulter said that while he supports the overall intent of EVIP, he wishes that the program did not come with such substantial cuts in revenue.

“This makes an already hard situation even more difficult,” he said. “In some ways, it feels like the state is kicking the ball down the hill and pushing their financial problems on to the local municipalities. I like the idea of being able to track the city’s finances online, and I like the idea of the state giving cities incentives to earn revenue. But the fact that this was essentially done as a way to mask decreased revenue sharing seems really unfair to me.”

Huntington Woods City Manager Alex Allie agreed. He also lamented that not all Michigan communities are required to meet the state’s new standards — only those 270 that are eligible for funding through EVIP.

“This (program) is putting a hammer on local communities that are already poor and requiring them to do this extra work and make additional sacrifices,” he said. “What upsets me the most is the degree of these cuts and how many strings are attached. The state is balancing its budget and coping with its woes largely on the backs of municipalities, and they’ve been doing it for more than a decade now.”

Allie said that there has been a “slow erosion” of state-shared revenue over the past 12 to 14 years. He pointed out that when he started as Huntington Woods’ city manager in 1990, the city received about $1.1 million in total funding from the state. This year, that number dwindled to just $402,000.

Under EVIP, Huntington Woods would be eligible to receive approximately $63,000 in revenue. Allie said that the city would have its dashboard program online by Oct. 1. Like Ferndale, the city is using Munetrix to provide financial data to its residents, but Allie noted that this information has always been within close reach.

“We already put all of this information up online for people to read,” he said. “There’s nothing that people can’t access on our website if they want to see it.”

Officials in Berkley feel the same way. City Manager Jane Bais-DiSessa explained that Berkley residents can already find documents for the city’s budgets, audits, master plan, capital improvement plan and more on the city website with just a few clicks of a mouse.

“We’re required by law to provide this information,” she said. “I think that local governments have always been very transparent. We don’t really understand why this (dashboard) is necessary, but we will do our best to meet the governor’s requirements.”

Berkley can receive just over $151,000 in 2012 through EVIP. It has already completed the first step of the program by launching a link to city dashboard information on its homepage. According to Finance Director David Sabuda, the city should have no trouble meetings steps two and three of program to receive its maximum potential revenue.

“Every dollar counts, so we will go after that funding as aggressively as we possibly can,” he said. “I don’t care what kind of roadblocks the state government wants to throw up in front of us — we will do what we have to do to earn that revenue. And at the end of the day, we’re also doing something that’s going to make our city even more transparent than it already is.”

Pleasant Ridge City Manager Sherry Ball believes that finding additional ways to be open with residents can only help Michigan communities. She is supportive of the Munetrix program and believes that it summarizes complex financial data in a way that is easy to understand.

“I think anything that gives residents more access to important city information is a great idea,” she said. “Transparency is everything. It makes for better government.”

Pleasant Ridge is in line to receive nearly $40,000 in revenue if it complies with EVIP, which is about $2,000 more than city officials had budgeted. Ball is confident that her city will be able to meet all of Snyder’s requirements and receive the full amount.

She also contended that while the new program is not ideal for municipalities that are losing large chunks of revenue, it is not the all-out cut that some communities had feared.

“Yes, we’re anxious about the future, but we will do whatever we can to earn as much funding as possible,” she said. “Decreasing state-shared revenue has been a concern for at least the past 10 years, but this is not just an across-the-board reduction. It’s a reduction with an opportunity to get some of that funding back by meeting these criteria.”

Coulter, on the other hand, does not see things this way. He views EVIP as a way for the state government to force local communities to play by a new set of rules in exchange for limited financial incentives.

“The state is saying that they have no ability to raise revenues on their own,” he said, “so they are telling the municipalities that it’s up to them to pass their own local millages in order to stay afloat. Revenue sharing was an agreement between the state of Michigan and its cities for many, many years, and this feels like the state is reneging on that agreement.”

For more information on the state of Michigan’s new Economic Vitality Incentive Program, visit