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Grosse Pointe Woods

January 16, 2013

Finance Committee talks cuts, financial future

By April Lehmbeck
C & G Staff Writer

GROSSE POINTE WOODS — With the failure of the city’s millage proposals during the November election, it is time to discuss more areas where the city can save money, but city officials want to take a careful look at the options.

There was good news and not-so-good news presented during a Jan. 14 finance committee meeting, which consists of a few of the members of City Council.

The good news is things seem to be looking up in the housing market in Grosse Pointe Woods, with a projected 2.3-percent increase in state-equalized value. Yet, even with similar increases down the line, the city’s expenses are outpacing expenditures, and the city will deplete its fund balance in future years.

Without additional cuts, the city will end this year by having to use almost $700,000 from its general-fund balance, which would still leave the city with a more than $4 million fund balance. Then, however, they are forecasting having to take another approximately $900,000 from the fund balance for next year’s budget.

“We’re still $900,000 short with a 2.3-percent increase (in SEV),” Treasurer/Comptroller Dee Ann Irby said.

“We do need to make some cuts somewhere, try to find ways to bring in some revenue,” Irby said.

Cities across the state have been hurt by falling property values throughout the last several years, leading to less money for city use, among other revenue shortfalls. They also have faced many rising costs, like health care and pension fund costs.

Irby said the city needs direction from council as to what they want to see in contract negotiations with employees, but reminded those at the meeting that the employees have taken 8- to 10-percent cuts, which have hit some employees hard. She also said they are looking for direction as to how to direct department heads when planning their budget proposals.

The city has until May 20 to approve its 2013-14 fiscal year budget, so they have a timeline for moving forward with discussions.

“We’re on somewhat of a tight schedule,” Irby said.

With expenditures continuing to outpace revenue due to rising costs and other financial concerns, the city will ultimately deplete that fund balance in future years.

To prevent that, city officials said that a Headlee override proposal will be in the city’s future.

“In all probability, that Headlee override is going on the ballot in 2014,” Mayor Robert Novitke said.

During the committee meeting, a list of possible cuts for this fiscal year and next was presented. The committee chose a couple of the items to recommend to council to cut but left most of the discussion for a future Committee of the Whole meeting so everyone at the council table could give input.

“A lot of this to me is too important for us to go through and say, yes, no, yes, no yes, no,” Finance Committee Chair Todd McConaghy said. “I think they should be discussed by the Committee of the Whole.”

Novitke said he doesn’t want to make a knee-jerk reaction to the failure of the millages and pass cuts that will hurt the city or its residents. When the city created this fiscal-year budget, they didn’t plan on the passage of millages.

“We formulated a budget last year doing a whole lot of due diligence,” Novitke said, adding that the city is going to be in a better financial place than projected at the end of this fiscal year. 

“We spent, as a council, an awful lot of time on the budget,” he said. “We didn’t do a number of things. We deferred a lot of the capital-improvement purchases, etc.”

The committee decided that, since mulching of city beds was done last year, they could recommend cutting it from this year’s budget and do it again next year. They also decided to recommend putting up an investment in a municipal-wide area network as a technology upgrade.

Some things on the list concerned Finance Committee members. For instance, putting off a purchase of a backup diesel pump could cause problems down the road, which could result in additional costs. The city has already put off a number of purchases.

“You start delaying too many of these things (and) we, as a city, are really going to be in bad shape,” Novitke said.

When discussing the outcome of the millage votes, McConaghy said he felt “our residents were telling us they want a Chevrolet, not a Cadillac,” when it comes to city services.

However, after the election, he said the residents he has spoken to are telling him they don’t want their services cut.

He said he realizes that cuts need to be made, but he wants to make sure cuts don’t affect the nature of the city, which is known for providing quality services to the residents.

The committee considered whether to recommend cutting shredding services at a cost of $1,100. They chose not to recommend that, however, because it is such a small savings for something that residents use. It wouldn’t help the city’s budget situation, but takes something away from those who use it.

“It would send a very terrible message to the residents,” Mc-Conaghy said.

While they need to find a way to inform the residents of the financial forecast and depletion of the city’s general fund if something doesn’t change, committee members said they didn’t want to make draconian cuts as a reaction to the votes.

“We’re still doing our best to give the most to our residents, as best as we can,” committee member Michael Koester said.

They discussed some other options, including possibly having a reasonable park pass fee per household so that they don’t have to make cuts at the park that will diminish its quality.

“It makes people want to move here,” McConaghy said.

“Don’t look at the park as a luxury,” Novitke said. “That park truly adds value.”

They even mentioned the programs and events that are held during the year. McConaghy said that the total of all events is only about $15,000. While saving money is important, cutting all of the events wouldn’t help the city’s bottom line, but would affect residents who enjoy them.

“What a drop in the bucket for all of those events,” Mc-Conaghy said. “They’re all well-attended most of the time. I really believed that there was more money involved in these events. There isn’t.”

Novitke agreed that nickel and diming the budget isn’t a way to approach the problem. They also agreed that they should avoid cuts that are simply symbolic in nature and don’t help the city’s financial situation.

You can reach C & G Staff Writer April Lehmbeck at alehmbeck@candgnews.com or at (586)498-1043.