Madison Heights City Council adopts budget

By: Andy Kozlowski, | Madison - Park News | Published May 12, 2016

MADISON HEIGHTS — The budget for the new fiscal year met with unanimous approval at the Madison Heights City Council meeting May 9.

There weren’t any notable changes from the budget previewed at council’s workshop in April. To recap, that means no new taxes. It also means that while the Great Lakes Water Authority (GLWA) is charging the city more for water, the increase won’t be passed on to taxpayers.

The 5.6 percent increase in water rates from the GLWA has been balanced out by improved efficiencies in the system, including water main replacements and better leak tracking. In addition, the slight increase in the storm runoff rate charged by the county will be more than offset by a decrease in the sewer treatment rate.

As for the overall budget, as previously reported, the city is expecting property values to rise in FY 2016-17, with residential values rising by 13.7 precent, commercial by 0.8 percent and industrial by 5.9 percent, for an average overall increase of 10.3 percent.

However, the Headlee Amendment and Proposal A continue to limit increases in taxable property values to 5 percent or the rate of inflation, whichever is less, meaning city revenue will only increase by the inflationary factor of 0.3 percent.

In other words, the city will receive only a fraction of the value from recovering property values.

While the recovery won’t be quick, members of council were optimistic. Mayor Brian Hartwell praised his fellow council members and the city manager for preparing a balanced budget.

“What I’m excited about as a first-term mayor is residential property values will rise 13 percent. What that means is we will see … a rejuvenation of our neighborhoods with new homeowners and new families coming in. So how do we as a city plan for this? We’re marketing ourselves region wide to attract and retain the residents and businesses we want. And our budget is a useful tool to express our values and our goals.”

The numbers
The city tax rate for FY 2016-17 is set at 23.0150 mills — a very slight increase from the current fiscal year. A mill is equal to $1 for every $1,000 of taxable value.

The only millage that will increase is the fire stations bond millage, which will go up by roughly 0.05 mill. This will bring the fire stations bond millage to just over a half-mill, which will help cover the city’s debt service payment.   

The overall budget totals more than $47.9 million — a 0.2 percent increase from the current fiscal year. The general fund portion is nearly $26.7 million, a 1.4 percent increase.

Of the overall budget, nearly $40.8 million is for the operating budget, a 2.3 percent increase from the current fiscal year. The capital budget, however, sees a 10.4 percent decrease, clocking in at less than $7.2 million. 

Capital projects in the coming year include the first district of a citywide water meter change-out program, and Year 9 of the neighborhood road construction program under the Proposal R-2 millage, which expires in FY 2017.

The proposed budget contains a planned use of fund balance in the general fund totaling about $1.07 million. As of June 30, 2015, the general fund unreserved fund balance was nearly $7.2 million. The fund balance is expected to total nearly $5.3 million, or 19.7 percent of expenditures, come June 30, 2017.

Not counting the use of fund balance, there is about $25.6 million budgeted in general fund revenues — a 0.4 percent increase over the current fiscal year.

One police officer position has been budgeted for overtime in order to participate in a federal task force that will address crime in area hotels.

It’s not a new position, but it does move the city one step closer to fulfilling the undercover work once done by the Special Investigations Unit, which was disbanded years ago to save money.

“The foundation of our goals is public safety, and I’m going to continue to fight for the return of the SIU,” Hartwell said.

The city will eliminate one vacant full-time building official — now outsourced — and one vacant full-time Department of Public Services equipment operator, the result of contracted grass cutting.

One part-time DPS office assistant position will replace a shared part-time position with the City Clerk’s Office. A part-time office assistant shared by the clerk and DPS will now move 100 percent to the city clerk.

The mayor said he wants to make sure the current employees are happy.

“We need to retain the best talent, like any organization, and over the last five or six years, many of our departments have been cut so thin that our employees are overworked and stressed, and that is going to impact the delivery of services,” Hartwell said. “So we need to work with them, in every city department, to make sure they have the resources they need to get the job done.” 

In an email, Madison Heights City Manager Ben Myers noted that the city continues to make its contributions to pensions in the new fiscal year, as well as a planned contribution to Other Post Employment Benefits (OPEB) in the amount of $6.6 million.

Council has also taken the step of approving Pension Obligation Bonds (POB) that will convert 95 percent of the city’s unfunded liability for general employee pension to a 16-year debt service amortization.

The city expects to sell the bonds and receive proceeds by the end of the current fiscal year. POB financing provides budget relief through a fixed payment schedule over the terms of the bonds, and is projected to save the city around $4 million over the 16-year period.

“The FY 2016-17 budget continues the city’s emphasis on prudent financial management by prioritizing and balancing major spending needs with available resources,” Myers stated in an email. “Although we expect conditions to improve long term, the fact that our overall budget remains basically at status quo with a 0.2 percent increase, when the regional economy is doing better, reflects that Michigan’s municipal funding model is still broken.

“Despite stagnant revenues, though, we were able to reinstitute a city goals process this year and undertake several important infrastructure projects,” he added. “So we’re hopeful about the future and being able to meet the challenges that lie ahead.”

Council reactions
Mayor Pro Tem Mark Bliss had one concern with the budget: namely, $14,000 budgeted to replace 28 chairs in the council chambers and conference rooms at City Hall. The current chairs date back to 1998, and many do not function properly.

“It’s $14,000 — that’s with three zeroes — to replace chairs. In the workshop, I railed against this heavily, not just because I think it’s an absolute waste of money, but there are alternatives I threw out for the use of funds,” Bliss said. “We could replace that $14,000 line item in the budget with a paid internship position that would help manage the city’s social media channels and write grants for all of the other programs that we need — someone to communicate with the residents and all of the grant facilitators to get us money for different departments. That’s a return on investment — a good move.

“But as it stands, it’s $14,000 to replace chairs when we don’t have a lot of wiggle room in our budget,” he said. “I’m open to other ideas as well. At our goals-setting session, there were nearly 20 goals that could’ve been accomplished with this line item for chairs.”

Not wishing to hold back the budget and knowing that it can be revisited later, Bliss went ahead with the budget in its current form. He said that on the whole, the budget marks a turning point where the city is shifting out of “survival mode” and into a state where it can begin to improve things.

“I consider this a foundational budget, since this is the budget that has started our approach into a new era,” Bliss said. “We still don’t have a lot of money … but what we do have now is a defined system, on the staff and council level, to decide where every one of those extra dollars can and should go. The ability to spur growth in the downtown, for example, or to revisit some of our planning and zoning requirements, or to fund some of our projects to make the city safer with police and fire, with new equipment and new personnel. This is the start of that discussion — that process — of understanding where the city can go in the future.”

City Councilman Robert Corbett said a big part of the city’s future will be shaped by what residents decide to do with the downtown. The current Downtown Development Authority is nearing the end of its 20-year tenure. In the coming years, the city will re-evaluate the jurisdiction of the DDA and decide what can be done to give the city something resembling a proper downtown, albeit one that makes sense for Madison Heights.

“I really think the next breakout position, the next big thing for the community, will be to go from concept to design to implementation of a downtown strategy. That really is key for the next 20 years in our community,” Corbett said. “It will have a positive effect all the way around if we do this. It will obviously increase the tax base. It will cement us as a destination community, both for living in and for recreating in. It will serve those two purposes.

“Because really, we need to move beyond our current identity,” he said. “Right now, we’re sort of a blue-collar, middle-class town, and obviously that was the model when we developed in the 1950s and ‘60s. But now we have to bring in new people, new energies, new attractions. That’s going to be important since the tax base won’t grow by virtue of appreciation — we will simply have to build and go through a new building phase in order to come up with the revenue we want, and to create the services and city we want. This means new construction, new rehabilitation and redevelopment of our neighborhoods.

“We’re well-positioned to do that, with quality leadership and a quality managerial team,” Corbett concluded. “I’m very optimistic.”
The mayor pro tem agreed.

“We’re approaching a true turning point, a wonderful fork in the road, with choices which way we’ll guide the city,” Bliss said. “Now we can have those discussions. I’m excited.”