FERNDALE — Without laying off any staff members, Ferndale city officials were able to present balanced 2015 and 2016 operating budgets to City Council April 14, with the City Council’s final approval coming at the end of the month.
Ferndale faced about a $1.2 million deficit for both 2015 and 2016 as officials entered budget workshops in March, but reducing funding for other post-employment benefits and finding alternative funding options for a few expenses will balance the budget heading into the 2015 fiscal year.
The biggest reduction came in OPEB, to which the city contributes for when employees retire. Ferndale originally was budgeted to contribute almost $1.3 million to OPEB in 2015, but the city reduced it by almost $900,000 to balance the budget.
OPEB is the city planning for the future, City Manager April Lynch said, and the goal is to fund OPEB with a contribution between 25 and 50 percent each year, and the new amount of nearly $400,000 keeps the city at a 30 percent contribution in 2015.
“A few years ago, cities started being required to contribute to other post-employment benefits, which is a cost for current retirees and those that have not retired yet,” Lynch said. “It is a trust to pay for bills that have not come up yet, like pensions. The OPEB is not required to be 100 percent funded, and you don’t really need to pay anything as long as you are paying current retirees. The best thing to do is to pay, because the sooner you do, the sooner you are fully funded, but a lot of communities cannot afford that.”
The 2016 budget has Ferndale only paying $175,000 to OPEB, or a 14 percent contribution. Lynch told council that officials would work throughout the next year to get the contribution increased to meet the goal of a 25 percent contribution.
Mayor Dave Coulter said that while the city would like to make a full contribution each year, it is not possible at this time in order to obtain a balanced budget.
“It is not an ideal move, but it is a necessary move, given our financial situation,” Coulter said. “We have enjoyed the benefit of funding it more fully in the past and more so than most communities, and we hope as the cash flow increases, we can increase our participation rate again.”
During Lynch’s presentation on the budget, she talked about how low taxable values have made balancing a budget more difficult for many communities, including Ferndale.
Even though Ferndale will receive more money from taxes in 2015 compared to 2014, the city still is bringing in less compared to five years ago. Despite the general operating millage being almost 5.5 mills higher in 2015 compared to 2010, the city is bringing in about $300,000 less in taxes in 2015.
“Taxes have increased, but taxable values are down, so it is a structural deficit that is very hard to gap, and we are one of many dealing with this, and other communities are in worse shape than we are,” Lynch said. “The full Headlee of 20 mills will be in effect this year, and we are actually down in taxes, even though we are up almost 5.5 points.”
Another big chunk of savings came from changing how the city funds aspects of the Police Department.
While the city usually spends around $135,000 a year to rotate new police vehicles into the fleet, Police Chief Timothy Collins informed Lynch that the department could get by with only one new police vehicle in 2015, so the city will save $100,000 there.
Officials also decided to keep a citation fee that helped the city save money for 12 years to renovate the 43rd District Courthouse and the Police Department.
The $20 fee attached to traffic fines will help the city pay for a new Police Department roof, saving the city $100,000 in 2015.
“One thing municipalities are doing is deferring infrastructure improvements, and now we get to a point we need new buildings once you keep doing that,” Lynch said. “By keeping the capital fee and focusing on municipal buildings, we won’t let them crumble and pay for a lot of high-ticket items like roofs. If we keep this and use it for our facility maintenance fees to keep buildings in good conditions, we won’t have to take it from the general fund.”
Coulter said the fee helps save residents money in taxes and helps the city bank money for unexpected expenses.
“It was smart of the city 15 years ago to institute that fee to help with future capital projects, and I think it is just as smart now to continue it for additional projects going forward,” he said. “We can’t use it for just anything, but it is a wonderful source of revenue to be able to go to, and it has the added benefit of not being a tax on residents, but paid through tickets.”
One of the big goals for officials this year was to move to a priority-based budget process and make the budget easier for council and residents to understand.
While it was only the first year, Coulter said he feels the city is on the right path to make the budget process simpler.
“I think we took a big step toward greater transparency, as the budget in the past was confusing to not only residents, but to us on council at times,” he said. “It is not where it needs to be, but we are committed to make it easier to understand and identify the entire costs of projects to make better decisions.”
A public hearing will be held on the budget during the City Council meeting at 7 p.m. April 28 at City Hall.