ROCHESTER — When looking at the city’s 2014-15 proposed budget, which includes no increases in taxes or fees, City Manager Jaymes Vettraino said it’s the first “recovery” budget he’s had a chance to work on since the economic downturn.
“Last year’s budget was better than the year prior, and this year’s — with the actual projection of being able to include new, large-scale development in the budget — is a welcome change from holding our own with the rest of southeastern Michigan for the last several years,” he said. “With the increase of home values over 20 percent, and knowing that in the future the city’s taxable value should increase — not that dramatically, but we should be going up instead of down — and the ability to project that we’re actually going to have new, large-scale development during this fiscal year of over $50 million, I see the city finances, and this budget in particular, as something the city can be proud of. Also, City Council’s decision to provide the 0.4 mil tax decrease, rather than to reassign that millage in some other way, is good for the property owners, as well.”
For a number of months, the city has been working on preparing the proposed budget, which will be up for discussion during an April 28 public hearing.
“This has been a work in progress over the last four months as we’ve been turning over every rock,” said Mayor Jeffrey Cuthbertson of City Council’s involvement in the process.
The city’s budget defines anticipated city revenues and sets the legal limits for expenditures by the government. The city’s fiscal year begins every July 1 and ends June 30. The overall proposed city budget for fiscal year 2014-15 is $24,364,664, which is approximately 0.8 percent higher than the previous year.
The city is obligated to pass a balanced general fund budget — meaning revenues must equal expenses. The balanced general fund budget is about $9.99 million, which is 1.4 percent higher than the 2014 budget and includes no appropriation of the fund balance, Vettraino said. This is the third consecutive fiscal year with an increase to the general fund budget after six consecutive years of decreasing general fund budgets, he noted.
The citywide property tax value increased by 1.38 percent — from $642,686,450 in fiscal year 2014 to $651,573,650 for fiscal year 2015. Vettraino said the increase in overall taxable values resulted in an increase of approximately $113,258 in revenue for the city’s general fund, the second increase in taxable value since 2007.
During 2013, the average home sale price in Rochester increased by 22.28 percent. However, Vettraino said the impact of the increased values only reflects an increase of 3.67 percent in residential taxable value due to the impact of Proposition A of 1994, the Headlee Amendment, which regulates by state law that residential values can only increase at most by the rate of inflation, which is 1.6 percent for fiscal year 2015. The fact that total residential taxable values increased by 3.67 percent is good news for the city, Vettraino noted, because residential properties make up 74 percent of the property value of the city and therefore have the most significant impact on the city’s budget.
Industrial taxable values fell by 0.56 percent, commercial taxable values decreased by 1.87 percent, and personal property values fell by 14.68 percent. According to Vettraino, personal property values fell as a result of a change in the state law to exempt properties with less than $80,000 value in personal property from the personal property tax.
The 2015 budget reflects anticipated economic activity in the coming fiscal year, Vettraino explained. Revenue in Building Department licenses and permits, within the general fund, increased by $87,890. As a result, the Protective Inspections Department is $74,628 higher, reflecting the additional inspection costs.
“We have over 300 new residential units that either have been approved by the Planning Commission or are currently in the process, with a total value of approximately $50 million,” Vettraino said. “We’re pretty excited about the continued investment in the city.”
The property tax levy for fiscal year 2015 is recommended to be 3 percent less — or 0.4 mills less — than the fiscal year 2014 millage — which Vettraino said is approximately 14 percent less than the total millage in 2006.
“Everyone would have a 0.4 mil tax cut as part of this budget,” he explained.
Cuthbertson said the cut comes as a direct result of some sewer bond debt that was retired, noting that the city is proposing a reduction in the special millage rate that’s associated with the debt.
“We’re not going to put it on the ballot and repurpose it as if it was something else and say ‘your taxes weren’t going to go up because of it.’ We’re going to do the transparent and straightforward thing with that item, so I think that’s a positive precedent to set here with voted debt,” he said.
The city has a low level of debt, Vettraino added, noting that the city has not taken on any new debt since 2001. He said the city’s debt expense for fiscal year 2015 is $97,799,116, which is less than 0.04 percent of all budgeted expenditures. The city’s only bond debt is the 2001 Older Persons’ Commission Building bond payment of $97,799. The City Council has approved a policy position indicating that the city intends to issue debt during fiscal year 2015 for two new parking platforms, which Vettraino said is not included in the budget because the council has not yet passed the formal legislative action necessary to issue the debt.
The City Council will consider adopting the 2014-15 budget May 12. A copy of the city’s entire proposed budget is available for download at www.ci.rochester.mi.us.
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