Roseville City Council approves yearly budget

By: Brendan Losinski | Roseville - Eastpointe Eastsider | Published May 10, 2021

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ROSEVILLE — The Roseville City Council approved its fiscal year 2021-22 budget at its regular meeting April 27.

The budget was approved 6-1, with Councilman Charles Frontera casting the dissenting vote.

“There’s no specific good reason,” Frontera said, addressing the council. “I just had some reservations going into this (while) talking with some neighbors.”

Frontera announced his resignation from the council later that same evening.

City Controller John Walters made a presentation at the meeting, laying out the details of the upcoming budget and providing an overview of Roseville’s current financial state.

“We’re budgeting just over $38 million for the year (in the general fund),” Walters said. “You can see property taxes is the largest component of revenue in the general fund. We have other revenue, which is made up of charges for services, highway fund reimbursements, federal grants from the state, and licenses and permits. We also have state-shared revenue. It is a pass-through from the state. There is a constitutional and statutory component, and part of that formula is from sales tax revenue.”

He said the city is currently on stable financial footing, but this is largely thanks to a millage increase approved by voters in 2018. Home values in the city have increased, but taxable value on those homes is still increasing at a slow rate due to state statutes that prevent taxable value from rising at too steep a rate.

“Back in 2010, the assessed value in the city was almost $1.4 million. In 2026, we’ll be back in that area. There was a sharp decline from 2010 to 2014 (where it was $861,000), and we have inched our way back from that slowly but surely,” Walters explained. “Assessed value doesn’t necessarily equal tax value, because the tax value increases are limited by the state Proposal A and the Headley Amendment.”

Also making financial recovery for the city difficult is the steep decrease in state revenue sharing, which has continued in Michigan for the last 20 years.

“About 20 years ago, the city was receiving about $6.3 million a year in state-shared revenue. The state made cuts to all municipalities,” said Walters. “There’s an accumulation of about $34 million of lost revenue since 2001 because of those cuts the state made.”

The general fund revenue for the city showed a strong decline in 2021, but this was largely due to some of the revenue being moved into a separate fund for Police and Fire department retiree costs approved by voters in 2020.

“In 2011, you can see the sharp decline of property tax revenue. It goes to 2014, and then there’s a slow rebound through 2020,” Walters said. “There was a huge drop in 2021, and this was a result of moving revenue and costs out of the general fund related to the police and fire pension and retirement costs, which were moved into their own fund. We moved a portion of millage going into the general fund out of the general fund and used it to cover some costs in the newly created fund. It drops from $19.8 million down to $16.5 million in 2021. It will then go back to increasing (from this year forward).”

The city’s general fund costs decreased, as well, but this was also largely due to the Police and Fire department fund being established.

“General fund expenditures for fiscal year 2022 are estimated to be $36,215,741. Last year, our estimate was about $41 million. There’s a significant decline,” Walters said. “The costs per department are mostly the same, with the exception of police and fire. The total costs last year were about $12.7 million, and the total costs this year is $10.5 million (for the police department). This difference is because costs associated with police and fire, mostly pension costs, were moved to the newly created (police and fire) fund. It’s the same with the Fire Department, where costs are $6.3 million, and last year, it was $7.2 million.”

One of the biggest concerns for the city’s bookkeepers in the last year has been the state of the city’s fund balance — the city’s “savings account.”

“The state recommendation for fund balances is about 20%-25% of your annual expenditures,” said Walters. “Our annual expenditures are $36 million, and our reserve should be between $7.2 million and $9 million. In 2009, we were there. We had $11,977,669 in fund balance. In 2011, we were there, but we were barely there at $7.3 million. That’s the last year we had a fund balance at that recommended safety level,” said Walters. “We’re projecting in 2021 our fund balance to be restored, but this includes a $2 million federal grant for COVID-19 relief, and without that grant, we would be in trouble.”

Walters went on to say that the fund balance should be back to that $7.2 million level by 2024. This was made possible by increases to the total millage levy for residents, which increased from 22.3416 mills last year to 26.2791 mills this year, according to the budget resolution in the April 27 agenda packet. He noted that without the millage increase, the fund balance would be gone by 2023. Councilwoman Catherine Haugh explained why keeping the fund balance in strong shape is important for the city.

“If you let the fund balance dip below a certain point, it allows the state to step in and take over,” she said. “It is built into state statutes, and we have worked so hard over the years to keep this from happening.”

Walters said that state control of the city would likely result in taxes raised to their maximum point of 18 mills — they currently stand at just under 16 mills — as well as city employees being laid off and bargaining agreements made by the city being invalidated.

City Manager Scott Adkins said the city has done everything possible to stay afloat during the last decade in order to keep the city operating. He said that voters approving millage increases and city employees taking pay cuts or accepting layoffs were crucial to those efforts.

“If you look at where we were 10 years ago in 2011, we have been able to move forward by cutting expenses to make up for lost revenue,” he said. “Nearly $35 million of lost revenue from the state during the last 20 years is really hard to understand, even for those of us who do this job every day. We have been able to be good stewards of the taxpayers’ money. We have had a huge reliance on the backs of our employees when, beginning in 2007, we started layoffs, we saw massive concessions in 2010, we had a second round of massive concessions in 2012. We had some small increases to employee wages and benefits in 2018, but those were nominal and were between 1% and 1.7% increases (to wages). … We have had cuts to every department, as well.”

He added that Roseville is one of many cities across Michigan that is still finding ways to recover from the devastating loss of revenue nearly a decade ago.

“No one expected in 2008 to see a recession that lasted three or four years,” said Adkins. “Looking at cost increases such as utility cost increases, cost of materials and so forth add up. We’re still looking at those increases in the coming years. We have adjusted our health care costs, how we look at competitive bidding, how we work with other communities. We are using every tool in the tool box to stay fiscally responsible.”