City officials consider proposed budget for Madison Heights

GLWA charges city more for water, but taxpayers won’t see increase

By: Andy Kozlowski | Madison - Park News | Published May 3, 2016

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MADISON HEIGHTS — On Monday, May 9, the Madison Heights City Council is expected to vote on the budget for fiscal year 2016-17.

There are no new taxes planned. And while the Great Lakes Water Authority is charging the city more for water, the increase won’t be passed on to taxpayers.

“We will have a zero increase in water rates this year,” said Madison Heights City Councilman Robert Corbett. “There’s a (5.6 percent) increase we’re getting from the GLWA, but because of efficiencies in our system, we have eliminated it and are not passing any of the increase on to our residents. We’ve replaced water mains; we’ve been much more aggressive in tracking down leaks in the system. We’ve been getting good at this, and all of these efficiencies together help.”

In addition, there are changes to the rates for storm runoff and sewer treatment. The storm runoff rate charged by the county will increase slightly, but it’s more than offset by a decrease in the sewer treatment rate, Corbett noted.

“It’s excellent news,” Corbett said. “After year after year of double-digit increases (in the overall water bill to the city), we’re finally able to say — for one year, at least — that we’ve stopped that, and we’re moving toward a more efficient system that will deliver water and disposal services in the most economical fashion possible.”

As for the overall budget, the city is expecting property values to rise in FY 2016-17, with residential values rising by 13.7 percent, 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 revenues 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.

The city tax rate for FY 2016-17 is expected to be 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 set to increase is the fire stations bond millage, which would go up by roughly 0.05 mill. This would 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 is expected to total 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 will go toward the operating budget, a 2.3 percent increase from the current fiscal year. The capital budget, however, will see a 10.4 percent decrease, clocking in at nearly $7.2 million. 

Capital projects in the coming year will 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.

The city plans to eliminate one vacant full-time building official — now outsourced — and one vacant full-time DPS 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.

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.

“I think that the FY 2016-17 budget reflects a reasonable approach to meeting the most critical needs in our service areas, while continuing to position the city for long-term stability,” Myers stated.