Madison Heights City Council adopts budget

By: Andy Kozlowski | Madison - Park News | Published May 23, 2019

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MADISON HEIGHTS — The average homeowner in Madison Heights can expect to pay less in city taxes in the new fiscal year beginning July 1, as per the budget adopted by the City Council at its meeting May 13.

The budget for fiscal year 2019-20 weighs in at $52.7 million, of which $30.1 million has been allotted to the general fund. The average city tax bill will decrease by 1.7% from the current fiscal year, due to the Headlee Amendment’s rollback mandate and Proposal A.

The average homeowner in Madison Heights has a home market value of $115,820, with a taxable value of $38,020, and can expect to pay $962.47 in city taxes in FY 2019-20. This includes all city services, including rubbish and recycling pickup. The city will not be increasing its water, sewer and stormwater rates in the new fiscal year.

The city’s total millage rate for FY 2019-20 will be 25.2887 mills, down from 25.7213 mills in the current fiscal year. The city collects $1 for every $1,000 of a property’s taxable value, multiplied by the millage rate. The city’s millage includes:

• General operations (8.6566 mills)
• Millage restoration (1.1592 mills)
• Neighborhood roads (1.9632 mills)
• Vehicles (0.2454 mill)
• Advanced life support (0.2454 mill)
• Solid waste (2.5968 mills)
• Senior citizens (0.4663 mill)
• Police and fire retiree benefits (7.3886 mills)
• Fire station bonds (0.4951 mill)
• Library (0.9816 mill)
• Chapter 20 drain debt (1.0905 mills)

The budget for the new fiscal year was balanced with a $174,512 use of fund balance, with the general fund’s unreserved fund balance projected to be $5.5 million.

Madison Heights City Manager Melissa Marsh said that the city has identified a need for additional public safety staffing, and residents continue to request enhanced quality-of-life programs.

However, the city is unable to fund new positions, with the exception of changing a current part-time position at the Active Adult Center (formerly the Senior Citizen Center) to a full-time position and eliminating two part-time probation officers at the court, replacing them with one full-time position. Both of these positions will be funded with dedicated revenue sources.

Otherwise, “Service levels remain at status quo, due to restriction on taxable value growth and inability for tax revenues to keep up with inflation,” Marsh explained.

Looking forward, public works projects in the new budget include roadwork funded by the neighborhood streets millage, planned for Meadows, West Dallas, Kenwood, Madison and Windemere avenues.

The city is also entering the fifth year of the eight-year People Powered Transportation and Sidewalk Repair Program, which will cover the area from 12 Mile Road to Gardenia Avenue to Stephenson Highway and Dequindre Road. The budget also includes a continuation of the water main replacement associated with the neighborhood roads program, budgeted at $1.15 million.

The city manager noted that the Madison Heights Public Library will be adding Sunday hours at a cost of $13,806.

“This initially will be for a trial period of September through December,” Marsh said. “After that, staff and City Council will evaluate the program for consideration of continuation.”


Ongoing challenges    
Marsh said that one of the greatest challenges facing the budget each year is the interaction of the Headlee Amendment and Proposal A — two state policies that together sharply limit what the city can collect in terms of revenues from improving property values.

By way of background: In 1994, Michigan voters approved the education finance amendment known as Proposal A. This included two key provisions: 1) that growth on taxable value of properties is limited to 5 percent or the rate of inflation, whichever is less; and 2) that when a property is sold or transferred, the taxable value is reset to match the state equalized value, which is half of the property’s cash value.

This process of adjusting taxable value upward to the state equalized value is commonly called “uncapping” — and uncapped values were not included in the definition of exempt properties for the purposes of the Headlee Amendment’s rollback calculation.

“The result of this is that communities with substantial market growth in existing property tax values are penalized by being forced to roll back their millage rates,” Marsh said.

The result of this, she continued, is that the taxable values for municipalities can drop as much as the assessed market value will go. For example, if a home’s value drops 25% during a recession, the taxable value would drop 25% as well; however, in an up market, the taxable value would still be capped at inflation or 5% — whichever is less — so the city would have to roll back its millage rate if the growth was higher than inflation.

“There is no cap on the downside or drop, but a strict cap on the increase,” Marsh said.

She said that for Madison Heights, the taxable value in 2008 was almost $1.2 billion, compared to today, when the taxable value is only $820 million. To put this in context, in 2008, 1 mill of property taxes generated $1.2 million, but today 1 mill generates only $820,000.

“Residents are demanding more quality-of-life programs and increases in services; however, at our current funding levels, we cannot increase services,” Marsh said. “City Council and staff recognize that in order to retain current residents, attract new residents and businesses, and become a quality city with quality life, we need to address this funding issue and use our recently adopted blueprint for the future to set the future in motion.”
    

Finding savings
To help support quality-of-life initiatives by the city’s citizen-led boards, the council identified new savings as it reviewed the proposed budget line by line.

Most notably, nearly $10,000 in savings were identified by Mayor Pro Tem Mark Bliss across a dozen different line items that were either unnecessary or could be reduced to the previous year’s lower amount. Among these items were office supply increases on four line items, as well as small contract increases and training exercises.

These savings will be invested in the citizen-led boards, among them the Arts Board, which has been working on outdoor murals and activities including art exhibits, karaoke events and classes; the Environmental Board, which has been educating the public on recycling; the Library Board, which has been focused on expanded hours and new furniture; the Parks and Recreation Board, which has been working on new equipment purchases and citywide cleanups; and the Active Adult Center Board, which has been focused on senior programming, advocacy and outreach.

“This falls in line with our new strategic planning sessions, which prioritized our budget into five key areas: public safety, quality of life, economic development, financial stability and infrastructure. This budget is the first that utilizes that new process, and in my opinion, it is the best and most complete budget we’ve done since I joined council (in November 2013),” Bliss said. “Taking these budget savings and turning them into investments in quality of life is consistent with our long-term goals and ties into the overall budget strategy we’re leveraging.”

Mayor Brian Hartwell applauded the staff’s work on the budget, noting that this is the first budget prepared by Marsh in her role as city manager, as well as the first budget by Linda Kunath in her role as financial director and treasurer. He said the recent hiring of a new downtown development director, Barry Hicks, will also improve the city’s economic prospects.

“The City Council has built a strong team of financial leaders who are carefully managing taxpayer funds. … City Council studied every penny of spending and has developed a long-term strategy to grow our tax base,” Hartwell said. “There is a reason that I regularly promote the north-side Asian town to bring together our 200 Asian-owned businesses. There is a reason a majority of City Council adopted an ordinance allowing 14 medical marijuana industrial businesses. That reason: A rising tide will lift all ships.

“Last year, we saw the largest investment by private businesses in the city’s history. This year could be better,” the mayor continued. “Expanding our tax base will provide a safer, healthier and more productive life for our residents. As we continue to rebuild our city out of the gray decades of suburban sprawl and strip malls and relentless pounding of the Great Recession, we will always be mindful of what our residents need: affordability, safety, access to good schools, good jobs and professional city services.”    

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