Park to seek Headlee override for public safety millage

By: K. Michelle Moran | Grosse Pointe Times | Published August 3, 2016

GROSSE POINTE PARK — In November, Grosse Pointe Park will be asking residents for a special millage to retain public safety services at their current level.

Because the city has been at its Headlee cap for a number of years now and can’t raise its millage rate without voter approval, the city will be asking voters to approve a Headlee override of up to 2.75 mills for 15 years, starting in 2016. The millage, which would be dedicated to public safety, would be levied at 1.5 mills for each of the first two years, which would raise an estimated $855,000 each of those years in new revenue.

Like many other cities across Michigan, the Park was hit hard by the housing market crash and recession. Although property values have rebounded nicely since the mid-2000s, state law limits property tax increases to the rate of inflation or 5 percent — whichever is lower. This year, state officials determined the cost of living adjustment to be only 0.3 percent, giving the Park a property tax revenue boost of less than $30,000 over last year.

City Manager Dale Krajniak said that if the city had gotten just a 2 percent tax increase since 2008, the city would have more than $1 million in additional annual revenue today.

During a July 25 meeting, the Park City Council unanimously approved language to put the millage on the November ballot. City officials said they wanted to put it before voters during a presidential election cycle, when the largest number of registered voters would be casting ballots.

Krajniak said public safety accounts for about 60-65 percent of the Park’s operational costs. 

“We’re going to have to raise additional mills going forward. … We’re really not in a position where we can comfortably maintain the service level we have now (without a millage increase),” he said.

City officials concurred.

“It’s never a good time to have to ask residents to pay more taxes, but in my judgment, we can’t wait,” City Councilman Daniel Clark said.

He noted that for the 2016-17 fiscal year alone, the city plans to use $500,000 in reserves and $400,000 from the sale of city-owned property to balance the budget.

“That’s not sustainable,” said Clark, pointing out that the city needs to retain reserves of at least 10 percent. “If we don’t do something now, we put ourselves in a bad position where we might not be able to deal with an emergency (expenditure).”

Because the city has about 3.6 mills coming off the books over the next three years — including the retirement of millages for sewer separation and the Lavins Center — Krajniak said taxes “will actually go down” even if the public safety millage is approved.

“It wouldn’t be any more than what (residents) are paying now (in taxes),” City Councilman John Chouinard said.

Over roughly the last decade, the city has seen an average annual drop of about $600,000 in property tax revenue, Krajniak said at a council meeting in May. In 2008, the Park collected an estimated $6.9 million in property taxes, he said. For 2016-17, the proposed budget anticipates property tax revenue of $6.082 million. Krajniak added that property taxes and state-shared revenues — the Park’s “two primary sources of income” — have both been hit hard; 14 years ago, he said, the city got about $1.4 million annually in state-shared revenues, but now receives about $500,000 less per year.

“That’s a $1.1 million (annual) swing in reduced revenues,” Krajniak said in May. “That’s produced some challenges.”

To make ends meet and produce a balanced budget over the last decade, Krajniak said they’ve reduced staff and contracted out a number of services that used to be handled by Park personnel. He said the city had 85 full-time employees 10 years ago and now has 66 full-timers. Krajniak said that in essence, the Park has contracted out the entire Public Service Department staff, including trash collection, building inspection and blight inspection.

“We try to do everything to the same standard we always did, but it’s becoming more and more difficult,” Krajniak said.

He said the city has reduced pension and health care benefits as well for remaining personnel.

In addition, the city has deferred equipment and vehicle purchases and maintenance on buildings and other city facilities over the last decade, something officials say can’t continue.

The exception to this is roadwork, and that’s only because a voter-approved five-year, 1.75-mill special assessment for local streets has provided the Park with more than $900,000 each year now to focus on needed repair work, Krajniak said. Last year, the first full year since the millage was approved in August 2014, he said they undertook two years’ worth of road resurfacing because the needs were so great.

Despite the challenges, he said the city was still able to add to its reserves over the last 10 years. With health care costs and pension contribution requirements slated to skyrocket in the coming years, though, Krajniak said the city will no longer have funds to add to its surplus.

Mayor Robert Denner said the city’s pension — which was once almost completely funded — is now only about 60 percent funded, and the Park will need to kick in $1.4 million this year alone. In just five years, he said, the city is slated to be looking at an annual pension contribution of more than $2 million, and within 15 years, it’ll be over $3 million.

The city’s pension is administered through the Municipal Employees Retirement System of Michigan, or MERS.

“These increases in (pension) cost are beyond our control,” said Clark, noting that they relate to increased longevity, investment performance and other factors. “This is a cost we really have very little control over. In areas where we have had control, we’ve exercised it.”

City Councilman Daniel Grano said that if the Park decided to get out of the MERS system now, officials would have to pay the city’s shortfall of $27 million, “which is obviously not an option.”

Almost all of the city’s union contracts expire in spring 2017, and Krajniak said the city might be able to negotiate for additional concessions. However, the city doesn’t want to lose good employees or not be able to attract them in the future, so that’s an area that needs to be approached with caution. Already, some of the Pointes have seen, for example, public safety officers leave their departments for other cities in the area that offer better salary or benefits packages.