Royal Oak, Clawson officials believe budgets will need major amendments

By: Kristyne E. Demske | Royal Oak Review | Published June 9, 2020

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ROYAL OAK/CLAWSON — The Clawson City Council passed its annual budget June 2, and the Royal Oak City Commission is slated to approve its annual budget June 8, after press time.

While both municipalities shaved where they could, both expect to have to make significant changes to their financial blueprints in the coming months, when more information is known about the full scope of the impact of COVID-19.

“Under any circumstances, a budget is a living document that’s frequently being amended or changed. It’s not written in stone. On any given year, if you were to go back through the City Commission minutes, there are budget amendments over the course of the year,” Royal Oak City Attorney David Gillam said.

While both Royal Oak and Clawson budgets resemble status quo figures, officials believe the 2020-21 fiscal year is going to be a challenge.

“There’s no way to make any realistic projection or estimate of what the impact is going to be. We figure we’ll have to amend or adjust as we get more information, particularly more information from the state about what the state impact will be in terms of revenue sharing,” Gillam said. “Probably sometime in August, there’s a very good chance we’ll be coming back with significant budget amendments.”

Municipalities are still operating based on property values established Dec. 31 last year and won’t know the impact of COVID-19 on property values until Dec. 31 of this year, he said. Additionally, it’s unclear how many residents will not be able to pay property taxes this summer due to job losses or reduced hours. Revenue from parking fees, parking tickets and building permits also significantly decreased.

According to the Finance Department, Gillam said, state revenue sharing in Royal Oak is down roughly 17% from last year, and Act 51 revenue, which is supplemented largely by gas sales, is projected to be down about 13%.

“There’s about a couple million dollar hole in the budget that has got to be filled from somewhere,” he said. “There are different funds that can be used (to supplement the hole), but the money will have to come from the general fund.”

Gillam said the pandemic ramped up midway through the budget process. Department heads relayed their needs via virtual meetings. The City Commission held three budget work sessions on May 13, May 20 and May 28. After the second, they requested that department heads make additional cuts.

“It’s not to say things will be eliminated from the budget entirely — the answer wasn’t so much ‘no’ as just ‘not right now,’” Gillam said.

Clawson Finance Director and interim City Manager Lori Fisher said that when she started analyzing the numbers and projecting the city’s needs for next year, this year posed a huge challenge because “everything changed come March.”

The city appointed Fisher to the interim city manager position May 5 after former interim City Manager and longtime Director of Recreation and Senior Services Kathy Leenhouts retired.

“I fully expect significant changes to the budget we adopted,” Fisher said. “I went through the general fund and reevaluated some numbers, tightened up a lot. I pulled money out of every department across the board. In Clawson, we’re small and can make quick adjustments.”

She said, overall, Clawson is in good financial shape and does not have some of the cash flow issues other municipalities in the state are experiencing.

“The economy never dipped down to where we were thinking there was going to be an impending recession,” Fisher said. “People are still out, still spending money, which points to probably a shorter recovery time.”

Both Gillam and Fisher said the cities of Royal Oak and Clawson are tallying up their expenses related to COVID-19, such as outfitting city buildings with plexiglass, purchasing disinfectant and personal protective equipment, and staff overtime costs, in the hope of being reimbursed by federal emergency aid.

Royal Oak City Manager Paul Brake did not respond to a request for comment by press time.

To view the proposed Royal Oak budget, visit romi.gov/198/Budget-Documents and click “View 2020-2021 Recommended Budget.” To view the proposed Clawson budget, visit cityofclawson.com and click “Proposed 2020/21 City Operating Budget” under “City News.”

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