Sterling Heights tightens budget belt amid economic downturn

Council dips into fund balance

By: Eric Czarnik | Sterling Heights Sentry | Published June 19, 2020


STERLING HEIGHTS — It required some targeted spending cuts and the use of rainy day funds, but Sterling Heights now has a new budget for the 2020-21 fiscal year.

The Sterling Heights City Council adopted its 2019-20 budget during a June 16 council meeting in a unanimous vote.

At that meeting, Finance and Budget Director Jennifer Varney said the new budget weighs in at $213.9 million, with the general fund making up over half of that total, at $108.1 million. The rest of the budget is composed of the $53.4 million water and sewer fund, $33.6 million for special revenues, $12.5 million for capital projects and $6.3 million for debt service.

Varney said the new budget shrank by about $55.5 million, or 20.6%, from last year.

“There is decreased spending in nearly every fund, including capital projects, major roads, Recreating Recreation, facilities improvements, road bond construction and local roads,” she said.

While general fund revenues are set at $105.5 million, general fund spending is estimated at $108.1 million. The latter rose 2.5% over last year, or $2.6 million. This is due to more expensive personnel costs, pension contributions and health insurance, she said. She said the city expects to see spending go down in the categories of retiree health care contributions, capital projects, debt payments and liability insurance.

But in the end, because city officials expect decreases in state revenue sharing, the budget needed around $2.2 million in cuts. That meant not increasing employee headcount, Varney said.  

To balance the general fund budget, the city plans to spend around $2.6 million in fund balance savings. The 2019-20 fiscal year had its estimated fund balance at 25.7% of spending, and for the next fiscal year, that is expected to fall to 23.6%. She called the resulting fund balance “still a very healthy amount” and said the usage will “give us time to evaluate the constantly changing economic conditions.”

Varney said the city tax rate will be unchanged at 16.2069 mills.

During a June 2 City Council meeting, Varney linked anticipated revenue reductions to the pandemic and its economic fallout.

“Needless to say, the city is facing challenging times,” she said.

According to the National Bureau of Economic Research, the U.S. economy is now in a recession. Tens of millions of Americans became unemployed due to business and event closures, as well as other regional, national and worldwide effects of the COVID-19 pandemic.

“This crisis is unlike any other we have faced, and the truth is there are many unknowns in the future,” Varney said.

Councilwoman Barbara Ziarko thanked Varney June 2 for quickly adapting the budget amid the pandemic, even with so much of the groundwork previously laid, to the point that it was nearly done.

“She had to do the budget twice,” Ziarko said.

Councilwoman Maria Schmidt said the proposed budget is “significantly less than what it was supposed to be” and recalled the feeling around 2008 of “trying to save wherever we could.” She called the proposed budget the result of a good compromise and thanked administrators for their work.

Despite some budget cuts, city officials said residents can still expect $23.6 million in major road repairs to happen this construction season, as well as $5 million in repairs for 26 neighborhood streets. However, officials said the $500,000 sidewalk gap and repair program has been postponed for now.

At the June 16 meeting, Sterling Heights Mayor Michael Taylor predicted that some budgetary matters will remain unpredictable for some time.

“We still don’t know what’s going to be coming down from the federal government,” he said. “We understand that we’re going to be getting a substantial amount of money from the county, flowing through the county from the federal government.

“But we are all going to have to get used to the idea that things are not going to be the same anytime soon.”   

Find out more about Sterling Heights’s 2019-20 budget by visiting get or by calling (586) 446-2489.