Ann Arbor Area Community News
[posted with permission]
Dear 3rd Ward Resident-
Happy New Year! As you know, the City of Ann Arbor – like most cities, counties, and states – faces a difficult financial situation. The City Council is planning the City budget for fiscal year 2006, which begins on July 1, 2005. Over the next several months, I plan to send several e-mails updating residents about the budget process. This is the first message in that series of e-mails. The purpose of this e-mail is to provide background information regarding the City’s budget. I feel it’s important for residents to have a full understanding of the City’s budget before we begin discussing possible revenue increases or spending cuts. I plan to issue additional e-mails in the coming months outlining the efforts the City has undertaken in recent years to cut costs without reducing any major City services; the problems that are causing the ongoing structural budget deficit; and the various options to cut spending and/or raise revenues.
Throughout this process, please e-mail me at
Overview of the City budget
The City budget for the current fiscal year (2005) is approximately $288 million. The City’s sources of revenue include:
The current property tax rate for a “homestead” property in the City is 47.3625 mills. However, only 35% of a property tax bill – 16.9015 mills – is paid to the City of Ann Arbor. The remaining 65% of our property taxes are paid to other governmental entities, including:
Ann Arbor’s 16.9015-millage rate is lower than the property tax rate levied by many neighboring communities, including Ypsilanti, East Lansing, Kalamazoo, and Ferndale.
The 16.9015 mills paid to the City are divided between the general operating millage and various special millages:
The City’s $288 million budget is divided between the “general fund” and several “special funds.”
“Special” funds are established to set aside revenues and expenditures for specific purposes. The City’s special funds include:
Some of these special funds – such as the three parks-related funds and the Solid Waste Enterprise Fund – are funded by dedicated property tax millages that were approved by the voters and are part of the 16.9015 total property tax millage paid to the City (as outlined above). Other special funds are funded by their own revenue stream and/or state and federal grants. For example, the main revenue sources for the Water Supply Fund are the quarterly water bills paid by property owners connected to the Ann Arbor water system and proceeds from the sale of bonds. Money generated by special funds may not be used for any other purpose. In other words, funds from the special parks funds may not be used to pay for police or fire operations.
The City’s “general” fund provides funding for many major city functions, such as police, fire, park operations and maintenance functions not covered by the special park funds, community development, the City Attorney, and street lighting. The 2005 general fund budget is approximately $76.8 million. The main source of funding for the general fund is the City’s operating property tax millage of 6.2125 mills.
The 2005 general fund is broken down as follows:
Safety Services (police, fire, emergency management) = 41.8% Police Chief Dan Oates leads the Safety Services Area. The Safety Services budget consists primarily of salaries and benefits paid to police officers and firefighters. Labor contracts for police officers and firefighters are regulated by State law, which limits the City’s ability to reduce expenses related to wages, health care, and pensions. For example, the minimum staffing levels required by the labor contract with the Firefighters Union means that any further reductions in our Fire Services Unit would force the City to close one of our five remaining fire stations. The Police Services Unit include road patrol, traffic enforcement, dedicated “beat cops” assigned to specific areas of town, the detective bureau, and other support services. The Fire Services Unit includes the firefighters stationed at the City’s five fire stations.
Community Services (parks & recreation, community development, City Clerk, planning & development) = 11.0% Jayne Miller leads the Community Services Area. Her department provides a variety of high-profile services. The Planning & Development Unit reviews site plans, inspects rental housing, issues building permits, and administers the City’s historic preservation program. The Community Development Unit allocates several million dollars in federal funds – as well as $1.3 million in City general funds – to human service agencies. The City Clerk maintains all official City records and administers local elections. The Parks & Recreation Unit manages park facilities, such as swimming pools and community centers. As described above, the three voter-approved parks millages, as currently written, may not be used for park operations, and thus expenses for operating park facilities must come from the General Fund.
Public Services (park maintenance, project management, street lighting, customer service, solid waste) = 9.7% The Public Services Area, which is led by Sue McCormick, provides a variety of services, including cutting the grass at City parks. The three special parks millages approved by voters may only be used to acquire, develop, and rehabilitate parkland. As currently written, the millages may not be used to provide routine maintenance at local parks, and thus these maintenance expenses must be included in the general fund. The Public Services Area also handles road construction and maintenance; water and sewer systems; solid waste; streetlights that ensure safe neighborhoods; and customer service functions to assist citizens with solid waste and water matters. These departments have been significantly re-organized in recent years to save money and provide more user-friendly service for Ann Arbor residents.
Finance & Administrative Services (accounting, risk management, information technology) = 8.8% The City’s Chief Financial Officer, Tom Crawford, leads the Financial & Administrative Services Area, which includes the clerks who collect taxes and fees, accountants who ensure compliance with financial reporting guidelines, and the information technology unit. The Assessor Unit – which appraises real and personal property located inside the City – is also included in the Financial & Administrative Services Area.
15th District Court = 4.5%
City Administrator = 2.73%
City Attorney = 2.06%
Mayor & Council = 0.41%
Non-departmental transfers = 19.0%
I hope you find this background information useful. I am a member of the Council Budget Committee, and we have established an aggressive schedule over the next several months to tackle the budget, including three town-hall meetings with residents that will be scheduled in March or April. We will make every effort to balance the budget without raising taxes or eliminating major City services. Unfortunately, after several years of streamlining the budget, I anticipate that we will be forced to raise revenues, reduce or eliminate programs, or both. It is important for Ann Arbor residents to play an active role in shaping the budget. Throughout this process, please e-mail me if you have questions.
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