Arbor UpdateAnn Arbor Area Community News | ||
Third Greden Budget LetterMarch 2003 Dear 3rd Ward Resident- As you know, the City Council is preparing the 2005-2006 City budget. As part of this process, I am distributing periodic e-mails to residents regarding the budget process. In the first message, I provided background regarding the City budget. In the second message, I outlined the steps the City has taken in recent years to cut spending. In this message, I will describe why the City faces a structural budget deficit despite our cost-cutting efforts. The City faces a $3.2 million general fund budget deficit for fiscal year 2006, which begins July 1, 2005. Although the City’s property tax revenues are growing by 3-5% each year, property taxes constitute only a portion of the City’s total revenue stream. Other sources of revenue are not growing as fast and, in some cases, are declining. For example, grants to the City from the State and federal government have been slashed by millions of dollars. Accordingly, total general fund revenues are rising by only 2-3% each year. Expenses, on the other hand, are rising faster than revenues (by approximately 5% per year). This structural budget deficit is expected to continue into the foreseeable future. Revenues The “Headlee amendment” to the State Constitution limits property tax growth for local governments in Michigan. Under the Headlee amendment, increases in a city’s property tax revenue stream that are generated by increased property values and new real estate development must be partially offset by mandatory reductions in the city’s property tax millage rate. This process is known as a “Headlee rollback.” Many communities – including Royal Oak, Grand Rapids, and Plymouth – have asked or may ask voters to approve a “Headlee override,” which allows a city to increase its property tax rate to offset the Headlee rollbacks. Proposal A, which was passed by Michigan voters in the 1990s, also limits property tax growth for Michigan municipalities. Proposal A, which applies to a taxpayer’s primary residence, limits annual increases in the property’s taxable value to the rate of inflation or 5%, whichever is less. Together, the Headlee amendment and Proposal A have saved Michigan taxpayers millions of dollars in property tax payments, but they also severely limited revenue streams for local governments in Michigan – including Ann Arbor. Under Headlee and Proposal A, property tax revenues in Ann Arbor are growing by 3-5% per year. Other sources of revenue are growing at a slower rate or, in some cases, declining. Accordingly, total general fund revenues in Ann Arbor are projected to grow by just 2-3% per year. The following are examples of other sources of revenue that are growing slowly or declining:
Expenses As outlined above, the City’s general fund revenues are projected to rise by approximately 2-3% per year. Expenses, however, are expected to rise by twice that amount. Expenses are expected to rise despite the millions of dollars in cuts the City has enacted in the last three years. The following examples illustrate the cause of the City’s rising expenses:
Problems in other cities Ann Arbor is not the only city in Michigan facing a structural budget deficit. The Michigan Municipal League has described the current statewide budget crisis as the greatest fiscal crisis facing local governments since the Great Depression. Accordingly, it is naïve to believe that Ann Arbor could or should be immune to this crisis. Fortunately, our 4% projected general fund deficit is considerably less than the deficits facing other cities. Consider the following examples:
Ann Arbor avoided these draconian cuts – and we do not face the same dire budget projections for next year – because of the cost-cutting efforts we implemented in recent years. (See Budget Message #2, February 2005). Conclusion I hope you find this information useful. I plan to distribute an additional message in the coming weeks explaining the various proposals to raise revenues and cut spending. In the meantime, please e-mail me at Lgreden@ci.ann-arbor.mi.us if you have questions or would like to be removed from this e-mail list. – Leigh Greden, City Council (3rd Ward) |
||
New Comments(twitter feed)
Arbor Update Topics
Site Library
|
Local Information
U-M Links
Local Blogs
Movie Showtimes
License |