City Budget: Some Cuts Sooner Than 2011?
At Monday night’s city council work session, councilmembers heard news from their Lansing lobbying team that had a $260,000 negative impact on the Ann Arbor city budget for FY 2010, which they are expected to adopt next Monday, May 18. The quarter-million dollar shortfall against the city’s own budget planning estimates for state shared revenue led to discussion of the possibility of accelerating an already-planned reduction in the number of Ann Arbor firefighters. A reduction of 14 positions in the fire department could be implemented in early 2010, instead of sometime during FY 2011, which was originally planned.
At the work session, city administrator Roger Fraser and the city’s chief financial officer, Tom Crawford, indicated that their preferred strategy was not to build any firefighter layoffs into the FY 2010 budget – they wanted to see if they could squeeze the $260,000 out of the budget in the course the first part of the FY 2010, which for the city begins July 2009. There’s uncertainty still, said Fraser, about how many police officers will take advantage of the early retirement offer – a move the city is making to avoid laying off 27 officers for FY 2010. Officers have until mid-June to make a decision. That uncertainty factors into decisions on the FY 2010 budget that council will make on May 18.
Councilmembers took turns calling city staff to the podium to clarify questions on other topics of interest. That included parking meters – their possible installation in residential areas, as well as the feasibility of maintaining current levels of ticket revenues without as many community standards enforcement officers dedicated specifically to ticketing. Other topics included the Local Development Finance Authority (questions about angels), historic district consultant (likely to be cut in FY 2010, instead of waiting until FY 2011), Project Grow (fund balance seen as too high) and the civic band (has not requested funding). The East Stadium bridges question came up, too (no money from state, but possibly from feds).
No formal decisions were made at the work session.
State Revenue Sharing Reductions
Kirk Profit and Kenneth Cole of Governmental Consultant Services, Inc. presented a grim economic picture to councilmembers in terms of the state shared revenue the city can expect. Of the four means of taxation – property tax, income tax, business tax, and sales tax – it’s sales tax that figures in state shared revenues.
The concept behind the state shared revenue system is that local municipalities in Michigan have a restricted ability to levy taxes, so the state reapportions to local municipalities some revenues out of the 6% sales tax that it collects. It’s 4% out of the 6% that the state can redistribute. The reapportionment comes in two flavors: the constitutional portion (15% of the 4% gross collections of the state sales tax) and the statutory portion (up to 21.3% of the 4% gross collections of the state sales).
Budget planning by the city of Ann Arbor in FY 2010 assumed the same amount of state shared revenue as last year – based on flat dollar amounts since 2005. Those figures were more conservative than the “consensus projected” numbers from January 2009, given by GCSI. But the most recent projections – based on an Executive Order (2009-22) passed on May 5, 2009 by both the House and Senate appropriations committees – put expected state shared revenues at around $260,000 less that the number used for city of Ann Arbor budget planning.
Statutory Constitutional Total A2 budget planning $2,942,517 $7,884,545 $10,827,062 January 2009 forecast $3,233,618 $7,763,929 $10,997,547 May 2009 forecast $2,988,371 $7,576,700 $10,565,071
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The reduction in projections for the constitutional portion of the total is due to flagging sales tax revenues, which are coming in at around $22 million below what economists had projected for the current year. The reduction in the projection for the statutory portion stems not just from flagging sales tax revenues. It’s due to a stipulation in the executive order that calls for cities, villages and townships (“CVTs” in state legislative parlance) to get a payment that is only equal to the FY 2008 allocation. Without that executive order, the total revenue sharing amount would have been protected from cuts, even if sales tax collections decreased and caused a reduction in the constitutional portion. That protection is afforded by Public Act 251 of 2008.
Fire Protection
To address the shortfall of $260,000 against the numbers used for city of Ann Arbor budget planning, Tom Crawford, the city’s chief financial officer, suggested that one strategy would be to contemplate earlier layoffs than originally planned in the fire department. Those staff reductions had been planned for FY 2011. In response to a question by Leigh Greden (Ward 3), city administrator Roger Fraser indicated that the budget he wanted to put before council on May 18 would not include the fire department layoffs.
Fraser suggested a wait-and-see approach, in light of the fact that (i) it still was not clear how many police officers would take advantage of the early retirement option being offered, (ii) there was time to see how actual operating expenses played out from July 2009 to the end of the year. On the first point, Fraser said it was possible that more officers would take the early retirement than the minimum needed in order for the city to meet its budgetary goal (which might itself help cover the $260,000). Officers have until mid-June to decide, which is after council votes on the budget. On the second point, Fraser said that the city monitors its spending on an ongoing basis and would be able to evaluate whether it was managing to spend somewhat less than actually budgeted – which could mean layoffs in the fire department would be unnecessary.
On the scenario sketched out by Fraser, if it were necessary to do so next spring, the decision to lay off firefighters could be made through an amendment to the budget. A budget amendment could also be undertaken in July, if the financial picture became clearer by then, he said.
Fire protection was also the one bright spot in GCSI’s report to council. The $1.1 million grant from the state to the city to cover the cost of fire protection for public institutions like the University of Michigan would not be cut. Mayor John Hieftje, however, asked Profit to clarify that this amount did not reflect a “fully-funded” grant, but rather only about 60% of the actual cost of fire protection. Profit allowed that there were some problems with the formula – among them, vacant land can figure into it – but that the kind of fire protection required by the university, with its laboratories and larger buildings, reflected a greater challenge.
In the ensuing discussion, Sandi Smith (Ward 1) asked Fraser to explain where the $1.1 million could be found in the fire department’s revenue statement. Fraser said that the $1.1 fire protection grant was listed as revenue in the general fund, not the fire department specifically, because the city didn’t tie the provision of fire protection to having the grant.
Parking Meters and Law Enforcement
Barnett Jones, director of safety services for the city of Ann Arbor (police chief), was on hand to explain how parking ticket enforcement would be achieved, given the plan to reduce community standards enforcement positions (who are dedicated specifically to writing tickets). Faced with skepticism from Stephen Rapundalo (Ward 2) and Sandi Smith (Ward 1) about patrol officers’ ability to write the same number of tickets, thus preserving ticket revenue, Jones remained cheerful. Jones said that he’d be calling on his officers to respond and that they would rise to the occasion. Patrol officers had always written tickets, and they’d continue to do so.
On the topic of a police officer presence in the downtown, Jones said that he wanted to get those officers assigned to downtown areas (which they have the option to cover by bicycle or on foot) back out on patrol. That didn’t mean that downtown merchants wouldn’t see police officers walking around downtown, he said. That’s because there’s a general directive to patrol officers to spend at least an hour a day outside their cars. Some of that time could be spent downtown, when officers would park and write tickets. A parked police car could help act as a deterrent. The downtown officers that merchants had come to know, he said, would be replaced by a greater number of different officers filtering through.
Carsten Hohnke (Ward 5) tried to get an arithmetic handle on the shift of responsibility of ticketing from community standards officers to patrol officers. If there’s 64 patrol officers, and 5 community standards were to be cut, then each patrol officer is being asked to pick up the slack of 1/12 of a community standards officer, he reasoned. “And that’s what you think they can do?” he asked Jones. Jones’ answer: Yes.
Sabra Briere (Ward 1) expressed concern that the added responsibility for ticketing could have a negative impact on those officers’ ability to fight crime. Jones reiterated his belief that his officers would rise to this occasion. He also pointed out that 54% of the city’s budget is the police department and that he was operating within the reality of a situation where cuts were necessary.
It wasn’t just the ticketing at parking meters that was at issue, but also the possible installation of new meters in residential areas outside the DDA. Field services staffers Mike Bergren and Pat Cawley were on hand with maps to give the same presentation they’d given last week at the DDA board meeting.
There are an additional 208 meter locations proposed in the central business district, in many cases adjoining the University of Michigan hospitals system. Bergren said that the city would like to explore the possibility of having the DDA do the management – the DDA administers the city’s existing parking program. He also indicated that options were being considered for addressing the negative impact on free parking availability for residents in the area.
Sandi Smith (Ward 1) – who had heard the presentation at the DDA board meeting because she serves on that body – pointed out that the addition of meters in residential areas was counter to the recommendation in the Nelson/Nyaagard study, which saw residential areas as appropriate for residential parking permits, but not meters. If parking is not allowed except for residents, that pushes motorists into the parking garages, according to that strategy. Bergren said that if a motorist had to pay to park anyway, then they might choose to park closer to downtown (i.e., in a downtown parking structure). Otherwise put, the goal of getting more people to park closer to downtown could also be achieved with parking meters.
Smith was joined by Briere, Stephen Rapundalo (Ward 2) and Hohnke in expressing their skepticism of the proposal. Hohnke expressed concern that parking meters reflected a “commercial invitation” into residential areas. Rapundalo’s concerns were partly practical. He wondered if motorists would simply move to the next block down where there were no meters. From Bergren, he elicited the revenue projections per meter, which Bergren characterized as on the low end – 30% occupancy. While a meter could potentially bring in $2,000 a year, they assumed only $500 for estimating revenues for the newly installed meters, he said.
Historic District Consultant
The city’s historic district consultant was originally slated by the budget plan to be cut in FY 2011. Christopher Taylor (Ward 3) called on Jayne Miller, community services director, to inquire what the impact on planning staff would be for eliminating that position a year earlier – in FY 2010. In what way was city staff poised to absorb the loss of the consultant’s services, Taylor asked. Miller described how the consultant [Kristine Kidorf] had worked with staff over the last three and a half years on the unification of guidelines across all the city’s various historic districts plus a project in one of the districts – the Old West Side – to identify contributing structures. That work, Miller said, was complete. The consultant had also worked to help train planning staff on historic district issues. Individual staff [Jill Thatcher] had furthered her professional training by taking courses at Eastern Michigan University.
LDFA
Stephen Rapundalo had questions for Tom Crawford about the LDFA’s budget. [There's useful backround on the LDFA board, on which Rapundalo serves, in a previous Chronicle article on the recent LDFA retreat.] Rapundalo elicted from Crawford that he had been unable to identify other SmartZones (of which the Ann Arbor LDFA is one) across the state that used LDFA monies to fund organizational costs for private angel investing groups. That’s what is proposed for Ann Arbor Angels, as a part of the LDFA’s budget.
Rapundalo also sought clarity on the question of LDFA microloans: When they get repaid, do they get repaid to the LDFA or to Ann Arbor SPARK, the region’s economic development agency which is funded in part by the LDFA? Crawford said that was still being worked out.
Rapundalo also wanted to know if he’d be provided with any additional clarity as to the specific duties and responsibilities of the LDFA’s proposed staff person. Crawford said he had nothing detailed to report, but responded in the affirmative to Rapundalo’s request to get that information from the LDFA’s president as well as the details of the microloan situation.
Also related to economic development was a brief discussion of the city’s economic development fund. The fund was created in order to pay for the parking spaces in DDA parking facilities, which were required by Google as a part of the deal that located one of the internet company’s advertising divisions in Ann Arbor. Regarding the current fund balance of around $700,000 – the fund had budgeted for a faster hiring rate than Google has achieved – Rapundalo acknowledged that it was an attractive amount of money to be used for other purposes, but encouraged his colleagues to leave it in place to provide for the eventuality that another similar situation to Google might come along.
Project Grow and Civic Band
At Briere’s request, Jayne Miller gave some background on Project Grow and the Ann Arbor Civic Band, which are not slated to receive the $7,000 they’ve been allocated in previous years. In the case of the civic band, Miller said that the organization had not requested funds. The city and the band, said Miller, were working together on an arrangement for the band to use equipment for their concerts (e.g., music stands). Miller said that the city had worked with the band on getting fundraising efforts started.
Project Grow, on the other hand, had requested funding, Miller reported. The main consideration the city was looking at was the organization’s fund balance, which is roughly equivalent to the operating budget for one year. Briere noted that Project Grow’s explanation of the current sizeable fund balance was that their income came all at one time [plot rental fees in the spring]. [Council had heard from Sheri Repucci, former staffer at Project Grow, on the previous Monday night during the proposed budget's public hearing. She had addressed the fund balance by saying that the reserve was necessary because it took an entire budget cycle to replenish it, given the one-time-a-year income stream.] Miller said that according to Project Grow’s IRS 990 forms, the balance had persisted for four years.
East Stadium Bridges
Kirk Profit, the city’s consultant in Lansing, gave a fairly grim picture on prospects that the state could provide the kind of funding required to replace the Stadium bridges over State Street. [Council approved an application for state funding at its last meeting.] Said Profit, “There’s almost no state resource for that bridge.” But federal dollars might be available, he suggested, in the form of the Discretionary Surface Transportation allocation, which provides $1.6 billion – for the whole country. Profit said that U.S. Reps. John Dingell and Mark Schauer were working diligently to obtain funds for this area. Profit characterized Terri Blackmore from the Washtenaw Area Transportation study (WATS) as “our quarterback” on DST issues.
Based on the severity of the recession in Michigan its hard to believe that budget planners are just now realizing that there is going to be a short fall in tax revenues for a budget that begins only a few months from now. It should be clear just by the unemployment numbers and auto sales that budgeted tax revenues would be sharply declining.
Thanks for the great coverage.
It boggles the mind that Ann Arbor is spending money on a new city building in the current economic climate. And now we’re cutting firefighters and discussing parking meters in residential neighborhoods?
I wish I could remember the Ann Arbor “civil servant” who complained that the new building is needed because his office doesn’t even have a window…
I recently read that the rules of Seattle’s public art fund have changed to focus on supporting local art. Imagine that.. Seattle supporting local artists. Yet Ann Arbor does a no-bid gift to a German artist under very questionable circumstances. Has the city released their art consultant’s contract yet? If not, why not?
And I agree with the previous poster. How can the city mgmt be so short-sighted that they are only now considering that past rosie forecasts may come up short? Oh, I know – because they assume their budgets will always increase and that people like giving their money to others to spend on their behalf.
Has there been any discussion of cutting city salaries?
There have been plenty of signs that both tax and state revenues would be headed lower. Past councils have just chosen to ignore them. Just wait till they need to “Top Off” the pension plans for the next 5 years. You haven’t seen anything yet. This is just the tip of the iceberg.
“Has the city released their art consultant’s contract yet? If not, why not?”
Good questions. Maybe it’s available and I am not aware of how to access it, but there should be an easy link to all of the city’s salaries, at least listed by job title. Then voters could see what positions might be options for salary cuts or elimination.
I know the Arts Commission only has the minutes to two meetings posted online, but has the luxury of a city webpage and their own, private (and paid for by the city…) second webpage. This waste of money is probably small but an example of waste that could be cut. And an arts czar while we cut police and fire positions is an insult as well.
The budget for the Art in Public Places project is 441,612 for fiscal year 2010 and 519,196 for fiscal year 2011. Included in the total is 35,329 for contracted services in 2010 and 41,536 for contracted services in 2011. The rest of the amount is described as contingency. Contracts above $25,000 require council approval.
The contracted services amount must be for the art consultant since a search of my list of city positions by fund did not turn up an employee charged to the art in public places fund.
I suppose we could all slice and dice the city budget to meet our goals and values and it is of course easy to say they should have done this or that, long after the deed was done.
The important votes (9 to 2 in favor as I remember) on the police and courts building were long before the market crash and foreclosure crisis. But I don’t know what else they could have done anyway, the city needed a new building after the county told them they needed to move out of the courthouse. From everything I have seen, the operating budget is only lightly impacted because of the rent they will save and money from the DDA.
As for the art project. This is not new money but money that was budgeted from other projects and the current one. If you were against a “Percent for Art” you should have come out a few years ago to protest. This particular piece will be there for 50 or 60 years or more and this is the only time it can be installed.
The artist and art work received the vote of every single council member so I suppose we should throw them all out.
But wait! These are the same people WE elected, 5 of them just last August. They are there by the will of the people. City council is a reflection of the will of the voters.
People in A2 get to vote for 1/2 the council every year and they have only two year terms. I doubt there is an elected body anywhere that has to face the voters as often.
I for one believe we owe them our support (at least until the next election) in this time of budget crisis in our state and nation. After all, WE put them there. Besides, if you look around, few cities in our depressed state are doing as well as Ann Arbor.
Thanks Karen for the information!
Dusty Lake makes a number of statements on an “as I remember” basis, but most of them (opinion aside) are in error. The historical record shows that most votes that authorized the city hall were 7/4, with Kunselman, Briere, Anglin, and Suarez objecting. The most critical vote was 6/5, with the mayor also voting against it. However, despite extensive lobbying, he refused to veto it. Late in the day, Kunselman voted in favor of certain measures that supported the city hall, including adding this project to the capital projects list.
As to the Percent for Art, this is not “money that was budgeted from other projects” but a surcharge on all capital improvements. This surcharge effectively increases the cost of each project. It is not extra or free money, but an additional cost of doing business.
Pfizer announced that it would close its Ann Arbor research facility in January 2007. News reports from 2007 indicated that Michigan was in the third year of a “one-state recession”. The national economy was sufficiently bad in late 2007 and early 2008 that the Bush administration and Congress sent out stimulus checks to give it a boost. We hadn’t yet had a meltdown, but there were plenty of storm clouds that council should have considered before authorizing a huge public works project.
I see we are spending $1.4 Million dollars over the next 2 years to keep the 2 City golf courses open. Why? There are so many golf courses to choose from in the area, and the City is basically competing with the private golf courses as is. Why not close the public ones and let the private course make a little extra money? The City courses could be converted into lower maintenance frisbee golf courses for now and maybe recovered to golf courses in the future when the enconomy improves.
In Error Vivianne? The most critical vote came in the late spring – early summer of 2008. It was the last chance they had to say no without throwing away $10 million.
It was the vote to sell the bonds and it was 9 to 2 with Kunselman and Suarez voting in favor. By that time all but two council members were in agreement that the building was needed and there were no alternatives that would meet the courts security requirements.
You are correct Vivienne that the economy was certainly going south but there was no hint that property values would begin to plummet since this had not happened in A2 since the late 70′s – early 80′s. This view was so prevalent that the county did not see it coming either.
Regarding the economy, again, what I said above was not as you say “in error.” I wrote: “the votes came before the market crash and the foreclosure crisis.” This was what happened.
You are correct in that there were “storm clouds” but that is easy to say now. In the end there was nothing that could have been done anyway.
The county had told the city they needed to move out of the court house by the end of 2010. The city had spent years in planning and evaluating alternatives. Building on the county site would have solved nothing in that the city would have paid for all their own costs and, the same as today but would have still been paying rent and 40 year space problem for the police would have remained unsolved.
Now the saved rents can go to make the bond payments. Without a new building there would have been no rent savings, only more and more rent to pay.
You would know that the county’s budget hole is a whole lot deeper than what the city faces. I suppose you will blame it on their building projects. I guess we don’t need more space in a jail that has become a revolving door with those arrested last week going back on the streets to make room for those arrested this week. Maybe there was no need for a new courthouse in Saline.
What fun you can all have in August when the county is making 20% cuts.
Oops I forgot, the $$ for art: Being that you are an experienced politician I will leave the correct verbage to you. I meant only that the funds were accumulating from projects. Again, if people were against public art they should have come out years ago to oppose this when it was being put together. I don’t think anyone ever spoke out against it.
If you are against public art, you should come out and say so. Tell it to the many cities and states that have such a program. Whenever the economy turns art is what gets thrown overboard first. I don’t think a city known for art should do that.
The program was in formation for years. I respect all 11 members of the city council who stuck with a program that will provide long term benefits to the community long after we are all gone.
I fully support everything Dusty has said.
Hind sight is always 20/20, but is not necessarily accurate. Even if the court house was not being built then that money would not and should not be used for operating expenses; it would be and should be saved for the next infrastructure project. Your analogy that this money should be used to fund city operating expenses is bad business.
It is equivalent to pulling money out of your 401K plan (a plan in which you saved for a specific purpose-retirement) to pay your bills. One would only do this when absolutely desperate after you first cut out entertainment, all unnecessary purchases and maybe eat more frugally. Many of you want us to pull out the 401K money to pay for items that fall into an equivalent category of “paying the bills”. It is just not fiscally responsible.
What is scary to me is that former and potential elected officials cannot recognize how fiscally irresponsible their thinking is. It is one thing to be anti-PD/courts building; it is another thing to actually believe that this money should fund operating expenses.
I am assuming everyone here supports ‘art’. What I do not support is the flawed way money is being spent with no published process in place, how even members of the Arts Commission aren’t sure of the process and the arrogance of a some of those involved who weren’t honest about how the process evolved. And painting people who bring up these isses as ‘anti-art’ is a dishonest argument. On the surface reviewing the A2AC budget, it looks like they are wasting money and I’m leaving the Court-Police art out of the equation. Dusty, everyone wants ‘art’. But I also want my tax dollars to be spent carefully and on that issue, it just isn’t the case. We’re spending $500K a year on that part of the city budget. I just want to know what we are getting for that money.
Alan you have posted widely against the art project and there is nothing anyone could say that would change your opinion. That’s fine.
I note that you seem to disagree with the process for this particular piece of art but from your comments I take it that you support the 1% for art program.
One point that I would make is that the committee is made up of residents with knowledge in area of art, local artists, a business man, an art professor from the university and in the case of this piece citizens active in the downtown area, the Watershed Council Director, etc.
There was nothing in the council resolution establishing the program that said the task of coming up with a set process had to be in place before any selections were made. Only that the board needed to come up with a process. From boards I have observed this type of thing can take many meetings, sometimes a whole year.
The group needed to make a decision when they did if the theme they selected was going to be acted upon because it needed to be part of the plumbing in the building.
I guess I don’t see anything wrong with the actions of this group of citizens who volunteered their time for the public good.
You ask what we are getting for the money?
A piece by the most renowned artist on the planet for this type of work. Someone who has won awards from other US cities as well as cities in Europe and for all I know, beyond that. The selection committee was being conservative on this, rather than take a chance on their first big commission they went with a sure thing. I can’t blame them.
Like Two Cents, I would be very much against taking this money from the purpose for which it was set aside and spending it for short term operating expenses.
We need a moderator for this column. I suggest that Dusty and My Two Cents start as the first moderators. They seem to understand the issues better than anyone else. I will take the second shift.
“We need a moderator for this column.”
Stewart, could you explain why you think that is the case?
On the parking issue, does anyone have any thoughts on the potential environmental lawsuit involving the planned/proposed Library underground parking structure covered in the Ann Arbor News today?
Having a fact checker would be the best strategy for moderation here.