LETTER: City Council Member Bourgoin Says Tax Increase Ill-Advised

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 06/01/2013 - 00:41

(Editor's Note: This letter was submitted by Saline City Council member Lee Bourgoin)

After some bureaucratic foot dragging, the (City of Saline) general fund budget gap is now reduced to an easily corrected $188,615. 

Staff has the responsibility of following City Council established procedures by making the entries listed below, properly balancing the budget without higher taxes. Excessive tax collections from an ill-advised, preconceived tax hike could promote government waste and thwart ongoing efficiency measures. 

My request to colleagues is to not block the balancing of the budget. For years a major issue has been the City Council not getting proper timely information leading to heavy ongoing costs from the shortcomings in construction and negotiations. Getting beyond these issues would allow City Council to focus on positive community-building activities.

Proper practice — these are 100 percent certain corrections for a balanced fiscal year 2014 budget and improving future:

  • $70,000 for fiscal year 2014 recreation bond debt, one-third of 209.6 percent restricted balance required by the Saline fund balance policy. The general fund pays for fiscal year 2013 and fiscal year 2015 through 2017.
  • $61,000, lower loss by recreation center due to final lease purchase payout plus high 20.1 percent fund balance, as required by the Saline fund balance policy.
  • $65,000, allow cost savings, not adding spending upon dropping $160,000 on new dump truck replaced by $95,000 upgrade of current truck; get additional items next year.
  • $36,000, more from LDFA2 in fiscal 2013 and fiscal year 2014, removing detrimental reserve language.
  • $226,000, total of properly budgeted absolutely certain gains to the fiscal year 2014 general fund

These sensible, 100 percent certain budget-balancing entries sidestep poor budgeting or misdirection. The established City Council policies require staff use of funds to balance the budgets.
Excess funds in the $226,000 allow a fiscal year 2014 cost-of-living for nonunion staff. The immediate “worst case” growth to the general fund’s rainy day fund from more than $1.1 million to closer to $1.2 million is without higher taxes. Projections through the city manager are skewed downwards.
Actually the projected revenue is certainly at least $100,000 too low, transfers out are likely $300,000 too high, plus a likely budgeted net gain line (now hidden) would be more than $400,000.
Without a tax hike the rainy day fund should exceed fiscal year 2013 for the next three years. Plus there are many highly likely other expected gains to the general fund in each year.
There is a structural change of future improvements to the general fund -- from the rising home prices, the funds with excess cash, plus final payouts on about $185,000 of annual debt service (LDFA2 and recreation). Presentations through the city manager were lacking or misdirecting, not correctly admitting that these are clear “structural” improvements.
Data now shows a recovery upswing in the recession/recovery/recession/recovery economic cycles. The change in average residential values has been 3.25 percent in 2007, 3.61 percent in 2008, 7.64 percent in 2009, 3.60 percent in 2010, 4.67 percent in 2011, 2.17 percent in 2012, and now 2.25 percent up.  A response from the city manager that the upswing will be capped by the Department of Treasury set inflation rate is more misdirection, that’s not the way it works. As the downswing went down to a negative (7.64 percent) loss annually, the historical record in Saline shows that the upswing could also go up beyond a positive 7% gain annually.  Tax bills are largely based on home sales in the prior two years, so current Saline home price increases are 100 percent known for year-after-next taxes.
Saline city taxes historically ranged from 8.6 mills to 17.3 mills (from police double budgeting). They were raised above the 11 to 13 average up to 15.53 mills by 2006 due to expected Ford plant closure. Current rising home prices even without another ill-advised tax hike will push residential tax bills up quite a lot within two years. Excess tax bill money will go to the city’s rainy day fund. There is likely an upcoming vote for an additional streets tax, as separate from city operating costs because residents will get the benefit of new streets. Other likely new tax items are higher gas tax at the pump, education tax issues, area transportation tax and area recreation tax. State changes to give big business owners $1.8 billion in tax breaks resulted in higher costs for most taxpayers such as many losing the homestead state tax credit, and a new state tax on retirement. Elimination of personal property tax will enrich big business owners but requires another new tax on everyone. What about the danger of bigger, less efficient government with higher taxes?
Saline’s guidelines for City Council decision making require timely, unbiased data: “The City Council will have an open, transparent and accessible decision-making process. This process is based on accurate information with various viewpoints being available to all, that the information is easily understood by the general public and that public engagement opportunities are provided for participation in decision-making.”
This fall’s audit will also show no need, beyond the currently authorized water and sewer rate schedules, for raising the water rates or raising the sewer rates. The next two audits will show a healthy general fund, demonstrating that a premature push for tax hikes was a poor administrative approach. Open transparent decision making requires timely accurate information with proper balanced budgeting that does not create a scary picture by squirreling away funds on the side or by spending off any savings to artificially create a budget gap. If the City Council follows its own established procedures, projections through the city manager will not happen to dip Saline’s general fund unrestricted balance below Ann Arbor’s 8 to 12 percent target by fiscal year 2016. Rather, Saline’s cash on hand should grow to well above the top end even with no ill-advised tax hike. 
First I saw downward skewed multi-year information through the city manager being well over half of $1 million off, leaving out key budget-balancing aspects. Next, after meetings with the city manager, the city and schools Plante & Moran consultant declared the general fund year-end balance would be driven below zero if covering $150,000 of recreation center shortfall this coming year because the current balance was only $100,000 — again this is off by close to $1 million but that firm normally has a great track record with numbers. 
On April 19, the city manager said that staff discovered close to $1.2 million fund balance in the Major Streets Fund, but “discovered” seems very strange. Staff in fiscal year 2012 budgeted to have about $1 million ending cash, confirmed by last fall’s audit, and the updated fiscal year 2013 budget was approved with about $1.2 million fund balance.
Presentations say city retirement costs grow upon retirement but it’s upon hiring. Untimely and poor presentations are hard on City Council members, who may not be trained to see the errors.
Right now excess fund balance is being kept by the recreation center. With fewer than 4,000 Saline tax parcels, the $256,949 from the General Fund for the recreation center fiscal year 2014 shortfall is at least $64 per tax parcel. If there were $1.5 million again of additional recreation center projects, that would average to more than $400 per tax parcel.
Council guidelines state that it should be easily understood by the public, and we should get the public’s unbiased view. Since the facility is now halfway to going back into Pittsfield Charter Township, would voters prefer the facility to go into private hands or that it come under the Washtenaw County recreation taxes paid by Saline taxpayers? In any case, should an excess amount of funds now be taken from the general fund?

Tran Longmoore's picture
Tran Longmoore
Tran Longmoore is a veteran community journalist. He is founder and owner of TheSalinePost.com. He is co-publisher of The Saline Post weekly newspaper. Email him at [email protected] or call him at 734-272-6294.

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