So far, the phase out of Michigan’s personal property tax hasn’t been as hard on the City of Saline as first expected.
Instead of receiving tax revenue generated by levies on business equipment, the city now receives money from the state. That amount is determined by a series of calculations. To city officials’ surprise, the replacement revenue has been much more than expected. Last year the city expected about $300,000 and received $200,000 more than expected.
City of Saline Treasurer Mickie Jo Bennett said the state generated more revenue than expected and passed along that revenue to municipalities. The city spent the year sitting on the funds, worried the state might take the funds back. But when the details were released the year, excess payment was even higher. The city received $424,000 more than excepted.
“The state doesn’t know how to determine its convoluted formula,” Bennett told city council Monday. “I’m scared to death they’re going to take (the excess) funds from me.”
As Saline City Council sits down to begin next year’s budget deliberations, the excess funds stand out like a sore thumb. This is a city council that last year was compelled to choose between funding an ice rink at Henne Field and its annual contribution to Saline Main Street. Now, thanks to the state overpayment and $385,000 for the hotel land sale, the city is looking at a $1 million net gain for the 2018 fiscal year.
The City of Saline’s fund balance is expected to reach $3.8 million by June 30. That’s 26.84 percent of the previous year’s expenditures. A city council policy requires a fund balance of 15 to 20 percent (by comparison, the school district policy requires a five percent fund balance.) When the fund balance exceeds 20 percent, the city council may consider using excess funds for unfunded pension liability, capital projects, other retirement benefit obligations, or debt. That 6.8 percent over the 20 percent threshold amounts to $618,000.
Mayor Brian Marl expressed support for the idea of paying down its unfunded pension liability.
“Managing legacy costs is of paramount importance. When we have the dollars to reduce our liability, we should do that,” Marl said.
Council members Dean Girbach and Christen Mitchell expressed support for paying down debt.
Council member Jack Ceo asked DPW Director Fordice about road construction. Fordice noted that it costs about $1 million to reconstruct 1 to 1.5 miles of road.
There’s no guarantee the city will sell more land this year and city officials expect the state will repair its personal property tax replacement scheme, so the city can’t count on the kind of revenue that caused the excess funds. The revenue is being treated like one-time revenue – which maybe be why the city council didn’t discuss tax cuts.
The 2019 fiscal year budget includes:
- $54,000 for a police vehicle, tasers and bullet-proof vests.
- $255,00 for a salt dump truck and pick up truck for the DPW.
- $90,000 for a tennis court at Peoples Park, $25,000 for a Brecon Park path project, and $15,000 for the Rentschler Farm.
- Continued contribution to Saline Main Street.
- Cost of living increases of 2.5 percent, plus steps and longevity increases for employees.
- A one percent increase in the employee contribution for the defined benefit pension cost.
- Lower Medicare retiree health premiums.
- The addition of an employee to the Department of Public Works.
In two weeks city council will sit down with DPW Director Fordice, Parks and Rec Director Carla Scruggs and Police Chief Jerrod Hart for a deeper dive into the 2019 budget.