Contents of Taxes & Budget Dialogue

2010 Taxes & Budget Dialogue

In **1966,** Royal Oak voters shot down a request for a 3-mill increase. . . . In **1967**, the rejected a proposed income tax. . . . In **1971**, the city again researched an income tax. . . . In **2005**, voters rejected a 1.75 mil increase. Now, in January 2010, we have learned that our General Fund is likely to reach zero in at most two years. Since about 2000, VersagiVoice has covered discussion about budgets and taxes. This page provides a summary of and access to that previous dialogue.

It has become clear placing Budget coverage and Tax/Millage discussion in separate columns isn't helpful. The 3-column table immediately below which began this year's discussion provides the context for the broader and more integrated reports and comments which will be elsewhere in this Folder: Ongoing Dialogue . . . 2010-2012 Comments . . . Royal Oak talks Millage
City Taxes/Millages This file reviews a bit of history, the first request for an income tax, for example. The sometimes sour mood of voters is reflected in unflattering comments about city officials. Disagreement about whether city departments, including Fire and Police, are really understaffed, is on display. Detestation of "developers" reached the point that volunteer groups were so-labeled when they worked to establish the Veterans Memorial Plaza. The City Assessor explains his calculations. What' has happened, what is happening,, in other cities? Forget about cutting costs, It's time to think taxes. Links to comments about everything from selling Normandy Oaks to the wisdom of trying to override the Headlee Amendment. 2010 Strategic Planning looks at taxes A dedicated public safety millage and a per drink sin tax are among the revenue enhancements city leaders noodled. Reader Rick Karlowski says: With regard to the fiscal issue - I am willing to consider additional property mils IF: a.) The employee unions are willing to recognize that current, not just future, employees are going to have to have a reduction in benefits, particularly health care (present and in retirements) and pension. If anybody thinks I am going to pay more so we can keep the status quo while my pay and benefits are being cut they are on a mind altering substance. b.) They have a defined sunset timeline. We will need to have additional mils to get us through the downturn. However, once property values begin to recover (and understanding the Headlee effect), the increase needs to expire. One way to handle this trigger point - taxable valuation level. When the values return to say 2009 levels, the millage rate reverts to the 2009 rate. c.) Some real effort is made to share resources with sister communities. Can we farm out or combine the vehicle garage? Share fire resources? Have a combined purchasing effort to get quantity discounts. d.) I get a complete answer on how the DDA tax structure works and why the DDA is still a fiscally valuable entity. Can we do better without it? e.) A special millage for liquor serving establishments is implemented. This can be done based on a square footage basis. or a square footage/hours of operation basis. If these facilities truly require addition police and fire resources, they should be required to pay for the delta. In other words, I want to see a change in the way we do business before I am asked to give up any more of my money. -- 08 Feb 10 Dave Richards We might want to start talking about taxes by being aware of the difference between taxes and the tax rate. With assessments going down radically, property taxes themselves will be going down radically, which is one of the major reasons municipalities are in financial trouble. An increase in the tax rate may, depending upon the amount and the assessment of a particular parcel of property, still result in a "tax reduction" (less taxes paid) even though the rate has increased. Thus, talking about "tax increases" is probably inaccurate and frames the question in a one-sided fashion. Given the give backs in union contracts, combined with reductions in the number of employees, the likelihood is that we could increase the tax rate, provide for reasonable city services, and still have reduced taxes. -- 08 Feb 10 Rick Karlowski I am aware of the difference between the millage rate and and revenue collected, which is why I have a sunset requirement (see note b.) As for employee concessions, I have yet to see any of any significance for current employees. Nobody is saying all governmental workers should be paid minimum wage, but lets get the benefits more in line with the private sector. -- 16 Feb 10 Brendan Wehrung re city finances Substitute the fire station on Rochester south of 13 Mile for the one in Madison Hts., which the Chief said might have to be closed if they lost 5 firefighters at the last budget session (2 years ago), and you have the same situation. The figures presented last Monday haven't changed much in 2 years. And they aren't getting any better. If anything they are worse. --16 Feb 10 Rick Karlowski re "held harmless" Why is it that governmental institutions and employees seem to have the notion that they are to be held harmless in this current economic downturn? I'm sorry, but current city workers and retirees are going to have to understand that the citizenry are not maintaining their revenue levels, so assuming that we are going to vote additional mils to keep city revenues constant is not going to fly. Everybody is going to have to get pared down if we are going to get though this. -- 22 Feb 10 Rick's email to City Hal	Budget Coverage Everything CITCOM decides in routine meetings (1) costs money, (2) brings in revenue, or (3) breaks even (is "revenue neutral"). And there are special meetings dedicated exclusively to budget matters. So, skimming years of reports about commission meetings provides context for this year's discussions. 2005-06 Deliberations 2007-08 Deliberations 2008-2009 Deliberations Other municipalities On to 2010 ►The January Strategic Planning meeting of CITCOM and several department heads provides an excellent launching. pad for 2010 discussion A document distributed during the opening of the city's 10-hour, 2-day Strategic Planning sessions paints a somber picture. Simplified and summarized, Economic and Budget Update makes it clear that even if General Fund expenses are maintained at their current level, unlikely, the city's Fund Balance will have a negative balance by the end of the 2011-2012 Fiscal Year. -- 08 Feb 10 City Manager Don Johnson's 45-page 2010-2012 Budget Strategy report has provided everything CITCOM and citizens need to begin evaluating the pros and cons of specific cuts in Staff and Services. His 7-item list sharpens the focus. Continue to prepare a two-year balanced budget for 2010-2012 Continue plans to prepare a complete prioritization of needs and service Authorize the issuance of layoff notices Approach Bargaining Units for contract concessions Consider an early retirement offer to employees within two years of retirement Prepare a privatization study Consider City Hall modifications to promote efficiencies and allow staff reductions. News and comments in the Table below will follow developments. Near or just after the 2010-2012 budget is approved, VersagiVoice will suggest that Johnson prepare a similar groundbreaking paper about taxes. -- FJV: 08 Mar 10 Tax Talk on Hold? The internal fights within Royal Oak's ruling class have reduced tax talk among the city's chattering classes. One hears sustained critical comments extending beyond CITCOM to the Administration. The most noticeable change is that some long-admired city employees are being criticized. When the chatter does turn to local taxes, the positions re Royal Oak's budget differ only slightly between residents and city employees. Details aside, there are three operating premises: No way the commission will/can seek increased taxes, so no need to talk about it Despite all the personnel and service cuts so far, residents have not yet felt pain.. They'll feel it. The city will go halfway to Hell. Then will come the taxes. Most frequent guess when Number 3 will happen? Four years. -- 19 Apr 2010	VersagiVoice Comments Start thinking taxes 1. Sin taxes . . . 2. No new taxes! . . . Ever? 3. Pluses and minuses of each tax: Income Tax, Sales Tax, Sin Tax, Property Tax. It is helpful to point out that a user fee is really a tax and that *any* tax except an Income Tax is really a user fee: Cigarette, Park Permit, Alcohol, Sales Tax. One pays no tax if one doesn't smoke, visit the park, drink, or buy anything.. Under that definition, a property tax, especially residential, is a user fee. One pays no property tax if one owns no property (renters' claims to the contrary notwithstanding). On the 22nd and 23rd of January, 2010, CITCOM will begin its series of budget-focused meetings, named "Strategic Planning." Such planning must include considering increased taxes. Begin by thinking at least of: (1) Increasing property taxes. (2) Enacting a sin tax on alcoholic beverages. (3) Reducing or eliminating property taxes and replacing them with an income tax. (4) Sales tax. Dedicate mills to Police, Fire Other thoughts? It's easy to suggest eliminating or privatizing this or that city department if one doesn't consider the human price. Put simply, I can't think of a single Royal Oak Department head whom I'd like to get rid of. And I'm convinced that Royal Oak is perilously close to "attritioning" to the point of adversely affecting public safety and welfare (not health). VersagiVoice readers have long asked for an objective exploration of options for increasing revenues instead of focusing exclusively on consolidation and outsourcing and attrition. So, early in 2010 I'll probably create a folder in which a tax dialogue can be conducted and followed. -- FJV When I first suggested an ongoing tax dialogue, in mid-2209, two city officials were among the first responders. § Finance Director Don Johnson offered a quick correction. Michigan law does not provide an option for a local unit of government to levy a sales tax. To provide such an option would require amending the state constitution. The only significant tax choices currently available available to Royal Oak and other local units in Michigan are the property tax and the local income tax. -- 26 May 09 § Commissioner Mike Andrzejak submitted this Ronald Reagan statement, and he humorously suggested it is a suitable caption for the picture of the three commissioners and baby at the Historical Society's Memorial Day Pancake Breakfast. "Government is like a baby: An alimentary canal with a big appetite at one end and no sense of responsibility at the other." -- 27 May 09 On to 2010 ►The most unsettling aspect when residents discuss city budget is their suspicion that officials aren't always leveling with the voters. In 2006, the suspicion generated a story by a Daily Tribune writer who chided officials about how budget numbers changed after being challenged. See Where did that $6.4 million deficit go? ►Royal Oak is not alone in experiencing budget shortfalls. It may be useful, it certainly is interesting, to learn how other municipalities approach their financial problems. City officials, ours and theirs, are notorious for choosing (1) "Let's check to see what other cities are doing" or (2) "I don't need to hear how other cities handle this," depending on (a) the issue or (b) their mood at the moment. ►The January Strategic Planning meeting of CITCOM and several department heads provides an excellent launching. pad for 2010 discussion A document distributed during the opening of the city's 10-hour, 2-day Strategic Planning sessions paints a somber picture. Simplified and summarized, Economic and Budget Update makes it clear that even if General Fund expenses are maintained at their current level, unlikely, the city's Fund Balance will have a negative balance by the end of the 2011-2012 Fiscal Year. -- 08 Feb 10 ►"Yeah, sure" is a frequent dubious reaction to official statements that because residential real estate values are dropping, homeowners will be paying less taxes even if the tax rate is increased (see far left column). It doesn't help that one of the cities seeking a millage on February 23 is aiming for a 10-year increase. Among those who suspect Royal Oak may have to try for a millage, early chats involve attempting to evaluate the opposing arguments about allocating any increase to the General Fund or to Police and Fire. CITCOM uses the R-word No, not "Retard." Commissioner Chuck Semchena requested that City Attorney Dave Gillam provide the commission with some information about "Receivership." Technicalities aside (Gillam will be providing them), Chuck is asking Dave to tell us what is involved and what happens when a city goes bankrupt. As I write this on the Friday before the next CITCOM meeting, the somber mood generated during the late-January Strategy/Goal setting retreat and very much present in the 01 February CITCOM meeting has precipitated into a bitter pill. So, VersagiVoice readers owe it to their friends and neighbors to share the developing arguments about city budget matters: Must choices be made between services and taxes, or is that just scare tactics? Whom do you believe when you are told that taxes will be lower even if millage is increased? If it is true that dropping residential taxable values will cause lower taxes despite increased millage, whose word do you take about how long it will be before taxable values rise again? VersagiVoice will gather official information, documented and speculative facts, opinions from diverse sources. Readers have begun their dialogue. This one is coolly rational. That one is emotional. Still another is both. Gathering them in one folder and leaving them in-place indefinitely allows readers to benefit from access to diverse knowledge and opinion for many months -- or "as long as it takes." 16 Feb 09