The millage failed. What happened next? The deficit virtually disappeared, a suburban miracle that has some congratulating city leaders and others questioning if the numbers were ever correct. The projected deficit was slashed in the last seven months without new taxes or major property sales. It happened without one layoff. In fact, shortly after a 1.75 mill tax request failed the deficit was downscaled to $4.2 million.

With retirements, bonds refinanced at lower interest rates, and vacant positions unfilled, projections were reduced several more times. In the new budget projection, Royal Oak has a shortfall in flux between $1 and $2 million and enough cash to handle it.

Royal Oak has $4.9 million in its general fund balance and the city will cover the shortfall by cutting the savings account to $4.3 million by July 1, 2007. The rest will be covered by money in parking and other enterprise funds. The picture is much different than last summer and fall when voters were told at town hall meetings, City Commission hearings and on the city's Website there would have to be massive layoffs in police and fire to handle a $6.4 million deficit.

Now the incredibly shrinking deficit has some city officials saying the $6.4 million projection was based on bad assumptions. "They were relying on information that I believe was faulty," Councilman Carlo Ginotti said. "I brought that to everyone's attention as did some colleagues. That's not to say it was intentional. There was no ill will. It was just 'We must act on this immediately' and we needed to step back and make sure it was accurate." 

Questions remain
City Manager Tom Hoover stands by the $6.4 million projection, but several commissioners said they plan to ask tough questions during hearings on the 2006/07 budget draft, which continue through June. A final budget must be approved by July 1.

It's important since residents were told police, fire and parks were on the line because after $1 million lost in personnel they were the only departments that still had staff to lose. 

"With over 70 percent of the general fund wages and benefits being attributed to the police and fire wages and benefits, it is obvious that the largest reduction in force must be taken from those two departments," Hoover wrote in an open memo before the millage failed. 

Former City Commissioner Andy Prentice never bought it. "We said it last year, that they were trying to scare voters into approving this big tax increase ... when all of a sudden the man who puts the budget together says there's a $6.4 million deficit, and nothing had changed, there had been no cuts in revenue anywhere, it showed you the numbers were wrong," said Prentice, who did not run to retain his seat in November.

Prentice and several other city leaders say they wish the millage had never been proposed. "Bottom line, the millage request was unnecessary, and the city shouldn't have pursued it," Mayor Pro Tem Mike Andrzejak said. 

Hoover counters finances were as bleak as portrayed and he credits new ideas from Finance Director Don Johnson, hired in September, 2005, for why there were no lay-offs. 

Mayor Jim Ellison echoes Hoover, saying Johnson deserves credit for making the numbers work more painlessly than was predicted. "We've had some dramatic changes so I feel optimistic," Ellison said. "It's still going to be tight to do, but we've got to look toward the future." 

Bleak outlook
Before the November election, residents were repeatedly told they had three options: suffer with deplorable services including almost half the police and fire departments; pay higher taxes; or sell assets like golf course Normandy Oaks, a 48-acre parcel that could bring in an estimated $17 million. 

When the millage failed, new options came to light. Clerical staff was given additional duties and some offices shuttered during the lunch hour. Vacant jobs went unfilled. Projected equipment expenditures were slashed and street medians and parks were scheduled for mowing every 3-4 weeks, down from every 2-3 weeks. 

The city sold two vacant lots to garner a few hundred thousand dollars, raised fees for permits and services -- and a few months later there was a much smaller shortfall with enough money to cover it. Hoover said it was always understood the city would do whatever possible to avoid cutting into essential services. 

But some city leaders are steaming mad because the budget options Royal Oak ended up with were not ones presented to voters. Residents were asked for a tax hike based on inflated numbers and an unrealistic picture of what would happen if they didn't pass it, many said. " ... I am disappointed that that community as a whole was threatened that police, fire, and ALS would suffer greatly if an additional millage wasn't passed," Andrzejak said. "During the last municipal election (in November), Commissioner Carlo Ginotti and Steve Miller were absolutely correct in saying that the budget could be balanced without the additional millage, or layoffs." 

Systemic flaw
Hoover and Johnson said layoffs were avoided, in part, because the $6.4 million projection was based on filling about 54 vacant positions. That would have re-staffed the city at a 2004 level, when Royal Oak had 416 employees. 

Instead of demanding 51 police and firefighters turn in their badges the city cut empty desks in nearly every department. The city manager said filling vacant positions was, and is, necessary for the smooth operation of City Hall. Others said the rhetoric should have featured a potential hiring blitz across the city instead of, or at least alongside, the police, fire and parks staff layoff list. 

"Here's a good example of why government works slowly," Ginotti said. "It was a systemic sort of flaw. We saw the numbers and panicked, and acted on numbers that time has proven to be less than reliable. Does that mean we're back into gravy again? Does it mean we act recklessly? No. It just means we're now making the necessary moves and thankfully we didn't do anything rash." 

After the millage failed, Commissioner Pat Capello asked administration to eliminate vacant jobs in the budget forecast and that's when the deficit started to deflate. "I brought forward a motion to eliminate all vacant positions from the current budget and any future budgets," Capello wrote in an email. "This helped us eliminate the confusion of what positions were included in the budget ... It also enabled us to bank the savings from the elimination of the positions. For example, if we saved $300,000 from positions this year, that same $300,000 would be eliminated from the following year." 

Cutting vacant positions and factoring in more recent attrition moved the deficit closer to $4 million. The projected deficit had also factored in 1.5 percent raises for all employees whose contracts had yet to be negotiated for the 2006/07 budget. 

That assumption was dropped when the millage failed. Now, administrators hope to get concessions instead of across-the-board raises. Seven of the city's 11 union contracts expire during this budget. Two others expired a year ago. The 2006/07 budget is based on giving employees the status quo, so any cut in pay or benefits would enhance overall budget numbers or leave room for hiring. 

Royal Oak has 360 employees in the 2006/07 budget, down through attrition from 397 the year before.

The revenue side
The fund balance is projected at $4.3 million for the end of 2006/07, or 13 percent of the $34 million general fund, and should stay relatively static through 2011, according to the city's budget. 

Refinancing debt saved $500,000 for 2006/07 and moving five forestry workers to the Water Department's budget saved the general fund $200,000. 

The 2006/07 budget assumes the loss of three more people through attrition in the Police Department and higher parking fees, but no further cuts in employee numbers and no property sales. 

The new budget may look solid, but Hoover said Royal Oak's finances are still precarious. 

Health care and pension costs continue to rise across the state. Royal Oak will spend $4.1 million on retiree insurance in 2006/07, up from $3.9 million the year before. 

The state has cut shared revenue to communities for years and the Headlee override keeps driving down millage rates for older communities like Royal Oak. 

No matter how many new developments are built or how high house prices rise, Headlee says Royal Oak can not collect taxes that outpace the rate of inflation without approval from voters. 

"It's a downward spiral, it's not getting better," Hoover said. The city manager took a resounding "no" vote on the millage as a call for the city to cut into municipal pay and benefits. Even if it was unstated, he said voters understood it was an option. "I don't try to scare the public," Hoover said. "When they (voters) tell us they don't want a millage until certain things are done, we get control of costs." 

Ginotti, and others, are afraid voters were turned off by faulty predictions this time around and will reject a millage if the city really is about to go broke. "I think it taught everyone a lesson," the councilman said. "We have to continue to look at these things carefully and we have to rely on the experts, but not blindly. Fortunately, we didn't do anything crazy here (like layoffs), but it's going to take some time to build up credibility."

*A $1.2 million reduction in 2005/06, by leaving vacant positions. 

*Garnering $1.6 million in higher revenue or lower costs for 2006/07 and another $1.1 million in 2007/08.

*That represents $3.9 million over three budgets. *The city also took $1.5 million out of the fund balance in 2005/06 and $653,383 in 2006/07. 

*Overall, that represents about $6 million in cuts, savings account decreases and revenue enhancement over three budgets -- while keeping a 13 percent general fund balance. 

*The millage would have raised about $11 million over three years, which officials said would cover just half of the shortfall.

Before the millage
*Officials said: The Fire Department's advanced life support medical runs would be eliminated, which meant firefighters would have only basic equipment and training. When responding to a serious, life-threatening emergency they could only transport to the hospital or stand by and wait for advanced life support workers to show up from somewhere else. 

*Twenty-nine advanced life support firefighters -- representing slightly less than half the department -- would have to be laid off. 

After the millage failed
*No one has been laid off in the Fire Department. The department lost three staff members in the last year due to attrition. The Fire Department now has 66 employees on the payroll, down from 69 a year ago. Advanced life support is alive and well. 

*The city pays overtime to existing officers to meet the 16 firefighter-per-shift mandated minimum without any new hires.

Before the millage
*Officials said: The police department would lay off 22 officers in addition to leaving vacant positions unfilled and would only be able to handle basic patrols. All community policing would be eliminated.

After the millage failed  
*No one has been laid off in the Police Department. Six jobs were lost in the last year through attrition, so total staffing decreased from 123 to 117. The department is budgeted to lose three more employees through attrition this year. 

*The department still has a school liaison officer, but is considering asking the school district to pick up the cost. 

*There are motorcycle cops in the summer, and an old-fashioned downtown police beat for officers to meet and greet the public while keeping order. The downtown beat was established in early 2005 and is paid for by the Downtown Development Authority.

*The Directed Patrol Unit, which was dedicated to combating drugs, was disbanded a couple of years ago. 

*Police Chief Ted Quisenberry plans to assign one officer to a special Drug Enforcement Agency program that allows participants to share in the forfeitures collected. He estimates it could bring in $150,000-$300,000 this year to ease the department's personnel crunch.

Before the millage
*Officials said: Senior programs could eventually get eliminated because the city would no longer be able to contribute to them. The city would have to revoke its membership in the Woodward Avenue Action Association and other regional groups. The city would have to revoke all funding for the Oak Apple Run and other events. 

After the millage failed  
*Senior programs are untouched and still paid for with federal Community Development Block Grant funds. If those federal funds dry up in the future, as some worry they will, the city would have to decide whether to pick up the slack.

*The city included $6,875 in dues to WAAA, plus $6,008 for the group's median maintenance program, in the 2006-07 budget draft.

*Oak Apple organizers were asked to pay for police overtime for the 2006 event. 

*Royal Oak plans to spend $97,740 on community promotion in 2006/07, down from $162,232 in 2005/06. 

Before the millage
*Officials said: All park restrooms would close, while street medians, parks and athletic fields would get mowed only once a month, which would impact recreation, school and local youth sports programs. 

After the millage failed
  *The mowing schedule was moved from every 2-3 weeks to every 3-4 weeks. No youth sports have been cancelled, though some parents and athletes have complained about poor field maintenance. 

Before the millage
*Officials said: the Forestry Division will be eliminated and eight of its workers laid off. 

After the millage failed  
*No workers were laid off. Five forestry workers were folded into the Water Department, which is self funded, to save the general fund $200,000. Eight full-time workers are left in forestry, which administrators said is not enough to manicure parks at the level residents were used to. 

Before the millage 
*Officials said: One of the city's three fire stations would close. 

After the millage failed
*All three fire stations are still open, though like other money saving ideas, city administrators said the proposal is not permanently off the table.

Before the millage
*Officials said: City staff laid off from other departments would work in the library. 

After the millage failed  
*There have been no lay-offs in any department. A $4.5 million library renovation, paid for with a 1-mill levy voters approved in 2003, was completed this spring. During construction, Royal Oak paid library staff while they worked in other libraries so no one would be laid off even temporarily. 

Sources: Royal Oak 2006/07 budget draft, city commissioners, interviews with City Manager Tom Hoover, Finance Director Don Johnson and department heads.

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