Tough Budget Choices Ahead

The City Council has begun the process of putting together a 2010-11 budget and the first signs warn that there will be difficult decisions to be made. For reasons explained below, Owosso faces a $2.4 million shortfall on a general fund budget of six to seven million dollars. The good news, if there is any, is that we have begun the budget process early to allow for lots of input and for discussion of options and priorities. The City Charter requires the City Manager to submit a budget in April for adoption in May. We have a lot of work to do before then.

In January, City department heads will submit their budget needs for the necessary staff, equipment, and training to carry out the responsibilities of their offices. They will use their best judgement to determine whether police cars and other capital investments need to be replaced, new staff hired, repairs made to equipment or facilities, and investments in City infrastructure undertaken. Past analysis predicts that these costs of maintaining the City will increase about $1.1 million next year. This so-called "structural deficit" can, and will be, trimmed as the City Manager and his team put together a budget, but doing so is an implicit decision to defer investments in what keeps Owosso going.

In addition to the $1.1 million structural deficit, six factors are combining to make next year's budget difficult:
1. Local property tax revenues will decrease $250,000 as a result of declining property values and a declining tax rate. The State's Headlee amendment and other reductions have lowered the property tax in Owosso from 14.5 mils in 2001 to 13.4 mils now.
2. State revenue sharing will decrease $250,000 as a result of Michigan's difficult budget realities. In the last six years, annual support from the State to the City has declined $600,00, and further reductions may yet hit us. We should all contact our representatives in Lansing to recommend against such cuts.
3. State transfer payments for road repairs will decline $100,000; the City's share of state taxes collected on gas and vehicle weights no longer are sufficient to meet local road maintenance needs.
4. Pension obligations to retired city employees are anticipated to rise $200,000.
5. Contractual obligations to city employees will require a $200,000 increase in wages and benefits.
6. An old landfill that the City of Owosso used needs to be cleaned-up and the City's share of those costs may be $300,000.

While these predictions may not be as severe as outlined above (on the other hand, revenues may decline further and exacerbate the budgt picture), the City needs to plan to make $2.4 million in reductions in its planned expenditures in 2010-11. The City Manager believes he can continue to find efficiencies that could yield significant savings. Tough decisions will also need to be made about what capital improvements and other long-term investments to scale back or postpone. Still, to deal with the shortfalls it will likely be necessary to reduce spending on the current services the City offers.

One option is to cut spending across the board, and given that a large part of the City's budget is spent on personnel, then such a cut could be quite negative on our employees.


As you look at the existing expenditures (see pie chart), the largest portion of general fund revenues are dedicated to public safety (police, fire and ambulance) and a proportionate budget cut would have the biggest impact on these important services. Thus, the comprehensive evaluation now begun may offer some valuable ways to reduce the cost of the programs without sacrificing the quality of public safety programs (see previous post, "Optimizing Public Safety").

What do you think? The budget is complicated, with multiple revenue sources, legal requirements, and contractual obligations all limiting the options available. Still, some questions can be asked and answered now, and your input will be important:

• Do you observe any areas of City Government where funds can be saved? Do you see waste? What services could be delivered more efficiently?
• In your opinion, what City services could be scaled back with the least negative impact? That is, if we have to cut, what would you willing to do with less of?
• What investments in equipment and facilities are the most critical and cannot be deferred?
• In previous years, the City has spent general funds on street repairs (in addition to state funds for roads) to address critical transportation needs; should we continue this practice?
• Only 3% of the city budget goes to park maintenance and improvements; should this be increased? And if so, from where do we redirect dollars?
• Owosso has recently been successful in getting a variety of grants, but frequently they require some small outlay of general funds; should we continue to leverage our dollars this way?
• Should the City pursue a Headlee override to restore property tax rates to earlier levels?
• In our economic climate, are there options for revenue increases that would be acceptable, or should we continue to live within our (declining) budget?
• Would you be willing to pay additional taxes for roads? parks and a pool? public safety?any other special benefit?

Again, we are early in the budget process and I start out being a novice and without any particular bias. So, please educate me where you can. Or if, like me, you don't have much specific knowledge, let me know what your priorities and concerns are. Thank you for your continued participation.