A new way to manage City of DowagiacPublished 10:45am Wednesday, February 17, 2010
By MAYOR DONALD D. LYONS
The elected officials and department heads of the City of Dowagiac recently held their annual Strategic Planning Session.
The purpose of that all-day session was to review the collective accomplishments of the prior year and to establish goals for the upcoming year.
This year, your city is facing a bigger challenge than we have in years past because of Michigan’s accelerating economic problems.
In the 12 years since I was first elected mayor, our annual state revenue sharing payments have decreased by about $185,000 per year from their peak in the 2001-02 fiscal year.
Headlee rollbacks have taken another $130,000 per year away from our general fund revenue, which is the money we use to pay our police and firefighters and maintain our parks, cemetery, roads and sidewalks.
This total shortfall of about $315,000 per year represents about 8 percent of our general fund revenue.
While significant, especially when considering that all of our operational costs have continued to rise, we have been able to continuously streamline and refine our operations and keep expenses balanced with revenue.
However, the pace of Michigan’s decline is accelerating and we’re seeing that there’s a real risk that our revenues will start to fall faster than what we can reduce expenses through improved efficiencies.
We expect that this will begin to happen towards the end of this fiscal year, which ends Sept. 30.
We are expecting state revenue sharing payments and property taxes to continue to fall during the fiscal year 2010-11.
In total, we expect a reduction in revenue of about $150,000 from our revenue for the 2009-10 fiscal year.
This means that we’ll have to make significant adjustments to our operations that will result in a very different approach to our delivery of services if we are to continue to balance expenses with income.
Knowing this, the elected officials and staff took two crucial steps toward a fundamental restructuring of the delivery of city services.
We first identified what we consider to be our core responsibilities. Those responsibilities are police and fire protection and streets and sidewalks. Those responsibilities are critical to maintaining the viability of our city.
The city has two other functions we perform that, while important, aren’t as critical as those just mentioned: our parks systems and our cemetery.
The second critical thing that was agreed upon was that the city staff would develop a set of objective criteria that would define a minimum acceptable level of performance for the delivery of all of the city services.
Much of what we do now is done because “that’s the way we’ve always done it.”
For us to make the fundamental and necessary changes and maintain an appropriate level of services, we’re going to have to define what constitutes an appropriate level of service.
As an example, when assessing our fire department, we might say that from the time a call is received, a truck and three firefighters must be on the site of the fire in no more than five minutes.
This objective criteria gives the city staff a benchmark against which they can measure whatever fire protection system is put in place.
That set of criteria will also define, in a measurable way, what the minimum accepted level of service is to the community.
Another example might be our parks.
We currently mow all the public spaces in the city every week during the summer, because that’s the way we’ve always done it.
We’ll replace that routine with a measurable standard that might say the grass should never be longer than three inches.
By establishing these criteria, everyone will know what to expect and, in the face of continuing state revenue problems, those criteria are easy to adjust.
Again, using mowing as an example, if the state’s financial condition continues to worsen and future additional cuts were required, we might set a four-inch height for an acceptable maximum for the length of grass instead of a three-inch height for our mowing criteria.
Over the next several months the city staff will be developing measurable criteria for all aspects of the management of the city.
As these criteria are developed, council will be reviewing them and seeking public comment.
It’s also important to understand that the state’s financial challenges and local falling property values don’t impact the operation of our utilities, which are electricity, water and sewer.
Our utilities are managed separately from the rest of city government and are on a pay as you go basis.
We control the amount of revenue by the rates we charge.
While it’s important to run our utilities efficiently and to be sure that our rates are competitive with other communities, it’s ultimately up to us to establish rates that will provide a stream of revenue that allows the city to cover its expenses.
Those revenues are not connected to local property taxes, the state or the federal government.
The other issue that was addressed at length was how to find money to do a better job of maintaining our streets and sidewalks.
Several options were explored. Those were: Enact extreme cuts to other areas of our general fund expenses that would leave enough money to do appropriate maintenance on our streets and sidewalks.
We’ve reduced staffing in the city by more than one third over the last 12 years, and I’m sure we will continue to reduce staffing as we further streamline our operations in the face of continued falling revenue.
However, the cuts that would be required to balance our expenses against our revenue and have enough left over to fix our roads and sidewalks would be Draconian indeed and would negatively impact our ability to deliver other essential city services.
Another alternative is to levy a special assessment against the properties that front on the streets that are being repaired.
The logic of a special assessment is that the people who are benefiting directly from the upgrade of the streets, namely those living along those streets, should pay for the upgrade.
However, the cost of paving is fairly high and a special assessment would amount to several thousand dollars per parcel of property.
While it would be payable in installments over several years it would still be a large burden on the individual property owners and others besides the property owners would benefit.
A third alternative would be to seek a community wide millage to raise enough money to pay for the street and sidewalk upgrades.
An adequate amount of money would require a levy of two to three mills.
The city currently levies about 16 mills, so this would require a 12-percent to 18-percent increase in city property taxes.
And since it would have to be voted on, passage would be problematic at best.
For obvious reasons, none of these options were considered appropriate.
What council decided to do instead was to turn to our utilities as a source of funding.
We’re currently leasing space on our water towers to cell phone companies for their transmitters. That rental income is about $50,000 per year. Currently, it is being credited to our water utility and is being used to offset operating expenses of that utility.
However, there’s nothing about the water utility that’s specific to cell phones, other than the water towers are the highest points in the city.
If some other structure were higher, then the cell phone equipment would be on that structure, not the water towers.
Council made the decision to redirect those cell phone lease monies from the water utility to a capital improvement fund for streets and sidewalks.
This will require a small water rate increase to make up for the lost cell phone income, but spread across the community it is relatively modest.
In addition to this source of funding, the decision was also made to charge a Payment In Lieu Of Taxes (PILOT) to our water and sewer fund; we’re already doing this for our electrical fund.
These PILOTs for utilities are quite common, most communities do them; they represent the taxes that would be paid by a private utility if they were operating our utility instead of the city operating the utility.
Again, a small rate increase will have to be enacted to offset the cost of the PILOTs to the city’s utilities. But, taken altogether, the cost to the average residential homeowner of the PILOTs and the redirected cell phone tower rentals will only be about six dollars per month.
The combined revenue from these cell phone tower leases and the utility PILOTs will total about $200,000 a year and will be enough to begin an aggressive street and sidewalk improvement campaign at an affordable cost to the citizens of Dowagiac.