City budget shrinks governmentPublished 10:36pm Monday, May 24, 2010
By JOHN EBY
Dowagiac Daily News
Dowagiac’s 2010-2011 fiscal year budget starting Oct. 1, eliminates 2 1/2 more jobs and addresses crumbling neighborhood streets with the Lyons administration’s attempt to “size our city government so that we live within our means” while Michigan recovery lags.
Over the previous 12 months at City Hall, departments have been consolidated to reduce staffing levels by seven fulltime employees already.
The budget calls for additional reduction in staffing of two fulltime positions from the general fund and movement from fulltime accounting services to contract with an accounting firm for part-time services. Including wages and benefits, those cuts are expected to save $130,000 to $135,000.
“This budget does not increase any taxes,” City Manager Kevin Anderson said, “in spite of the fact we continue to face challenging finances. Taxable values are down in the community and we will see less tax revenue, as well as reduced state-shared revenue” anticipated at $40,000.
“These reductions in jobs simply deal with the loss of revenue from those two sources,” Anderson said.
“This budget also calls for reduced overtime,” Anderson said, “and an emphasis on some capital improvements because despite some of the revenue shrinking, if we don’t continue to make capital improvements, maintenance costs will continue to rise.”
Anderson added, “We will be looking at water and sewer rate increases” of $5 per month for the latter and $2 for the former – about $7 total.
It has been almost two years since the last adjustment.
“Rental rates we have been receiving for cell towers from telephone service providers” will be redirected from subsidizing water rates to the capital fund, the city manager reported Monday night.
The Police Department notes street light outages, which reduce overtime in the electric utility.
The Fire Department flushes hydrants, which reduces overtime within the Water Department.
The budget reflects a slight increase in the payment in lieu of taxes within the electric utility amounting to approximately $103,000.
This sum will be earmarked for streets along with the cell phone antenna rental income for some $150,000.
“As we try to craft a smaller, but effective, city government,” Mayor Donald Lyons stated, “there is one fact that we must keep foremost in our thoughts, and that is that we must assume that there is not going to be any significant improvement in Michigan’s economy over the next 10 years.
“As the auto industry, Michigan’s economic foundation, reinvents itself and grows back to a production level of 15 million-plus personal vehicles per year from its projected 2010 level of 11.5 million personal vehicles, that production will not be concentrated in Michigan as it has been in the past. A disproportionate share of that new production will be from foreign companies (which) are either bringing in product from overseas production facilities or have built domestic plants in southern states that enjoy lower labor rates.
“As a consequence,” the mayor continued, “the entrepreneurial effort that will be necessary to rebuild Michigan’s economy will take literally decades. This means that state revenues will be stable at current levels at best or continue to decline at worst, which in turn equates to flat or declining state revenue sharing payments to local units of government.
“A flat or declining economy will also translate to flat or declining property values, again, providing less income for local units of government. All of this means that we must size our city government so we live within our means.
“We must maintain adequate fund balances,” and Dowagiac’s of 26 percent will be in line with its 20- to 25-percent goal,
“We must be able to hire top-notch people and pay them competitive wages and we must be able to provide reasonable annual wage and salary increases to our employees. In short, we must run the city in a fiscally and morally sound manner.
“If the economic pressures we’re experiencing were short-term in nature, 12 to 18 months, it might make sense to ‘hunker down and ride it out’ by foregoing wage and salary increases and putting off capital spending projects,” Lyons said. “But given the long-term nature of our revenue restrictions, this would be a recipe for disaster. We must craft a city government that lives within the means available to it, delivers its essential services fairly and efficiently, maintains its infrastructure and invests in its future.
“I’m pleased to say that this balanced budget is an excellent example of doing more with less,” the mayor said. “It is balanced by sizing your city government to revenues available. There are no smoke and mirrors or any dipping into fund balances. Our general fund balance at the end of 2011 is projected to be a very healthy 26-percent of revenues. As we go forward, we will continue to find creative ways to do more with less. This will include a leaner organization and extensive cooperation with other units of government.”
Using new software, Anderson is able to show the council comparisons of financial activities from previous years. Over time, reporting financial information in this manner will aid in identifying revenue and expenditure trends, which should aid in managing the operation.
Comparisons he presented the council include the two prior fiscal years, the current budget, current expenditures through March and his recommended budget.
The budget line score shows $3,644,158 in revenue in 2007-2008, $3,926,722 in revenue for 2008-2009, projected revenues of $3,456,692 for the current 2009-2010 budget and a bottom line recommended in the general fund for June 30, 2011, of $3,003,572, with a fund balance of $788,384.
There have been a number of accounting changes that will impact the ability to track individual line items. Labor costs are now directly allocated to the various funds.
Previously, inter-fund transfers were made, then stated as revenue in financial statements, which gave the appearance of lower revenues and expenditures.
Costs are assigned to specific departments. For example, within the general fund health insurance, retirement and motor pool, expenses appeared on single line items. Now these costs appear in each department where the cost is incurred.
Purpose of assigning direct costs to each department is to make sure officials can clearly understand the full cost of operating each cost center or department.
These steps make department heads more accountable for their full operational costs.
Department heads have access to financial information updated daily.
The council followed up last Thursday evening’s budget work session with a hearing May 24 for public comment from Howard Hall and Linda Keesler.