Mark Liss

Download (PDF, 639.71KB)

Macomb Daily; Date:2011 Mar 13; Section:Homefront; Page Number: 7C

Like most cities, Warren is seeing dramatically lower property tax revenue as a result of the collapse of the housing bubble. But unlike many other cities that have anticipated lower revenue and are reducing spending, Warren has been spending millions of dollars more than it brings in.

Every administration budget relies on deficit spending:

• In fiscal year 2008, Warren spent about $144 million but took in $142 million, an imbalance of about $2 million.
• In fiscal year 2009, Warren spent about $142 million but took in $135 million, contributing to a $7 million deficit.
• In fiscal year 2010, Warren is projected to spend $141 million while taking in only $133 million, a deficit of $8 million.

While the administration takes great pains to publicize putative cuts and supposed revenue brought in by the city, Warren’s financial condition has actually worsened.

The administration’s claim that the city saved more than $2 million in overtime was not the case. A review of Warren’s comprehensive annual financial report shows that overall spending for overtime has actually gone up. The only major department that saw a decrease in overtime was the police department, but, overtime costs for the fire
department more than made up for those savings, skyrocketing 72 percent between 2008 and 2010.

Last year during contract negotiations, the administration demanded workers take pay cuts from 10 percent to 25 percent. That didn’t happen. Instead, the city negotiated zero wage concessions, with some workers agreeing to a new health insurance plan, resulting in an anemic 3 percent overall savings.

Contrast that with how the administration dotes on its political appointees by steadfastly refusing to cut their high salaries and indulging some with luxurious raises. One appointee saw a raise of $14,264 — going from a salary of $36,000 to $50,264 — a whopping 40 percent increase in pay with no change in duties. Had the administration cut appointee salaries by 15 percent instead, the city would have saved more than $2.4 million in four years.

No doubt city hall will showcase increased revenue by the fire department’s patient transport service as showing improvements in the bottom line. Unfortunately, that income is already offset by the dire need to upgrade or replace firefighting vehicles, medical vehicles, equipment, firehouses and significantly higher overtime. You have to expect the unexpected: One fire truck was recently involved in a traffic accident and damaged beyond repair. Because the city is self-insured, the replacement could cost a cool $450,000, depleting fund reserves even more. Another fire truck recently failed its MDOT safety inspection and has been taken out of service.

Even the administration’s projection cited in a recent Macomb Daily article predicts a staggering $11 million deficit, going to a $14 million deficit if Gov. Rick Snyder’s proposed cuts to revenue sharing are approved by the Legislature. Tax appeals could push that number much higher.

Unfortunately, that leaves the city with a rainy day fund of around $6 million, down rom $32 million just four years ago. The separate water and sewer budget rainy day fun has also been depleted from $8 million to only $200,000, just a water main break away rom catastrophe.

Between the general fund budget and the water budget, this administration will have spent an unprecedented $17 million more than it collected in the last three years. No wonder dozens of appointees have left city hall, grabbing their pensions while they can. Once the rainy day funds are depleted, the city will have no choice but to impose massive layoffs or ask the voters for massive tax increases, or both, to balance the budget. City services will collapse, its coveted bond rating will turn to junk, property values will fall even more and property tax revenue will decline more sharply.

It’s also long overdue for the city council to control spending if city hall is unwilling or unable. Warren can no longer take millions from its rainy day fund as it did last year whe a bare council majority voted to appropriate $10 million to cover revenue shortfalls. That plan was ill-conceived, making subsequent cuts much harder. Had the administration been serious about cutting expenses, that budget would have been vetoed.

The city’s financial position won’t improve with the economy. Michigan constitutional prohibitions will continue to force property tax receipts to drop, or at best stagnate, even f the economy improves. The state is training 65 emergency financial managers in the expectation that scores of city budgets will soon crash.

Had the administration heeded the warnings of its financial officers — the same people who built-up the once envious, but now depleted, $32 million rainy day fund — these inancial problems could have been avoided. They predicted in 2007 that Warren could no longer sustain its spending levels and needed to make cuts. In order to balance the upcoming budget, city hall will now have to cut one of every seven budget dollars. But don’t expect this administration to make any tough choices in an election year. Councilman James Fouts might have, but Mayor Fouts is hoping to kick this can past November.

But, November will be too late. It’s time to balance the budget now.