Grosse Pointe Woods May Ask Voters For Headlee Override

The is coming off a financial audit that shows it is in an elite group of Michigan municipalities that has actually added to its reserves rather than dipped into them, but the numbers aren't working in the city's favor for much longer and it appears that voter approval to pay a higher property tax rate may be required to maintain city services at their current level.

The rosy financial situation for the city, which received high compliments from auditors from Plante Moran for being speedy and thorough in opening city budgets and for maintaining high standards of fiscal reporting, is turning thorny as delayed expenses and continually declining property tax revenue converge.

It puts the city in the position of looking for ways to cover future budgets, especially delayed expenses on repairs and updates to roads, equipment and public safety staffing are coming due.

The audit shows the city with an enviable $4.9 million fund balance. Meanwhile the city will likely be facing budget shortfall of at least a $1 million next year and in subsequent years, City Treasurer and Comptroller Dee Ann Irby, whose work improving the books since taking over from past treasurers was praised by the auditors.

She said without a new source of revenue the city could be forced do dip into the fund balance,  which is held in case of emergencies and to ensure a bond rating for lowest possible interest rates, taking the reserves down to risky--if not legally unacceptable--levels. With property taxes predicted to decrease 8 to 10 percent next year and likely in years after, the million dollar shortage could continue year after year.

"Even keeping expenses exactly the same, as we know will be highly unlikely…We are looking at a $1.1 million shortfall. There's a lot of red the further we go," Irby said. "Although we're in a good spot today we don't want to put our heads in the sand…We want to be fiscally responsible. We want to think about roads. We can't stay the course. Even if council chose and voters agreed, it doesn't' solve the city's problems we still need to make some cuts and tighten our belts."

The only option, it appears, is to ask voters to approve an override of the Headlee Amendment, which in part requires tax rates be rolled back if state equalized values on are greater than the rate of inflation.

The tax rate (or the millage paid on a property's taxable value--about half its market value) in Grosse Pointe Woods has dropped far below the maximum rate of 20 mills that can be assessed. To return that revenue to the city voters could be asked to pay approve the return to the maximum 20-mill assessment, adding between 4 and 5 mills to the tax rate. A mill is equal to 1/1,000th of a dollar or for every $1,000 of taxable value, an owner would pay $1 in property tax. 

Even if voters approved the maximum number of mills that could be assessed they still would pay less in property tax than they did in 2007, city officials said. It could mean a vote as soon as May or as late as November, but the finance committee, which is now chaired by Councilman Todd McConaghy, will evaluate the proposal and make recommendations. In the meantime, the city will also look for other ways to cut costs and find efficiencies.

Mayor Robert Novitke called the financial situation, which was discussed after the uplifting audit from Plante Moran "a reality check."

The discussion of the possible millage increase to keep the city financial healthy came at the city council's committee of the whole meeting last week.

"I think we've got to turn this up pretty quick so that probably by February we know where we're at," Novitke said.

The council talked about the difficulty and regret of having to turn to taxpayers, some of whom are struggling themselves, but said there may not be another option.

"I don't see that you have a choice if we're looking at three years going through everything we have in our fund balance," McConaghy said during the meeting last week. "If not a Headlee its a drastic reorganization of this city as we know it and i don't see that happening. I think it's our responsibility to try and maintain what we have."

Several unsettled matters could improve the budget picture. Labor negotiations, consolidation of services with other Pointes, specifically dispatch and jail lock-up, various grants and announcement of state revenue sharing. There also is the added revenue to come from . But it is unclear when construction will begin.

"It's nice for us to be realistic without being pessimistic,"  Novitke said. 

Mayor Pro Tem Vicki Granger said the city can't continue putting off repairs to roads and letting the public safety department drop in numbers. 

The big fear is that every year a street that was in asphalt category goes into rip-and-replace and a much higher cost that comes with it," she said. "Voters need to know this is about every part of the city budget."

She suggested the city consider hiring an outsider to look at where the city has made cuts and could make others, to determine if there are inefficiencies that can lead to savings and to look for sources to generate more revenue. 

"We should do this in case we've missed something and do it for the voters who have the question, 'Have you guys done everything you can?'"