According to a six year projection, Ypsilanti's general fund balance is expected to decrease by $6.4 million through 2019.
Courtesy City of Ypsilanti
Ypsilanti will continue to draw from its general fund to pay down its $24.7 million Water Street debt and a consultant warned the city its general fund balance may decline by $6.4 million through 2019, largely because of the debt.
Ypsilanti has heavily drawn from its reserves and general fund balance over the years to remain afloat. One potential effect, according to John Kaczor from Municipal Analytics, could be no wage increases for all city employees through 2019. However, those who would be due step increases would likely be exempt.
Ypsilanti's fund balance is estimated to decline from $8.6 million to $2.2 million by 2019 and Kaczor said the city's Water Street debt is the "driving force" of the city's budget imbalance.
"The city will continue to rely on its fund balance and reserves," Kaczor said Tuesday during the city's second budget session. "The challenge is to minimize that each year. All of this is Water Street debt that’s driving that balance. Without it, things would be significantly better."
A fund balance is an accumulation of revenues minus expenditures, and each fund maintained by the city has a fund balance. Any surplus revenues in excess of expenditures at the end of a fiscal year goes into a fund balance.
The city will transfer $1,341,778 from its general fund in fiscal year 2013-14 to go toward the Water Street debt. To date, the city has paid $4.6 million of the debt.
The payments, and interest rate, are expected to increase as the city continues to pay through 2031. The debt repayment schedule shows two payments are due each year and the first 2013 payment of $848,783.75 was due May 1 of this year. The next payment, $435,070, is due Nov. 1.
Officials have discussed refinancing the debt in the near future.
So far, the city has used more than $5 million from the general fund to go toward Water Street and has spent $30.2 million in total, according to city records.
City Manager Ralph Lange and Mayor Paul Schreiber
However, City Manager Ralph Lange said the six year outlook provided by Kaczor gives the city time to figure out how to pay for its debt, while maintaining city services.
"If it wasn’t for that, we would be in the black and not the red," Lange said. "The goal of this city is to get past 2031. If we get past that, everything changes. The sky is not falling and the place isn’t going to go down the drain tomorrow. We have time to make the changes we need."
Notable six-year projections:
- Taxable valuation increases 0.87 percent in FY 14-15, then 2 percent each year after
- All new employee hires receive will receive Tier 2 benefits
- No wage increases through FY 18-19
- General fund expenditures expected to reach $15 million by FY 18-19
In total, the city will transfer more than $2.4 million from its general fund to pay for city services and retiree costs in fiscal year 2013-14. Lange noted that if the city didn't have to make those transfers and contributions to other city funds, it would have a nearly $2 million surplus.
Courtesy City of Ypsilanti
Lange said the city needs to focus on finding a way to run and manage a successful economic development campaign, which he believes would create more tax revenue for the city.
Lange said he and city staff will focus on the redevelopment of Water Street, the Angstrom USA property and selling city-owned property. Lange said he would like to put 100 percent of the proceeds from any sales toward the Water Street debt.
"If we’re successful in that, a lot of our problems will be greatly reduced," Lange said.
The city received a $2.7 million Community Development Block Grant loan from the state of Michigan for the Water Street property that it must start repaying in 2015. Lange said for every five million dollars of real property investment on the property, $100,000 will be taken off of the amount owed to the state.
"If we're successful (in redevelopment) we can peel off a lot of money," he said.
However, council member Pete Murdock thought some of the budget presentation distorted how serious of a financial strain the city is in.
"If I saw this I would say, 'Wow ,we’re in great shape, what are we complaining about,'" Murdock said. "But those general fund transfers and contributions are real expenses. It kind of distorts our situation. The Water Street debt is not going away."
Murdock said the amended budgets for 2013-14 and projections do relatively little to improve the city's financial picture.
"At the end of five years we’re at the same place where we were going to be at your first whack at this," Murdock said to Lange. "We're going to be $1.2 million in the hole and have no more usable fund balance.The debt is still the same
At some point its all going to crash. If we don’t get a handle on some of those things in the next several years, it isn’t going to matter how much we build our the taxable value."
Lange said the city is not alone in figuring out how to manage city services, while repaying debt and handling increasing pension and retiree costs.
"There are a lot of macro forces that are crushing the city and we’re certainly not alone in this," Lange said.
Kaczor said the projections allow the city to have a chance at regaining stability.
"These projections include stability," he said. "This is the first chance you can say we have a chance to stabilize government operations. Without stability there's a lot of uncertainty."
Police and fire budgets
The Ypsilanti Police and FIre Departments have experienced decreased staffing and tight budgets over the past several years.
Courtesy City of Ypsilanti
The police and fire departments have been understaffed over the past several years, as the city looked for ways to maintain city services.
The police department has 26 sworn officers and Police Chief Amy Walker said there's a crucial need for more officers on the streets. Walker said she is continuing to focus efforts on moving toward a police and fire hybrid model.
"This time last year, I was looking into ways to collaborate with the area townships," Walker said. "We’re on a new adventure and we’re exploring that and that’s moving forward."
Police highlights:
- The fiscal year 2012-2013 operating budget has 26 sworn officers and 4 civilians for 30 full-time employees.
- The amended fiscal year 2013-2014 includes an additional three new police officers and two part-time police officers. This would increase the total to 29 sworn police officers and four civilians. The department would have 33 full time employees and two part-time officers.
- The overtime budget will be reduced from $434,000 to $360,000, for a savings of $75,000.
Similar to the police department, Captain Max Anthouard said an increase in fire department personnel is needed. The department has 15 employees. Anthouard said his goal is to reach 17 personnel, including one fire marshal, three captains and three lieutenants. The city's fire marshal position is empty at the moment, and Anthouard said the job being filled is crucial to the work the department does.
Anthouard also said the department's overtime costs need to be controlled. From January to April 2013, the department has incurred $67,320 in overtime costs.
"The overtime we have at fire department is out of control," Anthouard said. "We have overtime every day and hiring two firefighters would be saving money over time. It would also decrease the amount of overtime senior firefighters are making."
Garbage fund in severe distress
The city's garbage fund is out of reserves and will require hard negotiating for the new contract this year, according to city officials. The fund is currently being subsidized by the motor pool fund. Kaczor noted that the garbage fund will likely be in the red by nearly $819,000 in 2019.
The garbage fund is depleted and Kaczor said the city must find new revenue sources for it.
Courtesy City of Ypsilanti
Kaczor said the fund will require a significant effort to be self-sustaining and the city's waste hauling contract must be renegotiated. Other cost reductions will be required and the city should consider exploring other funding options as well.
Motor pool contributions to the garbage fund will be fully eliminated by fiscal year 2015-16.
"Beyond that, the city needs to find a solution for this fund," Kaczor said. "It really should not be something you're subsidizing from the motor pool and the general fund cannot subsidize it."
The motor pool may also be severely impacted through 2019, Kaczor said. The fund has about $3.5 million in reserve funding, but they may be depleted entirely by 2019.
"We have to find way to make the garbage fund sustainable," Lange said.
Katrease Stafford covers Ypsilanti for AnnArbor.com.Reach her at katreasestafford@annarbor.com or 734-623-2548 and follow her on twitter.