Chamber's Position on the Ann Arbor 2007-2008 City Budget and 2008-2009 Financial Plan

May 18, 2007

The Ann Arbor Area Chamber of Commerce generally supports the direction of the City of Ann Arbor’s proposed 2007-08 budget and 2008-09 financial plan.  Strategic issues we raised a year ago remain, however, and the budget and plan contain specific elements we do not support.  We encourage the Mayor and City Council to amend the Administrator’s proposals accordingly.

A year ago, the Chamber expressed concerns regarding the transparency of the City’s public presentations and communications.  Although transparency is improving, the City’s occasional reluctance to fully disclose information continues and results in a qualified endorsement.

Strategic Issues – Health Care/Pension Costs and Intergovernmental Collaboration

Last year, the Chamber’s support of the City budget was premised on the belief the City would make significant progress in improving uncompetitive health care and pension benefit costs.  Contracts with all of the City’s largest unions expired in June 2006 and the City had appropriately indicated addressing these costs was a priority.  Contracts for two of the City’s largest unions (AFSCME and Police Officers) remain open and, understandably, the City is reluctant to share details of those negotiations.  Our expectation remains that the City will re-align employee health care and pension benefits to levels more consistent with the private sector.  Based on the limited information provided to the Chamber in response to our request, it is unclear whether the recently settled Firefighters’ contract meets that expectation.   

A year ago, we also encouraged the City to accelerate intergovernmental consolidation and collaboration efforts to provide more efficient services and eliminate duplication.  To date, only minor progress has been made.  The Citizens Research Council of Michigan just recently published a study indicating that the enabling legislation required for significant local intergovernmental collaboration already exists in Michigan – the only roadblock is local administrators and elected officials hesitancy to act.

Specific Budget Issues – Business-Related Rate and Fee Increases

Recent announcements by Pfizer and other employers have reminded us of the importance of creating a climate in Ann Arbor conducive to attracting and retaining businesses.  Several potential actions in the City budget and plan are contrary to that spirit including:

• water, sewer, stormwater usage rate and construction fee increases at multiples of inflation 
• raising fees to private developers 15-30% while also charging for attorney’s review time 
• instituting a charge to downtown businesses for street lighting (Special Assessment District) 
• a 12% rise in front-load dumpster fees to commercial businesses 

The Chamber does not support increases of this magnitude or adopting new charges that target only businesses.  Consistent with our position in prior years, we would support rate and fee increases approximating inflation and encourage the Mayor and City Council to re-consider these specific items.

Additional Observations and Considerations

• The Chamber is encouraged that budgeted operating expenditure growth for 2007-08 is relatively modest (2.2% in the General Fund), but we believe the City should revisit the 4.1% General Fund expenditure growth planned for 2008-09 prior to adopting the 2008-09 budget.  Although tax rates are up slightly for 2007-08, we recognize the increase is more than accounted for by the voter-approved tax increase for parks.  No Headlee overrides or other tax-related fee increases are proposed for 2007-08.

• In assessing the proposed reduction in Police staffing levels, the Chamber is relying on the City’s firm commitment that the number of officers on the street, and the overall service level to the community, will not be adversely impacted.  While we support efforts to eliminate bureaucracy anywhere at City Hall, Public Safety should be the City’s top priority and we would oppose any meaningful service reductions in Public Safety.

• The Capital Improvements Project (CIP) plan includes $34 million for a new Police/Court facility.  We are disappointed that the factors driving the need for separate court facilities have not been articulated to the community, only that the 15 District Court must move. The Chamber believes establishing separate court facilities for the City and County represents an expensive step backwards in the journey towards greater intergovernmental collaboration.    We encourage the City and County to work together to find a solution that avoids this substantial investment and likely higher operating costs.

• The City’s General Fund Reserve Balance has been growing the last several years and for Fiscal Year 2007-08, the General Fund is budgeted to generate a $1.4 million surplus – revenues of $81.7 million compared with expenditures of $80.3 million.  We recognize that building reserves is certainly preferable to depleting them, but given the reserve now exceeds the target range (8-12% of annual expenditures), we believe the City should consider relieving the heavy burden on taxpayers rather than continuing to add to the reserve.  If the City is building the reserve to eventually transfer funds to the Police/Court facility (or for another purpose), that should be made clear to the community.

The Ann Arbor Area Chamber of Commerce has been reviewing and commenting on Ann Arbor City budgets since 1998.  Our review and analysis would not be possible without the assistance of City Staff.  We thank City Administrator, Roger Fraser, and City Chief Financial Officer, Tom Crawford, for taking the time to meet with us and answer our questions.