Amid escalating costs and declining revenues, the Orchard Lake Finance Committee may have found a way to streamline operations while adding to the city’s fund balance.
The Finance Committee is comprised of Councilmen Tim McCabe, Jerry Kosmensky, Jim Talpos, and Mark Hoffman; Treasurer Frank Copeland; and former councilman Dave Boerger. Due to Hoffman’s absence, Mayor Bruce McIntyre has stepped in as his replacement.
The committee developed a plan for 2011/12 and was expected to present its findings to the City Council yesterday, Tuesday, Feb. 22.
According to the plan, the city’s “rainy day fund” is projected to increase from $326,688, or 13 percent of operating expenses, to $443,004, or 20 percent. The Michigan Department of Treasury has established a 13 percent minimum benchmark for a community the size of Orchard Lake.
“It’s not mandatory, but we feel it’s fiscally prudent because you see what happens to cities if you go bare bones,” Talpos said. “With a city our size it doesn’t take a lot for unexpected expenses or any litigation for that 13 percent to be blown away with one stroke.”
Currently the rainy day fund is at 17 percent of planned expenditures, but is expected to drop to 14 percent, according to Boerger.
“A number of retirees are getting a lump sum for accumulated sick leave and that kind of thing, and that was unexpected, so we feel we’d be too close to the limit and it needs to be raised up,” Boerger said.
The financial plan, though bleak from a revenue standpoint, calls for no increased spending on supplies and services. The plan assumes a 3.7 percent decrease in taxable property values, compounded by a 15 percent reduction in state revenue sharing.
However, given Gov. Rick Snyder’s budget plan unveiled last week, Boerger said revenue sharing cuts may not be as grim as previously anticipated.
“We may have the opportunity to reduce or maintain altogether the revenue sharing depending if Snyder’s budget is approved,” Boerger said.
To offset property tax and revenue sharing declines, the city’s overall operating millage would be increased by 1 mill, with operating mills up 1.19 mills and debt retirement collections dropping to 0.19 mills.
The impact on residents with a taxable value of $300,000 would be a $300 per year tax increase. The annual costs to operate the local government per household is $2,847 based on the 2011/12 budget of $2.26 million.
The city is expected to make broad brush changes including cutting wages by 2.5 percent. It also assumes 15 percent will be derived from efficiencies, four scheduled retirements and expenditure cuts.
On Friday, Feb. 18, the city reached a tentative agreement with an AFSCME bargaining unit that calls for a 2.5 percent wage reduction for the four represented employees.
“The AFSCME group fully understood the city’s position and agreed to the pay cut, and we hope we get the same cooperation from the police union,” Talpos said.
The financial plan estimates a 10 percent benefit cost increase in tandem with 5 percent going toward contracting fire and EMS personnel.
The next step is to create a formal budget proposal that will specifically address efficiencies once council approves the financial plan.