Kalamazoo balances proposed 2013 budget

KALAMAZOO, Mich. (WOOD) - The City of Kalamazoo's proposed 2013 budget is balanced, thanks largely to a 2012 Early Retirement Incentive (ERI) program that will reduce the municipal workforce to its lowest level in about two decades, according to a news release.

But the draft spending plan unveiled earlier this week includes about $1.5 million in proposed new revenues that will require Kalamazoo City Commission approval. Without it, city leaders may again be looking for more ways to cut in fiscal year 2014.

Overall, the proposed 2013 budget essentially represents another “hold the line” year as the city continues to experience declining property tax revenues and little in the way of fiscal help from state or federal sources, officials say. Kalamazoo also has to write off an estimated $2.5 million of revenue from prior-year property tax bills that are aging, uncollectible, in foreclosure or ordered refunded by the Michigan Tax Tribunal.

Both general fund and capital improvement spending will decline in 2013, compared to 2012.  Officials plan to drain the municipal “rainy day” fund of $1,650,000 to supplement declining revenues.

The cost of Kalamazoo's General Fund services -- everything from Public Safety to leaf pick-up -- is budgeted at $49.2 million for 2013. This compares to $49.7 million in 2012.  

It should be noted that, in accordance with the last four years of fiscal plans, the proposed fiscal year 2013 budget includes $650,000 of personnel costs that were paid by a federal public safety grant (the so-called "COPS" program) from 2009 to 2012.  

In 2013, nearly 60 cents of every general fund dollar would be spent for Public Safety.

Total city spending is predicted at $144 million for 2013, down from $156.8 million in 2012. Much of the difference is due to federal stimulus grant programs being completed in 2012.

The city's 2013 tax levies will remain unchanged at 19.2705 mils for general operation, 1.55 mils for solid waste and 0.60 mils for Metro Transit.

Those millages will be applied to $9 million less taxable property value. The city's total taxable value was $1.528 billion in 2012, and it’s expected to decline to $1.518 billion for 2013 and 2014.

The budget predicts 674 city positions in 2013, down from 759 this year. Kalamazoo's municipal staff peaked at 915 in 2001 and has declined more than 26 percent since then.

Rather than budgeting year to year, the City of Kalamazoo adopted a five-year fiscal plan model in 2007 that uses the best available data, and projects both revenues and spending out over five years. The method has allowed the city to “smooth” gains and losses and predict changes earlier to manage the long-term fiscal landscape.

ERI and a plan to deliver services with less staff grew out of the five-year analysis that had forecast major property value declines. That resulted in nearly a $5 million drop in city property tax revenue between 2009 and 2012.

In addition, Kalamazoo's state revenue sharing also declined nearly $2.5 million from 2009 to 2011, and projections say the City should expect little change for the next five years.

The city's pension fund has been one bright spot on the fiscal horizon. It lost nearly half of its investment value in the 2007 stock market decline, but subsequently regained 90 percent of that. That investment growth means the City is not expected to have to contribute operating funds to the pension account until at least 2020.

Capital improvement projects are budgeted for 2013:

• Upgrades at Hayes Park and Kik Pool
• City hall maintenance, including energy upgrades to the air handling system
• Updating two fire trucks and technology upgrades
• $4.8 million of major and local street improvements that include

1. Alvan from Saidla to Sprinkle
2. Austin from Oakland to Davis
3. Fulford from Cork to Stockbridge
4. Kendall from Hylle to Memory
5. North Burdick from the railroad tracks to the north city limits
6. Oakland/Parkview intersection
7. Race from Stockbridge to Lake
8. Sailda from Miller to Alvan
9. Westfall from Michigan to Hylle
10. Wheaton from Merill to Westnedge
11. Various traffic signal upgrades

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A public hearing on the proposed 2013 budget is expected Dec. 17, with final adoption scheduled for Jan. 7.