Revenue Sharing Getting Scary

May 5, 2006
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GRAND RAPIDS — Whether he meant to or not, State Rep. Kevin Green caused a bit of a stir at a recent meeting of the Grand Valley Metro Council — which took place a day after the Wyoming Republican said he was going to try to add $20 million in statutory revenue-sharing funds for cities, townships and villages to the upcoming state budget.

“It’s the first time in six years that the arrow is pointed upward,” said Don Stypula, GVMC executive director.

Should the proposal Green made become part of the state’s 2007 fiscal-year budget, it would mean a 2 percent hike in revenue sharing above the amount that Gov. Jennifer Granholm has proposed in her budget.

Wyoming Mayor Pro-Tem William VerHulst, though, told board members that Green told him he made the announcement to put pressure on Granholm, a Democrat running for another term, and that Green hadn’t figured out where he would find the additional $20 million to turn his proposal into a reality.

Still, Kentwood Mayor Richard Root said any increase in revenue sharing would be welcomed and would be an improvement over the cuts his city and others have seen the past several years. Grand Rapids 1st Ward City Commissioner Roy Schmidt expressed the same sentiment and hoped that Green’s proposal would mark the start of something bigger.

“What we are looking for is a champion of West Michigan,” said Schmidt.

Schmidt said that Green, a former Wyoming city council member, fills those shoes now, and he added that Green told him that he would seek a further increase next year. Schmidt also said he would ask State Sen. Bill Hardiman, R-Kentwood, to make a similar request in the Senate. Hardiman is a past mayor of Kentwood.

State Rep. Jerry Kooiman, though, told the Business Journal last week that how much statutory revenue sharing gets distributed is up to lawmakers. The Grand Rapids Republican explained that the formula has only been fully funded once since its inception eight years ago and that a majority of lawmakers can change the distribution every year.

Kooiman added that a new formula could be coming from the Legislature in the near future and this one wouldn’t treat all municipalities the same. By that he meant units that scored well on at least three of nine potential indicators would get more dollars than those that didn’t.

For example, municipalities that reduced pension costs, lowered health care costs, shared services, or worked together on regional issues would get larger shares than those that didn’t, because these efforts should result in lower operating costs for each unit that did.

But Root countered that current state laws make it difficult for cities and other units to share services. Kooiman agreed and he said changes need to be made to make it easier for cooperation agreements. He explained that under current law, the municipality with the higher wage and benefit package has to prevail if two units come together to, say, provide combined fire services, and that doesn’t let either unit benefit from cutting expenses.

“There are roadblocks to consolidation,” said Kooiman, who added that a bill proposed by State Rep. Glenn Steil Jr. would amend that statute.

“We have to be on top of the revenue-sharing rewrite when that happens,” warned Don Hilton, supervisor of Gaines Township.

The proposal made by Green would add another $465,000 in revenue-sharing funds to Grand Rapids. The city, though, has already passed and sent a resolution to Lansing that calls for full restoration of the revenue-sharing formula, which would result in another 9 percent and not the 2 percent that Green offered.

But Grand Rapids Township Supervisor Michael DeVries said the ultimate prize would be a rewrite of the state’s formula that would let counties share in the statutory portion, too. Kent County is operating without those dollars until 2011, the year lawmakers have pledged to restore that funding.

“We must have a much longer view,” said DeVries.

Kent County Fiscal Service Director Robert White told the Finance Committee last week that the county won’t receive any property tax revenue in the first quarter of 2007 because of the shift in that levy’s payment dates, which was made as part of the revenue-sharing change the state undertook a few years ago.

White said first quarter tax receipts for this year were down by 51.5 percent from the first three months of last year due to the gradual shift of payments from winter to summer. He also said the county has already allocated this year’s share of its revenue sharing reserve fund, which totaled $10.8 million.

“Your tax revenue is going toward the end of the year and you will have some cash flow problems,” White said to the committee.

At the last board meeting, White said commissioners would have to reduce personnel and services if the state doesn’t restore revenue sharing. Commissioner David Morren said the board needs to set aside $160 million between now and 2011 to offset the county’s loss of revenue sharing.

“But we don’t have $160 million,” said Morren, a past commission chairman.

“If you think the county will get revenue sharing back, you’re crazy. Cities will get it first, not counties,” he added. “I think this issue should drive every financial decision we make.”

Kent County Administrator and Controller Daryl Delabbio said the county stands to lose $11 million in 2011 if lawmakers don’t keep their promise.

“We are in this together,” he told Metro Council members. “I hope the cities, townships and villages stand by the counties.”   

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