Kentwood at a critical juncture

January 8, 2010
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Editor's note: This is the second and final installment reviewing the impact of a sharp reduction in state equalized taxable value on the tax coffers of local municipalities.

The news wasn't totally unexpected, but it very well may have been the last thing Kentwood Mayor Richard Root wanted to hear.

According to the latest figures from the Kent County Bureau of Equalization, the state equalized taxable value for properties in Kentwood will fall more than in any other city in the county this year.

The taxable value for commercial properties in Kentwood will decline by 8.32 percent, for industrial properties by 6.79 percent, and for residential properties by 10.23 percent. The declines mean the overall value loss for all taxable properties in Kentwood is 8.95 percent.

In contrast, the nine cities in the county, including Kentwood, have an aggregate loss of 5.34 percent. The collective loss for all the municipalities in the county, nine cities and 21 townships, is 4 percent.

Still, Root took the bad news in stride, as if he has heard it all before — which he has.

"They initially came out and said 10 percent. Then they came back and said 5 percent. Now they're saying 8.95. So it's still a moving target," he said of the loss, which he thought would be closer to 5.5 percent.

"What we've certainly become aware of is many of our commercial and industrial properties are certainly concerned about their tax rate, and we're going to be looking at all those, like everybody else in the state is. But we can't just sit here and say, 'OK, everybody gets a 9 percent cut.' That's not how it works. Tax assessments are far more complex than that," he added.

Root said what the county's EQ office is doing with taxable values is exactly the same thing Kentwood officials are doing with the city's annual operating budget: planning and estimating. So far, the city's budget planning has incorporated a 5 percent dip in property-tax revenue for the coming fiscal year, which begins July 1. That drop marks a revenue loss of $830,000. A 9 percent drop in taxable value would deplete the city's revenue total by close to $1.3 million.

"You tie that to what the state has already done to us on statutory revenue sharing, combined with a drop in constitutional (revenue sharing) — that by itself represented a $520,000 drop in revenues," said Root.

A few years ago, the city's operating budget nearly reached the $27 million mark. It's at $23 million today, and could fall even lower by the time the fiscal year arrives.

"Without being able to firm up any numbers at all and just grabbing numbers out of the air as we hear these things, we're looking right now — even after the October cuts we made — at another $2 million in deficit," said the mayor.

What's ironic about Kentwood having the largest taxable value loss among the county's cities is that it also has one of the lowest operational millage rates, at 7.7064 mills. Only Walker has a lower one, as it relies on income-tax revenue for operations and Kentwood doesn't collect income taxes. Because of that low rate, Root said the city has always been very frugal in regard to its spending and has largely used a minimalist approach to budgeting.

"In other words, we didn't add a lot of fluff. We've always been focused on core services at that low rate. Well, when you start talking about drops this significant, the only things you can cut are core services," he said.

"Our seniors programs, even keeping our parks open — all of that has to be considered, because my obligation, before anything else, is to produce a balanced budget, and those are the kinds of things I'm looking at. With $2 million more to go, further reductions in police, fire, department of public works, recreation — those all have to be on the table."

Kentwood has been reducing its number of employees since 2003 and now has reached a staffing level that Root called "thin." He also said the city is at a "critical juncture" in that he isn't sure how the city's staff can be reduced further.

"So, it is definitely critical. We're looking at and discussing amongst the commission and myself right now the potential for a millage increase request. But, by our charter, we cannot simply appropriate; we ask the citizens," said Root.

"We're at the point now where we've done more with less the last few years and now it's clearly going to be less with less."

Ranking the rates
Of the nine cities in Kent County, Kentwood has the second-lowest operating millage rate. Here are the most recent rates in property-tax mills for the cities’ operations.

City

Operating Mills

Cedar Springs

16.3414

Lowell

16.0706

East Grand Rapids

14.7395

Rockford

10.9000

Wyoming

10.3873

Grandville

8.4540

Grand Rapids

8.3709

Kentwood

7.7064

Walker

         

1.3360


Source: Kent County Bureau of Equalization, 2009 Apportionment Report

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