Time to close city’s budget gap

May 17, 2010
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The outcome of next week’s meeting of the Grand Rapids City Commission will go a long way toward determining how officials will close the remaining gap in the city’s 2011 general operating budget. City Manager Greg Sundstrom said last week the deficit stood at $9.5 million, after voters approved a five-year income-tax hike that will bring $7.5 million in new revenue to the fund for each of those years.

“Unfortunately, the passage of the ballot proposal didn’t solve all our problems,” said Sundstrom.

But two items on next week’s agenda could lead to filling about $4.5 million of that $9.5-million gap. One is a given; the other isn’t.

City commissioners are all but certain next week to transfer ownership of the Government Center parking ramp beneath Calder Plaza to Parking Services, the city’s parking department. The transfer document was written in February and parking commissioners approved the transaction in March. Sundstrom said the transfer would net the city’s general fund an estimated $700,000 a year for the next nine years and would reduce the 2011 deficit from $9.5 million to $8.8 million.

Commissioners also will hold a public hearing next week on whether to charge an annual fee for street lights by creating a street lighting utility. Residents and businesses would pay from 53 cents to 79 cents for each square foot of a building’s street frontage. The exact fee depends on the location of a structure and the intensity of the lighting it receives. Sundstrom estimated the fee would add $3.8 million in new revenue to the general fund, which would reduce an $8.8 million deficit to $5 million.

Commissioners, though, were clearly uncomfortable last week when they discussed the street-lighting issue, in light of voters narrowly agreeing to raise their income taxes a week earlier. But Sundstrom said if they don’t create the utility, then $3.8 million would have to be cut from the budget. That cut would result in elimination of up to 40 positions for a savings of nearly $2.5 million and closing the pools for a cut of $870,000. Another $400,000 would be erased that has been set aside as matches for five street reconstruction projects that have received $2 million in federal grants.

Of the 40 layoffs, 10 would be made in parks and recreation and would leave the department with five full-time employees. Five more layoffs would come in planning and would leave that department with four full-time employees. “You almost don’t have a parks department. You almost don’t have a planning department,” Sundstrom told commissioners. The city’s Economic Development Department would lose one position and would be left with a staff of three. Code compliance would lose four positions and be left with eight personnel.

Commissioners lowered the personal exemption for income-tax returns from $750 to $600 last week, which will cost a resident another $2.25 and a nonresident who works in the city $1.13 next year. Both 1st Ward Commissioners, Walt Gutowski and David Shaffer, voted against the change. “I can’t see us asking for more,” said Shaffer. “I believe the timing of this just isn’t right,” said Gutowski.

Sundstrom, though, said dropping the exemption to $600, the level it was at from 1968 to 1972, would bring $460,000 in new revenue to the general fund. That revenue would also reduce a $5 million deficit to $4.54 million.

City Attorney Catherine Mish said that last Tuesday was legally the final day commissioners could lower the exemption for it to have the full revenue effect. She said waiting one more meeting would have meant the new exemption would only have been effective for six months of next year, and the revenue from it to the general fund would have been cut in half to $230,000.

Sundstrom said he expects to get $500,000 for the general fund from the Downtown Development Authority to pay for police and fire services in the district, and another $300,000 from parking ticket collections once the state changes the current collection law. Should that $800,000 become new revenue to operations, then a $4.54 million deficit would be reduced to $3.74 million.

“We need to find $9.5 million in this budget to have a balanced budget,” said Mayor George Heartwell.

“There is a lot of discussion we still have to have. I want us to be careful that we don’t pigeonhole us now,” said 2nd Ward Commissioner Rosalynn Bliss.

Sundstrom said commissioners, who meet weekly to discuss the budget, have until June 22 to adopt a general fund spending plan. The new fiscal year starts July 1.

Commissioners will hold a second public hearing next week on raising fees for building inspections, cemetery operations, neighborhood improvement operations, stormwater management, the city treasurer’s office and the vehicle storage program.

“We started on this five years ago,” said Jana Wallace, of the city’s fiscal services department, who added that the new fees are comparable to those of nearby cities. “Our fees are meant to cover our services plus overhead.”

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