Lighting charge nixed; fee hikes next
With just three weeks left before they have to finalize a general operating budget for 2011, Grand Rapids city commissioners will have to decide how to save the jobs of 37 workers — now that they won’t create a special fund for street lighting — and whether to approve some fee increases requested by city departments.
Public hearings were held on both potential revenue generators last week.
Also last week, commissioners transferred the city’s ownership of the Government Center parking ramp beneath Calder Plaza to Parking Services, the city’s parking department. The move is expected to boost revenue to the general fund by $700,000, and possibly up to $1 million, annually for the next nine fiscal years. The transfer will cut the 2011 fund’s reported $9.5 million deficit to at least $8.8 million.
“We’ve done an analysis of Parking Services revenue to make sure we can make the payments,” said Parking Services Director Pam Ritsema.
Those payments will range from $1.5 million to $1.7 million for the first eight years and conclude with a $1 million final payment in 2019. Parking Services will pay the general fund a total of $14.2 million for the ramp, which was appraised at $12.2 million. Interest is at 4 percent per annum. Parking Services will also pay off the ramp’s remaining three years of bond debt, which totals $414,326.
City CFO Scott Buhrer said the department couldn’t go to the bond market for financing because the ramp is being transferred from one city fund to another and that move doesn’t truly count as a sale. Parking Services should begin the fiscal year with roughly $11 million in working capital; gross revenue from the ramp should be around $1.7 million this year.
“This move seems to make sense,” said 2nd Ward Commissioner Ruth Kelly.
About $3.8 million in new revenue would have gone into the general fund annually if commissioners had established a new street lighting utility. The city would have charged residents and business owners 53 cents, 64 cents, or 79 cents for each square foot of street frontage they have. The prices were based on the type of lighting someone receives. Those with higher-intensity lighting would have paid a higher charge. Bills would have been sent annually.
Commissioners seemed hesitant about establishing the utility a few weeks ago after voters approved a five-year increase on the city’s income tax, which is expected to add $7.5 million in new revenue to the general fund for each of those years. Following last week’s public hearing, they nixed the idea. Commissioners were scheduled to vote on the matter June 15.
Without the utility, City Manager Greg Sundstrom said 37 workers will lose their jobs to reduce the fund’s expenses by $3.8 million unless that amount can be raised from other areas. He is expected to identify those positions this week. Sundstrom also said the fund’s reserve only has enough money to sustain two weeks of operations.
Tom Almonte, assistant to the city manager, conducted a research effort that uncovered 13 cities with power utilities in 24 Michigan counties. He reported that eight of those cities have formed a special fund to pay for street lighting, while five used general operating dollars. He also found that 27 townships in those counties covered the cost of lighting through either a special assessment or a millage, while only two used money from the general fund.
Almonte noted in his report that 83 percent of cities that do not operate an electric utility rely solely on the general fund to meet street-lighting costs. But the reverse is true for townships. He found that 83 percent of the townships he researched billed residents for street lighting through special assessments and didn’t use general-fund dollars.
“I also connected with the American Public Power Association, which represents over 2,000 community-owned electric utilities serving over 45 million people in our nation. According to this organization, 44 municipalities in Michigan operate a public power utility,” wrote Almonte in his report to Sundstrom.
The fee requests commissioners will consider would raise an estimated $2.8 million in additional revenue for the city, but only $455,889 of that total would go into the general fund.
Most of that general fund revenue would come from a $20 increase in the cost of two-unit and multi-unit housing code compliance certificates for four years, along with the creation of two new compliance certificates that would be good for six years. A six-year certificate would cost a building owner less on an annual basis than the existing two- and-four-year certificates do. The changes would raise an estimated $252,924 for the general fund.
An estimated $194,465 would also go into the general fund from inflationary hikes made by the city’s Environmental Services Department to SESC and stormwater applications and permits. Enforcement and review fees will remain unchanged.
The city Treasurer’s office has requested higher fees for processing bad checks and for mailing multiple property-tax bills. These fees would raise an estimated $8,500 for the general fund.
Another request is for a hike in building permits. The fee would rise from $6 to $6.50 for each $1,000 in construction cost above a project’s first $1,000 in cost. The charge covers code review and inspection by the city’s Design and Development Department and would raise an estimated $1.3 million for the special revenue fund.
Requests for roughly $670,000 in cemetery fee hikes and about $360,000 in additional vehicle towing and storage charges complete the list. But none of that estimated $1 million would go into the general operating budget for the coming year, which begins July 1. Commissioners have until June 22 to finalize the budget.
Fee request breakdown
Fee request breakdown
The city of Grand Rapids could gain an additional $2.8 million in revenue for the upcoming fiscal year if city commissioners approve six departmental requests for fee hikes. Of that estimated $2.8 million, $455,889 would go into the city’s 2011 general operating fund budget. The bulk would go into other funds.
Fee Type City Fund Estimated Revenue
Source: City of Grand Rapids, May 2010