City moves from survival mode to investment mode
Six years ago the city of Grand Rapids was on the verge of bankruptcy, but today it has regained its financial footing and city officials see a bright future ahead.
“We were literally on the edge of bankruptcy,” said Greg Sundstrom, Grand Rapids city manager. “We had a $33 million operating deficit on about a $110 million general fund budget.”
Sundstrom said one of the big reasons the city faced such a grim future was because of its practice of operating with reserves of only 5 percent of its operating budget. He explained that cities and townships with larger reserves were able to weather the economic downturn better and for a longer period.
In addition, the city employed nearly 2,100 people and wasn’t delivering its services in the most effective or efficient ways.
Staring at a bleak future, Grand Rapids went into survival mode, shedding a third of its workforce, or approximately 550 positions, and reviewing all of its service delivery models in an effort to cut costs.
The city also adopted a five-year, three-phase transformation plan to try and dig itself out of the hole into which it had descended, including the creation of a $50 million transformation fund and millages to fund parks improvements and street repairs.
In March, the city entered phase three of that transformation plan, and Sundstrom said for the first time in six years he is delivering a budget to the city commission that isn’t focused on survival.
The $457.6 million budget includes a general operations budget of just over $125 million.
“We don’t have operating deficits and we don’t project any for the next five years,” Sundstrom said. “We have the highest levels of reserves we’ve had in our history.”
The city is now operating with reserves of 19.5 percent, with an objective of reaching 25 percent. It is also operating with a budget that has returned to its peak.
“If you look at our peak as far as size of budgets, which was in 2002/2003, and compare it at that point to our low point in about 2010 and to our current state, we are now operating on a budget for the first time that is equivalent to about the 2002/2003 state,” Sundstrom said.
He noted with a third fewer employees — approximately 1,450 — it means the city is spending significantly less on its workforce.
The city has also seen its bond rating recover, and it may rise even further.
“For a period around 2010, we had what the rating agencies would call a ‘negative outlook,’” Sundstrom said. “The future looked negative for us according to them, and we were an AA-. They have removed the negative outlook for us. We are currently an AA and we think we might become an AA+.”
Sundstrom said it is unlikely the city will ever receive a AAA rating like Kent County.
“To get an AAA bond rating, we’d have to have reserves totaling 80 percent,” he said. “I don’t think we have an interest in doing that. We don’t want to hold taxpayer money just for a better bond rating.”
With its financial health on the rebound, Sundstrom said the biggest change people are likely to notice about the FY2016 preliminary budget is its focus on neighborhoods and business districts.
“We are focused on how do we make this a better community?” he said. “We think our real objective here in local government is not to create economic wealth or job creation; our role is to create the environment for those things to happen.
“That means creating an environment where entrepreneurs want to start their business, and creating an environment where people want to buy property and homes and live here.”
Sundstrom said with the 2016 preliminary budget, he is trying to direct more resources to the things that make Grand Rapids unique.
“It’s not the city that creates the economy; it’s these neighborhood business districts,” he said. “We have some that have all of a sudden blossomed to be huge economic drivers, be it Cherry Street or Wealthy Street, and we are now seeing it on Bridge Street and Plainfield (Avenue).
“We need to do more to support those efforts.”
He said the city would be doing more to support Corridor Improvement Districts and Business Improvement Districts in the coming years.
He also said that, to support the economic development happening throughout the city, more staff is being added to the planning and building inspections departments.
“There is a lot of economic activity that businesses are undertaking,” he said. “We added four people into our planning department to ensure we can review plans and move them right along and not be the cause of delay, and we added a couple of people in our building inspections program so, again, we can do timely inspections during the construction process and keep projects moving along.”
New police department hires are expected to add to the safety of downtown.
“We are expanding our community policing program, which is about making neighborhoods and neighborhood business districts more safe,” Sundstrom said.
Sundstrom said the city is really focused at this point on creating a “sustainable city platform” that will improve the quality of life of its residents and its neighborhoods.
“Now we can focus on what is it that this community needs to flourish,” he said.