City puts brakes on spending for parks
Higher construction bids, timing contribute to millage fund deficit.
City officials are struggling with a case of too much, too soon for parks renovation projects.
Commissioners decided last week to postpone voting on a recommendation to obtain a $2 million, five-year loan from the general fund — with a 1 percent interest rate — to address a Parks Millage Fund deficit of $800,000 for the fiscal year ending June 30, 2016. The plan also calls for allocating a portion of FY2016 property tax receipts to make up the shortfall.
Voters in 2013 approved a 0.98-mill, seven-year tax levy to upgrade the city’s parks system.
The millage was anticipated to generate approximately $30 million in funds. As part of the planning process, the Parks and Recreation Department, Parks and Recreation Advisory Board and Friends of Grand Rapids Parks hosted neighborhood design workshops in 2014 to plan major improvements to eight selected parks.
But construction bids $1.3 million higher than anticipated, coupled with a sooner-than-expected completion date of this summer, put the current Parks Millage Fund at a $1.1 million deficit.
First Ward Commissioner Walt Gutowski said the city should communicate the current situation to voters.
“We are being very transparent,” said Gutowski. “We are saying we were a little aggressive; we need to slow down now.”
The deficit is combined with the more than $559,000 positive balance of the Parks Operating Fund for the Comprehensive Annual Financial Report, which results in a $536,958 deficit fund balance as of June 30, 2015, according to an Oct. 8 agenda action request memo.
Discounting nearly $720,000 in planned pool activities from the $3.9 million in FY2016 tax receipts, the remaining $3.18 million can be applied to the FY2015 deficit, leaving approximately $2 million available for existing projects. Due to a remaining balance of $2.8 million for existing contract awards, there will be a fund deficit of $800,000 for FY2016.
During last week’s Committee of the Whole meeting, commissioners discussed four options before awarding pending contracts: postpone the $1.8 million in projects currently in design and development; issue short-term bonds; obtain a short-term loan from the general fund or Transformation Fund; and allocate $560,000 previously committed for projects in the Community Development Block Grant Fund to offset a portion.
City staff recommended commissioners obtain a $2 million, five-year term loan from the general fund at a 1 percent interest rate, which “reflects investment of the previously allocated CDBG funds of $560,000 and also an FY2016 allocation of $365,000,” according to a memo submitted by Jeff Dood, deputy chief financial officer, and Scott Buhrer, deputy city manager.
While the reallocation from the general fund is not expected to have an impact on the fund balance at the end of the term loan since the 1 percent interest rate exceeds the rate of return of other investment options available, there were concerns raised by officials.
Third Ward Commissioner Senita Lenear suggested an alternative option of completing a portion of the six new projects while still leveraging support from the general fund to address the deficit.
“Not necessarily doing all six projects potentially impacts the Third Ward, but I think to be fiscally responsible, instead of trying to do $1.8 million, how about we do $560,000 worth of new projects out of the six we are looking at right now, and then still have something in place from the general fund,” said Lenear. “So we are slowing down sooner rather than later.”
First Ward Commissioner Dave Shaffer said he would rather postpone projects or at least provide more time to make sure the revenue funding is available to match expenses.
Second Ward Commissioner Ruth Kelly said, since the city has made some promises, there are expectations.
“As long as we have a solid plan to move forward, I really think we need to do that,” said Kelly. “I understand construction costs have gone up. … We may well have to be extremely cautious.”
Mayor George Heartwell said underlying the deficit issue is the commitment made to voters by the city for every neighborhood park to receive capital investment as a result of the approved millage, and he would rather see an alternative solution rather than not pass a plan.
“I would prefer to see some amendment, at least, to address the issue, even if it does require a delay or slowdown, which I would personally not prefer,” said Heartwell.
The Committee of the Whole supported the motion to postpone approving the recommended plan until the next meeting when additional options could be presented.