Audit shows possible budget shortfall in city

BURTON -- A drop in property tax revenue and a precipitous fall in revenue sharing will force the city’s administration to pinch pennies even tighter in the upcoming budget year.

The financial assessment presented by Plante Moran, PLLC on Jan. 27 painted a bleak financial picture for the city moving forward. While auditors noted the city has a fund balance of four months of annual revenue and has started a retiree health care fund, they also reported to city council members and administration officials in attendance that Burton faces a declining tax base, declining revenue sources and significant legacy

retiree) costs.

One of the statements in a slide show by the auditors stated “The income to operate the City is simply not enough to continue to pay active employees, maintain service programs and keep commitments to past employees.” The presentation was put on by Plante Moran employees Tadd Harburn, Kellie Goines and Chrystal Simpson.

Eighty-one percent of expenditures and transfers from the city’s general fund are related to wages, fringe benefits and retirement payments.

A graph showed $5.601 million going towards payroll, fringe benefits and retirement contribution (including police) taking up 82 percent of the general fund, while $651,000, or 9.5 percent, went towards “other goods and services” and $581,000, or 8.5 percent, was spent on transfers to other funds.

Auditors stated if the city remained on the current track, payments for pension, health coverage for past and current employees would take up 27 percent of the general funds budget, while fully funding retiree health care costs would alone take up 44 percent of the budget.

The city already has a prefunding shortfall on all retiree health care costs of $1.185 million, and the auditors stated “The city has few means to pay the additional $1.185 million per year needed to fund this liability.”

The audit presenters concluded the city “cannot increase its largest revenue sources,” as 87 percent of total general fund revenue comes from state shared revenue and property taxes.

State shared revenue dropped $2,566,000 in 2008 to $2,446,000 at the end of the 2009 budget year. Projections show a $272,000 drop in revenue by the end of the 2010 budget year on June 30, with an 11.1 percent decrease by the state.

Auditors pointed out during proposals have been discussed on the state level to eliminate the statutory portion of the shared revenue, which could mean an additional $188,000 drop for the city.

Property taxes are a big factor, and auditors forecasted a large decline in upcoming years. Projections based on sales data from the past 12 to 24 months show a cumulative decrease in property taxes of $20,000 for the 2010 budget year and a $482,000 drop in the 2011 budget year, with tax revenue going $3,629,000 to $3,147,000 in that time span.

Councilman Tom Martinbianco made some mention of the audit session during Monday’s city council meeting, stating “there’s going to be major sacrifices that are going to have to take place” on the part of the city, residents and the council.

He said tough decisions are going to come on police and fire protection when demanded and how often is the clearing of roads necessary to residents.

While Burton does carry the lowest millage in Genesee County while the second largest city in the area, Martinbianco said the city is not in the position to ask residents to do much more than they currently are.

Martinbianco did caution while the 2010 budget looks okay, 2011 and 2012 “are going to be a challenge for everybody concerned.”

“The future that was laid out by the auditors is not very pretty,” he told the audience, whom he said he felt needed to know about the situation. Martinbianco said it will be incumbent upon government to provide the “very basic tenets” for residents to ensure their “safety, health and welfare of the community” so Burton “avoids becoming another River Rouge, Hamtramck, or city of Flint.”