Michigan Municipal League Michigan’s Broken Municipal Finance System
What is happening to Michigan’s Cities, and why should you care?
The issues Michigan’s municipal finance model is broken Municipal Funding doesn’t track with the • economy Many problems cannot be fixed locally • Not enough tools in the toolbox • Need a 3 tiered approach •
Local Government Budgets
Nearly 2/3 of the average municipal operating budget is funded by revenue from only two sources - property taxes and revenue sharing
Local Government Revenue 11.9% Total revenue decline * MI Treasury F-65 Data from 225 cities – Inflation Adjusted
Statutory Revenue Sharing FY20 budget still $53M below FY11 level
Constitutional Revenue Sharing
Traverse verse City Elk Rapi pids $7,227 27,425 ,425 Big Rapids pids $685, 5,537 537 $8,650 50,77 774 Kalkask ska Kingsl sley $859 59,202 02 $693, 3,135 35 $8.6 Billion Frase aser Mancelo elona na $7,239,48 ,488 $864,75 ,751 In Lost Revenue Sharing Since 2002 For Cities, Villages, Townships, & Counties Thomps psonvil nville le Ludin ington on $260,5 ,534 34 $4,443,1 3,196 Lansing sing Grand d Rapid ids Det etroit it $128,093,8 93,809 $100,63 ,632,1 ,161 61 $1,446,68 446,683,7 3,788 88
Property Taxes/Values
Headlee vs Proposal A Headlee Amendment (1978) limits a community’s • property tax revenue growth to the rate of inflation. Proposal A (1994) limits an individual parcel’s • assessed value growth to 5% or the rate of inflation, whichever is less. • Unanticipated consequences during a recession – property values drop and community unable to recover.
26% GF/GP & Restric ted
-10.00% 110.00% 30.00% 50.00% 90.00% 70.00% 10.00% Hawaii South Dakota Iowa Idaho Wyoming Mississippi Oregon General Revenue 2002 - 2012 Florida Growth in Municipal New York Missouri Louisiana Kansas New Mexico Rhode Island Maryland Oklahoma North Carolina Connecticut Arkansas Arizona New Hampshire Virginia Nebraska Maine Ohio
240.00% -60.00% 140.00% 190.00% -10.00% 90.00% 40.00% North Dakota Vermont South Dakota Alabama Oregon Texas Delaware Missouri Louisiana Idaho Alaska Montana Utah Tennessee Change in Municipal Revenues Indiana Hawaii Washington From State Sources Wyoming South Carolina North Carolina Nevada Connecticut Mississippi Oklahoma Virginia Arizona New York West Virginia Colorado Rhode Island Iowa New Mexico Pennsylvania Maine Illinois Florida Georgia Arkansas Ohio New Hampshire Massachusetts Maryland Wisconsin New Jersey Nebraska Kentucky California Minnesota Kansas Michigan
Payroll Comparison 2002 - 2012 14.6% 33.5% 24.3% Cities, Villages, Twp, State Payroll Municipal Payroll and County Payroll
What do we do? Costs Structure Revenues
What can we do? • Remove the conflicts between Headlee Amendment & Proposal A allowing local revenue to better track with the economy. • Prioritize investment in Michigan communities by partnering with local government and systematically begin to restore revenue sharing.
What can we do? Provide more local funding options for locals to • fund critical services & infrastructure. • Equip local units with the tools to modernize legacy benefits. Reduce the cost of government by changing • existing laws that discourage duplication of infrastructure & services.
Questions?
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