Buckets of money: Why the city of Ann Arbor can't use the money it has for what it really needs

Christopher Taylor

"You’ve probably heard us talk about our ability to pay for some services and our inability to pay for other services as if our hands were somehow tied - as if we somehow do not control how to spend taxpayer money," City Council Member Christopher Taylor, D-3rd Ward, wrote to constituents in a recent e-mail. "How can this be?"

Taylor answered that question in the paragraphs that followed, explaining the laws governing municipal revenues and expenditures are different from the rules that apply to private citizens. Contrary to a household that may have just one checking account, Taylor said the city is a highly complex organization with anticipated revenues in excess of $350 million this year. And to organize those dollars, the city maintains a variety of separate accounts.

"You may have heard about the possibility of firefighter layoffs (averted for the time being) while at the same time seen progress on construction of an underground parking structure on the downtown Library Lot, or heard about investments in single-stream recycling while driving over the degraded Stadium Bridge," Taylor wrote. "How can it be that the city on the one hand can claim revenue distress, while at the same time, go out and begin construction on these other projects?"

Taylor addressed the Library Lot as an example.

"It seems peculiar that construction on an underground parking structure should begin at the same time as we were nearly required to lay off firefighters," he wrote. "Aren’t the firefighters more important than a new structure? Arguably yes, but the money for the Library Lot parking structure could not be used to pay firefighter salaries - the money to pay to construct the structure will come from the parking lot itself through a fund controlled by the Downtown Development Authority. In other words, a decision to forego the Library Lot parking structure would not increase the general fund - it would not increase the money available to pay for safety services or to pay to mow park grass."

Taylor noted the city's various voter-approved sources of funds can't be used for any purposes other than the ones designated up front.

"So, for example, we may appear well-funded with some 'parks' money by virtue of the Parks Improvement Millage, but because these are 'improvements' monies, we cannot use them for 'operations' - to mow the grass or groom the baseball fields," he said. "Operations monies must come out of the general fund, where budget pressures are severe."

In addition to an $82 million general fund, Taylor noted the city has set up separate "enterprise funds" to account for the operations of city service units like water, sewer, the airport, farmer’s market, solid waste and golf courses.

"Consider the city’s golf courses," Taylor said. "These amenities run at a loss of hundreds of thousands of dollars a year. Over the past few years, the city has determined to turn these facilities around. With the data provided by enterprise fund accounting, we can accurately determine the revenue and true costs associated with running these business-like ventures. Although there is still much work to do, the city’s efforts are bearing fruit; golf is still a drain on the budget, but there has been a substantial improvement."

Taylor used the City Council's recent decision to invest more than $4.5 million in single-stream recycling as another example. He pointed out in his e-mail a long list of ways it will improve efforts to recycle in Ann Arbor.

"These are obviously substantial benefits to our community, but you might reasonably observe that these benefits might not be as important to Ann Arbor as, say Stadium Bridge," he said. "The money that will be used to fund the single-stream investments, however, cannot be spent on bridge infrastructure - it comes from reserves in the Solid Waste Fund, a fund supported by the Solid Waste Millage and sewage fees. It would be, therefore, illegal to use that money for anything unrelated to waste stream management."

Taylor acknowledged the limitations.

"These limitations prevent the city from freely shifting its resources from flush funds to impoverished funds, even though we might all believe it to be a 'better' use of those resources," he said, concluding his message. "In the end, these restrictions are a fact of life and we will do our best to provide the services that Ann Arbor demands with the resources entrusted to us."

To read Taylor's full report, download it here.

Ryan J. Stanton covers government for AnnArbor.com. Reach him at ryanstanton@annarbor.com or 734-623-2529.