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Posted on Thu, Aug 13, 2009 : 9:41 p.m.

City income tax proposal not likely to come before Ann Arbor voters this fall

By Ryan J. Stanton


After nearly two hours of discussion, Ann Arbor City Council members made it clear tonight that they're leaning against putting a city income tax proposal on the November ballot.

Though no official vote was taken at the special working session in city hall, a majority of council members agreed it was too big of a decision to make in such a short time frame.

The council was up against a Monday deadline to decide whether to approve putting the tax proposal on the ballot. Several council members said they felt there wouldn't be enough time between Monday and November to properly educate voters on the proposal.

“It wasn't as though the council was saying, 'Hey, we can't do this.' What they're saying is, 'We're not prepared to do this,'” said City Administrator Roger Fraser. “We know that we've got additional research to do to better prepare ourselves to make this decision and, if we choose to do it, to prepare the community to consider it.”

The proposal called for a 1 percent tax on income for all Ann Arbor residents and a 0.5 percent tax on income for non-residents who commute to work in Ann Arbor.

Councilman Tony Derezinski, D-2nd Ward, pointed out the city's income tax proposal would have been side-by-side on the November ballot with a school millage, which could have hurt its chances.

Council members said there's still the option of coming back before voters in February or May, the next two election cycles. They indicated that even though the proposal is not being considered for the November ballot, discussions on the merits of an income tax will continue.

If an income tax is approved, the city's charter mandates that the city's operating millage must be eliminated, which would knock tax bills down nearly 15 percent - or 6.2 mills. City officials say some residents would pay more in taxes and some would pay less, depending on their own circumstances.

Councilman Stephen Rapundalo, D-2nd Ward, was in the minority tonight as he pushed for swift action on putting a city income tax before voters.

“I think we owe it to the public to put it in front of them, and I think the sooner the better,” he said. “The fiscal picture is not going to get rosier anytime soon.”

Councilwoman Sabra Briere, D-1st Ward, said the public has heard about the income tax for a long time now, but she's not so sure many people understand it.

City officials said January 2011 is the earliest a city income tax could be implemented, even if it was approved this fall.

About 17 people attended tonight's meeting to discuss the income tax idea. Ann Arbor resident Tim Rhoades said he's owned his own business in Ann Arbor for 15 years, but the idea of an income tax has him looking at moving his business.

“It's a bad idea. This is harmful to the business environment,” said Rhoades, co-owner of Applied Safety and Ergonomics Inc., 3909 Research Park Drive.

Rhoades showed up at tonight's meeting with floor plans in hand for an office space he's looking at in Pittsfield Township, just a stone's throw across Ellsworth Road. He said most of his 25 employees are against a city income tax, and he thinks many businesses would leave the city if one goes into effect.

Tom Crawford, the city's chief financial officer, said an income tax could improve the city's bottom line, but he had no definitive data to share on whether it could create a “doughnut effect” with companies relocating to surrounding townships. He noted Grand Rapids, one of about two dozen communities in the state with a local income tax, has not had that problem.

As an alternative to an income tax, Crawford said the city also is considering a Headlee Amendment override to help close gaps in the city's budget in the coming years.

The city's charter gives the City Council authority to levy up to 7.5 mills for operations, but a combination of two state laws - Headlee and Proposal A - effectively reduces that cap each year. A Headlee override, if approved by voters, would suspend state law and reset the bar to 7.5 mills, which could raise about $6 million in new revenues, Crawford said.

Though projections show a city income tax could increase revenues by $7.6 million, Crawford said it's most likely the money would be used not to grow the city budget or add services, but rather to cover anticipated budget shortfalls and avoid service cuts in the coming years.

Crawford reminded council members tonight that the closing of the Pfizer facility means the loss of $2 million to the city's general fund, and $12 million to $13 million for the total community. State revenue-sharing also is a challenge to the city's budget.

Fraser said it's worth asking Ann Arbor residents whether they would rather see service reductions or increased taxes. He pointed out the city is talking about closing down its senior center, a public pool, and laying off 14 firefighters, in addition to other cuts proposed in the next year.

“We either have to get more income, or we have to make the cuts,” Fraser said, noting that the city may have to cut expenditures by 7 percent by next year.

Ryan Stanton covers government for Ann He can be reached at (734) 623-2529 or

Photo by Ryan Stanton: Tom Crawford, Ann Arbor's chief financial officer, addresses the City Council about the merits of a city income tax.



Tue, Aug 18, 2009 : 4:54 p.m.

I cant understand all the people against income tax. The outsiders dont pay and we would get a milage decrease. No ann arbor business would leave; they need the money we give. dave ann arbor

Matt Van Auker

Mon, Aug 17, 2009 : 3:54 p.m.

Die, tax proposal. Die.


Sun, Aug 16, 2009 : 9:02 a.m.

Can we stop with the taxation already! A fabulous place to live, but how much more can our residents take!


Fri, Aug 14, 2009 : 10:17 p.m.

The real story is that the city needs to cut spending in ways that will alter the status quo with the unions. Retiree pensions and retiree heath care are huge, and I mean HUGE expenses. We need to move to 401k-like retirement LIKE THE STATE GOVERNMENT DID FOR ALL EMPLOYEES HIRED AFTER 1998. Two basic questions - Why is the city of Ann Arbor over 10 years behind the curve in cutting costs? Why is there so much secrecy about the current contract negotiations with the unions. These are the real issues that need to be investigated. Is able to do any investigative reporting?


Fri, Aug 14, 2009 : 6:13 p.m.

Sorry, but I have to laugh each time I hear someone complain about all of the "city services" non-residents use. Ann Arbor has to have a police department, a fire department, trash pickup, water and sewer service, and parks and recreation whether or not one single non-resident ever sets foot in Ann Arbor. Most non-residents come into Ann Arbor to eat in your restaurants and shop in your stores, yet I have never heard one single complaint about that. Furthermore, I've never seen the Ann Arbor City Council offer to reimburse other municipalities for the use of their city services by freeloading Ann Arbor residents. Non-residents shouldn't be drafted to support the City of Ann Arbor when the Ann Arbor City Council has made no serious effort to live within its means. As I see it, Ann Arbor residents and businesses have two choices: move to the surrounding townships (they'll welcome you gladly) or start electing QUALIFIED candidates who are committed to living within the existing tax structure instead of grasping at straws to avoid cutting the budget.


Fri, Aug 14, 2009 : 1:26 p.m.

People, businesses, and governments are very different entities, so you can't say I'm tightening my budget, so the city should too. Cities should reduce expenses, but they have services to perform, without which, our quality of life suffers and potentially escalates into a downward spiral. Some of these services actually increase when the economy worsens.

Alan Goldsmith

Fri, Aug 14, 2009 : 1 p.m.

The bridge removal might not be a bad idea, but the city powers are refusing to look at that option. Either way, it's more bad planning. And health care is off topic and not forwarding this discussion.

American Patriot

Fri, Aug 14, 2009 : 12:55 p.m.

Bottom line: Ann Arbor has to reduce it's expenses and not raise taxes on the city's businesses (employers). We need to help ALL businesses as much as we can. Because if businesses are running and making a profit, they will continue to employ people... maybe even higher a few more! Now if only Washington would adopt the same attitude of not rushing big decisions too fast... instead of trying to ram that Healthcare Bill (HR3200) down the American Public's throats!! I'm proud to say Ann Arbor is acting a little more conservative;-)


Fri, Aug 14, 2009 : 12:06 p.m.

Alan, i remeber back on M-Live someone suggested just getting rid of the bridges and letting the road go back to its natural state. seems to make sense for me. There is not a ton of train traffic there to support spending that much money. They didn't put a bridge over State Street there.

Alan Goldsmith

Fri, Aug 14, 2009 : 11:47 a.m.

"What about the 100,000 plus that packs the Big House? Why not tax them too? They use the roads, the water, police, fire protection....ect." Who are all going to be REALLY happy when the Stadium Bridges are closed with no plan for replacement in the near future. Thanks to my 4th Ward council reps for taking the lead (eh, since 2001) on this issue too.


Fri, Aug 14, 2009 : 10:45 a.m.

Spend less tax less. They should not pass this tax, but if they do, those out of city people paying it should be entitled to one seat on City Council so some attempt at stopping the waste can occur. Just look at all the employee from out of town tax revenue the city of Detroit has wasted.


Fri, Aug 14, 2009 : 10:36 a.m.

What about the 100,000 plus that packs the Big House? Why not tax them too? They use the roads, the water, police, fire protection....ect. I am plain sick and tired of funding these pet projects. It needs to stop. Home owner of Ann Arbor


Fri, Aug 14, 2009 : 10:01 a.m.

Ann Arbor Resident has seemed to sum things up nicely. Living within your means is something that governments on all levels (local, county, state, and federal) seem to have difficulty with. The concept of 'residents who use city services and who do not live in the city should share some of the financial burden to support city services' is realized every time I come in to town and pay to park, spend money at restaurants and stores. A city income tax has been bantered about for the 30 years I've been in the area - don't expect that it will go away soon. ssdd


Fri, Aug 14, 2009 : 9:56 a.m.

I agree with Alan Goldsmith - "5% income tax for city administrators who are payed by A2 taxpayers but chose to live in the township while we're at it."


Fri, Aug 14, 2009 : 9:50 a.m.

Sell the golf course. Repurpose the greenbelt money. Contract for trash.


Fri, Aug 14, 2009 : 8:47 a.m.

Just looked at city event calendar, and no "city council work session" listed...I watched on TV, and Higgins said someone complained there was no public notification. The issue was settled when a random person in the crowd said they saw it listed. Another example of poor city the lack of a detailed proposal by the Finance Dept.


Fri, Aug 14, 2009 : 8:21 a.m.

Why did so people attend this meeting? Maybe because it was not on the city's event calendar! That's right, this meeting wasn't posted. Check for yourself at the city's home page (of course, it may be added within hours of this post!)

Alan Goldsmith

Fri, Aug 14, 2009 : 7:16 a.m.

"Council members said there's still the option of coming back before voters in February or May, the next two election cycles. They indicated that even though the proposal is not being considered for the November ballot, discussions on the merits of an income tax will continue." Yep, let's put this up during an off cycle election when council members, like Marcia Higgins in the 4th Ward, aren't facing a reelection. I think it should be in November. No wonder elected officials are afraid. And I suggest a 5% income tax for city administrators who are payed by A2 taxpayers but chose to live in the township while we're at it.


Fri, Aug 14, 2009 : 7:02 a.m.

All this talk about an income tax and still only lip service from politicians to finding ways to get the UM to pay their fair share for the services they and their constituents use. Considering the Mayor is one of their employees, we shouldn't be surprised.

Ann Arbor Resident

Fri, Aug 14, 2009 : 6:57 a.m.

After following this debate for the past few months, I really believe the City Council and Government are using subtle scare tatics to push this proposal. Mr. Fraser's threat to close the Senior Center with its minimal savings as compared to other big ticket items brought this home to me this morning. Citizens grew their material wealth when financial times were good. The city grew when financial times were good. Financial times are now not very good. Citizens have had to adapt to these changes either through voluntary changes in their spending habits or by forced changes (home foreclosure, auto reposession, limited credit, etc.). It is now time for city government to understand that they will have limited resources ($s) for the next several years. They must learn how to modify their spending to provide the basic services the community needs and to cut out non-needed services (e.g, public art and parking garages). I can agree that residents who use city services and who do not live in the city should share some of the financial burden to support city services. However, the timing of this burden shift is just wrong. The city government has waited until their backs were against the wall before they tried to toss this financial lasso upon vulnerable potential taxpayers (non-residents). These taxpayers cannot participate in the vote to institute this tax, orcampaign and vote against the elected government officials. Their only other recourse is to find a job outside of the city or to convince their employeer to move his/her business out of the city.


Fri, Aug 14, 2009 : 5:38 a.m.

I am grew up in Manchester and moved to Jackson to start a business. My business grew to over 50 employees and a new building was required. I would not move my business or own a house in Jackson proper because of their income tax. Their's is 1% if you live in Jackson and 1/2% if you work there. I felt it unfair to ask my employees to pay income tax just to work there. I moved outside of town, have the same benefits at no cost to anyone. Your income tax proposal will make a difference in business and housing as it has in Jackson. It should be a last resort.


Fri, Aug 14, 2009 : 5:33 a.m.

Fraser is too much... 85 million for the green belt initiative, 55 million for that expensive,for a currently not needed parking structure..people you need to live within your means... I will not support a city income tax. They need to change their spending priorities.


Fri, Aug 14, 2009 : 3:10 a.m.

Thankfully, some members of council has the foresight to see that the push for this was on a fast track that needed to slow down. Since the proposed income tax would affect commuters the most, how about the City of Ann Arbor partnering with the UM to provide informational sessions to UM employees since they will be the one's who will impacted the most. Why just get the information out to residents of the city? Either way, with only 17 people showing up, there greatly seems to be a major public relations gap. What about the digital divide whereas those who will be impacted the most might not have access to since a paper might had been eaiser to obtain. If as 2nd ward council person Reaundalo states, " put it in front of them..." then please include those who will also be impacted, not just city residents. And, the budget is planned for two years down the road, so (A) knowing how the budget would be impacted isn't new, (B) there is still plenty of time. Also, if the CFO of the city can't provide a more complete cost analysis as to whether there could be a "doughnt effect" then the issue should be shelved until he can. Maybe the Chamber of Commerce and its vast connections in the business community could assist him. Last, if Roger Fraser thinks it's worth it to ask A2 residents if they would rater see service reductions or increased taxes I think he would find his answer in two letters; guess which one. Prudent and due diligence would suggest that the city seeks avenues of reduce cost and services first, but having now built another edifice to himself (as he has in every other city he's managed) there's no money left while our infrastruce (roads, bridges, pipes) crumbles he now wants to find more money.

Laura Bien

Thu, Aug 13, 2009 : 10:45 p.m.

I note that Mr. Stanton took the time to write up and post his informative story long after regular business hours, so that readers could get the info. Thanks to him. Look forward to more Stanton stories.