With poll: Roger Fraser presents 2010-11 budget to Ann Arbor City Council, says he's still waiting on unions

Ann Arbor City Administrator Roger Fraser

Ryan J. Stanton | AnnArbor.com

Contrary to budget impact sheets released in February that showed a $5.2 million deficit that remained to be addressed, Fraser's presentation Monday night showed his staff has worked to close what ended up being a $5.8 million budget gap for the coming year.

Click here to download a PDF of Fraser's budget presentation.

A public hearing on the budget is planned for 7 p.m. May 3. The council then meets one more time at 7 p.m. May 10 for a work session before the budget is adopted May 17.

"We will be making a decision on this budget — we'll certainly start making that decision at our second meeting in May, and we need to have made that decision by the end of May," Mayor John Hieftje said.

Fraser said at this time last year, city officials expected revenue of about $85 million for the 2009-10 budget, which they predicted would drop by about $2.5 million in 2010-11. It was expected a surplus from the first year would cover a slight deficit in the second year of the two-year plan, he said.

"In reality, what's happened is that our revenues this year have been short of expectations, resulting in an expenditure excess of about $2.8 million if we did not modify our spending," he said. "If we carried that forward into fiscal year '11, our revenue forecast is now at $77.5 million, and we've had a $5.8 million deficit that we needed to make up in order to balance this year's spending plan."

The budget Fraser released earlier this month showed $76.35 million in general fund revenue for 2010-11 and $77.88 million in spending, leaving a $1.53 million deficit in the next fiscal year.

Fraser said a drop in state-revenue sharing is the first and foremost problem the city has faced in the last two years.

"Last year when we put the budget together, we made the mistake of believing the state when they said that our state-shared revenue would be held harmless," he said. "In October, they announced that formal reductions were going to be implemented for this year. We forecast that by this time next year the state will have cut state-shared revenue — in the legislative portion of that state-shared revenue, the statutory portion — by half of what's left. So that would mean another $1.2 million reduction."

Fraser said investment income is down, and so is revenue from traffic citations. Development review fees — compared to previous years — are "virtually non-existent," he said. And the revenue the city forecast from parking meters hasn't been met because of actions by the council to hold off on installing new parking meters in near-downtown neighborhoods.

"The one bright spot in all of this was that our forecast in property taxes was actually a little bit pessimistic," Fraser noted. "We had about $300,000 this year in revenue that was better than we anticipated."

Fraser said the city continues to hold out hope it can find savings through negotiations with its labor unions. But so far only the firefighters union has accepted wage cuts. Other unions — including AFSCME, the city's largest union — haven't made any concessions.

"We have a contract that is existing with AFSCME that provides, in its terms, a 3 percent wage increase for AFSCME on July 1," Fraser said. "They're essentially the only group of employees who have an increase coming. It's fair to point out that this is the end of a five-year contract with them and, in the first three years of their contract, they had no wage increases at all. There were some lump sums, but they went for three years without a pay increase. Nonetheless, we have asked AFSCME to open the contract for July. That request is still pending."

Fraser also discussed the details of cuts being proposed in the police and fire departments.

"We're recommending the elimination of 15 FTEs in police — one of those is vacant," he said. "That's in addition to five vacancies that occurred in the early part of this last fiscal year that were not filled."

Those cuts will save $1.6 million. Another $2 million in cuts is being proposed by eliminating 20 positions in the fire department — that's six more than originally planned this time last year.

Fraser acknowledged his budget also includes reductions of $260,000 in funding for nonprofit human services agencies. He also proposes savings by eliminating maintenance to 17 city parks and another $120,000 by "de-energizing" some city streetlights.

Fraser also is making room in the general fund budget by shifting the costs of right-of-way tree planting to the stormwater fund.

"This is based on the premise that we have identified in research during the last couple years, which indicates that the most effective thing that we can do to reduce runoff is to plant trees," he said. "And so our stormwater activities, we believe, will be enhanced by the continuous efforts on tree planting and that the stormwater fund could justify paying for some of that planting outside of our parks in the coming year."

The city is raising stormwater rates by 2 percent in July, wastewater rates by 3 percent and water rates by 3.88 percent.

After Fraser's budget presentation, Ann Arbor resident Libby Hunter serenaded council members with an original song in which she criticized the city for the ongoing $47 million building addition to city hall. She questioned the project coming at a time when city services are being cut.

"Police-courts building, we adore thee," Hunter sang. "Grand McMansion of our eye. We lay off police to afford thee. You are our new blushing bride."

Hieftje responded to Hunter's song later in the meeting, maintaining the city has never laid off a police officer as long as he can remember. He also said he thought everyone had figured out by now the need for the police-courts building.

"Actually the conversation started a very long time ago," he said. "And, in fact, when I arrived on council ... back in 1999 there was a discussion of rebuilding this entire building and the drawings had been done and the city was ready to move forward. And that was back in the '90s when the money was flowing freely."

Hieftje said city officials chose not to go forward with a new building at that time, and it wasn't until recent years that the idea resurfaced.

"The police-courts building was, in large part, triggered by a letter from the county administrator a few years ago now ... informing us that the county had another use for the courtrooms where the city courts reside," he said. "And in my conversations over the weekend with a county commissioner, indeed the county is moving forward with their plans to move the juvenile courts from Platt Road over to take the space where the Ann Arbor courts had been. That will be coming to the county for a vote sometime relatively soon. One of the judges is drawing up that plan, and that is moving forward."

Hieftje said the city looked at about 10 different locations where it could put the courts but ran into challenges with the strict security requirements.

"And then if you really want to go back several years — decades perhaps — to when this building was constructed, you find that there was never a plan to keep the police in this building and the police have been looking for a station for all these years," Hieftje said of the police department's current occupancy of city hall. "It made really good sense a few years ago when these plans were put together to build the police station and to put the courts on the same foundation. And that's what City Council decided to do."

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