Kirk Profit talks to Ypsilanti City Council about revenue sharing battles
For several years, cash-strapped Ypsilanti has struggled to balance its
budget amid shrinking state-shared revenues and declining property
values.
And there's no end in sight, governmental consultant Kirk Profit told the Ypsilanti City Council Tuesday night.
Ypsilanti certainly isn't alone - communities across the state and nation are dealing with the loss of state revenue-sharing.
At Tuesday's meeting, Profit discussed shrinking state revenue, its causes and the struggles in Lansing over it.
Profit and fellow consultant Kenneth Cole told council members their revenue will continue to shrink in the next few years, and they shouldn't plan any major spending based on future revenues.
Cole said city revenues dropped from $3.9 million in 2001 to $2.6 million in fiscal year 2010, a $330,000 drop from 2009. Profit said the decline reflected revenue drops at the state level, which have shrunk from $9.8 billion to $6.9 billion since 2001.
Profit said it's harder for both the state and municipalities to make ends meet.
"The numbers don't work," he said.
Profit also said residents who criticize the City Council for budget shortfalls don't recognize many of the budget problems were beyond the city's control. He said the council is doing a good job considering the economic conditions in the state.
"This city does an incredible job with almost no resources," Profit said.
Profit also credited local legislators - State Senator Liz Brater, D-18th District, and State Rep, Alma Wheeler Smith, D-54th District for being in the forefront of the state battle.
Profit said if it wasn't for federal stimulus money, which runs out at the end of 2010, some municipalities might be facing shortfalls that could potentially shut down vital city services like police and fire protection.
The local budget problems reflect the larger economic problems of the state. Cole said the state lost money partially due to a 13 percent drop of sales tax revenue and a shrinking population because state shared revenues are partially based on population data.
Profit said the state needs to take at look at its tax code, which is based on a old manufacturing economy, not the new economy. For example, startup companies in industries such as IT or health care are unfairly overtaxed, he said.
While neither he nor Cole necessarily advocate restructuring the tax code, Cole said there are areas they believe the state should take a look at.
• Michigan has a 6 percent sales tax but only a 3.9 income tax.
Should they not raise income tax and possibly lower sales tax to about 5 percent each?
• Should Michigan tax services like lawn care, lawyers and even barbers? Neighboring states like Ohio and Iowa do. If Michigan were to instill a service tax, it would be collecting more than $8 billion in extra revenues, making it more competitive with other states and even globally.
• The GOP and some Democratic lawmakers in Lansing stress the need to always give tax breaks to businesses, Cole said, but he questions whether those breaks need to be so large. For example, the 40 percent movie industry tax break has brought new business to the state, but should that break be lower?
He also said the state is looking into other ways to raise revenue like taxing bottled water and cigarettes. But, he said, those efforts are "nickel and diming" solutions for a much bigger problem.
Comments
Martin Church
Thu, Oct 22, 2009 : 11:31 a.m.
first the problem rests with us. we elected our officals and now we have to hold them accountable. Sit down and figure up your tax bill, I find I am paying over 40% of my wage for taxes to all governments. Everyone says raise taxes. Where do I get the money in the last 5 years my wages have been staggant and have begun to decline. So far this year I have taken a 30% pay cut. My taxes have not gone down. In order to make ends meeet I may have to take two jobs, this will hurt my family and the community because I will be unable to take part in anything. I make a living wage but after taxes I make about the same as someone on low wage scale. And this article is wrong if Mr. Profit said we currently pay 3.9 percent in state income tax. The Legislature raised it to 4.35% last year. And we still have not dealt with the spending issues. Why do we need an additional school system between the state school board and the local School Board. This only increases administrative overhead. How about cutting the aid to the universites with such heavy endowments - Common what do schools need with over a billion dollars in state schools sitting in banks when the state is paying for infrasturce improvements and our kids tutuion keeps going up. it is time for a consitutional change and rewrite our government.
AndyYpsilanti
Thu, Oct 22, 2009 : 10:59 a.m.
You are correct, Happy Senior, on all accounts. Jobs are what we need. That is why the movie tax credit is a good idea, that I will hope will stay intact. Even though the beniffits and number of jobs created are small, they are tangible. More programs like that are part of the answer, building Michigan jobs a little at a time and for the long term. But I can't help but think that a tax hike is now inevitable. The inability to act by our state government has crippled us. We can continue to blame Obama, the Democratic congress, Washington, Stimulus money, what ever. But Michigan's problems are Michigan made. To think otherwise is to pass the buck. The statistic I gave about who gets revenue sharing are true, even if I was wrong in my conclusions about who is to blame (and only partialy). Michigan is not keeping its promise to its cities. And we need to change that.
HappySenior
Thu, Oct 22, 2009 : 6:25 a.m.
Actually, the Michigan House has a Democrat majority and the Michigan Senate has a Republican majority. Another point to consider in getting Michigan on track for a better future is JOBS. State revenues are down because people are out of work or working for less money. More JOBS would mean more personal income which would mean for state revenue. Michigan needs to attract and keep companies willing to bring JOBS by reducing the tax burden, not increasing it. Ypsilanti took a huge hit when the auto plants closed. You can thank President Obama for taking over the auto industry and forcing plant closures and union pay cuts. You can thank John Dingell for letting the auto companies do it their way for 54 years while he concentrated on getting re-elected. You can thank a Democratic controlled White House and Congress for sitting on the bulk of our stimulus money. Are the Democrats planning to use our tax money to help them win re-election in 2010? Will they buy friends and votes in contested races by "investing" stimulus money in projects the Democrats can take credit for? Ypsilanti is a great city in trouble. But look beyond Ypsilanti at the bigger picture. Michigan is in trouble. The country is in trouble. Taxes is not the answer. More and better JOBS is the answer. Government controlled economies do not work. Socialist economies stymie creativity and entrepreneurship. We need to let the markets decide which industries win and which companies win. We need to get the government out of our businesses. Modest regulation is fine and good. Modest regulation is necessary. Government take-over of entire industries is not good.
AndyYpsilanti
Wed, Oct 21, 2009 : 4:38 p.m.
This is an important topic. Ypsilanti is just one example of how the state is hanging it's cities out to dry. Ann Arbor, Detroit, you name a city and the state is strangleing them to death. The citizens of this state should be outraged. I read an article by Jack Lessonberry recently suggesting that a tax increase as little as.75 mills would totaly fix the budget. The chamber of commerce and many others have said that now is the time for a gas tax. But we get no action. No one wants to see taxes go up, but we are at the end of our rope here. We are going to be forced to do something. The feds won't be bailing us out next year. There was one interesting thing Mr. Profit said that has been left out of this article. I don't remember all of the exact numbers so I'm going to take a stab at them. Forgive me it they are not exact. About 32 cities in Michigan, including Ypsilanti and Detroit, get about 80% of state revenue sharing. Of those, about 28 are represented by Democrats. And our Republican run state house and senate are willing to play politics and let these cities flap in the wind. Shamefull. I am no Democrat (or Republican) but this is not an issue that we can afford to play politics with. We should be angry about this. We need to let our state government know that they are failing us and not working for the will of the people. We thought term limits would bring in fresh ideas and fresh leadership and eliminate the "working for the next election" syndrome. We were wrong. Now what are we going to do to fix our state government, besides throw them out? And, Mr. Goldsmith, you are missing the point. The city of Ypsilanti, and many others have cut the budget to the bone. Is our city government perfect? Certainly not. But the state is failing to keep it's promise and deliver the revenue sharing that Ypsi, and every other city in Michigan, is entitiled to by law. Untill the state starts living up to it's obligations, our cities are opperating with their hands tied.