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Posted on Wed, Feb 8, 2012 : 5:58 a.m.

Public provides input as Ypsilanti finalizes five-year financial plan and tax proposals

By Tom Perkins

The Ypsilanti City Council is taking its final steps in approving a five-year budget plan designed to avert a $6.1 million deficit projected for 2017.

The plan includes separate proposals for a personal income tax and Water Street debt retirement millage that will go in front of voters for approval on May 8.

This week, council approved the five-year plan and language for the Water Street debt retirement millage.

Language for the income tax proposal will likely be approved at the next regular council meeting. Then the city will have to sell the proposal to voters.

The income tax would be set at 1 percent for residents and 0.5 percent for those employed in the city, including at Eastern Michigan University. It’s projected to generate $1 million in fiscal year 2013 and approximately $10 million through 2017.

A Water Street debt millage would average 5.4 mills and generate $1.3 million in fiscal year 2013 and a total of $7.7 million through fiscal year 2017. A home with a taxable value of $50,000 would pay an additional $270 annually.

If voters approve both new taxes, the city won’t have to cut any staff or services, and it would face a deficit of $350,000 instead of $6.1 million in fiscal year 2017. Additionally, it would maintain most of the $9.4 million it has in reserves.

With approval of only one or neither of the measures, officials say, the city will make deep cuts to basic city services.

“If we want this to work, we need both of these items in terms of revenues, or it doesn’t work,” Council Member Pete Murdock said.

Several residents who spoke during public hearings on the plan and proposals voiced stronger opposition to the income tax than the Water Street millage. They said they liked that the Water Street millage ends once the debt is retired and feared an income tax would eventually have a negative impact on the city because it would drive away potential new residents.

Mark Hergott is among those residents who supports the debt retirement millage but not the income tax.

“(The Water Street millage) has an end to it,” he said to council. “We will eventually be done with the albatross that was the Water Street project. I want to let you know that you have a supporter for the Water Street development millage and I’ll talk to everyone about it.”

But he later added, “Inversely proportionate to how much I support the Water Street millage, I am against the income tax proposal.”

Council Member Dan Vogt said residents will face increased insurance costs, reduced staffing in public safety departments and reductions to other city services if the proposals aren’t approved.

“Some people have expressed concern that raising certain taxes or changing certain taxes will have a negative impact on the city,” he said. “I think rising crime rates, rising insurance rates, a failure to provide basic city services … I think that has 20 to 30 times the impact of what is only a slight tax increase some people will experience.”

He highlighted that some residents will only see a modest increase in their taxes, while others, like himself, will see a higher increase. But he said he is willing to pay to save city services.

Despite the situation’s “gloom,” the city’s financial forecast has improved from recent months.

The city projected a $10.69 million deficit during discussions on the issue in recent months. That hole is now $4.5 million less because the city was previously assuming the state would abolish the personal property tax.

Assistant City Manager David Kowal said it no longer appears like Lansing will eliminate the tax, and that trimmed the projected deficit by $2.4 million.

He said the city also found piecemeal savings throughout the budget and state shared revenues for this fiscal year came in higher than expected, which further reduced the projected deficit.

Still, the city is projecting a $6.1 million budget shortfall in fiscal year 2017. It’s estimating $55.5 million in revenues and $76.6 million in expenditures in that timeframe. That equates to a cumulative deficit of nearly $21 million over the five-year period.

Declining property value remains a significant issue. It dropped by $500,000 in 2010, and is projected to significantly decrease through 2017.

The city is also paying $30 million on its Water Street bond debt. It must continue to make payments through 2031, and the amounts will grow to $1.7 million annually by 2015.

If the Water Street millage were approved, the money could not be used for anything except repaying Water Street debt.

Income tax proponents highlighted that it would also tax those who work at EMU, which doesn’t contribute to the city’s tax rolls. It’s projected to generate $1 million in fiscal year 2013 and approximately $2.25 million each year through 2017.

Council Member Mike Bodary said he opposed an income tax before the recession when personal property tax used to support Ypsilanti.

“We need to diversify our revenue because property tax is no longer a stable source of income,” he said.

Council Member Brian Robb said council members needed to “dial down the rhetoric” and “be humble and say ‘We screwed up Water Street, we need the money, please support this.’”

He argued that the city isn’t diversifying its revenues because residents would still pay around 80 percent of the taxes through the income tax, Water Street millage and police and fire pension fund millage increase.

City residents will additionally pay an additional $4.4 million to its police and fire pension fund that state law requires it fund through a police and fire millage. That millage doesn’t have a cap and will continue to rise with those costs.

Mayor Pro Tem Lois Richardson asked about a possibility that wasn’t discussed throughout the meeting.

“What are our plans if these ballot measures fail?” she asked.

Beth Bashert is head of Save Ypsilanti - YES, a “ballot question committee” supporting both proposals. She said the city didn’t create the financial crisis that put it in this position, but that the city needs to address it.

“We need the services that make our city clean, comfortable and safe. This income tax will make that possible,” she said.

But several residents, including Leslie Ledbetter, contended that the issues were caused by the city's government, which now had to be "bailed out" by taxpayers. She and her family recently moved to the city and strongly opposed the taxes.

“We have four kids and that’s money that doesn’t get spent on them and we’re going to be angry,” she said. “Prepare yourself because it’s going to keep coming from me, from my husband and a lot of other people.”


City Confidential

Wed, Feb 8, 2012 : 1:06 p.m.

The vote was UNANIMOUS - all city council members, Mayor, everyone agrees. Even the anti-tax platform members agree. People that know what is going on know that we have to pass these proposals. Period. u·nan·i·mous /yo?o?nan?m?s/ Adjective: - in complete or absolute agreement - (of an opinion, decision, or vote) Held or carried by everyone involved. - Characterized by complete agreement: a unanimous decision

Glen S.

Wed, Feb 8, 2012 : 12:57 p.m.

I applaud the Ypsilanti City Council for having the courage to vote unanimously to put these two measures on the ballot. Because of falling property values, many people have experienced significant drops in their property taxes in the past few years. That, combined with more and deeper cuts from Lansing, have put the community in a potentially dangerous situation. The "alternative" to these proposals will be deep cuts to police and fire (which would leave our community vulnerable, and make it an undesirable place to live, or do business) -- OR -- being taken over by a State-appointed "Emergency Manager," with unlimited powers to make local decisions, and spend taxpayer dollars, without any input from local citizens. Given the circumstances we face, passing BOTH of these measures is the only way we can maintain a strong police department, fire department, and other city services necessary to keep Ypsilanti safe, strong, and solvent -- while also keeping local citizens in charge.

June Gordon

Wed, Feb 8, 2012 : 12:44 p.m.

It's time to stop pointing fingers and dwelling on the past. That will not save this city. We need to move forward with the best solutions available and get serious about keeping Ypsilanti viable. Start looking to the future - a future that includes police & fire protection, city services and park maintenance. You know, things that make a city safe and attractive for families with lots of children. The income tax will capture a new stream of revenue which is less regressive than millages and more dynamic in that it changes with each person's ability to pay based on income. The debt millage will shrink as the debt does, and with the help of our city planner, we will have an amazing downtown again - without the brownfield of the past. There are 22 cities in the state with an income tax, including thriving communities like Grand Rapids and quaint little places like Lapeer, Ionia and Grayling. People don't run from them like the plague. They won't run from us either, as long as we are a safe, clean, functioning city. They will come for the historic homes, the gardens, the downtown district, Depot Town, to live close to campus, to be able to walk on sidewalks that go places. Keep Ypsilanti safe, clean and functioning by voting YES on BOTH ballot proposals on May 8.

Stephen Lange Ranzini

Wed, Feb 8, 2012 : 12:20 p.m.

I find it fascinating that the City of Ypsilanti says to the public that it is in such dire shape financially and yet the bond rating agencies, Standard and Poor's and Moody's rate the city's bonds as strong and investment grade, with ratings of A1 and A2, respectively. See page 10 of the city's annual audited financial statement (CAFR) See: <a href="" rel='nofollow'></a> Who is lying?

June Gordon

Wed, Feb 8, 2012 : 12:33 p.m.

And on Page 11: &quot;Moody's downgraded the City's credit rating from A1 to A2 on the outstanding general obligation limited tax debt, which they say "reflects satisfactory financial position with declining liquidity, and declining tax base, while currently manageable, is expected to require general fund support beginning in 2013." Do we have to actually fall into the abyss before we can try to save ourselves? What are you insinuating? Or do you just like trolling?

City Confidential

Wed, Feb 8, 2012 : 11:52 a.m.

One of the major reasons that people move to Ypsilanti is because our stock of beautiful, well maintained, historic and charming houses are a *fraction* of the cost of similar homes in Ann Arbor. Another reason is that we are a walkable community, close to campus for University employees and students, close to bars and restaurants and shops. We have urban farmers and a thriving home spun economy. Ypsilanti has qualities that no other community has. The amount of money that the people in Ypsilanti pay in property taxes may be at a higher millage rate than other communities, but it is based on relatively low cost homes, especially compared to Ann Arbor, so it's still a bargain to move here. People that just moved here and now don't want to pay more taxes don't seem to understand the issues very well. They don't understand that this city's residents are ready to quit complaining about the old gripes and recognized that we need to bring in more revenue in this city and we need to do it now. Saying no is not an option anymore. People that object to these proposals are not seeing the forest for the trees. A 1% resident/0.5% nonresident income tax and the debt millage mean the difference between a future where people recognize Ypsi as a place that did what they had to do, took care of themselves and moved forward, and a city that fell because a few people weren't ready to recognize reality. This is serious business - hoping, wishing and praying is not going to save Ypsi. The residents who *understand* the issues, who are willing to get educated about them and vote YES on BOTH of these proposals are going to save Ypsi. That kind of motivation, pride and willingness to do what must be done will do two things: it will keep Ypsilanti stable long enough to have a fighting chance and it will attract people from all over the state and beyond who want to be a part of this community.