Press Release

OVERVIEW OF PROPOSED 2005-06 BUDGET

Budget Summary. The City’s budget for the fiscal year that begins July 1 guides spending on the complete range of City services, including public safety, public works, water and sewer utilities, the downtown development authority, and for capital improvements. The budget the staff has proposed to the City Council reflects a small reduction in the millage rate for both operating and debt purposes and an increase in water rates. The budget would be balanced through the appropriation of $400,000 from reserves.

Budget Process. Department heads submit funding requests to the Finance Director by March 1. The Finance Director estimates incomes from taxes, state revenue sharing, utility charges and other sources. In consultation with the City Manager, a spending plan is developed that balances proposed expenditures with available revenues. This budget was submitted to Council on April 4. Following a May 2 public hearing to receive citizen comments and a May 9 special meeting for Council budget discussions, the Council will adopt a budget during its May 16 meeting. This budget guides spending for the year that begins July 1, 2005 and ends on June 30, 2006.

Revenue Outlook. As has been the case for the last few years, the proposed budget is based on estimates of revenues that remain fairly close to those of the current fiscal year. The Headlee Amendment and Proposal A impose constitutional limits on property taxes that, when combined, mean that the City will derive less money next year from these taxes when adjusted for inflation. Another significant portion of the City’s revenues comes from a share of the sales tax that is returned to local governments. Due to the state’s fiscal problems, it is expected that about the same amount will be received next year as the City receives this year. The same is true of the share of the gasoline tax paid to the City for street maintenance purposes. While the City has more control over charges for water and sewer service, these funds can only be used to meet expenses associated with providing those services. The proposed water rate increase reflects costs associated with debt service payments for the recently completed water filtration plant upgrade.

Spending Plan. In keeping with Council directives, the proposed budget reflects a continuation of the types and levels of services from prior years, with the following exceptions: 1) A $200,000 increase in spending on street maintenance is planned. A study by the City Engineer concluded that additional investments in crack sealing, seal coating, and hot patching were necessary to reverse trends leading to deterioration; 2) The next phase of the loop trail in downtown Owosso is planned with improvements to the Oakwood Street bridge and construction of a trail on former Tuscola and Saginaw Bay Railroad property to take place. The majority of expenses are expected to be paid through a state grant; 3) The Director of Public Works is funded as a separate position. For the past 15 years, the duties of this position have been performed by the Director of Employee relations who is nearing retirement age. The budget proposes to separate these roles again.

Looking Ahead. It is expected that the state’s fiscal and economic challenges will continue for the next several years. These will continue to affect the City’s budget as they have over the last several years. The City remains committed to providing essential services and infrastructure that meet our standards of quality and dependability. To do so, several policy changes are proposed for Council consideration to help insure the City remains in good financial condition. These recommendations include the following:

• Eliminate the budget stabilization fund and establish a public improvement fund. Both of these funds are authorized by state law. The budget stabilization fund is to be used to insure that ongoing operating expenses can be met when dealing with emergency spending or revenue losses. A public improvement fund is used to pay for investments in buildings, roads and other facilities. If the City relied on the budget stabilization fund to make up revenue losses it would quickly be depleted. It makes more sense to insure that funds are available to make improvements to City infrastructure.
   
• Increase the general fund designated reserve. The general fund pays for police, fire, and ambulance services, park maintenance and for a range of administrative costs. A general fund designated reserve was established several years ago to insure that sufficient funds would be available to meet the need for emergency spending such as might result from a natural disaster. If the budget stabilization fund is to be eliminated, it makes sense to increase the size of this fund from its current 20% of general fund expenditures to 25%.
   
• Establish a designated reserve for Owosso Drain assessments. Over the next 20 years, the City will be making payments for the at-large portion of the Owosso Drain. To provide the most accurate accounting of the impact of these payments on the City’s budget, it seems desirable to set that money aside now in a designated reserve account.
   
• Seek other revenues for non-essential services. The City cannot continue to draw on its undesignated reserves to balance the general fund. It is proposed that in future years, new sources of revenues be found for non-essential services including ball diamond and soccer field maintenance, Holman pool, MAGNET drug team, Historical Commission activities, and the like. To give time to consider options, these will be funded next year but decisions might need to be made about funding them in subsequent budgets.

For More Information. Copies of the budget are available for public inspection in City Hall and at the Owosso branch of the Shiawassee District Library.