Troy Encounters Budget Troubles

Voters in the city of Troy face a ballot proposal on Tuesday, Feb. 23, for a five-year, 1.9-mill property tax rate hike. Troy's leaders say that without a revenue infusion, the 85,000-resident community north of Detroit faces cutbacks of everything from police protection to community programs. Even a total shutdown of the Troy Public Library looms.

Municipal finance expert Anthony Minghine says he has heard the tax-or-cut scenario dozens of times, but rarely in a prosperous place such as Troy, which as recently two years ago was rated 22nd among Money Magazine's "Best Places to Live" in the small cities category.

Long-standing reports of municipal hardship are familiar in the city of Detroit and hard-pressed inner suburbs such as Highland Park and Ecorse, Minghine says, but troubles in Troy and other middle-income communities show that economic hardship is spreading.

He serves as associate executive director of the Michigan Municipal League, which provides support services for more than 500 dues-paying member communities.

"Troy has always been regarded as a well-managed community with a huge commercial tax base, high-priced homes and great city services," Minghine says.

"No disrespect to some of these other communities, but when you hear of a place like Troy having trouble, you know times are tough. In almost 25 years in this work, I've never seen these double-digit declines in home values and tax bases. This factor, combined with cutbacks in state shared revenues, combines for a one-two punch that many communities haven't been able to weather. It's a big problem and it's a statewide problem."

Troy Residents at Odds

The tax proposal amounts to just shy of $1 per year for each $1,000 of a property's estimated sales value.

Heading toward the Feb. 23 referendum, supporters and opponents are in a high-pitched battle. Backers of the tax plan say Troy's tradition of providing superior city services and amenities is at stake. Foes describe local government as wasteful, and assert that a higher local tax rate would escalate problems rather than offering solutions.

Debates have emerged at a series of public forums, the last of which is slated a week before the election at 7 p.m. on Tuesday, Feb. 16, at Central Woodward Christian Church, 3955 W. Big Beaver Road.

City Manager John Szerlag notes that Troy's home values already took an 8 percent tumble last year, with the so-called burst of the housing bubble.

Szerlag forecasts an added housing value decline of 30 to 40 percent during the next few years. Reduction of the business and industrial tax base is even more severe. Meanwhile, costs continue sharply exceeding inflation for such basics as utilities, gasoline and employee health care.

Szerlag's analysis leads to a basic debate on how to characterize the Feb. 23 ballot proposal.

Opponents organized mainly through a residents' group, Troy Citizens United, are distributing yard signs and handbills that portray a 29 percent tax increase. They assert that voter approval would boost the city's general fund levy to 8.4 mills, up from 6.5 mills.

The proposal's supporters answer that the anti-tax campaign is misleading because declining property values and other local millage levies should be considered. They state that voter approval would establish an actual "overall change" of 3.4 percent in municipal tax payments, far less than 29 percent. For example, the owner of the typical $206,000 home faces a $196 cost, but the real choice is between a $38 increase in city taxes over last year, or a $156 decrease.

Regardless of how the tax proposal is portrayed, this year's general fund budget is $62 million, down from $64.3 million. Future declines are in the city administration's forecast.

When a city's tax base declines and expenses escalate, says Szerlag, the two main options are to raise millage rates or to cut services.

Under Troy's council-manager form of government, Szerlag in effect is chief executive officer and the seven City Council members function as a board of directors. Therefore, he says his position on a yes-or-no referendum vote is neutral.

"We (city staff) are just providing financial information," Szerlag says. "We are showing our citizens how the city is going to look with the proposal, or without the proposal."

If the millage fails on Feb. 23, Szerlag's cutback plan for council consideration this spring would:

- Lay off 140 of Troy's 413 full-time employees, including 47 of the 175 current police personnel, for annual savings of more than $8 million in wages and fringe benefits.

- Close city-operated Troy Public Library to trim $3.62 million per year.

- Close the Troy Museum and Historic Village for a savings of $380,000.

- Shutter the Troy Community Center to cut the budget by $300,000.

- End programs at the Troy Nature Center, saving up to another $300,000.

Szerlag adds that Troy leaders already have taken budget-cutting steps. Some 63 full-time jobs were eliminated during the past six years, which amounts to one in eight total positions, including 24 jobs during the past year alone. Employees have accepted concessions in wages, benefits and pensions. Troy is among cities that will use federal economic stimulus funds for energy conservation.

Tax Backlash Gets Early Start

When discussion of Troy's budget troubles took hold during 2008, tax opponents acted quickly. They petitioned for a ballot proposal to require voter approval for any millage increases, and residents passed the measure by a 2-1 ratio. Troy City Council members, without this City Charter amendment, would have had the option of raising the millage without the Feb. 23 referendum.

"The city has gotten out of control," asserts John Witt, a leading spokesman for Troy Citizens United. "Instead of making the necessary changes to balance the city budget, the city has chosen to continue new, unnecessary spending."

Going back to last year, Szerlag and his top aides have joined City Council members in responding to Troy Citizens United's criticisms:

- Witt says Troy city leaders want to "build and operate a transit center to nowhere." Szerlag and council members answer that not only do they consider the project worthwhile to enhance mass transit, but that the cost is paid with an $8.5 million economic stimulus grant from last year's federal American Recovery and Reinvestment Act.

- Witt says Szerlag "is paid more than $220,000 per year." Szerlag counters that his base salary is $133,000, after he took a 5 percent cut along a majority of employees, both union and nonunion, who have accepted concessions. He also states that critics are unfairly including his pension covering 20 years of previous service through 2006, before he took another job for a three-year spell.

- Troy Citizens United says city leaders should begin to spend down a budget reserve rainy day fund of $10.8 million, which represents 17 percent of the general fund. Szerlag says he will recommend small annual dips into the rainy day fund, but that the reserve should remain above 15 percent (between $9 million and $10 million) for basic financial stability.

- Another Troy Citizens United leader, Janice Daniels, says city leaders should close or sell a pair of municipal golf courses instead of cutting so many employees. Szerlag responds that the two golf courses combined break even financially and have no impact on the revenue shortfall.

- Troy Citizens United criticizes the City Council for spending $75,000 to conduct a single-issue special election in February, rather than waiting until May to combine with the annual Board of Education election. A majority of council members answer that they need an early decision to plan for the 2010-11 fiscal year, which begins in July. However, Councilman Martin Howrylak says he agrees with critics who say the council should have waited and saved the $75,000.

No Threat of Bankruptcy

Troy's recent financial troubles have caused some residents, along with outside onlookers, to speculate that the city might be going bankrupt. This is not the case, says the Michigan Municipal League's Anthony Minghine.

Several Michigan cities have gone into state receivership, Minghine notes, including Highland Park and Ecorse near Detroit and, most recently, Benton Harbor in the state's southwest section.

"It has never happened in this state where a community literally declared bankruptcy," Minghine explains. "A private company making widgets that was in the same financial shape as some of our cities these days might file for bankruptcy. But a community still requires at least basic public services, and so the state's emergency financial manager law calls for receivership with a state-appointed manager taking over.

"More and more communities, big and small, are dealing with significant issues."

Sources:

https://troymi.gov/2010Proposal/FAQ.asp#q6

https://troymi.gov/2010Proposal/TaxBillCompare8Homes010610.pdf

http://www.candgnews.com/Homepage-Articles/2010/01-20-2010/Troy-Tax-Forum.asp

http://theoaklandpress.com/articles/2009/11/15/news/doc4aff79eb9fdfd238988955.txt

http://www.candgnews.com/Homepage-Articles/2009/3-25-09/Ex-Troy-city-manager-back.asp

http://www.theoaklandpress.com/articles/2010/01/11/opinion/doc4b4afc44500b0772163221.txt

http://www.bestplaces.net/city/Troy-Michigan.aspx

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