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Ferndale Tackles Budget, Aims for More Transparency

Ferndale Tackles Budget, Aims for More Transparencyseed02_sharon chess

(Crystal A. Proxmire, April 3, 2014)

Facing a million-dollar deficit, Ferndale City Council and staff set to work in an all-day budget workshop Saturday, combing through department finances and searching for ways to cut costs.  In spite of continuous striving towards economic development and saving money, shortfalls continue.

Revenue Sharing Cuts and Legacy Costs

“These are very difficult times, which are complicated by the shrinking support of municipalities by the state,” said Mayor Pro Tem Dan Martin.  The presentation given by City Manager April Lynch showed how dinos02sidelogo3revenues have been shaped by decreases in property values in previous years and in reductions in revenue sharing by the state.  In 2010 revenue was $18,549,820.  In 2015 the estimated revenue is $443,220 less at $18,106,600.  This is with a general operating millage that was 14.5448 in 2010 and 20 in 2015.

“The thing that immediately struck me looking at this, is that taxes have increased, but revenue has still decreased,” Lynch said.

In February Martin introduced a resolution asking the state to replace funding to cities.  Ferndale, Southfield and Royal Oak all passed such resolutions. Lt. Governor Brian Calley spoke in defense of the state keeping local tax dollars during a March 2014 visit to Oakland University, saying that the state will no longer give “blank checks” to cities. The loss of revenue to cities’ general funds has impacted nearly pride2014adeveryone’s access to local governmental services. A Michigan Municipal League analysis in March showed millions diverted from cities to the state. So Ferndale is not the only community affected.

Another factor is that while home values are increasing, the taxable valuable still remains low.  Because taxes are based on home values, the recession has affected the amount of revenue coming in to fund city services.

Legacy costs also hinder the City.  In the past employees of most municipalities could look forward to retirement benefits and ongoing healthcare.  Governments have realized the snowballing cost of such programs, and have stopped offering these benefits, though there is still an obligation to pay for the promised benefits of workers past who are still collecting. $6,991,815 of the budget goes for employee benefits. Employees are no longer offered retirement benefits when they come seed05_jen_kat_latoschto work for the city, but instead have access to retirement investment plans.

The Million Dollar Question

As it stands, the city must figure out how to trim a million dollars from the budget before it can be approved.  Council will hold another special budget session on April 14 to finalize what those cuts will be, with the final budget expected to be voted on at the April 28 council meeting.

Fire Department on the Hot Seat

The discussions at the workshop put a lot of attention on the Fire Department, as several seed04_gallowayuncertainties could come into play over the next year. If the proposed budget is approved, there is no money allocated to keep the three firefighters who were being funded first from a SAFER grant through April 2013, and then from the general fund.  The current cost is $350,000 a year for the trio.  A fourth firefighter who had been being funded no longer works for the department.

The firefighters had been kept on staff longer than expected as the city continued to work towards a potential merger with the Hazel Park Fire Department.  Those talks went on for several years, but finally have come to an end.  “We’re always willing to talk further with Hazel Park, but it looks like they just don’t know where they would get the money from at their end,” said Ferndale Fire Chief Kevin Sullivan.  The move could moderntaxhave saved both cities money, though the upfront cost would have been a struggle and a public vote would have been necessary to create the fire authority.

The three firefighters will likely be laid off at the end of June.   The proposed budget already assumes that this expense will be eliminated, and does not count toward the million dollars that council must cut.

Another issue is that of Royal Oak Township, a community that contracts with Ferndale for fire service.  Royal Oak Township has fallen on hard times and has been taken over by the State of Michigan to have Emergency Financial Management.  Sullivan said that he is confident the State will continue to work with Ferndale, though the uncertainty lies in if the State will try to push Ferndale to give them a lower cost. Currently the contract is for $250,000 a year, a cost that Sullivan says HowesLocationis low for the amount of service his department provides.  “Royal Oak Township has very little updated infrastructure, and a poor water system, so we have to bring in tankers,” he said.  “And we have to bring in tankers.  We need to augment the water.”  He also noted that though the number of fires may be relatively small, they tended to be bigger fires, or even arson.

Sullivan said that he’s confident the state won’t take away the contract, but that it is a possibility council may need to be prepared for.  They could also try to re-negotiate it, at which point Ferndale might have to decline providing the service. “I’m glad to provide the service to our neighbors, but we’re not going to do it at our taxpayers expense,” Mayor Dave Coulter said.


dda_ad_03Police staffing levels are expected to remain the same.

Changes to the Budget Process

This is the first year that Ferndale has been contracting with Plante Moran to provide accounting services for the city.  Plante Moran was hired in August after longtime Finance Director Jaynemarie Hubanks retired.  Outsourcing has saved the city money and increased their access to multiple experts who are familiar with how many cities handle their accounting.

At the suggestion of Plante Moran, the city has renamed some of the budget items, and created a new department for Technology expenses.  “We’re focusing on creating a more transparent and understandable budget,” Lynch said.  Line item re-classifications give more specific details about where money is being sidebar016growspent.  The motor pool fund and human resources expenses have been moved to the general fund, and an administrative allocation is used to spread the cost of employees out between departments.  Smaller changes make it easier to see where money is being spent, such as itemizing out street lighting, which costs the city $507,600 per year.

“Plante Moran is the best in the business at what they do, and we’ve used them to make our budget simpler and more transparent.  I’m also glad they’ve helped us do a better job on our multi-year budgeting model, making realistic assumptions about next year so we can plan better, earlier. Sometimes people worry the city has money put aside somewhere that isn’t fully disclosed.  I hope people can see in this simpler format seed010_eric_dickersonthat every dime is accounted for and that we’re running a very lean operation,” said Mayor Coulter.

Progress Made

“Council and I have challenged staff in every department to look for efficiencies and savings, but it starts by giving them more ownership and discretion of their budgets. For example, DPW is saving money because of two pilot programs, one for tree management and one for pavement repair, that together could save the city nearly $1/2 million in annual contractor costs,” Coulter said. “Because of sound financial management and budgeting, we just had our bond rating increased from an A+ to an AA-, which is a big deal in this economy and validation that we’re doing the right things financially.”

Economic development has been strong, and the housing market has come back in the area, though it takes time for the tax revenues to return to normal.  In the meantime, Plante Moran and City staff are combing the budget further to figure out by next week what cuts could be made to make the budget balance.

“I appreciate all the efforts of Plante Moran and of course our staff,” said Councilperson Mike Lennon. “There is a little more conversation left for this budget and I am not currently satisfied with some parts of it all, particularly the Fire Dept.  However this is the most transparent budget we have had in quite some time.”

To view the budget documents and meeting information see the City of Ferndale website at


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