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Committee Recommends Headlee Override

C0mmitee Recommends Tax Override

(Crystal A. Proxmire, 12/29/2010)

The Financial Planning Committee held a public meeting on Dec. 29, 2010 to present options to residents for balancing the city’s budget, recommending that Council puts a Headlee Over-Ride on the ballot for the residents to vote on.  The presentation was just a rough draft of what the Committee will be presenting to Council, who will make the ultimate decision of how to move forward.

The Financial Committee, made up of 11 residents and 1 businessperson, has been meeting each Wednesday since September 15 to  discuss ideas for how the City can get past the $3 million dollar deficit they are facing for Fiscal Year Ending 2012.

The committee is made up of non-resident John McQuiggan, and residents Mark Van Dyke, Kathryn Hershberger, Scott Helmer, Daniel Harteau, Sharon Chess, former Mayor Bob Porter, Greg Pawlica, Ben Updyke, Joel Petrie, and Dennis Whittie.

Committee members spoke about the factors leading up to the City’s financial problems, mainly the devastating decline in property values and decreases in state revenue sharing.  Cities across the state are suffering from lack of funds, and dealing with the deficits by laying off workers, closing libraries and community centers, ending services, privatization and consolidation of services with other cities.

The group presented three possibilities to deal with the problem, noting that no matter what solution they come up with there will still be additional cuts needed to cover the $3.1 million deficit.  They are recommending option #1, a Headlee Over-Ride.

1.  Headlee Over-Ride – This option is to approve removing the cap and increasing the general tax and allowing Council to raise taxes.  If voters pass a Headlee override there are several possibilities for how that can be implemented.  Former Mayor Bob Porter, and Co-Chair of the Committee, pointed out that Hazel Park passed a Headlee Amendment and used all 20 mils of it, whereas Huntington Woods passed the 20 mil override, but their city council has only collected increased taxes as needed.

$750,000 annually would still need to be accounted for even if the residents pass a Headlee override.  This would come from reductions in public safety and other expenses.  The move would increases up to 5.4452 mills per household, and the committee is recommending a sunset to the term of the tax increase, which would be Dec. 31, 2015.  Currently there is Infrastructure Bonding that is set to end in 2015 as well, so without any additional changes, the taxes would lower again in 2015.  Ideally the economy will have turned around by then and home values increased.  The override could generate up to $3 million in revenue a year.  This would cost the average homeowner (of a $40,000 taxable-valued home) approximately $200 a year.

2.  Dedicated Public Safety – This option would be to ask voters to approve a separate tax to fund Police and Fire.

Just 4 UsThe committee presented options for a 5 mil public safety milage, and a 10 mil public safety milage.  “What you have to understand is when you have a dedicated public safety milage it is not nearly enough to fund the departments….You can set aside money for the departments, but money must still come from the general fund to fund public safety,” Porter explained.  He said that it reduces the flexibility that council has to make financial decisions by having two separate funds and the dependence on the general fund.

A ten mil tax increase would mean a $500 increase in taxes for a home valued at $80,000, according to Scott Helmer, another member of the committee.

3.  No Milage Passed – Greg Pawlica described what might happen if there is no milage passed, citing the following potential cuts, and the savings over five years:

~Decrease in City Council pay – voluntary reduction could save 121,500 over 5 years.

Combine City Manager and Finance Director Positions could save 750,000 over five years.

~Eliminate the DDA, save $1,250,000 over five years.  There would be $250,000 a year added to the General Fund if the DDA is eliminated.  Porter also noted that if we loose the DDA we do gain money into the general fund, but we would loose about $250,000 a year in funds that come from the County to be used by the DDA for business development and downtown revitalization.

~Contracting Police and Fire Services would save the City $12,500,000 over five years.

~Eliminating the DPW part of the general fund, dealing with municipal maintainance of parks, tree care, assistance with parades and events, monitoring of roofs and buildings owned by the cities.  It would not affect street cleaning or leaf pick up. This would save $1,565,000 over five years.

~Suspend sidewalk replacement  program – $475,000.

~Eliminate Parks and Recreating Department (including closing the Kulick Community Center) – $1,292,000

~Without increased taxes, the General fund balance would fall from $3,700,000 to $500,000, meaning that the city would loose the ability to receive good loan rates. And would not have any money set aside to operate in an emergency.  Pawlica stated that even if all of these cuts are put into place, it would still not cover the deficit.

~Another possibility is to merge Ferndale into a larger city with surrounding communities and sharing administrative services, public safety, etc.  That would work by creating boroughs so that each community could maintain it’s identity.  Pawlica said that this would be a long-term goal for council to consider.  Porter pointed out that Seattle and Indianapolis had become revitalized by combining communities into a larger city.  “There are ideas like this out there.  It’s not easy to get people to buy into them but we felt it was something that needed to be brought to council’s attention,” Porter said.

The Committee felt that the Headlee Override would give the public the most flexibility and the best ability to overcome the budget.  It keeps the majority of service at current operating levels, it has the least milage impact to property owners, it caps the tax at 20 mils and in 2015 it would mean taxes being reduced again.

“We don’t have the luxury of operating at a deficit.  If we were the Federal government we would just print more money,” Porter said, adding that municipalities are required to maintain a balanced budget.


Residents in the audience expressed concern over increasing taxes and gave ideas for cuts.  The first resident to talk, Vick Dias, suggested that Council look at letting the County take over the city.  He suggested bringing in an energy expert to evaluate the City’s energy consumption, which Porter explained has already been done.

Another resident said that if the Headlee Override would increase taxes for seniors to the point they could not pay their mortgages.  “I’ve gotten to the point I don’t know if I believe politicians any more.”  She said that she did not care if the streets are cleaned or the leaves are collected.  Porter explained that when those services aren’t provided it can create more damage to the sewer lines.

Another resident complained that the Police and Fire have not made concessions when other departments have suffered with cuts.  The Police and Fire have not been able to work out a contract, and the process has gone into arbitration.  The resident said that he and others in the community would not support a milage unless the departments made some concession.  Kate Baker, sitting in the audience, said that the arbitration would not be complete until after a milage vote would need to be done in May. Later in the meeting, Patrick Sheehan stood up to defend the Fire Department unions, stating that cuts to public safety would also lessen the quality of life for residents and reminding the public that people in his department provide a valued service.

Currently Ferndale has the third highest taxes in the County.  A resident brought this up and asked “Who would want to live in Ferndale with such high taxes?”  Porter explained that Ferndale made investments in infrastructure that are paying off for the community now. He also said that the level that the taxes might be raised would only be to compensate for the decrease in taxes caused by the declining home values.  Another factor Porter brought up was that if the quality of life in the city falls below a certain level it means that people will not want to live here either.

Resident Tom Gagne asked who would be appointed to “sell” the idea of a tax increase to the public, and members of the committee explained that once they make their recommendations the committee will not be active in promoting any of the options.


Documents used by the Financial Committee can be found on the City’s website at:

Video of the meeting can be seen at:


The Ferndale 115 News has been diligently learning about the budget process over the past year and a half.  To get more background on this complicated process, check out our previous articles…

Financial Planning Committee tries to tackle budget problems

May 5, 2010 – Final Budget Approved

May 4, 2010 – Council Puts off Budget Vote, Debates Parking and Animal Control

April 30, 2010 – Council approves individual sections of the general fund budget, waits to decide on DDA contributions and how to handle remaining $300,000 deficit

April 9, 2010 – Will DDA take over Parking?

April 4, 2010 – City, Fire and Police Give their Sides in Budget Talks

Feb. 1, 2010 – Public Forums to Discuss Parking

Jan 1, 2010 – Parking Fines Go Up, Other Changes to Come

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