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Wednesday, March 13,2013

Here comes a(nother) deficit

Property tax revenue drop, increased costs cause $11 million budget deficit projection for next fiscal year

by Andy Balaskovitz

Friday, Oct. 5 — Prepare for more “pain,” the Bernero administration said today as it announced a projected $11 million budget deficit for the next fiscal year.


A bulk of the deficit is attributed to higher costs in employee compensation as well as covering a shortfall in the city’s Tax Increment Finance Authority. The 2014 fiscal year starts July 1.


“The funding model for cities in Michigan is broken. In spite of that fact, I will eliminate this projected deficit and submit to Council a balanced budget on time in March. It will not come without pain,” Bernero said in a press release.


The deficit comes from an expected $3 million decline in revenues plus an $8 million increase in costs for city services. Cost increases include a combined $5.5 million increase in pension and health insurance costs as well as wages. The TIFA fund will need $1.5 million from the General Fund to cover a shortfall.


Projections say General Fund revenues will drop 2.7 percent from nearly $112 million to $109 million. Meanwhile, expenditures are projected to grow by 7.1 percent, from $112 million to $120 million. The city could erase that gap with “revenue enhancements” or budget cuts, or both.


The administration erased a $4.7 million budget deficit heading into the current fiscal year, which started on July 1. Over the past seven years, the release noted that Bernero has already reduced the city’s workforce by one-third and eliminated a combined $60 million in budget shortfalls.


“Everything is on the table. We have fared better than most cities in the state and we are nowhere near the financial calamities facing Detroit, Flint, Allen Park, Hamtramck, Benton Harbor and others. We have survived the depths of the economic crisis, but we are not yet out of the woods,” Bernero said.


The mayor will formally propose a fiscal 2014 budget in five months and the administration said these projections are subject to change.

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