Several Oakland County communities have been working to supplement essential services due to the millions lost over the past decade after cuts in statewide revenue sharing.
Michigan’s local governments receive revenue earmarked by the state constitution and statute to fund core governmental services such as police, fire, roads, water and sewer, as well as garbage collection.
According to the Michigan Municipal League, the state’s cities, villages and townships have lost a collective cumulative total of $7.5 billion in statutory revenue sharing since 2002, the last year it was fully funded.
“It’s an insane amount of money,” organization associate executive director Anthony Minghine said. “The entire (funding) model needs to be revisited.”
The Ann Arbor-based non-profit association, which is comprised of Michigan’s municipalities, has created a website aimed at educating residents and public officials about the issue. It has also launched a searchable database by location which shows how much each community has lost in revenue sharing over the past 12 years.
The money, rather than being used for essential local services, instead has been diverted to plug holes in the state’s budget, the group says.
Further, local leaders say the redirection of state funds only compounded woes brought on by the economic recession of the 2000s. Subsequently, many communities are still struggling with funding as their properties’ taxable values are limited to the rate of inflation, which is currently less than a half-percent.
“It took that downward (economic) cycle to expose this … fatal flaw,” Minghine said, adding state leaders have failed to address the issue, which “essentially pushed the problem down to local government which was already dealing with its own issues.”
Quality of life factors like parks and recreation are typically among the first cut, Minghine said, before local governments make cuts to services like police and fire.
Communities make do
In Pontiac, which just emerged from state control late last month, $46 million has been lost in statutory revenue, according to projections from the Michigan Municipal League.
Mayor Deirdre Waterman noted while other states have increased their local communities’ shares as revenues have risen, Michigan’s has continued to decline.
“Michigan doesn’t have a great record in partnering with communities in terms of shared revenue,” she said. “All the communities in Michigan have been affected by this policy and we’re all affected by the economic downturn.”
Reductions in shared revenue are just part of the problem, though, Waterman noted, adding economic trends are also to blame.
Pontiac has been forced to undergo a “sharp restructuring” of expenses, including reexamining vendor contracts and reducing a city payroll which once neared 500 employees to just over 30.
The city closed its police force in 2011, contracting with the Oakland County Sheriff’s Office, and its fire services are now handled through an authority with neighboring Waterford Township.
“We’re operating the city more creatively” through partnerships and efficiencies, Waterman said.
In Rochester Hills, budget forecasting helped identify losses, which are project to have topped $18 million since 2002, before it was too late. City officials have also found creative ways to operate.
“Anytime you lose that much money, you have to make changes,” Mayor Bryan Barnett said. “We were prepared, but it limited us from a project standpoint and we had to adjust accordingly.”
Capital projects such as road construction were scaled back and officials also worked to create efficiencies.
One such method came through a partnership with neighboring Shelby Township in which the municipalities swap building department employees on an as-needed basis.
The city also leases space on the city hall property to the Clinton River Watershed Council while its Department of Public Services performs maintenance on other communities’ vehicles.
The city also partners with Pontiac, Auburn Hills and Orion Township in the North Oakland County Water Authority to increase buying power and storage capacity, saving money on water.
While local governments have found ways to make do with less, the state government still needs to find a solution, Troy City Manager Brian Kischnick said.
According to municipal league projections, the city has lost more than $23 million in statutory revenue sharing.
“Everybody is leaner and meaner, but services have been severely impacted,” Kischnick said, noting Troy city employees, including the police department, have had to take furloughs in recent years. “The state has to get its priorities right.”
City employees have also taken concessions such as pay reductions and early retirement, he added.
A dedicated millage has also been approved by voters to keep the city’s library afloat, while Troy’s golf course operations have been privatized.
Operations at the city’s nature center and historical museum, meanwhile, have been transferred to the nature and historical societies, respectively.
‘Do something about it’
Taxpayers for Michigan Constitutional Government, a newly formed non-profit organization founded by Eastpointe City Manager Steve Duchane, is looking to align municipalities to bring legal action against the state for violating the minimum annual revenue sharing payments to local governments required in the constitution.
The state is incorrectly calculating the amount of statutory revenue sharing it sends to its municipalities, the organization contends.
“The state’s answer is a race to the bottom” through cost-cutting, Duchane said. “We feel it’s time to act.”
Like many Oakland County communities, Eastpointe has been working collaboratively with neighboring communities to make ends meet.
“(We’re) solid through no help from the state,” Duchane said.
The concept for the potential litigation came when Duchane was discussing the issue with friend and Wayne State University Law School professor John Mogk, who encouraged Duchane to “do something about it.”
Now, the organization is trying to rally leaders in distressed communities to raise $30,000 to cover the cost of the cost of litigation, which could be filed “relatively soon,” Duchane said.
“We want to build a small war chest to make this happen,” he added.
To date, a dozen communities, have given their verbal commitment, Duchane said, noting just one of those, Hazel Park, is located in Oakland County.
Michigan Attorney General Bill Schuette declined to comment on the proposed litigation.
Changes in revenue sharing could have spared cities like Pontiac and Flint from state receivership, according to Duchane, who noted emergency management is only a short-term solution to the problems local governments face.
“If not saved, it would have given them a fighting chance,” he said.
Pontiac was forced to part with some of its well-known assets under emergency management, including the Silverdome, which went for pennies on the dollar at a 2009 auction. It was a “very stunning sale and loss for the city,” Waterman said.
The city also sold its water and sewerage treatment plant as well as its community resource centers, which Waterman said “left a hole” in city services.
