Another Tax Increase Brewing
June/15/2010 06:46
At the June 15th Shores council meeting, a public hearing will be held to consider the 2010/2011 budget and the property tax millage rate. Word coming out of the finance committee is that yet another property tax millage increase is forthcoming.
At the finance committee last week, Mayor Cooper and his slate of cronies refused to consider around $ 500,000 of budget cuts proposed by Finance chair Ted Kedzierski. The council voted 5-2 to raise the city property tax millage another 0.7 mils. Only council member Dan Schulte joined Ted in voting against the millage increase. If Councilman Kedzierski's proposals were adopted, a millage increase could be averted, and the city would also end up with a healthier fund balance at the end of the next fiscal year.
After the incumbents raised taxes last year, contrary to the public sentiments expressed at the last budget hearing, Shores residents were promised that the city administration would “hit the ground running” and deal with the city’s budgetary crisis. Now here we are a full year later, and it appears that it is business as usual at city hall. The excuse proffered at the last finance committee meeting as that the incumbents were tied up with the recall. Yet isn’t having the city budget prepared in a timely and effective manner the responsibility of both our highly compensated city manager and the finance director?
Both the recent recall campaign from which Mayor Cooper and the remaining incumbents escaped by the narrowest of margins, and the recent city survey should have sent a clear message that taxpayers are not happy with the city’s solution of trying to solve our fiscal problems by raising taxes. The survey results were very unequivocal- only 15% of residents said they are willing to pay more property taxes to preserve services at current levels. Yet Mr. Kedzierski’s well thought out proposals to cut administrative costs at city hall were systematically shot down by Mayor Cooper and his incumbent and appointed cronies.
Something is clearly afoul when the city administration seems more concerned about "the moral of the municipal employees" than they are with looking out for what is best for the taxpayers they are supposed to represent. Shores residents are intelligent enough to understand that city services need not be drastically cut if excessive administrative and legacy costs were trimmed. How much would residents suffer if the administrative offices at city hall were only open four days a week, a simple cost cutting measure other local municipalities have utilized?
If Shores council votes to raise the tax rate again on Tuesday, they will have done nothing to solve the underlying root problems of a government that has consistently spent more money than it has taken in, to the tune of having depleted $2.5 million dollars in reserve funds over the past few years. Review the graphic portrayal of the city finances as contained in the Grosse Pointe Shores Informed Taxpayers Newsletter #2. Both the magnitude of Shores deficit spending and the reasons why the state has placed the Shores under fiscal watch during the Cooper era are clear.
The council’s failure to effectively address the unsustainable legacy costs that the Cooper regime has burdened taxpayers with over the last decade will only defer the pain that will be passed on to Shores taxpayers for years to come. Yet another millage increase will bring us ever closer to the 20-mil property tax limit that the Cooper regime foisted on unsuspecting city residents with the phony promise that this charter provision was for dire emergencies that may occur well into the future.
I certainly hope that there will be a large turnout of concerned Shores residents willing to speak their mind at the budget hearing on Tuesday night. It is clear that the message sent both by the recall campaign and the city survey has fallen on deaf ears.
Depending on how things turn out on Tuesday night, a group of concerned Shores citizens plan to meet in the very near future to consider our future strategy, planning to continue the momentum gained during the recent recall campaign. If you are interested in participating, or have any thoughts to share, please let me know using the contact form on the last page of the web site.
Post Recall Observations
May/16/2010 11:14
This blog is the unedited text of a letter I sent to the Grosse Pointe News after their headline reported “no change!” after the recall election.
The engagement of Shores residents in the recall movement has clearly resulted in a number of beneficial changes in our city. I thank the paper for publishing my observations in their May 13, 2010 edition.
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To the Grosse Pointe News Editor:
While the headline of your last edition trumpeted: “Recall fails; no change” this statement is far from true. While Mayor Cooper may have survived the election by a slim 40 vote margin, and the other two remaining members of his slate also managed to hold on to their seats, the fact that they were denied the crushing mandate they expected speaks volumes. It was also telling that city voters were widely split, with the recall carrying in Precinct 1, south of Vernier Road. The incumbents managed to hold on by getting more votes in their mutual home Precinct 2, north of Vernier.
With an outcome so close, the incumbents must realize that many whom they counted upon as supporters had to have cast their ballots against them in the sanctity of the voting booth. If after this recall, our elected officials and city manager don’t understand that Shores voters expect both accountability in the way their tax dollars are managed and a clear change in the way business is conducted at city hall, I don’t know what else could show them this.
As a result of the recall, the facts about why Shores finances are in such dire shape from the years of deficit spending under the Cooper administration are now out in the open. Shores citizens are highly engaged in an important dialog about the future of our city. Brian Hunt and Fred Minturn, who as the key members of the finance committee bear a good deal of culpability for the Shores present financial picture both chose to resign, rather than to face the judgment of the voters. Ted Kedzierski, a staunch advocate of fiscal responsibility, is now mayor pro-tem and finance committee chair. City council meetings are now televised. I doubt the incumbents will pass another tax increase this fiscal year. These positive changes would have never have occurred without a recall effort enjoying support from a broad base of Shores citizens.
The core nucleus of recall volunteers and supporters consider the collective results of our effort as a very positive achievement. The Save our Shores Committee plans to stay engaged as our city moves forward, continuing our efforts to disseminate the facts, promote fiscal sanity, and advocate for council competence and government transparency at Shores city hall.
Besides the headline, I must also take issue with the article that implies Shores public safety director Steve Poloni quit over the recall. The recall did focus on the excessive pay and retirement compensation of our past and current city managers as well as certain other department heads. However, at no time did the recall effort target, criticize, or even mention the management of our outstanding Grosse Pointe Shores Public Safety Department.
If Chief Poloni felt pressure to make a move, I can only conclude that it came from forces within city hall, and not from him being a focus of the recall movement. Perhaps his move to Ecorse has to do with the fact that the Shores only rewards the city manager, and not any of the department heads, with the luxury and security of serving under a contact. While several city council members have told me they are in the dark about the precise reasons behind the chief‘s resignation, I sincerely hope that residents are provided with a better explanation of Chief Poloni’s departure at the next council meeting than he is leaving because of the recall.
Shores Makes State Fiscal Watch List- Again!
April/22/2010 09:01
While Mayor Cooper and the incumbents proclaim to voters that city finances are not that bad, the State of Michigan has kept the Shores under fiscal watch for the second year in a row. Once again, the Shores is the only one of the Grosse Pointe Communities so named, refuting the repetitive assertion of the incumbents that all cities are in the same boat.
Look at the Shores fiscal report card from the State of Michigan Treasury Department and the basis of why the Shores remains under fiscal watch is clear. The prime factor keeping the Shores under fiscal watch, and a factor clearly under the control of the incumbents is two consecutive years of deficit spending. Note that their habit of spending more than the city took in started back in 2006. This is well before the precipitous decline in housing values that the incumbents would like you to believe is the current root cause of the Shores fiscal crisis.
Keep in mind that the state’s grading system severely underestimates the grim actuality of the Shores fiscal future, since the methodology employed does not even look at the Shores $17 million dollars of unfunded liability for retiree pension and health care costs.
More bad news will come when the state gives their grades for our 2009 fiscal performance. Expect the Shores to get dinged by the state with even more points for yet another year of deficit spending, an insufficient general fund balance, and a general fund deficit. The overdrawn general fund deficit of $215,000 is something that the city auditors were required to report to the state, as reported by the Grosse Pointe News in the article entitled “Seeing Red.”
Check out the facts on the Michigan Department of Treasury website by going to the Local Unit Audit Section. The audit reports from recent years for all cities in the states are there for citizens to peruse. Take a look at the last 5 years of reports documenting the deficit spending in the Shores, and you will understand why the healthy total balance in 2005 of 2.5 million dollars in major city funds have been frittered away under the Cooper regime. If you don’t have time to go to the web yourself, here are the figures, taken right from the Shores own annual audit reports as posted on the state web site.
The sad reality of the situation that the incumbents have placed our city in is that Michigan law mandates that municipalities run a balanced budget! The Uniform Budgeting and Accounting Act 2 of 1968 states that cities “shall not adopt a general appropriations act or an amendment to that act which causes estimated total expenditures, including an accrued deficit, to exceed total estimated revenues...” Yet in four of the last five years, the Mayor Cooper and his slate of incumbents failed to control expenses and let city expenditures exceeded revenues.
Mayor Cooper and Council members Boyce and Graziani tell Shores voters in their justification of conduct statements on the May 4th ballot that their actions were “in the best interests of the community”, and “did not violate any laws or policy.”
Anyone who spends a little time on the Michigan Department of Treasury web site to research both the basics of state municipal finance law, and the specific details of Shores finances is smart enough to know otherwise. The actions of the incumbents in handling the city budgets and creating the years of deficit spending that depleted our once adequate city coffers do not appear to be in compliance with what Michigan State law requires. Shores voters should remember this as they head to the polls on May 4th.
Pointe Mayors' letter on Votenorecall.com
April/11/2010 08:05
The anti-recall movement has set up their own website with the negative sounding name of votenorecall.com. On the site you will find a letter from the four other Grosse Pointe Mayors who tell us that: “Recall of elected officials should be used to address serious transgressions, but not against elected officials making difficult decisions on behalf of their community.”
Isn’t it presumptuous that four politicians who are not residents of our city feel the need to get involved telling Shores voters what to do? The mayors admit their concern is about the image of their communities throughout the state and the country. Isn’t that nice? Shore voters are concerned about the ability of our city to survive.
One does have to admit that at least these mayors did make difficult decisions that have kept their towns off the State of Michigan’s watch list of fiscally unhealthy cities. The other mayors did so by engaging blue ribbon committees of experts, maintaining very healthy fund balances, incurring low debt levels, and developing long-range fiscal plans. Why did Shores officials not take the same actions? If they were facing the same burden as Shores taxpayers, wouldn’t the other Pointe mayors feel different about their rights to hold the responsible office holders accountable in a democratic election?
Looking at what other Pointe cities have done, it becomes clear that the serious transgression that the Shores incumbents need to be held responsible for goes way beyond their decision to make the unnecessary 1-mil tax increase. The real transgression of Mayor Cooper and his incumbents is the fact that they have been unwilling over the course of their tenure in office to make the difficult decisions that should have been made to keep the Shores out of the current fiscal quagmire that threatens the viability of our city.
The fact of the matter is that here we are today, nearly a year after the incumbents raised taxes the amount needed to cover an operating deficit from the last fiscal year. The incumbents promised the tax increase was to maintain a healthy fund balance and for roadwork on Lochmoor. Despite their assertions as to what the tax increase was supposed to be for, the Shores own auditors subsequently had to report us to the state for a deficient general fund balance, and no roadwork has been done! The incumbents have yet to offer a concrete plan to definitively control legacy costs, hold the line on taxes and turn things around. Did you know that as a best practice the State of Michigan advises that cities finalize their annual budget up to 6 months in advance? Not so in the Shores.
Don’t expect any conclusive action or even to hear what they propose to do with next year’s budget and tax rate in advance of the upcoming election. Mayor Cooper and the remaining incumbents cling to the hope that citizens won’t have the courage to hold them accountable. They are working to defeat the recall so they can continue with business as usual. Don’t let this happen. We stand to be hit with another tax increase, which will drive property values down further. That is not the kind of management that this city needs.
Sincere thanks to the other four Grosse Pointe mayors whose course of action in keeping their cities fiscally sound make the urgent need for change readily apparent to Shores voters! Please get out and vote on May 4th!
Shores Municipal Finances
March/31/2010 18:14
For those Shores residents who want to learn more the fiscal problems facing municipal governments, I highly recommend reading two recently published newspaper articles. In the Friday March 19th edition of the Detroit News, the Metro section contains an article by Candace Williams entitled: “Warren mayor calls for pay cuts.”
A number of initiatives of Warren mayor Jim Fouts were highlighted, including the appointment of Louis H. Schimmel as executive administrator. Mr. Schimmel is the financial expert who helped lead the cities of Ecorse and Hamtramck out of insolvency. Warren, unlike Grosse Pointe Shores, is not one of the cities in dire shape that are on the State of Michigan fiscal watch list. Yet the mayor of that city chose to act boldly and prospectively by engaging the services of a recognized authority to help stave off financial trouble.
Shores residents should note that Mr. Schimmel is a friend of Shores resident John Booth. John’s public offer several months back to help arrange a meeting with Mr. Schimmel and our city council was firmly rebuffed at a recent “finance committee of the whole.” Citizens need to ask themselves- just what is it that has the incumbents so afraid that they would refuse the opportunity to have a highly regarded and widely recognized expert in municipal finances come in and look at the Shores situation? You would think what when the Treasury Department of the State of Michigan has us listed as one of the state’s most fiscally unsound communities that the offer of outside expertise would have been welcomed.
The other recommended article appeared in the March 15th edition of the weekly financial paper, Barron’s. It focuses on the “massive overhang that threatens the financial future of many cities and states” related to government pension obligations. To read the article called the “The $2 Trillion Hole”, activate this hyperlink. If you cannot access the article on line, Barron’s is also available at the Grosse Pointe libraries.
Author Jonathan Laing points out that the bleak financial position of many local governments can be traced to their defined benefit pension plans. The Shores seems to be the poster child for many of the practices brought to light in the article: modest contributions by plan participants, pensions exceeding 75% of pay from the highest earning years, “spiking” the pensions by including inflated overtime, payouts of years of unused sick and vacation days, and the practice of “double-dipping.” According to Laing, “besides the politicians, the primary culprits are the public-employee unions which have used their growing power to dramatically enhance pension benefits.”
The consequences of these unsustainable legacy costs is that they tie up more and more of the municipal budget, and leave less and less for providing direct services to residents. As I fill out my Grosse Pointe Shores Fiscal Priorities Survey, it puzzles me why the focus of the questionnaire seems to be what on services the city can cut, rather than asking residents how they want the council to deal with the true root cause of the problem.
Do some quick math. The Shores revenue intake is in the ballpark range of $6 million a year, and falling as your housing values plummet. Subtract the required $600,000 in pension fund contributions, the $800,000 that should be going to fund retiree health care, the $600,000 in bond debt service payments and add in the $2.6 million dollars in Shores employee salaries, and there is not a whole lot left to pave our streets or provide other direct services to residents. About 25% of your hard earned tax dollars that go to the Shores are required just to fund the retiree pension and health care liabilities! If these figures are hard to believe, don’t take my word. Please peruse the most recent Shores financial report, and the pension fund and retiree health care reports as posted on this website on the Source Documents page.
It seems to me that the best hope for the Shores is that the May 4th recall election will succeed, and our council will gain more fiscally responsible members like Ted Kedzierski and Dan Schulte. When Mayor Cooper and the incumbents refused an offer to meet with a well-recognized financial expert like Lou Schimmel, they provided voters with unequivocal proof that, unlike Mayor Fouts in Warren, they are not really serious about doing what is required to get Grosse Pointe Shores back on firm economic ground. Can we really afford another year and a half of letting the Cooper regime continue with business as usual?