5 mill increase being mulled: State of the City focuses on $20 million deficit

Photo by Daniel Heraty

Mayor John O’Reilly Jr. takes questions from the crowd following his State of the City Address Wednesday.

‘We are not taking in enough operating tax dollars to cover all of the costs of running our two public safety departments.’
— Mayor John O’Reilly Jr.

Times-Herald Newspapers

DEARBORN — Asking voters for a proposed increase of nearly 5 mills is among many solutions officials are considering to solve the city’s budget problems for the next fiscal year.

In his State of the City address Wednesday at the Henry Ford Centennial Library, Mayor John O’Reilly Jr. said Dearborn could be looking at a $20 million deficit in its $86 million budget for 2011-12. He said his goal was to make residents aware of the budget problems and how officials plan to fix them.

Other possible solutions include a three-year budgeting process, a 30 percent reduction in the number of nonpublic safety city employees, promoting visitor attractions and educational opportunities and sharing services with neighboring cities. Additional cuts in other areas also are being considered.

“Everything is on the table,” O’Reilly said. “if we work together on addressing our challenges as a city, we will also be working together to recoup the value of our own property. As mayor, I want Dearborn to emerge from these challenges as a community that continues to stand out in the region.”

O’Reilly showed video segments from a meeting with three members of the Community Task Force on the budget, featuring subcommittee chairs, Ernie Oz, Tim Bracco and Jane Ahern.

Noting the speech would be different than in years past, the mayor started off by saying the changes needed will be difficult, but that the goal will be to continue to improve Dearborn, which will not be easy.

“That means making uncomfortable, even painful changes to our service mix,” he said, “and raising our financial support, at least temporarily, to prerecession levels.”

The mayor said residents and officials working together is the key to addressing budget problems.

“We will fail without … support because (the residents) are the crucial component to our community’s success,” O’Reilly said.

He said the city over four years has lost over one-quarter of the revenues from taxable property values, adding up to $25 million.

“Think about the drastic lifestyle change a 25 percent reduction in your own family’s household income would bring,” he said.

Because of the loss, O’Reilly said, officials expect at least a $20 million deficit for the next fiscal year unless immediate changes are made, and that the situation will only get worse if not dealt with — to the tune of an additional $20 million for each of the next five fiscal years.

The mayor said the causes for the shortfalls have been “unforeseen and unexpected,” resulting in “an overall tax system statewide that can’t respond to cities’ new realities.”

Declining property values affect the total amount of city revenue, he said, and also affects police and fire operations.

“That tax rate today generates about $48 million a year,” he said. “The cost for running all aspects of our Police and Fire departments is about $51 million a year. This sobering fact means we are not taking in enough operating tax dollars to cover all of the costs of running our two public safety departments.”

Deficit elimination steps will require sacrifices from everyone, but cuts have been made over the last 10 years, O’Reilly said, adding that partnering with other cities to offer services also is a possibility.

“I’m convinced that even out most die-hard Dearborn residents won’t care who provides certain services,” he said, “as long as that service meets their needs.”

Part of the solution may include a ballot proposal to raise the tax rate from 13.62 to 18.5 mills. The city can only go up to 15 without approval from the voters. The state maximum is 20 mills, and Ahern said in a video clip that it wouldn’t be tax increase, just going back to an earlier rate.

“In 2005 and 2006, those 18.6 mills is essentially the same amount of money as 18.5 mills in 2011 terms,” she said. “The question before us is, what do the citizens of the city of Dearborn want?”

Ahern said raising the millage rate would be “an investment in our community moving forward.”

O’Reilly said if the increase was approved as the task force suggested, it would be with a sunset provision that it expires after a fixed period of time. He estimated that period at five years.

“That would give you, as voters, a powerful tool to hold us accountable,” he said.

During a question-and-answer session following the speech, O’Reilly contradicted Ahern, saying raising the millage rate actually would be a tax increase, since it isn’t 2005 or 2006 anymore.

“If you could pay it in 2006, the majority of people could still pay it in 2011 or 2012,” he said.

O’Reilly said the model to follow is Ford Motor Co. under current President and Chief Executive Officer Alan Mulally, whose approach is to accepting reality, and then form a plan to overcome it.

“If you ask anyone who works at Ford, they will tell you that much has changed,” O’Reilly said. “The company has fewer people and offers fewer products, but it is also more agile and capable of competing both today and tomorrow.

“Only now, after the change, the company, employees and shareholders are all seeing the benefits.”

He said the changes Dearborn must make will, in the long run, make it a better place to live.

“Together, we can make this happen,” he said.

(Contact Daniel Heraty at dheraty@bewickpublications.com.)