AP again faces $4 million shortfall

By ANDREA POTEET

Sunday Times Newspapers

ALLEN PARK – Declining property values and debt service payments for the city’s failed movie studio continue to put strain on the cash strapped city that faces a budget shortfall of $4 million for Fiscal Year 2013.

During the city’s annual audit from Detroit-based firm Alan C. Young and Associates Jan. 22, Principal Auditor Jay Wildes and Financial Advisor firm Plante & Moran’s Carl Johnson laid out the familiar story of decreasing general funds with one new item to announce during the 2012 fiscal year, which ended June 30.

“The general fund ended this year $857,000 in the hole,” Johnson said. “For the first time in many years, the general fund officially has a deficit.”

Johnson also pointed to two major strains on the general fund – the former studio property and the retiree health care fund – both of which cost about $2.5 million a year and account together for 28 percent of the total general fund expenditures.

After borrowing $2 million in tax anticipation notes in 2012, the general fund still saw a $1.8 million shortfall that Johnson said was attributed solely to the studio property situated next to City Hall.

“Absent the debt service on the property next door, (the TANs) would have covered our shortfall,” Johnson said. “There actually would have been a balanced budget. The shortfall of $1.8 million is the debt service next door that the general fund didn’t cover.”

General fund Police and Fire expenses, often pointed to as the city’s largest expense, dropped from $10.1 million to $9.1 million, but Johnson said it was a reflection of the city collecting $2.6 million for a public safety millage that residents overwhelmingly voted to support last year.

In reality, those expenses rose to about $11.6 million last year, but the general fund’s contribution to them decreased. Rising pension contributions, overtime related to staff cuts, and the loss of a one-time Fire Department memorandum of understanding for $500,000 in concessions that expired at the end of the 2011 fiscal year helped add to the departments’ costs, Johnson said.

But the city’s situation is only getting more dire, Johnson said, as property values dropped another 3 percent for 2013, translating to an estimated $1.8 million loss, and the 24th District Court’s proceeds are estimated to drop by another $500,000.

“Our revenues continue to fall,” Johnson said. “That’s the challenge we have here.”

Emergency Financial Manager Joyce Parker, appointed by Gov. Rick Snyder to the city in October, will address the city’s finances with her financial plan for the city, which she is expected to unveil this month.

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