Official budget talks began Monday in Farmington, with some good news and some bad.
City manager David Murphy said the millage rate will hold steady, but water and sewer rates are expected to go up by 6.86 percent and 5.82 percent, respectively. In addition to increased costs, he said, people are using less water.
Council members reviewed the city’s general and special fund budgets, as well as the proposed Downtown Development Authority (DDA) numbers. City-wide property tax revenues are expected to remain fairly flat, although big projects like the River Walk Farmington housing development on the former Flanders Elementary site, Digital Terrain office/retail building in the former Grand River/Halsted shopping center, and other large projects will come online over the next several years.
Council member Greg Cowley panned fund balances in both budgets; they represent a percentage of general fund expenditures typically saved for emergencies. He suggested the DDA should be investing in an “incubator” program or incentives to help fund property owners who want to redevelop by tearing down buildings.
“For the DDA to have $230,000 in the bank is a travesty,” he said. “That money is sitting there wasting away.”
The city’s nearly 28 percent fund balance exceeds the council’s established target of 25 percent, and city treasurer Chris Weber said a decline in interest rates has dropped investment income from $200,000 to around $30,000. Cowley asked about average fund balances among cities, and Murphy said they vary. A larger city, he said, might save a smaller percentage of its budget, because the budget itself is much larger.
“We have funds sitting here and not earning a return,” Cowley said. “People might say we’re over-funded.”
But Mayor Bill Galvin said officials have to take the city’s solid bond rating into account; rating agencies expect cities to build up funds in better financial times. He said he would support transferring funds to another city budget.
“I’m a little more fiscally conservative,” he said. “I don’t mind building up our general fund and capital improvement fund.”
The city does have one looming expenditure: about $400,000 in future pension costs. Weber said the city currently funds its retirement contributions more like a mortgage, but the state is requiring larger contributions over the next five years.
“Pensions will be fully funded quicker, but it’s going to be short term pain to get there,” Weber said. “Farmington is a more self-funded community. It’s tough on us, but it will be tougher on other communities.”
Officials will continue to discuss the numbers; state law requires them to pass a balanced budget by June 30.