25LINKBUDGET(FULL) - Flipbook - Page 29
City of Plymouth 2024 / 2025 Budget
Budget Issues
Multi-year budgeting has proven to be a valuable tool for trend analysis, allowing us to
anticipate developing issues years in advance. However, it can only shed light on systemic
problems that have been created, often by the State of Michigan, in their attempts to address
their own financial challenges. Here are the major issues that the City Manager and finance
department have grappled with in preparing this budget for the City Commission:
Continuing Revenue Shortfalls: While the City has significant flexibility in adjusting
user rates in the Water & Sewer, Recreation, and Waste & Recycling Funds, the General
Fund is most impacted by reduced revenues. The City lacks flexibility in taxation or
additional revenues, particularly in the General Fund and the street funds. These funds
heavily rely on state returns of sales tax and gas & weight taxes to fund services.
Moreover, the street funds are constrained by an outdated state accounting system that
fails to recognize operational differences between local government units and lacks
flexibility in funding road maintenance costs adequately.
Capital Outlay Replacements: Although the City has received strong support from
residents through bond issues in 1997, 2007, and 2019, totaling $34 million, to support
infrastructure replacement programs, maintenance of aging City facilities, and
equipment purchases, this has strained budgets lacking stable or increasing revenue
streams.
Inflation: In February 2024, the Consumer Price Index (CPI) increased by 0.4 percent,
with a 12-month increase of 3.2 percent. While the state permits an inflation factor in
property tax calculations under Proposal A, this factor is based on the previous year's
CPI. The 2024 property tax calculation is capped at a 5.0 percent increase after a 5.1
percent increase in 2023. The City will be significantly impacted by these increases,
particularly given the continuation of the street program, with gasoline and fuel oil
reflecting some of the largest increases in the CPI.
Legacy Costs: The City eliminated its defined benefit pension plan for new hires in
1999 and transitioned to a Health Care Savings Plan in 2014, eliminating the retiree
health care plan (OPEB). However, outstanding liabilities for these plans remain,
totaling $5,649,717 for the pension plan and $13,158,057 for the OPEB plan.
Outstanding Debt Balances: In addition to legacy costs, the City has three
outstanding bonds totaling $9,410,000, two of which are tax-supported. Additionally,
the City has $1,006,695 outstanding in equipment loans.
Long Range Deficit Elimination Planning
In June 2003, in response to dwindling State Revenue Sharing and stagnant tax revenues
caused by the Headlee amendment and Proposal "A," the City Administration implemented
new budgeting practices. These practices involved integrating the current year's budget with
projections for the following four years, aimed at addressing long-term deficits and enacting
permanent fiscal changes.
Substantial progress was achieved by 2006/07, with deficit-free budgets maintained for the
subsequent two years. However, the 2008 recession and declining property taxes resulted in
25BINTRO-04B-ES.DOCX
TABLE OF CONTENTS
INT 24
