What's New

The City Council recently adopted the budget for Fiscal Year 2007. This budget begins July 1, 2006 and ends June 30, 2007. Our budget process begins in December of each calendar year when the City Manager requests goals of the City administration. These are subsequently prioritized by the Manager in a memo to Council. Once Council adopts these goals, these become the administration?s direction for the next fiscal year. The responsibility of the City Manager then includes reviewing those recommendations and creating the formal proposed budget for Fiscal Year 2007. The budget is submitted to the City Council from the City Manager in mid-April. Next, the Council reviews the budget at an all-day Budget Worksession on the fourth Saturday in April. Based on the comments received at this year?s Budget Worksession, the City adopted a budget with a $20,000 surplus. The budget, once adopted, becomes the formal guide to the City?s operations for the next year. The FY 06 Interim Budget reflects revenues of $5.8 million and expenditures of $6.1 million. As a result, FY 06 should end with a $300,000+ deficit. This would be covered by the City?s existing fund balance. The FY 07 Budget, as reviewed and approved by the City Council, reflects revenues of $5.9 million and expenditures of $5.9 million. As a result, FY 07 is projected to end in a very slight surplus condition. You can review the Manager?s budget letter below.

May 22, 2006

Mayor Osborn and the Fenton City Council:

In accordance with the provisions of the Fenton City Charter, I am pleased to present for your review and consideration the interim budget for the balance of the current fiscal year (FY 06) and the proposed budget for Fiscal Year 2007, which begins July 1, 2006.

The budgets presented herein reflect and address the areas of concern discussed by the Council since the adoption of the current budget. As we have discussed recently, our financial situation has worsened over the last several years. This budget is presented to Council in a surplus situation. However, this exists only because the City has received over $500,000 from the Downtown Development Authority (DDA) and Local Development Finance Authority (LDFA) in revenue sharing programs. Without this adjustment, the General Fund would incur a very significant deficit. Incidentally, FY 06 will end in a deficit even with this funding from the DDA and LDFA. As has been mentioned in the past, we are operating with a structural deficit. An additional dispatcher in the Police Department and the replacement of a fire rescue vehicle were requested by the administration, but not included in this final document. The Five Year Financial Plan continues to show concern over our long-term revenue situation. Fortunately, the City has a DDA and LDFA that have the financial ability to assist the General Fund.

Contrary to popular belief, we have made significant progress in our street improvements. Torrey Road Bridge and the repaving of East and West Streets account for our two major projects in the Major Street Fund. The actual cost of these projects exceeds $1.2 million while the City will spend less than $300,000. Once again, we are spending over $200,000 in local streets. As Council may recall, major street dollars are offset with grant money while local streets typically are not.

The Water and Sewer Funds are in solid financial condition. However, we have noticed that our consumption, presumably due to the recent major increases, has decreased. This could create issues for us as revenue decreases when consumption decreases. Costs, of course, continue to increase. Additionally, Council has asked that we plan for major projects in both funds that will require rate increases. Lastly, Genesee County is planning an increase for their sewer system that we will need to reflect as well. Each of these items are reflected in the budget based on the information we have now.

The only personnel adjustments I am proposing include the creation of an additional sergeant position and the creation of a Chief Dispatcher position, both in the Police Department. Currently, we often have no sergeant in charge during selected shifts. This causes either overtime or senior officer-in-charge (SOC) pay. This cost can be reduced dramatically as well as provide better direction with a formal supervisory position. The Chief Dispatcher position currently exists without a pay adjustment and a formal title. Making this adjustment will greatly improve efficiency while costing a minimal amount.

As indicated in the Five Year Financial Plan, the fund balance of the General Fund is shrinking and will continue to do so, below policy requirements. On a positive note, however, this City continues to provide for projects and services through creative financing. We have been able to utilize our Downtown Development Authority and Local Development Finance Authority. Based on the amount, and quality, of projects completed over the last several years, the City administration has a proven track record of quality service to our residents.

Based upon the actual figures for the first nine months and projections for the remainder of the fiscal year, FY 06 will close in a deficit situation. Specifically, a deficit of approximately $319,481 is anticipated. The vast majority of this deficit does exist as a result of debt issued for the ladder truck and the 800 Mhz radios. As discussed previously, part of our concern stems from structural deficit conditions. Further, state regulated and mandated local revenue adjustments will impact our budget. I will continue to work with our representatives in Lansing to alleviate this issue. Recently, the State Legislature added over $20 million to the revenue sharing budget state-wide. This will amount to a minimal increase for us, but an increase none-the-less. Considering these points, we are in excellent financial condition compared to most of our colleagues. This is a strong point upon which we can build.

Accomplishments this year include:

• Nearing full completion of long-awaited Main Street/Silver Lake Road Connector
• Continued pursuit of local street improvements
• Technological improvements in every department
• Continued implementation of a Geographic Information System (GIS)
• Commencement of aesthetic improvements to City Hall
• The replacement of the Torrey Road Bridge (expected to begin shortly)
• Planning for the new water and sewer main projects
• Hiring of a new engineering firm
• Managed two major, controversial private development projects
• Made significant progress on a Downtown Master Plan
• Implemented a variety of economic development tools
• Completed various sewer and storm drain work
• Processed additional development requests (commercial and residential)
• Completed major improvements to the Mill Pond dam
• Filled various staff and employee positions
• Improved fire service with addition of day-time staffing and inspection
• and much more!

By Charter, the City can levy up to 13 mills for general operating. Currently, the City levies only one millage on its taxpayers, our 11.00 operating millage. However, this has been reduced, due to the Headlee rollback, to 10.6174 in FY 07. In FY 06, the millage rate was 10.7117. This fiscal year will be the eighth consecutive year where we have not levied additional millage for debt. This budget was prepared with the Headlee rollback in place for the coming fiscal year. Our total of 10.7117 mills represents the lowest millage rate levied by the City since at least 1976.

The budget for FY 07 was developed using the following assumptions:

• Revenues are calculated based upon a millage rate of .0106174
• State Shared Revenues are calculated according to Michigan Department of Management and Budget projections and include figures from the 2000 Census
• Interest rates will hold steady or increase
• Other services would remain intact or improve efficiency

Revenues in the General Fund are expected to show a $184,446 increase (3.2%) in FY 07 from the current year's amended budget. This includes the anticipated allotment provided by the DDA ($300,000) and LDFA ($200,000). The overall revenues includes money from our new contract with Tyrone Township. As you may expect, this also includes anticipated new revenues from several large new developments within the City.

Expenditures from the General Fund for FY 07 are expected to exceed $5.8 million, including transfers to other funds. Of this figure, nearly $900,000 or approximately 15% of General Fund revenues, will be transferred to other funds to subsidize their expenditures. Further, 58% of the General Fund will be provided to employees or retirees through salary and benefits packages. The remaining amount of the General Fund will go to capital, operating or contractual matters.

In the future, the possibility continues to exist that capital projects may not receive funding to the same levels as in years past.

On a positive note, these are the significant, new or increased expenditures for the coming year:

In regards to the City's other funds, most are in at least good condition. Special attention should continue to be given to the Parks, Cemetery, Major and Local Street Funds. The Parks Fund is the most serious as the contribution from the General Fund is $222,000. Virtually the entire amount is operations related, not capital. The fund balances in the non-enterprise funds continue to decrease annually and are only able to stay positive with significant transfers from the General Fund.

Funds have been budgeted in the local street fund for the coming year to allow for $220,000 worth of improvements (repavings) to occur. Our need for major street improvements is beginning to lessen and our focus on local streets can take over. However, until the construction on major streets has ended, our focus will only be figuratively rather than monetarily. Here are the current planned major streets and their estimated start year of construction (by fiscal year):

I am continuing to work with Genesee County and the Michigan Department of Transportation to complete a widening of Silver Lake Road. Discussions thus far have been fruitful and I anticipate coming to Council soon. Adelaide and North Leroy are still not fundable projects, however, Adelaide should receive funding when the next call for projects occurs (in one or two years).

Both the DDA and the LDFA remain in excellent long term financial health. The DDA is planning various downtown improvements as approved by the Council in the DDA Plan. They have included over $400,000 towards parking improvements as well as aesthetic improvements to the Leroy Street bridge, which has been recommended by the Downtown Master Plan. Further, they have budgeted funding to possibly reopen Caroline Street near the existing Library. The DDA and LDFA have included $500,000 towards our General Fund to assist in our operations. These amounts would accommodate our budget shortfalls. This is not anticipated to become the normal policy, but a stop-gap measure to assist us through this difficult period. One final point: these funds from the DDA and LDFA are beginning to strictly fund operations. More difficult decisions may lay ahead for the City.

I am recommending that the City Council maintain the millage and collect 10.6174 mills for Fiscal Year 2007. Reasons for this recommendation include:

• To increase the amount of millage would require an override of the Headlee Rollback which can only be completed by a vote of the people
• The budget as presented continues to meet the needs of the community and addresses areas of concern as expressed by the City Council
• City services remain the same, but are offset by DDA and LDFA financing
• Additional technology will continue to improve our efficiencies

Under the provisions of the Charter, the Council has until the 3rd Monday in May (May 15, 2006) to adopt the budget for the coming fiscal year. Our budget work session is scheduled to take place on Saturday, April 22, 2006 from 9:00am to 5:00pm in the Fire Hall Training Room (copy of proposed schedule attached). Our current schedule calls for us to hold our Public Hearing on the budget as well as adopt the budget at our Monday, May 8, 2006 meeting. Calendars for the months of April and May are provided for your convenience.

With the production of the budget now complete, I must thank Cynthia Shane, City Treasurer, and Wendy Burton, Deputy City Treasurer. This document reflects their great effort.

The entire city staff and I look forward to assisting you in your review and consideration of the proposed budget. If you have any questions at any time throughout this process, please do not hesitate to ask.

Respectfully Submitted,

Michael J. Senyko
City Manager