ypsi’s blue ribbon committee on city finances

OK, I just got back from City Hall, where I was in the audience listening to a consultant from Plante Moran explain the Ypsilanti city income tax study that they’d just concluded, something which we, the citizens of Ypsilanti, paid about $22,000 for. As I recognized about half the people in the audience as local bloggers who do a much better job of covering these things than I do, I won’t go into a lot of detail, but I did want to mention a few observations before dragging myself up to bed.

For those of you not from Ypsilanti, you should know that our finances, like the finances of many cities in Michigan, are fucked. We are, as people around here like to say, teetering on the edge of receivership.

It’s the same story you see playing out all across the rust belt – manufacturing jobs are leaving, and, in their place, we’re getting Wal-Marts, check-cashing parlors, and dollar stores. Living-wage union jobs, generally speaking, are being traded for poverty-level incomes. As American industry chases cheap labor around the globe, communities like ours on the frontlines of the “old economy” are reaping the consequences.

I should point out right up front that the men and women serving on the so-called “Blue Ribbon Committee on City Finances” are good people. Some are even my friends. They’re all residents of Ypsi, and I’m convinced that they all want to do the right thing. The sad fact of the matter is, however, that there are no easy answers. We either cut costs, increase revenues, do a combination of the two, or allow the state to take away control from us.

A second thing that I should add is that I’ll most likely make a lot of mistakes in this article. When you take the fact that I came twenty minutes late to the meeting, add to that the fact that I have a somewhat poor grasp on city finances to begin with, and then factor in the fact that I hadn’t eaten in twelve hours, there’s all kind of opportunity for error.

Did I say that we’re fucked yet? And I mentioned that everyone on the panel has only the best intentions? And I warned you not to take anything I say too seriously? OK then, let’s get started.

The Blue Ribbon Committee was formed a year and a half ago, and charged with looking into our city finances and what could be done to keep us from going belly-up and floating down the mighty Huron like a mercury-filled fish. They interviewed city employees, talked with union officials, looked at local and national trends, etc. The consensus of the committee, happily, was that we had a pretty well run city. We were, at least by the measure of our regional peers, being run efficiently. (In particular, we’d been doing a damned good job of stretchng resources, and making things like firetrucks keep working well after other communities would have retired them.) Unfortunately, revenues aren’t keeping up with inflation though, and increased costs, particularly with regard to the healthcare of City employees, are beginning to push us into the red, despite all our efforts.

(The Headley Amendment and Proposal A were also cited as contributing factors to the currect situation, but they’d take too long to get into here, so I’ll just leave it at that for now.)

So, in the course of exploring areas in which savings could be had and revenues could be increased, the idea of a City Income Tax was floated… Other ideas, on the cost-cutting side, seemed to revolve around joining with neighboring municipalities to consolidate fire, police and other services — something which seems, based on what was said tonight, to be almost inevitable. (No mention of increased response times, etc, was brought up.)

The big problem in Ypsi is that approximately one-third of the land within the boundaries of the city is off the property tax roles. Most of that is due to Eastern Michigan University (EMU). (Churches and other not-for-profits account for some, but EMU is by far the largest land owner.) Adding to this problem is the fact that these entities require city services, for which they don’t contribute. In the case of EMU, there’s apparently an equation that the state is supposed to use which spells out the amount that they will contribute to the local community hosting the state facility in order to compensate for their use of services. According to the members of the panel, that amount, as dictated by this state-mandated formula, is about $600,000 annually. The state of Michigan, however, never lives up to the obligation. Last year, they contributed only $130,000. In the words of one committee member, we allow them to “freeload.”

In large part, the idea of a citywide income tax, as I understand it, was first floated as a way to tap into the EMU community, the thought being that if we can’t tax the property, then at least we can tax the income earned in the city. This, it should be added, isn’t without precedent in Michigan. As many as two dozen Michigan cities already have income taxes, including Detroit and Grand Rapids. (A large percentage of EMU employees do not live in the city, and thus don’t pay property tax either.)

The fellow from Plante Moran has apparently also just completed a similar study for Ann Arbor (one wonders how much of the work we paid for was just borrowed from their report), our prosperous neighbor to the West. In his opinion, they’re more likely to sell the idea to their residents and business community than we in Ypsi are. He suggested that if we wanted to move forward, we’d have to engage the Ypsi business community in a discussion as to how it would affect them, etc.

A man in the audience, a resident of Ypsi who is a controller for a company in Ann Arbor, indicated that his bosses had asked him to draft a contingency plan for the possibility of the income tax becoming law in Ann Arbor. (They wanted to move the company if it passed.) According to an informal survey done by the Ann Arbor Business Review, 80% of business owners said that they would consider moving.

I suggested that perhaps, if it’s true that Ann Arbor might adopt a city income tax, we might want to delay our decision in hopes of attracting some of the fleeing businesses. I thought that it was a great idea, but it was quickly pointed out to me that we didn’t have the luxury of waiting. I was also told that, even if we did attract several businesses to the city, it would take too long for the benefits to ripple though the system as tax revenue.

If I understood the fellow from Plant Moran correctly, he said that a city income tax wouldn’t really fix anything, but that perhaps it would “buy (us) some time.”

It was mentioned that if we voted to enact an income tax (a vote is necessary to do such a thing), then perhaps property taxes could be decreased to somewhat offset the burden. We would still most likely be paying more, we were told, but perhaps it wouldn’t be a huge increase. (The burdon would, under this scenario, be primarily on those working in, but not living in, Ypsialnti. At least that’s what they’re claiming.)

Ingrid, who is on both the Spitting Cat team, and the Blue Ribbon Committee, did a good job of pressing the fellow from Plante Moran for details as to how this income tax would affect lower-income families, especially those renters who wouldn’t benefit from the suggested decrease in property taxes… Basically, he said he didn’t have the data to say one way or the other…. Ingrid pointed out that this information was promised in the contract between Ypsi and Plante Moran, to which he responded that he couldn’t just make up data that didn’t exist. (I found his comment to be less than helpful.)

At some point during the meeting, I learned that the Visteon plant in town would be closing. (The rumor had been circulating for months, but apparently it’s official.) One of my questions to the Committee (I asked a lot of them) was how, if at all, this would change the findings of their report. One of the men on the committee said that not having Visteon would cut the amount collected by the income tax by $200,000. (They didn’t know off hand how much we’d lose in property taxes though.) When I followed up by asking how an income tax might affect our chances in attracting a new tenant for the soon-to-be-vacated facility, they said they didn’t know… Someone mentioned that perhaps temporary exceptions could be made in cases like these, in order to lure new companies, but they were told that special deals aren’t possible when it comes to taxes.

Some discussion was had as to what other cities, like Washington, DC and Atlanta, had done in order to turn themselves around. I’m not sure, but, if I understood correctly, in addition to implementing income taxes, these cities had earmarked some of the resulting funds for investment in local economic development initiatives. I could be wrong about that though.

It sounded as though they were projecting an additional $4.1 million to come in as a result of the income tax… I should have probably mentioned it earlier, but all people living in the city would pay the income tax, as well as people who just earned their wages in the city. In the case of business owners in Ypsilanti who do business outside the city, they would only have to pay taxes on that portion of their revenues earned here. The rate being proposed, I believe, was around 1.25%. In the case of people living in Ypsilanti but working elsewhere, income taxes would be paid first to the municipality where the income was earned (if they have an income tax). You would not, in other words, be taxed twice.

At some point, when discussing another town in similar economic straights, a committee member said that we couldn’t really make the comparison as their town had a “growth industry” — a prison. After a bit of laughter, someone else suggested that perhaps we take a few of our closing schools (which are being closed due to similar budget constraints) and convert them into jails… There were a few very nice moments of black humor.

I had one question that I didn’t ask, due to the session drawing to a close… I wanted to know more about the model that the fellow from Plante Moran used to predict the results of the income tax in Ypsilanti. If I understood him correctly, they built their model and then, in order to test it, went back and looked at other Michigan communities as they were before passing their local income taxes into law. They then checked their predictions against what actually occurred in those same cities in the wake of the income taxes and then tweaked their model accordingly. That sounded good to me until I looked back in my notes and saw that the last income tax to be passed into law in Michigan was in 1995. If that’s correct, my concern is that their model might no longer be valid. The economy has, as we all know, changed quite a bit over the intervening decade.

One last thing that I wanted to mention before going to bed… And this doesn’t pertain to the income tax but to the cost-cutting side of the equation. It was mentioned by someone on the panel that Wayne has transitioned their fire department over to a fire/EMS service model, which essentially means that they provide emergency care and transport people to the hospital. By doing this, and charging for the service, as an existing EMS provider would, they’ve been able to contribute over $200,000 per year to the city coffers. Unless someone knows a reason why this wouldn’t work, it seems like a pretty good idea to me, and, I’m thinking that it might be our only chance to keep a fire station downtown, and response times fast. It’s certainly worth considering.

All in all, it was a good meeting. It’s nice to be reminded on occasion that we have bright citizens with good questions and dedicated community leaders who are willing to step up and consider the difficult questions confronting Ypsilanti. I’m sure I could think of a few unkind things to say, especially about the numbers and the assumptions that the Plante Moran study is built upon, but all in all I get the sense that we’re making positive progress… The only question in my mind right now is, how much would the cost savings made possible though a single-payer national healthcare system offset the healthcare costs that are, in large part, driving this local economic crisis. It’s worth considering.

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  1. Posted June 16, 2005 at 8:16 am | Permalink

    Great write-up. When they were discussing Ann Arbor’s potential income tax (and 80% of businesses considering leaving), did they discuss “impact on Ypsi if A2 made an income tax”, or just “impact on Ypsi of Ypsi income tax based on impact on A2 of A2 income tax”? If 80% of businesses in Ann Arbor would think about leaving, it seems like Ypsi would have a huge opportunity if it was ready to pounce. Ypsi is one of the Michigan Suburbs Alliance’s Redevelopment Ready Communities participants, isn’t it? Not that I’m hoping Ypsi will profit at A2’s loss, but, if A2 shoots itself in the foot, hopefully _somebody_ worthwhile will profit from it.

    I think the problem with studies like the one that Plante/Moran were hired to do is exactly as you say – the best tool available to them may be 10-year-old case studies that happened in a wildly different economic situation. “How much will this generate in Year One?” is a question of simple math – “How much will this generate in Year Five, after people have reacted to it?” is a question of black magic. Er, I mean, “urban theory”.

  2. Posted June 16, 2005 at 8:22 am | Permalink

    (Re-reading, I see that _you_ discussed swiping ex-A2 businesses. Did you get any reaction to that, aside from in Ypsidixit’s post on the meeting?)

  3. Laura
    Posted June 16, 2005 at 9:14 am | Permalink

    Murph: P&M covered for the black magic aspect by making sure to say in the study that, in essence, who knows what could happen in the future.

    Mark: As Murph says, this is a great write-up, your self-deprecation at the beginning notwithstanding. Informative.

  4. Posted June 16, 2005 at 11:26 am | Permalink

    If the little town with the jail is Hamtramck, Plante and Moran knows better. They are also auditors in Hamtramck. Wayne County is trying to screw us $800,000 per year on the jail PILOT right now. An electronic version of the proposed 05-06 budget for the City of Hamtramck is available online for anyone interested.

    “joining with other regional entities to consolidate fire, police”

    an extraordinarily bad idea. did I mention that Wayne County is fucking Hamtramck out of $800,000? County government has no love for the City.

    Fire/EMS is a very common arrangement and works well. I’m not sure what that would mean for Ypsilanti as I believe the ambulance services are entirely handled by Huron Valley Ambulance and others in the private sector. (30 years ago, ambulance services were handled by funeral homes in Michigan.)

    “The big problem in Ypsi is that approximately one-third of the land within the boundaries of the city is off the property tax roles.”

    remember, they said that last year, right before Council held an illegal meeting and gave another chunk of land to EMU.

    “It was mentioned that if we voted to enact an income tax (a vote is necessary to do such a thing), then perhaps property taxes could be decreased to offset the burden.”

    I still don’t buy it. How could they possible lower property taxes when the point of the income tax is revenue and the auditor said it would only

  5. Posted June 16, 2005 at 11:50 am | Permalink

    Hillary, please move back to ypsi, so that you or steve can run for mayor. Seriously.

    I think one part of the equation that’s missing here, which really bothers me, is their attempt to cover the ‘double city income tax’ loophole, which I regard as a perfectly reasonable incentive for people to work in the town where they live.

    Otherwise, I agree with everything hillary said, especially the point about the ypsi city council giving handouts to emu and then turning around and complaining about them.

  6. Posted June 16, 2005 at 1:34 pm | Permalink

    If you live and work in Ypsi do you pay more? I thought that with the Detroit city income tax that it works that way. You pay so much if you just work in the city, so much if you live in the city and they had those two together if you and work there.

  7. Posted June 16, 2005 at 1:48 pm | Permalink

    kathleen, i was sort of daydreaming there. the only thing they discussed, based on the descriptions i’ve read, was that if you work in another city and pay income tax there, you won’t be double taxed by ypsi if you live here (they’ll somehow split the tax between the two, i guess). I think that’s the reverse of how it should be, personally.

  8. Posted June 16, 2005 at 2:49 pm | Permalink

    Brett, we might have mentioned that we liked Ypsi until we got a load of the City’s Master Plan and direction of the Water Street ED fiasco.

    It all started before we showed up and nobody in town is inclined to challenge it.

    It’s the reason I was on the front page of the Courier going on about soulless bedroom communities.

  9. Eris
    Posted June 16, 2005 at 4:13 pm | Permalink

    Murph–are you referring to the Ann Arbor Chamber of Commerce survey? I’m always dubious about surveys and the one they conducted had a 10% response rate. (349 businesses out of 3,243) Plus I’d like to see whether this is a repesentative sample– a good mix of small, medium and large employers?

    I’d like to see how they’d respond to this survey question– “Would you help contribute to a city income tax in order to diminish the possibility that the city you do business in might go belly up?” But I don’t think that’s a Gallup approved question.

    It seems the issue of an income tax doesn’t stave off financial ruin. So would it be possible for the City of Ypsi to sue the state of Michigan and EMU and get the $8 million the Mayor says is due us over the last 30 years? (refer to the state of the city address)

    And I too also like the idea of an income tax. It gives more weight when yelling “I’m a taxpayer here!”. Right now I’m not since I’m a renter and the only taxes I pay in Ypsi is sales taxes, which doesn’t come back to the city anyways.

  10. Ingrid
    Posted June 16, 2005 at 4:58 pm | Permalink

    Your landlord is probably charging you something for the property taxes that he or she pays.

  11. mark
    Posted June 16, 2005 at 7:27 pm | Permalink

    One thing I didn’t mention in my post, was the fact that everyone on the panel seemed to share the opinion that landlords, if the city income tax came to pass, would just alter their books so that they wouldn’t show a profit on the properties (which would count as income earned in Ypsi). As rental properties are such a huge part of the local mix, I found that a bit disconcerting. Perhaps I was reading too much into the few comments that were shared, but it sounded as though it was just accepted that landlords would get by without participating.

  12. mark
    Posted June 16, 2005 at 7:35 pm | Permalink

    As for your comment, Murph, no, I didn’t get any feedback on my idea – other than the suggestion that it was niave. I can’t rember who responded, but someone told me that we didn’t have a year to wait and see. (My suggestion, again, was that perhaps we could turn the situation to our advantage by appealing to companies moving from, or not wanting to move into, Ann Arbor due to the income tax (if they pass it).) There was no discussion of the idea… Personally, I still think it’s a very good idea, but I don’t know enough about the specifics of the budget to say one way or another whether we’d be able to tighten our belts and wait out Ann Arbor. They might be right. It might be impossible.

  13. Posted June 16, 2005 at 7:47 pm | Permalink

    I thought it was a great idea, with the caveat that I also don’t know enough about the budget details to say whether it’s actually feasible.

  14. Suzie
    Posted June 16, 2005 at 8:13 pm | Permalink

    I’m appalled to learn how the Headlee amendment works – that even though a property sale “uncaps” the rate paid by the property owner, the overall revenue situation of the city is not improved. So even if lots of new folks move in, it only helps the city to the extent that they support new businesses, because the (very high) property taxes paid are not benefiting the city by themselves. I don’t mind paying the tax, truly. But if I pay the popup rate, the city should get the benefit.

  15. john galt
    Posted June 16, 2005 at 8:28 pm | Permalink

    If you guys increase the tax.. esp if you increase it on high earners. Why would people move in.. I don’t live there, but how is increasing the tax rate going to entice more people to move there? If there’s another county..(sorry township) with a lower rate, wouldn’t they choose that one? If anything, it will force the people who pay the majority of taxes to move to places where they don’t get raped by the township.

  16. john galt
    Posted June 16, 2005 at 8:37 pm | Permalink

    Yipsi needs to sponser a hippie jam fest, to “focus the power of rock and roll to affect social change”. Yes Yipsi fest is the best way to deal with your finacial crisis (its easier than a bake sale). On a completly different note… I’m voting for secession from my county tommorrow (in the south we have a history of that).

  17. mark
    Posted June 16, 2005 at 9:49 pm | Permalink

    Yes, the south has many lovely traditions, doesn’t it?

  18. Brian Filipiak
    Posted June 17, 2005 at 9:45 am | Permalink

    Mark, you did a great job of reporting on the meeting, thanks for that.

    As to the issue of the Ann Arbor Chamber of Commerce quick poll… I’d be interested in knowing more about the poll, who conducted it for them, how the question was worded, etc. The Chamber’s mission is not to serve the City, but to serve their members, so I doubt it was a neutral or informative poll (that’s just my guess) – more of a “knee-jerk” reaction, as one local Ypsi business owner told me after the meeting.

  19. Brian Filipiak
    Posted June 17, 2005 at 10:03 am | Permalink

    Oh… and a couple of other things.

    Hillary – there are always thoughts of how best to save money, and whether or not consolidation of services would be beneficial. People talk about this with the three school districts in Ypsi as well. The reality is, consolidation could save some money, but likely not enough to account for a truely meaningful impact. After all, it would likely be a few administrative positions to be purged by such moves – we would still need to have the personnel coverage – whether we’re talking about firefighters or school teachers – and that’s where the real expenses are, in salaries and benefits.

    On the comment “Council held an illegal meeting and gave another chunk of land to EMU”. I believe Council fixed that, by holding a legal meeting. And no land ended up being given to EMU. The land in question, I might point out, was a one-block section of a city street. It was not any taxable property.

  20. Posted June 17, 2005 at 11:36 am | Permalink

    I hadn’t heard about ideas to consolidate the school districts, which does seem like a way to reduce administration costs. Totally agree that the savings may not be worth the trouble.

    When I hear about consolidating police and fire, I remember back to the good old days in Barry County, Michigan, where dispatch is centralized, the police are all stationed in Hastings, and the fire department is run by volunteers and paid-on-call personel. Barry County is the subject of many studies to consolidate fire and police. It is also the least populated county in the lower peninsula.

    Most houses have “vented themselves” by the time the fire department gets there and the police come out to file reports, but they don’t often catch people in the act of a crime. Most people own guns for home protection. The biggest problem they’ve got is clandestine meth labs.

    No, thanks.

    Thank you for the correction, Brian. I should have said “tried to give”. The neighborhood associations got wind of it and the e-mails were flying. At the next legal Council meeting, the resolution was tabled and has not been heard from since. If I remeber right, the land included a number of City parking meters and I thought the discussion included a sorority house, but am not sure.

  21. john galt
    Posted June 17, 2005 at 6:21 pm | Permalink

    Ah stereotypes (and from progessives no less). I just so love it when people slam the south because of Klan Activity. You know in the 50’s the entire indiana Legislature was controlled by the Klan.. But noone seems to remember that.


  22. john galt
    Posted June 17, 2005 at 8:59 pm | Permalink

    just to complete my last thought… I’ve lived in Georgia my whole life (my family goes back to the 1800’s) I’ve never seen a Klan member ever. Why is it that people in the north seem to have this view that we’re all cross burning racists? I grew up in a very small town in west Ga. and I’ve never seen any overt racisism condoned by anyone.. The town I grew up in was probably 55% black and we never had any racial strife… Maybe mississipi or alabama is diferent… but I just don’t understand the north’s (what 5% black) argument that we’re all a bunch of racist rednecks.. If anything the south has a much greater history of integration than states such as michigan do. I;m sure mistakes have been made in the past but why is Atlanta called the “Black Mecca” if we’re such a bunch of racists? Regardless of race people are people.. At my mother’s funeral the crowd was probably 40% black (sorry African American) people she grew up with and who loved her… How could that be so if we are all so terrible?

  23. mark
    Posted June 17, 2005 at 10:11 pm | Permalink

    John, I know you’re not a liar, but you said in a comment a few months ago that your parents escaped from Castro’s Cuba. Which is it?

  24. john galt
    Posted June 18, 2005 at 9:34 am | Permalink

    those are my inlaws, I believe I said members of my family.. Sorry I didn’t make that clearer for you. I even spent last christmas with them in Miami.

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