Transcript Michigan`s Local Government Finances - Looking

“The Good Old
Days”
Are Fading for Michigan’s Local
Governments
The “New Normal”
for Michigan’s Local Governments
Presented by:
Larry Merrill
Michigan Townships Association Executive Director
Post-War Twentieth Century

Unparalleled Prosperity
 Michigan’s Per Capita Income: Top

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5
Detroit Fourth Largest City in
United States
Manufacturing Jobs Galore
Population Growth
Robust Economy (for the most
part)
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Sales and Income Tax Revenue
Housing Starts
Income Tax Revenues
New Revenue Sharing Program 1971
Recessions Infrequent, Short
Duration

1950-1999

2000-and on

Manufacturing Sector
Growth

Global Economy
Emerges

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Property Tax Revenues
State Shared Revenues
Federal Revenue Sharing
Expanding Role of Local
Government
 Federal Categorical
Grants

Dot.Com Bubble
 Capital Gains Growth

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

Manufacturing Declines
Population Declines
State Revenues Plunge
Mild Recession 20012003
 Severe Financial Sector
Recession 2008-2011
We are a state
divided:
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•
Resources
Expectations
Traditions
Infrastructure
The governor’s Regional
Prosperity Initiative
Diversity of Michigan’s Local Governments
THEN
NOW
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Still heavily reliant on declining industries and
products
Aging work force lacks skills for emerging
jobs
Entrepreneurial spirit is lagging
Lackluster immigration
Poor attraction, retention of knowledge
workers
The Data
Tells The
Story…
The Data Tells the Story..
Source: Bureau of
Labor Market
Information, Local
Area Unemployment
Statistics (LAUS)
Source: Bureau of Labor Market Information,
Local Area Unemployment Statistics (LAUS)
Source: Bureau of Labor Market Information,
Local Area Unemployment Statistics (LAUS)
Source: Bureau of Labor Market Information,
Local Area Unemployment Statistics (LAUS)
Source: Bureau of Labor Market Information,
Local Area Unemployment Statistics (LAUS)
Source: Bureau of Labor Market Information,
Local Area Unemployment Statistics (LAUS)
Source: Bureau of Labor Market Information,
Local Area Unemployment Statistics (LAUS)
Source: Bureau of Labor Market Information,
Local Area Unemployment Statistics (LAUS)
Source: Bureau of Labor Market Information,
Local Area Unemployment Statistics (LAUS)
Source: Bureau of Labor Market Information,
Local Area Unemployment Statistics (LAUS)
Statewide Total
Real and Personal
Property Valuations
$400,000,000,000
$350,000,000,000
$300,000,000,000
$250,000,000,000
$200,000,000,000
Taxable Value
$150,000,000,000
$100,000,000,000
$50,000,000,000
Source: Michigan State Tax Commission
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
$-
Property Tax Revenues By Type of Local Government
3,000.0
2,000.0
city
1,500.0
county
1,000.0
township
village
500.0
Year
Source: Citizens Research Council
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
0.0
1997
Revenues in Millions $
2,500.0
City Income Tax Collections
600,000,000
500,000,000
400,000,000
Total Statewide
300,000,000
Detroit
Lansing
200,000,000
100,000,000
0
2012
2011
2010
2009
2008
2007
2006
2005
Source: Citizens Research Council
2004
2003
Source: Citizens Research Council
Source: Citizens Research Council
Total Revenue Sharing to Locals
$1,800,000,000
$1,600,000,000
$1,400,000,000
$1,200,000,000
$1,000,000,000
$800,000,000
$600,000,000
$400,000,000
$200,000,000
$-
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
1,400,000
1,200,000
Michigan Local Government Miscellaneous
Revenue Source Changes
1,000,000
800,000
FY 2004-05
600,000
FY 2010-11
400,000
200,000
-
Parks
Housing
and recreation and comm dev
Solid
waste mgt
Interest
earnings
Other
general
revenue
2,500,000
2,000,000
Change in Michigan Local Government
Expenditures
2005-2011
1,500,000
1,000,000
500,000
FY 2004-05
FY 2010-11
-
1,200,000
1,000,000
Change in Michigan Local Government
Expenditures
2005-2011
800,000
600,000
FY 2004-05
FY 2010-11
400,000
200,000
-
Financial
administration
Judicial
General
Other
and legal
public buildings governmental
administration
45,000,000
Michigan Local Government Outstanding
40,000,000
Debt
FY 2005-2010
35,000,000
30,000,000
25,000,000
FY 2004-05
20,000,000
FY 2010-11
15,000,000
10,000,000
5,000,000
Short-term
Long-term
Public debt Long-term Long-term
for private debt issued debt retired
purposes

311 Local Governments Have OPEB Liability
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Total Liability is $13.5 billion;
Funded at 6%
Net Unfunded Liability is $12.7 billion
City of Detroit’s OPEB is $4.9 billion (2009) 39% of total for
all local governments
 47% are starting to prefund
 Equates to 20% of all general fund revenues
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Total Unfunded Pension Liabilities $3.1 billion (10% of
general fund revenues)
Average Annual Benefit per Retiree $8,887
Governmental Activities Total Debt
approx $5 billion
Performance Measure
• Total General Purpose Local
Governments
• Total Local Governments, Including
Special Purpose Districts
• Local Elected Officials
Per
Capita
State
Ranking
1,858*
33
2,893*
28
19.4/10
k
6.6*
26
• Average # Elected Officials Per Local
Government
• General Revenue For State And Local $7,310
Government Operations
• Federal Funding For Local Government $1,487
Services
•U.S. Bureau of the Census data, except where noted
38
32
33
Performance Measure
Per
Capita
• Number Of Local Government 12.2/1
Employees
K
• Funding From Local
$5,823
Governments’ Sources
• Property Taxes
$1,412
• Salaries and Wages, Local
$617
Government Employees
(noneducational)
State
Ranking
43
31
16
37
Performance Measure
Per
Capita
• Law Enforcement Expenditures
$242
• Fire Protection Expenditures
$95
• Financial Administration (tax
$94
collections, assessing, accounting)
• Other Government Operations
$68
(governing boards, planning and zoning
• General Use Public Buildings
$38
Expenditures
State
Ranking
28
37
44
43
38
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Levels versus changes
Local government debt
Cash solvency (current assets divided by
current liabilities)
Debt service divided by total revenue
Inflation-adjusted taxable value growth
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Munetrix Score
Population Growth
General Fund Expenditures as a
Percent of Taxable Value
Operating Deficit
Size of Fund Balance
Long-term Debt as a Percent of
Taxable Value
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Allen Park, Emergency Manager
Benton Harbor, Emergency Manager
Detroit, Emergency Manager
Ecorse, Receivership-Transition Advisory Board
Flint, Emergency Manager
Hamtramck, Emergency Manager
Highland Park, Under Review
Pontiac, Receivership-Transition Advisory Board
Inkster, Consent Agreement
Royal Oak Township, Under Review
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Current trends extended forward…
 Michigan will recover per capita ranking to the low
thirties from 41st
 Unemployment remains slightly above national
average
 State budget modest growth, with some periodic
minor recessions
Factors
impact
Older Urban Core
negative
Low Average Income
negative
High Accrued Legacy Costs
negative
Dependency on Old Manufacturing
negative
Struggling Schools
negative
Low Civic Engagement
negative
Declining Population
negative
Dependency on Auto Industry
Varies; engineering; assembly; parts
Expanding Industries
positive
High Technology, Financial, Health Sectors
positive
Prime Farmland
positive (potential bubble)
Alternative Energy (Wind Turbines)
strong positive
High Educational Attainment
strong positive
Few local governments have resources to satisfy
most, let alone all service demands
 No ready solution to accrued legacy costs
 Property tax caps slow revenue growth
 Growing reliance on sales tax, property tax
revenues
 State expects locals to solve their own
problems*
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*state will provide advice, financial oversight in
severe cases
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Better times ahead, if…
 State economy diversifies, reduces reliance on old
style manufacturing
 Improve education attainment of younger
workers
 Greater presence of expanding, knowledge-based
industries
 Agriculture remains strong
 Attract educated, wealthier immigrants
 Improved entrepreneurship climate
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Better times ahead, if…
 Natural resources increase in demand
 Invest in infrastructure, education
 Place making strategies
 Regional cooperation for economic
development
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Detroit will drift in and out of financial distress,
unless…
 The governance culture permanently changes
 The neighborhoods are made whole
 The education system is made functional
 The state and federal government partners on
infrastructure, adult education, workforce
development, economic development

Many older, poorer urban communities will
either struggle or die…
 Pockets of poverty and property
abandonment
 Eventual rebuilding driven by cheap land
prices
 Consolidation with surrounding
communities
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Growth primarily in metro areas
 Urban centers can thrive in New Economy with
place making strategies
 Suburbs will slow historical rate of growth
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Rural communities will continue to lose
population
 Residential will coalesce around small towns