Buckets of money: Why the city of Ann Arbor can't use the money it has for what it really needs
Most Ann Arbor residents watching the city's budget situation have probably heard officials use the word "buckets" to describe how city dollars are tied up in various funds - each with its own set of restrictions.
That's why, for instance, the city says it can't use the nearly $750,000 budgeted for a new sculpture in front of city hall to save the jobs of firefighters facing layoffs. The art bucket can't bail out the general fund bucket, they say.
Christopher Taylor
"You’ve probably heard us talk about our ability to pay for some services and our inability to pay for other services as if our hands were somehow tied - as if we somehow do not control how to spend taxpayer money," City Council Member Christopher Taylor, D-3rd Ward, wrote to constituents in a recent e-mail. "How can this be?"
Taylor answered that question in the paragraphs that followed, explaining the laws governing municipal revenues and expenditures are different from the rules that apply to private citizens. Contrary to a household that may have just one checking account, Taylor said the city is a highly complex organization with anticipated revenues in excess of $350 million this year. And to organize those dollars, the city maintains a variety of separate accounts.
"You may have heard about the possibility of firefighter layoffs (averted for the time being) while at the same time seen progress on construction of an underground parking structure on the downtown Library Lot, or heard about investments in single-stream recycling while driving over the degraded Stadium Bridge," Taylor wrote. "How can it be that the city on the one hand can claim revenue distress, while at the same time, go out and begin construction on these other projects?"
Taylor addressed the Library Lot as an example.
"It seems peculiar that construction on an underground parking structure should begin at the same time as we were nearly required to lay off firefighters," he wrote. "Aren’t the firefighters more important than a new structure? Arguably yes, but the money for the Library Lot parking structure could not be used to pay firefighter salaries - the money to pay to construct the structure will come from the parking lot itself through a fund controlled by the Downtown Development Authority. In other words, a decision to forego the Library Lot parking structure would not increase the general fund - it would not increase the money available to pay for safety services or to pay to mow park grass."
Taylor noted the city's various voter-approved sources of funds can't be used for any purposes other than the ones designated up front.
"So, for example, we may appear well-funded with some 'parks' money by virtue of the Parks Improvement Millage, but because these are 'improvements' monies, we cannot use them for 'operations' - to mow the grass or groom the baseball fields," he said. "Operations monies must come out of the general fund, where budget pressures are severe."
In addition to an $82 million general fund, Taylor noted the city has set up separate "enterprise funds" to account for the operations of city service units like water, sewer, the airport, farmer’s market, solid waste and golf courses.
"Consider the city’s golf courses," Taylor said. "These amenities run at a loss of hundreds of thousands of dollars a year. Over the past few years, the city has determined to turn these facilities around. With the data provided by enterprise fund accounting, we can accurately determine the revenue and true costs associated with running these business-like ventures. Although there is still much work to do, the city’s efforts are bearing fruit; golf is still a drain on the budget, but there has been a substantial improvement."
Taylor used the City Council's recent decision to invest more than $4.5 million in single-stream recycling as another example. He pointed out in his e-mail a long list of ways it will improve efforts to recycle in Ann Arbor.
"These are obviously substantial benefits to our community, but you might reasonably observe that these benefits might not be as important to Ann Arbor as, say Stadium Bridge," he said. "The money that will be used to fund the single-stream investments, however, cannot be spent on bridge infrastructure - it comes from reserves in the Solid Waste Fund, a fund supported by the Solid Waste Millage and sewage fees. It would be, therefore, illegal to use that money for anything unrelated to waste stream management."
Taylor acknowledged the limitations.
"These limitations prevent the city from freely shifting its resources from flush funds to impoverished funds, even though we might all believe it to be a 'better' use of those resources," he said, concluding his message. "In the end, these restrictions are a fact of life and we will do our best to provide the services that Ann Arbor demands with the resources entrusted to us."
To read Taylor's full report, download it here.
Ryan J. Stanton covers government for AnnArbor.com. Reach him at ryanstanton@annarbor.com or 734-623-2529.
Comments
EngineeringMom
Thu, Feb 11, 2010 : 11:50 a.m.
So the cost of mowing can't be covered by the millage funds... But... modifications to ELIMINATE the need for mowing could. We have a number of parks that could be naturalized with this money. These naturalized parks would not require the type of weekly maintenance that a green lawn does. I would love to see some of our parks seeded with native plants that would require only a single mowing a year. Add some walking trails and benches and we would have some fantastic parks at a fraction of the maintenance costs.
annarbor28
Tue, Feb 9, 2010 : 9:23 p.m.
Isn't there something in the City Charter, or state law, that allows for emergency redistribution of funds in bad economic times such as the present, so that money can be used for basic services like fire and police, and taken away from frivolities such as sculpture and parking structures, or new investments such as a City Hall, conference center and building of new low cost housing?
townie
Tue, Feb 9, 2010 : 9:04 p.m.
B.Corman said "Notice that mowing is not listed as one of the maintenance activities listed in the ballot proposal; therefore it was not approved by the voters." "Art" wasn't listed either, but somehow they managed to repurpose well over a million dollars from a whole variety of millage and other funds for it. Check out: City of Southhaven v Van Buren Board of Commissioners or Okeson et al v. City of Seattle. The City is going to have some real legal problems if they actually commit any of this money to the City Hall Urinal. Good thing we have a huge and very expensive City Attorney staff to handle the case.
KeepingItReal
Tue, Feb 9, 2010 : 8:20 p.m.
These are some very interesting comments: Three things stands out to me: (1) we really don't trust or know that much about the people we elect to represent us at the government level; (2) when we vote for millages and special tax assessment, most of us don't really know what we are voting for; and, finally, there is a great deal of frustration with our local government officials
B. Corman
Tue, Feb 9, 2010 : 2:32 p.m.
It appears to me that council moved everything that they believe they could legitimately move. IMO, they are now saying that moving mowing expenses is not legitimate at this time. (I hope for some reason that I don't know about yet, that they can change.) Don't get me wrong, I would love to see the "mowing" expenses moved to the parks millage. I am only pointing out reasons why I don't think it is possible due to the facts as I see them at this time. For every person like me who wants them moved, there is another person who thinks they should be kept in the general fund. Pressuring people to do something that they are telling you may not be legit leads nowhere.
glenn thompson
Tue, Feb 9, 2010 : 2:02 p.m.
Corman, There is one part of your post that is partially correct, that is: "The idea of the parks millage... was not to reshuffle expenses to pay for all park expenses from the new millage. The millage might never have passed if that was the intent." Bob Johnson sponsored a Council resolution stating that the contribution from the general fund to the parks operation would not be cut if the millage passed. As soon as the millage passed the city administrator started to "reinterpret" the resolution moving more and more expenses to the millage. Council has since moved most, if not all, of the park expenses except mowing from the general fund to the millage. In any case, this started as a resolution by Council, it is not part of the ballot language. Council created this 'bucket' and they can modify or eliminate it.
Vivienne Armentrout
Tue, Feb 9, 2010 : 1:51 p.m.
Unfortunately, the "buckets" are leaking. The Percent for Art fund is money siphoned off from dedicated funds like water, sewer, and roads (and other funds). These funds are in part paid for by fees that are continually being raised, so they are in effect a new tax. Likewise, the Fuller Road Station down payment was also made from enterprise funds like the water utilities. These buckets can be raided inappropriately when convenient (though, in my opinion, not legally or appropriately). Also, do most people understand that the DDA takes all taxes, even from dedicated millages, on new construction in its district? The SPARK SmartZone gets school taxes, though that has a more limited effect locally.
B. Corman
Tue, Feb 9, 2010 : 12:53 p.m.
@glenn Thompson- First of all "mowing" would be included as part of maintenance (if it was actually listed) not operations. Cutting the grass has nothing to do with operating the park, it has to do with maintaining the park. But even if you draw the conclusion that it is included in "maintenance", if the city told the public at the time of the vote that it would remain in the general fund then they cannot change that now. As for why they did it this way, I can only speculate and give my own interpretation of what occurred and am not saying my next statement is based on fact but rather on how interpreted the ballot proposal at the time (however id id not understand at the time that mowing was not covered by this either) I believe that the millage proposal creators may have thought that some in the public would interpret the parks millage as a "tax increase" rather than an "extra needed tax for a specific situation" if all the general fund expenses that previously were spent on parks would be transferred to the millage monies. The public might interpret that as leaving more money in the general fund for the council pet projects versus a necessary expense. The idea of the parks millage, if I am remembering correctly, was to raise money for much needed improvements and repairs that the city could not afford. It was not to reshuffle expenses to pay for all park expenses form the new millage. The millage might never have passed if that was the intent. Remember the millage passed when the city was in better economic times. Now people may be realizing that "mowing" does belong on the parks millage budget, but they probably would not have believed it then or wanted it that way at the time of the vote.
glenn thompson
Tue, Feb 9, 2010 : 12:08 p.m.
Mowing is clearly a necessary part of maintenance. It is a part of operation and necessary for many types of recreation. Therefore it is covered by the millage.
B. Corman
Tue, Feb 9, 2010 : 11:37 a.m.
@Glenn Thompson- Below is the ballot text for the parks millage and the text from the Ann Arbor City Charter. Notice that mowing is not listed as one of the maintenance activities listed in the ballot proposal; therefore it was not approved by the voters. "Maintenance" is interpreted to mean repair in this ballot proposal. I do believe that it was suggested last night at the working session to include mowing and such activities in the ballot language the next time this is up for renewal in 2012. Also, if I am remembering correctly, when this parks millage was presented to the people before the vote, mowing was shown as a general fund expense, which is why it is not listed in the ballot language. Why it was done this way, I have no idea. However, this is what we currently have to deal with. ***************************************** ANN ARBOR CITY CHARTER AMENDMENT AUTHORIZING NEW TAX FOR PARK MAINTENANCE AND CAPITAL IMPROVEMENTS Shall the Charter be amended to authorize a new tax up to 1.10 mills for park maintenance and capital improvements for 2007 through 2012, which will raise in the first year of the levy estimated total revenue of $4,886,505? PUPROSE OF AMENDMENT The amendment is proposed for the purpose of consolidating previously authorized and expiring tax millages for park rehabilitation and development (Section 8.19) and park repair and restoration (Section 8.22) as part of a new tax for park maintenance and capital improvements in Section 8.19. The amendment also deletes Section 8.22 (park repair and restoration). ****************************************** From A2 charter; Funds for Park Maintenance and Capital Improvements SECTION 8.19. In addition to any other amount which the City is authorized to raise by general tax upon the real and personal property by this Charter or any other provision of law, the City shall, in 2007 through 2012, annually levy a tax of 1.10 mills on all taxable real and personal property situated within the City for the purpose financing park maintenance activities in the following categories: forestry and horticulture, natural area preservation, park operations, park equipment repairs, park security, and recreation facilities; and for the purpose of financing park capital improvement projects for active parks, forestry and horticulture, historic preservation, neighborhood parks and urban plazas, pathways, trails, boardwalks, greenways, the Huron River watershed, recreation facilities and park equipment acquisitions. (Section 8.19 added by election of April 4, 1983; amended by elections of April 3, 1989, November 8, 1994, November 7, 2000 and November 7, 2006).
Old Salt
Tue, Feb 9, 2010 : 10:39 a.m.
Would you please explain as to what has happened to the Dean Fund,is there still money in it and if so how much and where has the money been going As a lifelomg AA resident I wouild like you to please explain to newer residents what the Dean Fund is and how they earned their living in Ann Arbor I think all residents should know this..P.S. Make sure you mention Main Street....Thanks..
glenn thompson
Tue, Feb 9, 2010 : 10:18 a.m.
The Parks Tax Millage States: "Shall the Charter be amended to authorize a new tax up to 1.10 mills for park maintenance and capital improvements for 2007 through 2012, which will raise in the first year of the levy an estimated total revenue of $4,886,505? " It is very difficult for me to understand why Mr. Taylor or B. Corman do not believe this millage can be used for mowing. Would you please provide references supporting your opinion?
Karen Sidney
Tue, Feb 9, 2010 : 9:52 a.m.
I disagree with Council Member Taylor's statement that money to build the library lot parking structure could not be used for police and fire. The DDA parking fund will get more revenue because of the increase in parking rates approved by council. This rate increase is now being used to pay for the parking structure but there is no reason that the revenue from the rate increase could not be transferred to the general fund in the form of increased rental payments to the city for use of the parking structures. The DDA parking fund has been transferring $2 million per year to the city's general fund for rent. The DDA parking fund also pays the city about $800,000 per year to maintain the streets around the structures and parking lots.
Dalouie
Tue, Feb 9, 2010 : 9:30 a.m.
The council member explained this accurately. What gets me is that most of you here would rip the council up and down if they got caught moving money from one bucket to another. (Unless of course it was going to save your city job without you having to give up any wages or benefits.) For the those of you here who do not work for the city and actually live in A2, look around the state. Ann Arbor is way ahead of other places in all categories that matter despite having so very much land that is non-taxable. Buckets are a fact of life in government accounting. This structure was set up over the years precisely to keep governments from shifting money around, collecting it for one purpose and spending it for another. Don't tear that down now.
KJMClark
Tue, Feb 9, 2010 : 7:30 a.m.
I'm going to comment on the one area I know fairly well. Act 51 weight and gas tax money can be used for more than just roads, but must be used for transportation purposes. In particular, MCL 247.660k requires that at least 1% be used for "facilities and services for nonmotorized transportation". So, for example, if the city wanted to use Act 51 money to clear certain sidewalks, it could do that, since that is a nonmotorized transportation service. If it wanted to hold a competition to provide sculpture that provides bike parking, it could do that as well, since bike parking is a facility. A good deal of the sidewalk art in Portland OR was funded that way. (Search for "David Byrne bike racks" for some examples in NY, NY.) It's my understanding that part of the funding for AA's recent non-motorized transportation plan also came from Act 51 money. So Act 51 weight and gas tax money doesn't have to be used only for road work. In fact, one of the big reasons Ann Arbor was designated a bike-friendly community is that several years ago city council had the foresight to designate 5% of our Act 51 money to nonmotorized transportation. I've asked for years for some sting operations from the police to enforce our crosswalk and safe passing laws, as an important safety service to pedestrians and cyclists, respectively. As a commuting cyclist, the most important facility or service I would like from the city is enforcement of the safe passing law. That would be far more valuable to me than another marginal bike lane. Or put another way, for nonmotorized transportation, a very good use of Act 51 money would be to pay for two police officers to be trained as a crosswalk/safe passing sting team, and funded to write tickets to people who don't yield to pedestrians in crosswalks and who pass cyclists unsafely. Not only would we be better off paying for some police with Act 51 money, but some of the ticket revenue would come back to the city. Anyone who walks or bikes around here could tell you that you could write tickets all day, every day, for those two infractions. I suspect most of the other "buckets" could be used like that if the city wanted to.
Fred&Barney
Tue, Feb 9, 2010 : 5:48 a.m.
What a joke, a year ago this guy did not even know where city hall was, now he is an expert on everything. Well it seems he is good at taking orders from his boss! LOL Go see what Roger wants you to say next Chris.
trespass
Tue, Feb 9, 2010 : 12:33 a.m.
How about asking the University of Michigan to pay its fair share of taxes? Then Ann Arbor could offer property tax relief to its citizens and fund the Fire Department without having to beg the University to pay for the services they receive.
snapshot
Mon, Feb 8, 2010 : 11:40 p.m.
Good explaination of how city budget dollars work. From some of the comments, some folks still don't understand the various budget restrictions the city faces. Others seem to just refuse to believe it's true and base their opinions on innacurate assumptions,but then, it is an opinion column.
TKA2
Mon, Feb 8, 2010 : 11:16 p.m.
Bravo Mr. Taylor, and annarbor.com, the citizens are actually debating budget particulars! This is a great improvement over city council debating whether leaving your goldfish home alone is a crime while the city manager stole millions!
B. Corman
Mon, Feb 8, 2010 : 10:21 p.m.
Ms. Lesko, You are incorrect in your facts. No part of the percent for art program would be returned to the general fund because none of the funding came from the general fund. If dissolved the percent for art monies would be returned to the original funds from which they were disbursed, which I say again is not the general fund. You are wrong. Also, some of the parks millage money may be used for operations, but only for specific operations; they are delineated. Grass cutting expenses are not allowed to be covered by the millage funds. You are making assumptions and are wrong again. Maybe you should check your facts before attacking people.
annarbor28
Mon, Feb 8, 2010 : 9:50 p.m.
I am sure there is an emergency provision that allows funds to be transferred from frivolous projects such as sculptures, conference centers, or underground parking lots and the such, to basic services such as firefighters and police, during dire economic times such as these. Likewise, I am sure there is a way for the the Gov or the state legislature to change any laws pertaining to these issues. If Granholm can commute sentences of murderers in for life and let them out of prison terms, which she does, then there is a way for one of the branches of government to change these "bucket" rules that Mr. Taylor refers to as being so absolute.
Patricia Lesko
Mon, Feb 8, 2010 : 8:49 p.m.
CM Taylor writes, "So, for example, we may appear well-funded with some 'parks' money by virtue of the Parks Improvement Millage, but because these are 'improvements' monies, we cannot use them for 'operations' - to mow the grass or groom the baseball fields," he said. "Operations monies must come out of the general fund, where budget pressures are severe." This is incorrect. He needs to go back and read the original millage document. There, he will find that, in fact, the money from that millage may be used for BOTH improvements, as well as operations. His explanation of how the money works is somewhat facile and betrays either a serious misunderstanding of how money is moved between funds, or the power of Council to, as another commenter pointed out, use resolutions to create and control funds. Had he voted to dissolve the Percent for Art Program, all of the money taken from the various funds from which it was diverted into the PFA would have been returned, including money to the General Fund. Mr. Taylor is on the Budget Committee and asks, I've heard, good questions. He should keep trying to inform himself, but as a novice not try to "teach" his constituents or anyone else.
townie
Mon, Feb 8, 2010 : 7:56 p.m.
OK, I get it. Millage funds can't be used for any purpose other than the purpose stated on the ballot that was approved by voters. So how come Council is planning on using streets and parks millage money, or water and sewer enterprise (fee-generated) money to pay for a water fountain at City Hall? Pretty dubious stretch of the law if you ask me. Ask the City Attorney in Seattle who lost a class action lawsuit over this very issue. If you're going to spend money from a certain bucket on art, especially a millage or fee-funded bucket, the art better be placed in or on that bucket--not next to a barrel of monkeys down the street. The legal term is "essential nexus." See Okeson, et al v. City of Seattle.
Lifelong A2
Mon, Feb 8, 2010 : 7:48 p.m.
Yohan is obviously not from Ann Arbor if he/she thinks that voters would vote to end the parks millages and divert those tax dollars to something else. The enterprise funds are controlled by Council -- but that's it. As others have pointed out, the remaining funds are restricted by State law, the City Charter, or voter-approved millages. Taylor's e-mail raises important points that -- judging by some of the comments posted here -- most voters don't seem to understand.
st.julian
Mon, Feb 8, 2010 : 7:38 p.m.
Rules can be changed. Eitehr change them or lobby the state to change them. These problems are not unique to Ann Arbor. The status quo whining does not solve problems.
Really?
Mon, Feb 8, 2010 : 7:24 p.m.
What the council doesn't want to bring to light is that when their pet projects fall short, the money to bail them out comes out of the general fund. So they can't use "bucket" money on anything else, but they can use general fund dollars on EVERYTHING.
Thick Candy Shell
Mon, Feb 8, 2010 : 6:52 p.m.
So, it would be O.K. on a vote by Council to increase the water rates by 20% and then use that money for building the Conference Center on the Library Lot? I don't think that is what anyone wants. The whole set up for the Enterprise fund says that water rates pay for the maintenance and operation of the water delivery system. To use the money for any other way becomes a "slush fund" for politicians. It won't matter anyway. Ann Arbor Citizens have never met a Parks millage they didn't like! A General Operating Millage on the other hand will never pass.
yohan
Mon, Feb 8, 2010 : 6:30 p.m.
As you may have guessed, I disagree. most of these buckets ARE IN CONTROL of the city council. The Enterprise Funds are accounting gimmicks set up by the city council and can be overridden by the city council. The millage funds are set by the vote of the people and can by changed by a vote of the people. If you ask almost all people if they want their dollars to go for setting fire to the parks or putting out fires in their houses I think the outcome would be obvious. Why isn't anyone on council proposing a ballot question about switching some of the park monies to the general fund? I do agree that some of the external revenue funds and some of the bond funds have to be spent on items stipulated in the contract but these are few when compared to the whole city budget.
Thick Candy Shell
Mon, Feb 8, 2010 : 5:46 p.m.
most of these buckets are actually out of the control of the council. The Enterprise Funds are revinue/expenditure are all spent on the same thing. If Council raises your Water rates, they can't use that to pay general fund obligations. That can not change otherwise, Council could pass a tax increase with no vote. The Millage Funds are all very specific and can not be used for anything else, and the citizens voted on it. The Citizens voted for a millage to pay for burning their parks, they have not passed a millage to pay for putting out fires in buildings. External Revenue Funds have to be spent on what the revenue source says. The Weight and Gas tax must go for road maintenance including snow removal. There may be a few that council imposes on it self, but the majority are imposed by State Laws or imposed by the Citizens by passing a millage.
yohan
Mon, Feb 8, 2010 : 5:34 p.m.
I and many others find it amazing and sad that the City of Ann Arbor will pay people to set fire to their parks but will not pay people to put out fires in the buildings. No wonder Ann Arbor is the laughing stock of surrounding communities. These "buckets" are, for the most part, set up by the city council for accounting purposes and can be overridden by the city council. A few may require a city wide vote and very few are mandated by contract covenants. Why is there no talk on city council of eliminating these barriers that exist between buckets? Because city council is doing exactly what they want to do; more construction projects while pushing for a city income tax.
Grumpy
Mon, Feb 8, 2010 : 5:27 p.m.
"In the end, these restrictions are a fact of life..." Seriously? Is there absolutely nothing we can do to change what seems like a flawed, confusing, bureaucratic system? What are our options to change this? Are we satisfied with our councilpeople telling taxpayers it is a fact of life and there is no solution so just deal with it?
John Floyd
Mon, Feb 8, 2010 : 5:10 p.m.
"Buckets", i.e. Fund Accounting, is indeed about segregating spending for specific purposes. Sometimes Fund Accounting has as its basis particular legal restrictions that tie counci's hands, such as the city charter, state law, bond covenants, and special millages passed by voters. Some, however, may be creatures of the council itself, and used simply to make managing and reporting easier. Fund accounting as a management tool is perfectly legitimate; however, it is not the same as an externally-mandated fund. I gather that last year the city transferred two million dollars from the general fund to the economic development fund. Is this fund an externally-mandated fund, or one set up by council for convenience? If it is not externally-mandated, is there a reason that it could not be returned to the general fund? Where will the economic development fund get the $$ needed to build the university its new commuter rail station?
beaumont_slave
Mon, Feb 8, 2010 : 5:06 p.m.
lay off's averted????? just down the page it's saying even after union concessions.. lay-off's are happening. makes me sick that offcials always get rid of police and fireppl. but heaven forbid they cut from their pet projects or their salary and benifits..
DagnyJ
Mon, Feb 8, 2010 : 5:03 p.m.
Thanks, Councilman, for sinking more of my tax dollars into money-losing golf courses.
uawisok
Mon, Feb 8, 2010 : 4:46 p.m.
"there's a whole in the bucket dear liza,"......