The Ypsilanti City Council is taking its final steps in approving a five-year budget plan designed to avert a $6.1 million deficit projected for 2017.

The plan includes separate proposals for a personal income tax and Water Street debt retirement millage that will go in front of voters for approval on May 8.

This week, council approved the five-year plan and language for the Water Street debt retirement millage.

Language for the income tax proposal will likely be approved at the next regular council meeting. Then the city will have to sell the proposal to voters.

The income tax would be set at 1 percent for residents and 0.5 percent for those employed in the city, including at Eastern Michigan University. It’s projected to generate $1 million in fiscal year 2013 and approximately $10 million through 2017.

A Water Street debt millage would average 5.4 mills and generate $1.3 million in fiscal year 2013 and a total of $7.7 million through fiscal year 2017. A home with a taxable value of $50,000 would pay an additional $270 annually.

If voters approve both new taxes, the city won’t have to cut any staff or services, and it would face a deficit of $350,000 instead of $6.1 million in fiscal year 2017. Additionally, it would maintain most of the $9.4 million it has in reserves.

With approval of only one or neither of the measures, officials say, the city will make deep cuts to basic city services.

“If we want this to work, we need both of these items in terms of revenues, or it doesn’t work,” Council Member Pete Murdock said.

Several residents who spoke during public hearings on the plan and proposals voiced stronger opposition to the income tax than the Water Street millage. They said they liked that the Water Street millage ends once the debt is retired and feared an income tax would eventually have a negative impact on the city because it would drive away potential new residents.

Mark Hergott is among those residents who supports the debt retirement millage but not the income tax.

“(The Water Street millage) has an end to it,” he said to council. “We will eventually be done with the albatross that was the Water Street project. I want to let you know that you have a supporter for the Water Street development millage and I’ll talk to everyone about it.”

But he later added, “Inversely proportionate to how much I support the Water Street millage, I am against the income tax proposal.”

Council Member Dan Vogt said residents will face increased insurance costs, reduced staffing in public safety departments and reductions to other city services if the proposals aren’t approved.

“Some people have expressed concern that raising certain taxes or changing certain taxes will have a negative impact on the city,” he said. “I think rising crime rates, rising insurance rates, a failure to provide basic city services … I think that has 20 to 30 times the impact of what is only a slight tax increase some people will experience.”

He highlighted that some residents will only see a modest increase in their taxes, while others, like himself, will see a higher increase. But he said he is willing to pay to save city services.

Despite the situation’s “gloom,” the city’s financial forecast has improved from recent months.

The city projected a $10.69 million deficit during discussions on the issue in recent months. That hole is now $4.5 million less because the city was previously assuming the state would abolish the personal property tax.

Assistant City Manager David Kowal said it no longer appears like Lansing will eliminate the tax, and that trimmed the projected deficit by $2.4 million.

He said the city also found piecemeal savings throughout the budget and state shared revenues for this fiscal year came in higher than expected, which further reduced the projected deficit.

Still, the city is projecting a $6.1 million budget shortfall in fiscal year 2017. It’s estimating $55.5 million in revenues and $76.6 million in expenditures in that timeframe. That equates to a cumulative deficit of nearly $21 million over the five-year period.

Declining property value remains a significant issue. It dropped by $500,000 in 2010, and is projected to significantly decrease through 2017.

The city is also paying $30 million on its Water Street bond debt. It must continue to make payments through 2031, and the amounts will grow to $1.7 million annually by 2015.

If the Water Street millage were approved, the money could not be used for anything except repaying Water Street debt.

Income tax proponents highlighted that it would also tax those who work at EMU, which doesn’t contribute to the city’s tax rolls. It’s projected to generate $1 million in fiscal year 2013 and approximately $2.25 million each year through 2017.

Council Member Mike Bodary said he opposed an income tax before the recession when personal property tax used to support Ypsilanti.

“We need to diversify our revenue because property tax is no longer a stable source of income,” he said.

Council Member Brian Robb said council members needed to “dial down the rhetoric” and “be humble and say ‘We screwed up Water Street, we need the money, please support this.’”

He argued that the city isn’t diversifying its revenues because residents would still pay around 80 percent of the taxes through the income tax, Water Street millage and police and fire pension fund millage increase.

City residents will additionally pay an additional $4.4 million to its police and fire pension fund that state law requires it fund through a police and fire millage. That millage doesn’t have a cap and will continue to rise with those costs.

Mayor Pro Tem Lois Richardson asked about a possibility that wasn’t discussed throughout the meeting.

“What are our plans if these ballot measures fail?” she asked.

Beth Bashert is head of Save Ypsilanti - YES, a “ballot question committee” supporting both proposals. She said the city didn’t create the financial crisis that put it in this position, but that the city needs to address it.

“We need the services that make our city clean, comfortable and safe. This income tax will make that possible,” she said.

But several residents, including Leslie Ledbetter, contended that the issues were caused by the city's government, which now had to be "bailed out" by taxpayers. She and her family recently moved to the city and strongly opposed the taxes.

“We have four kids and that’s money that doesn’t get spent on them and we’re going to be angry,” she said. “Prepare yourself because it’s going to keep coming from me, from my husband and a lot of other people.”