The deficit stems from a change in a state rule that redirects the collection of personal property tax, formerly kept at the municipal level, to the state. Local officials said the reimbursement has been a challenge to anticipate for the past few years.
From 2012-15, the city received no reimbursement from the state. In 2017, Grand Haven received $375,000, and then received a $912,000 reimbursement last year.
The city expected a similar amount this year, but instead only received $371,000, or $541,000 less than what was planned.
The City Council on Monday approved the city budget, with Councilman Josh Brugger opposing the resolution. He said he did not blame officials for mishandling the city’s finances, but disapproved of the dip in the fund balance.
City Finance Director Jim Bonamy acknowledged the mistake of miscalculating the reimbursement, but told the council that he is not worried about the outlook for the city’s finances.
“We have come to you with deficit operating budgets four times (in the past 14 years), but we have never come close to having that operating budget put the city in any kind of fiscal problem,” he said to the council. “I don’t see any financial problems for the City of Grand Haven that we can’t overcome.”
City Council requires that the city keeps 25 percent of its General Fund untouched by deficit spending. The budget still projects over that threshold, Bonamy said, maintaining about 28 percent of the $4.9 million fund.
While Bonamy said he doesn’t expect the city to face financial woes during the next five years, estimating the personal property tax reimbursement from the state will remain a challenge.
Councilman Bob Monetza acknowledged that budget planning is a “guessing game.”
“I think that a lot of the problems we’re seeing today, whether it’s questions of predictions or questions of making due with what we’ve got, have been poor management by the state,” he said. “Next year, we will see more conservative assumptions in terms of what we get back from the state. Lessons learned.”
The City Council focuses its planning efforts on the General Fund, which is the city’s primary discretionary budget. The city also has 39 departmental budgets, Bonamy explained. The General Fund accounts for both operating costs and transfers out to departments.
City Manager Pat McGinnis said the city is not facing a deficit where essential operations are concerned, but in “transfers out” for various projects. He said the council has been conservative with its budgets, while departments have rarely come to the council with frivolous funding requests.
Following the recession of 2008-09, municipalities faced massive revenue losses. The city is still working to recover its budget to the level it was in 2007, McGinnis said, but Grand Haven is in better shape than most communities.
The city has limited options due to its structure, McGinnis added, and remains at the whim of state policies.
“Every time we turn around, they’re telling us to do more and threatening to fine us,” the city manager said. “It’s not a wonderful environment in which to work when you’re just trying to provide the basic services that your people are willing to pay for.”
Investments such as the Grand Landing development are going to bring new tax revenues in the 2020s, which McGinnis said bodes well for the city’s General Fund balance, which is projected to continue growing.
“We’ve got more sunshine on the horizon than shadow and cloud,” he said.
The city’s need for infrastructure funding will be addressed by a 3-mill perpetual levy the city aims to bring to voters this year. On Monday, the council reviewed proposed ballot language for the initiative, opting to reword the request before sending it to Lansing for state approval.
The city will hold its annual budget work session April 15, which will include a review of financial projections looking ahead to the next several years.