March 13 2013 12:00 AM

The Council gets a taste of the 2014 budget

Tuesday Nov. 6 — On Monday night, the Lansing City Council got preliminary figures from the administration as to why the city is facing an $11 million deficit for fiscal year 2014.

Mayoral Chief of Staff Randy Hannan and Angela Bennett, the city’s finance director, presented the preliminary General Fund budget numbers before the Council at a Committee of the Whole meeting.

As is required by the City Charter, Hannan said Mayor Virg Bernero would have a budget ready for the Council to look at in March that eliminates the $11 million deficit.

“It’s important to recognize that all these figures are very preliminary,” he said. Bennett said the numbers will become more “more accurate” as time goes on.

Nearly 75 percent of General Fund expenditures go toward personnel costs like salaries and fringe benefits, Bennett said. And they expect the costs of health care and pension payments to increase.

The rising costs of health care and pensions are nothing new. According to the administration’s data, the costs of health care have increased every year over the last four budget cycles. In fiscal year 2009, they totaled $39.3 million — this year it’s $53 million. The expected cost for both health care and pensions in fiscal year 2014 is $57.6 million.

Bennett said the health care costs that were presented depicted a worst-case scenario.

The problem with the budget is two-fold, a combination of increasing costs and declining revenues. The city’s two primary cash cows are property taxes and income taxes. Property tax revenues are expected to decline into 2016 because of declining property values, Bennett said. For the next budget cycle, she projected that the city would receive $3.7 million less in property taxes.

The problem is not unique to Lansing, she added.

“We’re not the only ones seeing this,” she said. Some cities are seeing more of a decline and some less. She said property values haven’t been hit this hard “since the Great Depression.”

Along with declining property tax revenues, there’s been a historical trend of decreased funding from the state through revenue sharing. About 12 percent of this fiscal year’s budget comes from the state. Bennett said the city would know more about where that number stands for the next budget cycle when Gov. Rick Snyder releases his budget in February.