City Administrator

Overview    Articles

City Administrator Overview

From the Desk of
Terry E. Eull 
City Administrator

State of the City
January 30, 2007

The City of Niles has been very fortunate in the last few years to be successful in acquiring a variety of grants and other funding sources that have helped us to complete various projects including a new police station (thanks to former State Senator Harry Gast’s support of a one-time PILOT program), new fire station, removal of downtown facades, renovation of the downtown streetscape, repairing the infrastructure of the city water system and we are now looking towards a multi-million dollar upgrade and improvement project for the wastewater treatment plant. We have been very fortunate indeed to be able to work on so many projects that make a difference in our long-term infrastructure systems and other important issues pertinent to the City of Niles.

Although the City of Niles is on solid financial ground, in the last couple of years we have faced many challenges; and as we move forward into the future those challenges may become much greater. The economy in the state of Michigan, as we are all aware of, has unfortunately not been very good. This is because the tax structure (or tax procedures) that are used to collect our state taxes was primarily based on the automotive industry. As we know, the automotive industry has taken large hits in the State of Michigan, which has ultimately caused much of the reduction in the amount of tax revenue collected in our state.

State Level Changes Affect Niles

Michigan has lost approximately 400,000 well-paying blue and white collar jobs in the last few years due to the global economy and the decline of the Big Three Automotive Makers and subsequently many smaller companies that provided products to them. What I believe should be done in regards to the decline in revenue from the state is a complete restructuring of the state tax procedures, which was based primarily on the "good times" of the automotive industry.

I think many people have their own views on what a possible tax restructuring may look like. There are major discussions going on right now in the state legislature on how to replace the single business tax, a tax that has been eliminated along with the approximate $1.9 billion per year the tax generated. In addition, there are shortfalls in this year’s state budget of $700 million and projected budget shortfalls of $800 million for next year with the year after that being projected to carry a shortfall of approximately $2 billion.

As you can see, there are major issues facing Michigan that I think we all need to keep our eyes open for a couple of reasons: monies from state taxes are provided to local government as the basic money (general fund) that helps provide many different benefits in our city such as brush chipping, leaf collection, street maintenance, snow removal, police and fire protection among other things. In addition, we also can be affected by the kinds of taxes we pay, not only as individuals but also as business people. This is a very interesting time and we should take notice of what the state legislators come up with as they try to work through a very, very difficult situation.

Just for your information, the State of Michigan has cut $3 billion from its own general fund budget in just the last 5 years. They are now operating on less money in the state tax accounts than they received in 1999. When the state has less money in their budget, that shortfall is reflected in the amount that cities receive. So, as you can see, this is a very hard time for our state representatives.

Impact on City Budget

As further information, the city budget is made up of many segments. The segment that pays for primarily all fire department, police department, museum, street department, park department and other departmental operations is the City’s general fund. Other basic services provided by the city come from these same state revenues that we receive in our general fund. The Utilities Department (water, electric and wastewater) are on a completely separate budget line and are not affected by the tax revenues of the city or state. The Utilities Department operates strictly on service rates.

Consequences of State Revenue Reductions

As I said, for the past few years we have been going through major changes here in the city also. Today we are operating with fewer employees than we had even four years ago. We have also eliminated a number of projects in the city that we felt were important, but unfortunately we could not fund. One of those projects was our sidewalk improvement program. Another project was our city park improvements in which we were to upgrade one park each year. We were able to complete a couple of parks before the money got very tight. We felt these were good projects; we were just not able to continue to fund them with the reduction in revenues we began experiencing.

In addition, we are doing less street repairs in the city. We have needed to eliminate repairs on many of the secondary streets and concentrate on the major streets instead. Although the money was not in the general fund at the time to complete these repairs, we had hoped that the situation would improve and that we would be able to repair these streets later. Unfortunately, these projects that we had to let go will, in the long run, end up costing us more because we are not able to do all of the routine maintenance that would keep the infrastructure in good form.

How We Meet Economic Challenges

So, the City of Niles does have major issues that we are continually trying to address. But again, financially, the City is in good shape. The City is not going broke, but we need to really look at how we do things here at the City. We are continually looking for new ways to provide the same service with less people and with less funding. We rely heavily on our employees, who do an excellent job, but it is getting harder and harder with reduced funding to try to maintain the level of service our residents have come to expect. So far, we have been able to meet our obligations. We have had to dip into our fund balance (financial reserves) a couple of times in the last four or five years. We don’t want to, nor can we, do that on a continuous basis. The bottom line is that we want to continue to provide the level of services that we believe our citizens deserve and pay for with their local and state property taxes.

We have challenges that we must meet in the future. We know that our local projections for completing needed projects and routine maintenance will become even more difficult as state revenue becomes even more questionable. There are many unanswered questions regarding our revenue flow. We’d just like to keep you updated as to what some of the consequences will be if state revenues continue to be reduced even more. A continued reduction in these funds will inevitably cause a reduction in city services. A reduction in city services, of course, is not something we want to do and will be done only as a last resort.

Again, we are on solid financial ground at this time. As we move forward our goal is to continue to try to complete various projects as some monies become available. We are continually seeking out grants and different ways of doing things that are hopefully more economic. We want to keep improving the quality of life for the citizens of Niles. That is always our primary objective.