Mayoral Budget Message to Residents and City Council

FY 2024 Proposed Budget

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FY24 Final Proposed Budget	Budget Report	Open File | Download

To Flint City Council Members and Flint Residents,

The national economy remains in a precarious situation as the United States Federal Reserve Bank attempts to slow the economy to curb high inflation.  These actions have seen interest rates climb for everything from automobiles to homes.  This contractionary monetary policy comes as the United States government is also shrinking the size of federal spending.  The city will continue to monitor the national economy to determine if actions need to be taken if the nation dips into recession later this year.

Despite these national headwinds, the Flint economy has recovered from the ravages of the pandemic-induced recession. From the spring of 2020 where Flint's unemployment rate hit 45 percent, we have now seen a decline to a rate of 9.7 percent as of December 2022. This is the lowest rate on record since the late 1990s.

The real estate market has begun a slight recovery in the city of Flint.  The city’s property tax base had fallen to $710 million in tax year 2016, but has rebounded to $836 million in tax year 2022.  This represents a 17 percent increase since the 2016 low point. However, we should all keep in mind that this is still a 50 percent drop from the 2008 high of $1.6 billion at the onset of the global financial crisis.

Last year, I outlined the problems that have built up in the city’s pension system over the past decade.  The City of Flint has a super mature pension system that is a heavy legacy burden for residents.  However, these pension commitments are important to the retirees who provided service to residents for many years.  Year over year, the city pension system is paying out almost $50 million to retirees.  At the same time, employee and city contributions are only providing about $30-$35 million in inflows of money.  Due to this mismatch, the city has lost more than $100 million dollars in pension assets since 2014.

To address the massive leaks in the pension system, the city has had to increase contributions by over 100% since 2015. In 2015, the city’s pension payment was $12.3 million.  By 2022, the city's pension payment increased to $30 million, and much of this burden falls on the General Fund. This increase compares to very little increase in city revenues over the same time period.

In the state’s 2022-2023 budget, an important new program called the “Protecting Michigan Pensions grant program” was introduced.  This program was designed to establish a set of criteria for awards for payments to be deposited into a local unit of government pension plan.  The plan is designed to reduce underfunded pension systems and help stabilize local fiscal health. The City of Flint expects to receive $170 million through this program, and continues to pursue an additional $50 million.

This budget is based on no infusion of these funds as we do not know the exact timing at this point. This infusion of pension assets will reduce the city’s required pension contribution. A rough estimate is that overall city pension payments will decrease to $24 million or a savings of $6 to $7 million for all city funds.

The Path Forward

With this context, this proposed city budget represents an expression of my values and priorities as we collectively work to maintain city services and improve the lives of our residents. It is in this environment and with this set of challenges that I present to you my FY 24 budget.  This administration will not shy away from tackling decades-old structural problems. This budget reflects that reality. This is a balanced budget for the upcoming FY 24.

We will continue to approach all things using our three-point strategy: Prayer, Planning and Partnership. With this in mind, we are working together with our friends in philanthropy and bringing together some of the state’s leading experts in municipal finance to develop a long-term strategy to address legacy costs. Listed below are some highlights for FY 24.

This budget seeks to invest in critical resources needed for our community:

• Maintains investments in critically needed Police and Fire department staffing to ensure the ongoing implementation of public safety initiatives.
• Invests ongoing and additional resources in the fight against blight to the tune of $1 million in FY 24, increasing the number of full time positions in the blight division.
• Maintains overall staffing to ensure the consistent delivery of critical public services to residents.
• Ensures payment of the constitutionally-mandated pension contribution to provide for city retirees.

This is a transparent budget:

• Revenue projections are based on current economic trends and recent historical experience, per best practice.
• Spending projections are based on what it truly costs to operate the City of Flint government and to provide critical public services as efficiently as possible.
• Internal Services Funds and charges for services rendered (data processing fund, fringe benefit fund, motor pool fund, and self-insurance fund) are being operated based on current services only, with no accumulation of cash going forward.

I present the City Council and the residents of Flint with a balanced budget that includes important investments to move our community forward.  Combined with our judicious investment of American Rescue Plan Act dollars and other grant opportunities, we believe Flint is on track for a stable and improving quality of life for all of our residents.

City of Flint FY 24 Budget

The City of Flint budgets a total of 16 funds. These separate funds are maintained to ensure compliance with federal, state and local laws, as well as generally accepted accounting principles.

1. General Fund

Special Revenue Funds

2. Major Streets Fund
3. Local Streets Fund
4. Public Safety Fund
5. Neighborhood Policing Fund
6. Street Lighting Fund
7. Parks and Recreation Fund
8. Rubbish Collection Fund
9. Building Inspection Fund
10. Economic Development Administration (EDA) Revolving Loan Fund
11. Drug Law Enforcement Fund
12. Section 108 Loan Fund
13. General Debt Service
14. Public Improvement Fund

Enterprise Funds

15. Water Fund
16. Sewer Fund

General Fund Overview

The General Fund is the city's basic fund for carrying out public services, including most of the police and fire departments, federal government services like the city clerk, city treasurer, assessing, city council, and the mayor's office. The total General Fund budget is projected to be $66 million in the next two years.

General Fund Revenues

The General Fund revenues are based on 1) property taxes, 2) income taxes, 3) state revenue sharing, and 4) other revenues.  General Fund revenue projections are expected to be $63 million for FY 24 and $58 million for FY 25.  The FY 24 estimate includes a one-time supplement of dollars from the internal service fund balances that have unnecessarily accumulated.

City income tax revenues are based on residents (1%) and non-residents (.5%).  The total amount expected to be collected in FY 24 and FY 25 is $19.5 million.  These revenues are based on taxing residents and non-residents who work in the city of Flint.  These projections have built in a slowdown in the national economy, but we will continue to track if further estimate adjustments are needed.

Property taxes are stable at the moment and projected to remain so for the next two fiscal years.  However, the city is continuing to investigate strategies to improve property tax collections, which remain far lower than most other Michigan cities.

In the Governor's executive budget for FY 24, state revenue sharing was increased by 5 percent on an ongoing basis, with a 5 percent one time increase.  This budget is built only using the assumption of a 5 percent ongoing increase.

General Fund Expenditures

The General Fund is composed of several major spending categories.  Personnel services and pension and OPEB expenditures are the largest budgeted items and account for over two thirds of the General Fund budget. The total General Fund budget is projected to be $66 million in the next two years. 

Positions

There are 300 FTE positions in the General Fund (out of a citywide total of 549 positions or a little over 50% of total positions).  These positions represent approximately $24 million in payroll expenditures.  There are approximately 77 positions in Governance, 125.5 positions in Police, 69 positions in Fire, .25 positions in DPW, 45.7 positions in Finance and Administration and 8.2 in Planning and Development.  The majority of staff in DPW and Planning and Development are paid through other funds.

Special Revenue Funds

The term “special revenue” simply refers to the fact that certain monies that the city obtains are restricted in their usage for specific purposes. The typical restricted monies the city obtains are:

• Gas tax money from the state of Michigan for roads
• Federal and state grants
• Nonprofit foundation grants
• Extra voted millage monies including the neighborhood policing millage, public improvement millage and public safety millage
• Waste collection and street lighting special assessments
• Economic development funding

Major and Local Streets Funds

These funds are based on Flint's share of Michigan's gas and weight tax collections and other legislative appropriations.  

Public Safety Fund

The public safety fund provides for police and fire protection services through an extra voted millage first passed by Flint residents in 2012.  This fund pays for 12 police officers and 16 firefighters and a total of 28 FTE positions.

Neighborhood Policing Fund

This fund is also based on an extra voted millage and pays for 9 FTE positions who are neighborhood safety officers in the city of Flint.  

Street Lighting Fund

The majority of these funds are used to pay for street lights throughout the city.  A small portion of funds are used to pay for 0.1 FTE of a position to assist in account management.

Waste Collection Fund

The majority of these funds pay for the waste collection contract with a private provider. A small portion of funds are used to pay for 0.9 FTE of a position to assist in account management.

Enterprise Funds

The enterprise funds are those that are self-sufficient and charge a user fee for the service provided.  For Flint, the Water and Sewer funds are the largest Enterprise Funds and these services are paid for through the water and sewer charges and fees to users.

Water Fund

The Water Fund provides for clean and safe drinking water for Flint residents, purchased from the Great Lakes Water Authority.  The fund covers 58.1 FTE positions. Although GLWA has notified the City of Flint of a water rate increase, we project no cost increase for Flint residents.

Sewer Fund

The sewer fund provides for the removal of wastewater from the city. The fund covers 73.8 FTE positions.

In Conclusion

For FY 24, we have successfully right-sized the city budget with no staff layoffs, while enhancing city services for residents. For the first time in two decades, the City of Flint has a real path forward to achieving financial stability. Through prayer, planning and partnership, we will continue to move our community forward, from crisis to recovery.

For the love of the community,

Mayor Sheldon A. Neeley