March 22, 2004
Roger Fraser
City Administrator
City of Ann Arbor
100 N. Fifth Ave
P.O. Box 8647
Ann Arbor, MI  48104

Dear Administrator Fraser: 

The Ann Arbor Area Chamber of Commerce supports the following key principles and policies with regard to the City of Ann Arbor’s budget and related financial issues.  We encourage the City to incorporate these principles annually into its budget discussions including the upcoming 2004-2005 fiscal year.

• City government should be open and clear in the information it provides to the community, particularly with data related to taxation and spending. Reporting formats should be consistent from year to year to enable stakeholders to make straightforward comparisons and evaluations of City spending. The budget should clearly identify the costs associated with delivering services.
  
• Spending must stay in line with revenues, and fund reserves must be added to and maintained at an adequate level. Reserves (and one-time windfalls) should only be used for capital expenditures or emergencies and not tapped for programs or services that require continual funding. Plans should be in place to replenish City reserves for the next “ rainy day”.
  
• Revenues have consistently increased each year; therefore the primary focus should be on containing and reducing spending, not on looking for new funding sources. We caution the City about raising taxes or fees for services beyond the actual costs for those services, and we are concerned that raising fees also serves to reduce the incentives to contain costs.
  
• The City should be disciplined in ensuring that cost budgets are met. We believe that good budget discipline demands that when it appears overruns are likely in one area, offsets in other areas should be identified.
  
• The City should conduct benchmarking of other cities in terms of service levels and the cost/staffing levels to provide them. It should share those comparisons with the community.
  
• The City should be developing financial outlooks and plans beyond the upcoming fiscal year.  We have consistently suggested that the City develop five-year financial plans as well as more detailed budgets for two years (rather than just for the upcoming fiscal year). This is particularly important given recent increases in the costs of benefits for City employees and expenses related to early retirements.

 
The following is the Chamber’s general policy position with regard to taxes and the costs of doing business: 

Taxes and costs of doing business

• i)   Taxes are a significant cost of doing business, and a significant

Reason why people and businesses move into or out of a community.  Businesses, which pay a large share of the taxes in any community, often do so with little or no direct representation in the process if, for instance, the owners reside outside the community proposing the tax.  Still, businesses deserve to be treated as citizens by local government officials.  Proposals for increases in taxation on the citizens of a community should generally be treated with skepticism, and carefully weighed against any claimed benefits of the proposed programs.

ii)         Prior to considering the levying of a new or increased tax for public services or community enhancement, a governmental body should first accomplish the following:

• (1)   Prove fiscal responsibility and efficiency in providing public services;
• (2)   Evaluate whether the program could be funded with cuts in lower-priority programs.
• (3)   Evaluate the ability of the private sector to provide the proposed services;
• (4)   Carefully study the secondary impact, which a new tax might have on the business community.

iii)         In general, special dedicated millages should be used only for capital projects.  Maintenance, repairs, salaries, and general operating expenses should be paid from general fund revenues.

We look forward to working with the City of Ann Arbor again this year during its budgeting process. The Chamber will complete its annual analysis of the City budget and as always, we appreciate the City’s willingness to meet with us, share information, and answer our questions. 

Sincerely,
Brandt Coultas
Director of Governmental Affairs

Cc:      Ann Arbor City Council, Mayor John Hieftje