• Last year, we applauded the City for prioritizing Police and Fire services.  We are encouraged that relative prioritization appears to have been maintained.
  
• We support the City’s efforts to try and address health care and other benefit costs.  Many of our members and our fellow citizens have experienced dramatic reductions in these benefits or are contributing a much larger portion of the cost.  We have offered and continue to offer our services/expertise to the City in any manner we could assist.

• The City continues to improve its long-term financial planning.  The 2005-2006 Budget included a 2006-2007 fiscal plan and began to move the City to a two-year budget cycle.  This was a starting point for better fiscal planning the Chamber strongly supported.  The City stuck to its plan for the most part and that too demonstrates a discipline we certainly support.

• With the renegotiation of collective bargaining agreements and three expiring millages, we agree with City Administrator Fraser that 2006-07 will significantly impact the City's financial position for the next several years.  Given those uncertainties, we do not believe it would be prudent to implement any major new programs or initiatives requiring substantial funding.  Based on our understanding of the proposed budget, none are planned.  For example, the road repair millage will expire next year; we assume it will be renewed at its current level and not put before the public with an increase.

Budget – Immediate Concerns

• Over the last few years, the City has removed the revenues and costs for several major services from its General Fund. While creating separate funds may have been appropriate, presenting data to the public that does not adjust for these changes is not.  It is misleading. The result has been to present information to the public that understates the revenue and expenditure growth the City has actually experienced in its General Fund. 

To be specific, one year ago the City featured a graph in its public presentations that indicated General Fund revenues and expenditures were much lower in the 2005/2006 time frame than they were three to four years ago.  The chart did not adjust for those items that had simply been moved out of the General Fund to separate funds.  When those proper adjustments are made, the chart looks altogether different -- rather than lower levels today than a few years ago, one sees that there has been continuing growth in both revenues and expenditures.  Subsequent to our pointing out the error last year, the city provided a corrected version, but continued to use the misleading version in its public presentations this year.  Knowing that the City's revenues have grown, the community's perception of the need for new revenue sources is lessened.  We believe the electorate will make better decisions if they are well informed decisions.  Presented information must be shorn of any thoughts of political expediency.

• The City maintains it is seeking a vibrant downtown, growth in employment opportunities and a healthy tax base. The Chamber does as well, but we are concerned about the escalating "cost of doing business in Ann Arbor".  The 10% plus increases in development fees seems to contradict all the expressed support given to increasing downtown density and the growth of new technology based companies.  Fee increases at three times the rate of inflation are not supported by the Chamber. The desire to charge for actual costs incurred by the City can be attained over a longer period of time.

• In its budget materials, the City includes health care cost data that has not previously been shared.  The City’s annual costs per active employee and retiree are both about $1,250 over their respective national averages.  With 820 active employees and about 775 retirees, the $1,250 premium translates into a $2 million annual cost penalty compared with the national average for Ann Arbor taxpayers for health care alone, not to mention other benefits or pensions. As we have mentioned in previous position statements, this issue must be addressed before asking taxpayers or businesses for more through higher taxes or fees.

• Setting public presentations aside, we would at a minimum expect that the detailed budget materials would include a five year historical comparison of General Fund revenue and expenditure trends on a comparable, "apples-to-apples" basis.  They do not.

• We are also concerned that the City's revenue assumptions for its budgets and projections for the future years are overly conservative.  Last year, we noted in our position statement that the State Shared revenue budgeted by the City was $1 million lower than the State was projecting.  We were correct, and had the City recognized that higher level, it would not have been necessary to adopt a Headlee Rollback override or require as large a cash transfer from the DDA.  We understand overly optimistic revenue projections are irresponsible, but believe overly conservative ones that result in conclusions that new sources of revenue are required -- whether new millages, possible increases to existing millages, Headlee overrides, transfers from the DDA, or even an income tax – are equally irresponsible.

Budget – Mid Term Concerns

• The Chamber supports local governments collaborating to provide more efficient services and eliminating duplication.  We are told the City is informally involved in discussions with local governments and the County on this subject and we encourage the City to accelerate these efforts.

• As mentioned above, the Chamber strongly encourages the City to make substantial progress in achieving competitive employee benefit levels and costs.  We have been told in the past to wait until 2006 as the bargaining unit contract periods have been re-aligned to all expire this year.  Chamber members, their employees and thousands of Ann Arbor residents have experienced rollbacks in benefits, increases in co-payments and related wage adjustments.  We can not continue to tolerate a municipal wage and benefit structure that is dramatically out of sync with what our members provide themselves and that which is enjoyed by the majority of citizens.

• The Chamber believes the City must demonstrate that it will not rely upon ongoing funding from the DDA as a General Fund revenue source.  Downtown merchants are currently under stress. Tapping $2 million from DDA reserves for five years deprives the downtown of $10 million of infrastructure improvements.