State Revenue Sharing Replaced by Incentive Program

Ferndale is on track to meet the first deadline tied to receiving state funds under Gov. Rick Snyder's plan to eliminate statutory revenue staring to cities and replace it with an incentive program.

The new program, called the Economic Vitality Incentive Program (EVIP), was explained at Monday's City Council meeting in a presentation by Ferndale City Manager April McGrath.

There are two types of state revenue sharing, statutory and constitutional. The and last year was about $1.4 million. 

The statutory portion of state revenue sharing, which has been eliminated, was supposed to level the playing field between wealthy and poor communities. For example, Birmingham received less than $300,000 last year in statutory revenue sharing while Ferndale received about $1.2 million.

Revenue sharing has been in decline since 2008 when Ferndale  received $2.8 million in combined state revenue sharing.

Under this new program from the state, which only 270 cities across Michigan qualify for, the maximum amount of statutory revenue sharing Ferndale could received is about $855,000, out of a pool of about $202 million.  McGrath said it is about $431,000 less than last year.

During the budgeting process this winter, however, the city allocated zero dollars in statutory revenue due to the uncertainty of the funding. McGrath said she'd address in her mid-budget analysis in January where the statutory revenue funding will be allocated.

The $855,000 isn't a done deal, though. Under EVIP, in order to get the full amount, the city must meet certain criteria.

"There are three areas, or components, in order to be eligible for funds," McGrath said during her presentation Monday. "And the three components come with three deadlines."

As each deadline passes, McGrath said, and as the city hits each component on time, the city is expected to receive a third of the funds.

The Dashboard component

To hit the first component, a city must have a dashboard for its residents. The dashboard must provide easy to use and understand financial information of the local government. Snyder is also requiring the dashboard to including unfunded liabilities. The deadline to have this in is Oct. 1, but the city has already incorporated a program called Munetrix, McGrath said, which meets this requirement.

Munetrix, a link can be found on the city of Ferndale's homepage, lists where money comes from, how it is spent, historical trends of finances, and population data and crime statistics. The program also maps out budgets from 2006 to 2013, listing exact amounts of expenditures and revenues of each budget.

"I don't necessarily agree with everything the governor proposes, but I'm in full support of this," Ferndale Mayor Dave Coulter said. "I encourage everyone to take a look. When talking about being open and honest and transparent, take a look at that."

The consolidation component

Snyder's second component, which has deadline of Jan. 1, 2012,  requires municipalities to produce one or more plans that increase levels of collaboration, cooperation and consolidation with neighboring jurisdictions and the potential cost savings. This plan must also list previous examples of cooperation and the cost-saving benefits of the action.

"Basically we'll have to make a list," McGrath said. "The state is still working on this plan and we don't know if there will be some type of auditor at this point or not."

McGrath said the list should be sufficient to meet the requirement.

Currently, Ferndale is in a mutual aid agreement with surrounding southeast Oakland County cities for fire protection. It also provides fire service to Royal Oak Township and fire and emergency services to Pleasant Ridge.

The city is also in the . Coulter has said that it's the city's intention to continue pursuing collaborations and cooperation with other municipalities.

Other items of cooperation include using Oakland County's animal control services and sending the cities assessing to the county as well as being part of SOCRRA for waste pickup.

The employee compensation component

The third part of the incentive program requires communities to certify intended changes to retirement plans and health care contributions as defined by the state by May 1, 2012. McGrath said these requirements, handed down by the state, are expected to change pension benefits and require a hard cap to what all cities pay for health care for its employees. "We're actually below this hard cap right now," McGrath said.

This cap will be state law and require union contracts and employee benefits to fall under the cap. Unions whose contract is already above the cap will be forced below it once their contract has expired. This isn't the case in Ferndale right now though, McGrath said.

The only contract in question is the fire fighters contract and that is still in negotiations.

A $5 million state grant to assist in consolidation

Finally, there is a grant that is available from that state to help offset costs of mergers or other inter-local government collaborations.

There is $5 million available for this grant and all cities in Michigan are eligible to apply, McGrath said.

"It's not very much money," McGrath said.

McGrath said that it's unclear exactly what the money might go toward but that the Hazel Park/Ferndale fire consolidation could be one of those projects. "I believe we would be able to apply for a grant to offset those costs," McGrath said.

The study of consolidating Hazel Park and Ferndale's fire services is still ongoing and it is unclear on how much that would cost or how much it would save at this point.