Budget cuts and cost-cutting measures being undertaken in Bloomfield Township are expected to provide an additional $3.25 million to the municipality's annual budget, but could still require the township to dip into fund balance reserves in order to cover an estimated $2.2 million deficit and provide $2 million for unfunded liabilities.
Bloomfield Township Finance Director Jason Theis on Wednesday, October 16, presented the township board of trustees with budget projections for the fiscal year 2020, which began on April 1, 2019, as well as projections for the 2021 fiscal year, which begins April 1, 2020.
The board earlier this year approved an annual budget that included a $2.2 million deficit with the intention of amending the budget following the results of the special election in August, in which voters were presented with a Special Assessment District (SAD) that would have been dedicated to public safety operations. The tax, which was rejected by voters, would have provided a dedicated funding source for pensions and the township's other post employee benefits (OPEB) trust fund.
The SAD was proposed in response to a 2018 state law intended to ensure local retiree health care and pension plans are adequately funded. Under the law, a municipality must ensure at least 40 percent of the OPEB costs are funded within 30 years, or about $65 million in the case of the township. Prior to the law being implemented, municipalities could pay actual costs incurred on an annual basis, or “pay-as-you-go.”
"If you remember, with the timing of not knowing what the board was going to do to move forward with a SAD or not, and having to have a budget approved before April 1, the beginning of the fiscal year, we knew we would have a chance to amend budgets later in the year depending on the outcome of the SAD," Theis said. "That's why we had that $2.8 million deficit at that time."
The board had originally budgeted a $2.8 million deficit in its public safety fund; yet had budgeted balances of $10,000 in the township's road fund and a balance of $590,000 in the general fund, for an overall deficit of about $2.2 million.
"That's a $2.2 million deficit with no available funds to contribute toward OPEB," Theis said.
Since the rejection of the SAD by voters, township administration has had department heads look for ways to reduce their budget and present those findings to trustees. Township administration has made moves in recent months for additional savings by moving to a self-funded health system; refinancing municipal bonds let for pensions; higher investment earnings; maintaining a hiring freeze and reducing the number of total employees through attrition; and additional measures.
Figures presented by Theis indicate the township will end the current fiscal year with a deficit of about $325,000. That total includes a $400,000 deficit in the township's public safety fund, but offset by balances of about $25,000 in the road fund and $50,000 in the general fund.
As some proposed cuts have yet to be finalized, Bloomfield Township Supervisor Leo Savoie said it isn't yet known if the township will need to dip into its general fund balance to even out the budget.
"The fund balance would get us through any deficiencies we have out there, but I believe with the cuts we made and the hiring freeze, we can get through it at this particular time without going into the fund balance – but I can't be sure, yet," Savoie said.
The fund balance of the three major funds at the beginning of the fiscal year was roughly $28 to $30 million, with estimates to end the year with a total of balance of $25 to $30 million. Theis said while the fund balance alone could cover the originally projected deficit, it could only be used as a one-time fix that wasn't recommended by administration.
The budget estimate includes a total of $2 million in OPEB contributions, of which $1.5 million will come from the township's public safety fund and $500,000 from the general fund.
Bloomfield Township Treasurer Brian Kepes said the numbers were both "sobering" and "scary."
"What's really sobering is that we are in a good economy and this is what we are dealing with, and we are going to be dealing with a reduction in services," Kepes said. "You're assuming a 3.5-percent increase in revenue from property values, and should we come into any kind of scenario with a dip, whether it's a percent or half a percent, those are significant numbers that would be compounded on top of the cuts that we are already talking about. Again, it's a good economy, but we know Michigan can be very cyclical and we know it's not always 'if,' but 'when.'
"As a resident living with the expectations that I used to have and what we need to adjust to based on the economic realities, it's kind of scary."