DEARBORN, Michigan – Mayor John B. (Jack) O’Reilly delivered his address to local media, dignitaries, and a small gathering of citizens in the auditorium of the Henry Ford Centennial Library – this past Wednesday night.
The mayor talked about the challenges facing Dearborn after a $6 million decrease in state shared revenue, and an anticipated loss of $16 to $19 million in property taxes.
What follows is the text of the mayor’s speech:
Good evening. Before I begin, I’d like to acknowledge the elected officials and other dignitaries here tonight, and thank them for their support. Also like to recognize my wife, Chris. And I want to acknowledge all of you here in person or watching at home. That’s because you will be playing an important role by considering the actions called for in this year’s State of the City Address.
Mayor John B. (Jack) O'Reilly, Jr. delivers the Dearborn State of the City Address
In the past we’ve used this opportunity to report to you about our accomplishments at City Hall and our plans to move forward in the coming year.
While I’m proud of the great progress we have made on many fronts in 2010, this year’s Address will be different because it must serve an even higher purpose.
First, it must convince you that our tremendous financial challenges are real and need to be immediately addressed.
Second, it must convince you that our evolving vision for Dearborn is still desirable and doable.
Third, this speech must convince you to support plans to achieve that vision of Dearborn.
Realizing this vision requires that we balance our revenues with our expenditures. That means making uncomfortable, even painful, changes to our service mix and raising our financial support, at least temporarily, to pre-Recession levels.
Because it’s so important that everyone understand our economic reality, our vision for the future, and our plan to get there, I’m breaking with another State of the City tradition. If you have questions about anything you hear tonight, write them down on the index cards provided, and I’ll take some time after the speech to answer them.
Since I’m trying to get you to be open to the concept of change, I’m going to introduce one more.
Periodically during my comments I will turn to video segments from a discussion I had with three of the subcommittee chairs of the Community Task Force: Ernie Oz, Tim Bracco and Jane Ahern. I’m hoping their observations will help clarify tonight’s vital points.
If you don’t know, the Task Force members are representatives from a wide array of Dearborn groups and businesses. I want to thank them for their hard work learning about our financial issues and options. And even more so for their commitment to process all those details into recommendations, which are now helping us address our financial challenges.
Key to addressing them requires that we all work together to reach success.
This was the lesson that Ford Motor Co. learned and Tim Bracco explains
(Video with Tim Bracco was shown here.)
We will fail without this support because as always, you – residents, business owners, and city employees here and at home – are the crucial component to our community’s success.
For me, that success is fundamentally tied to safeguarding and improving your property values, your assets, and your investment in Dearborn.
Like we said before, getting there requires accepting reality. So, what is our reality?
It is this:
In four years, we will have lost about a quarter of our revenues, or $25 million, dedicated to providing services to you.
Think about the drastic lifestyle change a 25 percent reduction in your own family’s household income would bring.
Partly due to this dramatic loss, we are expecting at least a $20 million deficit for the next fiscal year if changes are not made now. And $20 million for each of the next five years if our budget continues unaltered.
That annual shortfall represents a structural deficit. What does that mean? It means our reduced revenues cannot cover even our essential expenditures.
The extent of these actual revenue drops is unprecedented and [was] unforeseen by all the experts.
We’ve been hit by:
- A projected loss of 25 percent in our taxable property values over a five year period.
- A $6 million decrease in state shared revenue. An anticipated loss of $16 million in personal property taxes, due to state action and changes in the economy.
- And, an overall tax system statewide that can not respond to cities’ new realities.
- This extraordinary decline in revenues was shocking for our Community Task Force members.
(VIDEO was shown with Ernie, Tim, Jane on their discovery of the magnitude of the problem.)
Expenditures not easily controlled by us are also significantly impacting our structural shortfall. Those include increases in employee health care costs, and required pension funding. These spending increases shift money away from delivering you services.
There is something else at work as well. No one likes to hear it, and I prefer not to say it. But we have to face it. The voter-approved City Charter provisions for minimum staffing of our Police and Fire Departments severely reduce our flexibility to manage our costs. The minimum staffing provisions also put disproportionate pressure on the other essential services we provide.
For example, over the last 10 years, we have eliminated 168 full-time non-public safety positions.
We are expecting to reduce another 40 similar positions by this July, bringing the total to more than 200. That’s a 30 percent loss in our general government employee staffing.
These reductions have played an important role in our comprehensive efforts to cut our structural costs annually by $12 million.
While this number is substantial, it would have been even greater if we were able to strategically include our Police and Fire Departments, which generally have our higher cost positions.
One startling way of looking at our predicament is this. Although we have other, limited sources of revenue, we primarily rely on our operating tax, which is currently 13.62 mills.
With the decline in our property values, that tax rate today generates about $48 million a year. The cost for running all aspects of our police and fire departments is about $51 million a year.
This sobering fact means we are not taking in enough operating tax dollars to cover all of the costs of running our two primary public safety departments — let alone all of our other services that add to your quality of life.
Believe me, we will never compromise on public safety.
But we need to understand that mandating the number of officers or firefighters doesn’t automatically correspond to our desired level of security. For instance, how we deploy officers and firefighters can be equally effective in addressing crime and safety issues.
Through residential surveys over the years, through the Community Task Force recommendations, and just using common sense, we know the most valued characteristic of our community is a high level of public safety.
But I am asking you to understand that it can’t be the only characteristic.
In fact, not any one program or service can or should define Dearborn. The attraction of our community has always been its broad appeal.
That fact should be foremost in our mind as we deal with these unprecedented times. As citizens of Dearborn, we can’t afford — financially or socially — to fight for a few favorite services while ignoring the big picture and the larger impact on our overall community.
Our Task Force subcommittee chairs recognized this responsibility.
(VIDEO shown with Tim Bracco. Other communities succeeded.)
I will make solid recommendations about our future based on a careful analysis of the facts, not in response to emotional appeals.
We need to accept that programs will be reduced, delivered in a much different way, or even eliminated.
Remember, our current revenue stream can no longer cover even those services considered essential.
Since our structural deficit is compounding, if we don’t take action this year, the problem will only get worse, and the required remedies will be more drastic. We will run out of time and options.
To assist us, this year I’m introducing a three-year budgeting process. It will clearly show that if we don’t make appropriate cuts or adopt revenue enhancements in year one, our failure will show up even more dramatically in year two and three. The harm caused by not acting now will become very apparent.
We know Dearborn is not unique in facing tough choices. The reality is, every city, at least in Michigan, is cutting programs or reviewing their tax rates.
I know all of you here tonight and those watching at home are community-oriented and want the best for Dearborn. But I think we all have an even better motivation to be part of the solution.
The value of our own homes means a lot to us. Even though we don’t actually experience a financial loss or gain until we sell our home, it’s still important for us to have confidence in the value of what is likely to be our biggest investment. If we work together on addressing our challenges as a city, we’ll also be working together to recoup the value of our own property. That way, we preserve the potential our investment represents.
Mayor O'Reilly answers questions after the talk.
As Mayor, I want Dearborn to emerge from these challenges as a community that continues to stand out in the region. Despite fewer resources, I want this City to still be known as a safe, appealing, and dynamic place to live, work and visit.
While we’ll have to accept that Dearborn will be different than in the past, we’ll still promote our quality of life, our parks, our recreation, green spaces, visitor attractions and cultural events. We’ll also promote our educational opportunities, like those found at Henry Ford Community College and the University of Michigan-Dearborn. We’ll continue to be an employment center, and a place for industry and innovation.
We’ll still capitalize on our geographic location within the metro area and promote our easy access to freeways, the airport, train station, and regional entertainment and sports venues.
Most importantly, we’ll maintain our competitive advantage because we will still offer you great value for your tax dollar.
So what are the parameters of our plan to overcome our significant financial challenges and keep Dearborn a city with exceptional qualities within the region?
The only way to abolish the $20 million structural shortfall is with a balanced approach.
My goal is to address the structural deficit equally with continued strategic reductions and with the pursuit of revenue enhancements, including tax rate increases or even a new tax model.
This balanced approach also acknowledges that pain must be shared and sacrifices made across the board by residents, property owners, businesses, and city employees.
These are unpopular steps, but it’s important to remember we’ve been making productive cuts for 10 years now. And any obvious reductions have already occurred. The Community Task Force discovered this in reviewing our options going forward.
(VIDEO with Jane. No low hanging fruit. Tim talking about a long way to go. – Task Force Recommendations. )
In light of this, we need to take an even harder look at the proper role of government. We have to ask ourselves if we should be providing particular services if others are doing them equally well, or even better. We can’t afford duplication.
And we must pursue partnerships with neighboring cities or regional authorities where it makes sense. I’m convinced that even our most die-hard Dearborn residents won’t care who provides certain services, as long as that service meets their needs.
Unfortunately, even if we are willing to accept cuts, accept different models for service delivery, and accept shared pain, we still won’t conquer our $20 million structural shortfall with these solutions alone.
As you’ve heard me say several times now, and backed up by the Community Task Force, we must also consider the role our tax rate plays in sustaining our necessary revenue.
One solution we’re considering is a ballot proposal to raise our operating tax rate, following a recommendation of the Task Force. Jane Ahern explains the benefits and impact of such a proposal:
(VIDEO Jane. 18.5 mills and 13.62 mills. Jane. Taxes as an investment.)
Before we get to that 18.5 mills Jane references, I’m going to recommend to the City Council that in the next budget year, we levy the additional 1.38 mills voters have already authorized.
Using the revenue generated by that increase is a responsible and significant move to address our structural deficit.
If we later need to ask for voter approval of the additional 3.5 mills recommended by the Task Force, we would include a sunset provision, making the tax rate temporary, with an ending date, established by law. That would give you, as voters, a powerful tool to hold us accountable. And, it would require us to sufficiently address the structural deficit in an expedient manner.
The Community Task Force anticipates a positive outcome.
(VIDEO Ernie. Sunset provision.)
With a balanced approach, we must also pursue strategic economic development projects and quality of life enhancements.
I know this part may be harder to accept. It’s natural to ask if funds are available for tomorrow, why wouldn’t they be applied to our problems today. We must look past the immediate financial pressures to also plan for our future.
Increasing the number of people coming to do business in Dearborn every day will directly increase investment and property values.
The Community Task Force was determined to include this goal.
(VIDEO Ernie. Courage to invest in quality of life issues.)
While we may wish for other options, our reality demands deliberate actions to realize our vision. The only way to take these steps is with your ongoing support.
We’ve seen the approach that I’ve outlined tonight be successful—right here in our own back yard.
Tim Bracco explains that Ford Motor Co., under Alan Mulally, introduced this process of accepting reality, defining a vision and forming a plan.
(VIDEO of Tim. Ford’s plan.)
I don’t want to diminish the pain that was involved. If you ask anyone who works at Ford they will tell you that much has changed. The company has fewer people and offers fewer products. But, it is also more agile and capable of competing both today and tomorrow.
It took great courage and sacrifice but we need to acknowledge the method is working for Ford. Only now, after the change, the company, employees and shareholders are all seeing the benefits.
The same can happen for our City if we are willing to pay the price for success. That means sacrificing some services we may feel very strongly about. It means accepting change as something we critically need. It means putting more of our hard-earned money into the community as a way to protect our investments.
The good news is we’ve done similar things in the past and have continued to prosper as a community. And that’s really our enduring goal—not just to eliminate our structural deficit but to become the Dearborn we want for the future.
Together, we can make this happen. Shortly, the City Council and I will be coming together to formally develop our plan. They have already accepted the reality and now we must work collectively on our vision. We must make the decisions, take the steps, bear the sacrifices, and come through this process tested, but still united.
Much can change, but if our commitment to one another as neighbors and to our sense of community remains true, I’m confident Dearborn will leverage its powerful potential and continue to be a very special place to live.
Thank you.