Bernero Explains Proposed 2013 City Budget

Mar 27, 2012

Lansing mayor Virg Bernero is presenting his proposed 2013 budget to the city council.  Last November, voters approved a public safety millage that enabled the city to reduce its projected deficit to between $5 million and $7 million -- roughly half of what it was last year.  But to close the remaining gap, the mayor’s plan asks many city employees to either take up to 26 days off without pay or pay more for their health insurance and pensions.  Mayor Bernero tells WKAR’s Kevin Lavery that the furlough days are on a sliding scale.

MAYOR VIRG BERNERO:  We can do up to 26 (days); we’d rather not, and if we can get some concessions then we could dial them all the way back to zero.  So, we want to tackle this problem together with our employees; we’ve been able to do that up to this point, and I’m hopeful that we will continue to.  Our budget does not include layoffs this year, I’m proud to say, I’m glad to say.  Every year, it’s something we worry about.

KEVIN LAVERY:  This year the state of Michigan is going to have some shared revenue mandates that will actually limit Lansing’s ability to contribute for employee insurance and employee pensions.  Because of that, Mayor, is what you’re proposing in your budget the start of a long-term strategy to chip away at what really is the city’s biggest recurring structural deficit item?

BERNERO:   That’s exactly what it is.  That is a big part of the structural problem.  I think that the governor and the legislature, they’re dealing with failing cities right now around the state, and this is part of it.  The legacy cost piece of it, the high cost of these benefits is a piece of it.  And so, the state is telling us under no uncertain terms that we must get more cooperation, and we have to have more employee buy-in, if you will, on these programs…and if we don’t, the state is going to slap us. 

In actuality, the state is forcing cities to address what needs to be addressed anyway.  Because if you look at what we had to do this year to take $2 million out of the general fund to add to pensions and health care, we can not continually do that as those cost escalate.  It’s not sustainable.

The other reason that people might not see:  cities and townships and counties are heavily reliant on property taxes.  We don’t have the big income stream coming from income tax that the state does.  The reality is that our income is down.  Property values are still depressed, and property taxes are what we rely on.

LAVERY:   One of the features in your proposal, Mayor, is increasing the return on equity that the Lansing Board of Water and Light pays to the city to increase the annual percentage from four percent to five percent.  That’s actually below the national average for city-owned utilities.  Was that an overlooked revenue stream in years past, and what do you think that could do for the city in the future?

BERNERO:   I don’t think that it’s been overlooked.  It’s been something that’s grown.  As the utility has grown healthier, the amount that it returns to the city, to the residents, is becoming healthier.  I don’t think that we want to milk this utility, because ultimately this is ratepayers who are making it work.  We want a fair return on equity for the taxpayers who are the shareholders.  So, we want to be prudent about it, like with the rest of the budget.  So we looked and said, what is the national average?  OK, it seems to be some are collecting up to six percent, we’re at four percent; let’s go for the happy medium of five percent.  Let’s not try to soak ratepayers; let’s not try to get all we can, but let’s have a fair return.

LAVERY:  So, your budget proposal is out on the table; there’s going to be a couple of public hearings between now and May 21, which is when the city council is required to vote on your budget.  What opposition – or to think positively – what compromises are you preparing for when you take this up to the council?

BERNERO:  I’m preparing for none of either (laughs).  We have a pretty good track record.  I think if you added it up, I think you’d find probably about 96 or 97 percent of my budgets have been approved as is; of my budget line items over seven years.  And part of that is, it’s difficult.  It’s easy to look forward five, 10 years and say well we ought to be doing this, we ought to be doing that…but the budget has to be balanced now.  Today.  So, if you’re going to restore that cut, show me what you’re going to cut to make it up.  And that’s usually where the argument falls down, because nobody wants to cut anything, and I don’t either.

A budget is a reflection of priorities, and we think this budget is a pretty good statement of the priorities of the people of Lansing; a pretty good reflection.  Public safety, neighborhoods, police, fire, roads, infrastructure investment and long-term investments in our future, like what’s going on at the Board of Water and Light.