Will Your Suburb End up Like Hazel Park?

Before I met the Hazel Park city manager, I was curious, first, about how the heck this suburb on Detroit’s northern border managed to pass a 9.8-mill levy last year and, second, how now those funds are not enough to balance the budget.

I wasn’t really personally concerned about that suburb’s financial situation.

After all, I’ve got my own ‘burb to worry about, not to mention the mess in neighboring Detroit and the state as a whole. Why should I – or anyone else who doesn’t live in Hazel Park – care what’s being cut or restructured?

Hazel Park finances were a policy geek’s passing fancy.

Until City Manager Edward Klobucher (pictured to the right) put it this way:

A busy but twisty stretch of Interstate 75 cuts through the suburb. Thousands of Michigan motorists travel that route daily. Yes, technically the Michigan State Police are responsible for public safety on the road. But who responds to crashes, accidents and fires there?

The Hazel Park police and fire departments.

So if the dire financial situation forces layoffs and less well-maintained equipment, that means a lesser response capability when it’s MY car accordioned into the overpass abutment.

Ah, now I’m starting to listen to Klobucher’s explanation of why Hazel Park – like many of Michigan’s suburbs, especially the older, inner ring municipalities – are in such bad financial shape and how few prospects of any real fixes are currently feasible.

And I want to know how Hazel Park got in this situation, what it’s done to cut costs and raise revenues and how the heck that $2.1 million it raised in last year’s millage isn’t enough. I wonder, are any policies from Lansing helping?

I start by asking Klobucher the question: Why municipal finances matter and I get an answer that is crystal clear.

“Why should somebody be concerned about Michigan’s broken municipal finance system? Well, if somebody is kicking in your back door in the middle of the night, you don’t call your state representative or your state senator.

“If one of your loved ones is having chest pains or your house is on fire, you’re not going to make a call to Lansing.

“If there’s a storm in your community and a tree falls in the road and the access is blocked, Gov. Rick Snyder is not going to come over with his chain saw and clear that tree. It’s local government that is expected to provide these services. Local government is where rubber hits the road and where the critical life-saving services that protect the average people in the state of Michigan happen. That’s where those services are provided,” he says.

Ah, that makes sense.

But like any business, Hazel Park or any other municipality can’t pick up garbage, put out fires and arrest criminals, for example, without paying people to do the work. And to pay people, the city needs funding.
But why does it so BADLY need funding now?

Sure, Hazel Park is collecting only a quarter of the revenue it did just a few years ago from its race track. But more significantly, like everywhere, a drop in property value mean less revenue for local government.

As Klobucher says, his community has “had some of the most significant declines in property values of any of the communities in the tri-country area.”

The suburb had rising values in the early 2000s, but since the bubble burst, Hazel Park property values have fallen to half of those levels.

Because municipal revenue is so intrinsically tied to property tax, which is tied to property values ESPECIALLY as they decline, that has meant steep drops in cash coming in.

Lucky you, if you consider your low property tax rate a fair trade off for fewer city services.

And many do. But not in Hazel Park. Residents passed last year’s 9.8-mill levy by a roughly 3 to 1 margin. That millage was supposed to raise $2.1 million toward police and fire operations.

But when property assessments came in and values dropped again, suddenly that millage only raised about half of what it would at last year’s levels. And the state has not made up any shortfalls in revenue sharing, for example.

So cut, many say.

Make municipalities run more efficiently. Live within your budget.
It’s not that Hazel Park hasn’t tried. In a decade, the 120 employees have been reduced to about 90, with many of them transformed to part-time positions. They’ve all taken 5 percent pay cuts. City hall is open four days a week instead of five.
Still there are legacy costs that can’t be touched. The city pays pensions to 120 retirees from a fund separate from the general operating account. But their health care costs – and their 80 dependents – do come out of Hazel Park’s general fund each year.

Klobucher says he’s been trying for a decade to figure out how to set up some kind of account and funding mechanism to get that expense off the general fund, but he just can’t.

What he and the public hear from the Snyder Administration is “service sharing.” Consolidate. Combine operations for greater efficiency.

So why can’t municipalities share services, contracts and employees?
They do, Klobucher says, when it works and actually lowers costs, which it doesn’t always do.

“Service sharing is not the solutions to all problems. It’s been somehow oversold in Lansing, and it’s a bumper-sticker slogan that’s become the catch-all throwaway solution to municipal finance when in fact it’s only a partial solution,” he says. “Each proposal for service sharing needs to be judged on its own merits.”
Uh-oh. So what’s the forecast without SOME funding changes at the state level?

“At some point, we will reach the point where it will become impossible,” Klobucher says.

And many of our other suburbs could be just like Hazel Park, but without the new millage.