Riverview City Manager Douglas Drysdale (right) discusses the city’s financial options once its landfill closes and a significant portion of the city’s revenue disappears, as City Attorney Randall Pentiuk (left) and City Councilman James Trombley listen during a Sept. 9 city council study session.
By SUE SUCHYTA
Sunday Times Newspapers
RIVERVIEW – The City Council is pondering ways to pay for city services once its landfill reaches capacity in 10 years, leaving the city with a $3.5 million drop in annual revenue.
The city-owned landfill, also known as the land preserve, provides 25 percent, or $2.6 million, of the city’s annual operating budget. The landfill also provides $351,000 to the city’s rubbish fund and $500,000 to the capital improvement and equipment fund each year.
City Manager Douglas Drysdale said during the Sept. 9 council study session that appraisals are being sought for city-owned property which has the potential for development.
Drysdale said in his Jan. 1 memo to the mayor and city council that the $2.6 million the landfill contributes to the city’s operating budget each year equates to 11.5 mills of property tax revenue, based the 2018 taxable value of $305.4 million.
Riverview is allowed by charter to levy up to 20 mills for operating purposes, but as of July 2018, the Headlee Amendment has limited Riverview’s millage to 16.26 mills for city operations. The current city millage is 16.3352 (as of July 2018), which leaves only 0.0752 available for an increase.
The Headlee Amendment, which became part of Michigan’s constitution in 1978, requires a local unit of government to “roll back” its millage when property values increase faster than the rate of inflation. A Headlee override lets local voters return to the original millage amount allowed by charter or state statute, or the amount voters put on the ballot, to counteract the impact of the rollback.
If city voters approved a Headlee override, the city could raise its operating millage to 20 mills, which would let it generate 3.6648 mills from property tax revenue. Based on 2018 values, Drysdale’s report indicates that this option could generate $1.1 million in additional tax revenue.
The report also indicates that two debt payments – for roads and sewers – will expire before the landfill revenue stream ends.
A 2.75 mills for road bonds expire Nov. 1, 2025, which would either remove 2.75 mills from the city’s tax levy or allow the city to research and pursue another road repair bond.
A 1.47 mills for a sewer judgement levy will be paid off during the 2019-20 fiscal year.
Riverview City Manager Douglas Drysdale (fourth from left) discusses Riverview’s financial options once its landfill closes and a significant portion of the city’s revenue disappears, as City Attorney Randall Pentiuk (left), City Councilmen Dean Workman and James Trombley, and Mayor Andrew Swift listen during a Sept. 9 city council study session.
The Riverview Veterans Memorial Library is funded through 1.06 mills, or $325,000, from property tax revenue as part of the city’s operating millage and with general fund transfers. The city could instead opt to levy 1 mill annually against taxable property in the city, as allowed by Public Act 164 of 1877, which would remove the 0.80 mill plus transfer from the general fund currently supporting the library. The voters could, in the future, add 1 mill more through a ballot proposal to the support the library.
Similarly, the city council could remove 0.75 mills from the city operating millage which funds local street maintenance. In 2018, tax revenues generated $230,000 for this millage. Road maintenance would still be paid for with Act 51 funds from the state. Act 51 is funded from gas taxes and vehicle registration fees.
Drysdale’s report notes that future road projects in the city would likely require ballot proposal approval by residents.
Drysdale’s report indicates that city pension obligations are 82 percent funded as of June 2018, and in 2019 the city will contribute $1.14 million to the fund, of which 70 percent, or $800,000, comes from the general fund. Drydale noted in the report that the unfunded liability could be paid off by 2029, about the same time the landfill is projected to close.
Other Post Employment Benefits represent more of a challenge to the city, with a $47.2 million liability. However, as the trust begins to be funded, and the discount rate (the minimum interest rate set by the Federal Reserve for lending to other banks) increases, the city’s actuarial (statistical) risk will decrease, which could decrease the city’s OPEB obligation to the $30 million to $35 million range.
The city council already has passed a resolution which would allocate any revenue from the landfill gas to go into the OPEB fund. Landfill gas, which is 40 to 60 percent methane, can supplement or replace natural gas, or can be used to generate electricity, which can then be profitably transferred to the power grid.
Drysdale said at the Sept. 9 study session that the city is still trying to find a partner for its renewable natural gas venture.
“The ren(ewable energy) market right now is in fluctuation, it’s down, and there is a lot of uncertainty,” Drysdale said. “So, these companies that we are talking to right now are hesitant to give us any type of proposal, because they are not quite sure what is going to happen next.”
The city could set up a separate rubbish fund, Drysdale said, prior to the landfill closing. It currently does not need to, since the landfill subsidizes the city waste disposal costs. By setting up a separate levy to fund trash collection and disposal before the landfill revenue stream ends, it will allow that revenue to go into the general fund or be set aside for future subsidies.
Drysdale notes in the report that not only will the city need to pay disposal fees at another landfill in the future, it will need to pay for the cost of transporting trash to the landfill. He estimated 2 mills will be needed for future garbage collection and disposal.
Riverview’s public safety – police and fire – budget is $5.9 million annually, which is 53 percent of the city’s general fund, Drysdale said in the report. Currently this is funded through tax revenue, state-shared revenue, fees and operating transfers from the landfill.
Drysdale said in the report that a dedicated millage to pay for public safety is allowed under Public Act 33 of 1951, which permits the creation of a special assessment district, against which a tax levy could be assessed. He said a legal review would be needed to determine whether this could be applied to the city, but it remains an option.
In addition to finding ways to reduce the burden on the general fund by removing obligations from it, Drysdale noted in the report that city land assets could be sold for a one-time cash infusion, and the resulting residential developments could then generate future tax revenue. He noted that this is dependent on the properties being marketable, and a purchaser and developer being found.
Drysdale added that the city attorney also would have to determine the permissibility of such proposed developments, four of which were identified in the report.
A 9.5-acre site on Grange Road south of Pennsylvania could accommodate 30 single family homes, with an average taxable value of $100,000, which could in turn generate $50,000 in tax revenue.
A 22.7-acre site on Sibley near Frontage could accommodate 40 single family homes or 175 multi-family homes, with average taxable value of $50,000 to $75,000, which could generate $50,000 to $140,000 in tax revenue.
The city’s golf course, which is 48.5 acres, could be developed into 160 single family homes, with a $75,000 taxable value, which would generate an estimated $195,000 in tax revenue.
Various acreage, approximately 30 lots, near Jefferson Avenue and Riverview Street could be developed into 20 single family homes, with a $40,000 taxable valuable, generating approximately $13,000 in tax revenue.
Drysdale said at the study session that neighboring Wyandotte has had success in redeveloping single lot properties, to get them back on the tax rolls.
“We aren’t just going to sell property to sell property, though,” Drysdale said.
Drysdale said at the study session that despite complaints about the city’s millage rate, only two neighboring cities, Flat Rock and Gibraltar, are lower than Riverview.
“We are pretty low, (with) one of the lowest (millage) around,” Drysdale said. “Taxes may be high. Your tax bill is based on the taxable value of your home. Homes in Riverview are valued higher than they are in a lot of other cities. I assume it is because of our services and public safety and things like that.”
Councilman Tom Coffey said the council’s only option is to plan for the future, assuming that the landfill will close.
“We can’t wait and then cut back,” Coffey said. “We have to keep our eye on the budget and expenditures from now forward, in anticipation that the closure will happen.”
Drysdale said the city could finds additional revenue somewhere, such as the state providing funds “like they are supposed to,” but he is “not counting on that.”
Drysdale said a public safety millage, as well as a Headlee override, to him, are “last resorts.”
Councilmen Dean Workman and James Trombley reiterated that the items listed in the report were all still options.
Drysdale said while he calls them options in his report, they are steps which city officials will need to take.
“These options are everything we need to do, and they still may not be enough,” Drysdale said. “It is not really a menu where you get to pick and choose. Every one of these we will probably need to do to offset the revenue that is being provided by the land preserve to our governmental funds.”
(Sue Suchyta can be reached at [email protected])