Pontiac — A 10-year capital improvement plan, no new budget tasks for county departments and elected officials for the first time since 2006, and changes in employee compensation and health care benefits are included in Oakland County Executive L. Brooks Patterson’s budget recommendation which is balanced for FY 2013, FY 2014, and FY 2015.
“This budget was balanced without a tax increase and ensures delivery of needed services to Oakland County citizens for the next three years,” Patterson said before the Board of Commissioners Wednesday evening.
The General Fund/General Purpose Estimated Revenue and Appropriations are balanced at $417,894,807 for FY 2013; $424,271,405 for FY 2014; and $428,639,468 for FY 2015. The total budget for all funds amounts to $775,464,839 for FY 2013; $782,091,068 for FY 2014; and $786,148,971 for FY 2015.
Oakland County’s budgetary excellence has resulted in Moody’s Investors Service and Standard & Poor’s renewing the county’s AAA bond rating within the past week. Therefore, Patterson’s budget recommendation includes financing capital projects at the lowest-possible interest rates over a decade.
“With interest rates as low as they have been over the past few years, the county has funded the last few major capital projects through the issuance of bonds,” Patterson said. “The county plans to take further advantage of the continued low interest rates by issuing approximately $19 million of bonds to be repaid over a 10-year period to fund the longer-term 10-year capital plan for building improvements, infrastructure, and technology projects.”
There is no general salary increase being recommended for FY 2013. A general salary increase of 1 percent is recommended in both FY 2014 and FY 2015. This follows years of general salary reductions coupled with no increases. However, full-time employees will receive a one-time $500 lump-sum payment for FY 2013. This $500 payment would not be recurring and would not be included in the base pay structure. The impact on the General Fund is approximately $1.4 million for FY 2013 only. Since it is a one-time payment, there is no impact on FY 2014 and FY 2015 operating budgets. A separate resolution will be subsequently presented to the Board of Commissioners for approval and authorization of the one-time payment.
“Prudent long-term planning requires that we contemplate a bigger picture, namely, the need to recruit and retain a quality work force in the future,” Patterson said. “Public sector economic recovery will lag behind private sector. With the anticipated need to recruit due to retirements and retain due to competition in the labor market, it is imperative that our ‘total compensation’ package be competitively positioned.”
The County Executive Administration proposed last month to make minor modifications to the employee health care plan, which will increase the prescription drug co-pay from the current levels of $5 (generic)/$10 (brand)/$25 (non-preferred brand) to $5/$20/$40. In addition, an emergency room co-pay of $100 would be implemented for non-emergency conditions. These changes are designed to encourage the use of generic prescription drugs and the use of physician office visits and/or urgent care centers for non-emergency related care. These changes would apply to all non-represented employees, retirees, and represented employees whose bargaining agreements provide for these changes effective January 1, 2013. The savings are estimated to be $850,000 annually but have not been incorporated into this recommended budget; the savings will be recognized in future budget recommendations after verification through actual experience.
Patterson’s budget recommendation’s long-term outlook anticipates what will impact revenue. For instance, even while property tax revenues continue to decline, they are not declining at the same precipitous pace experienced over the past several years. In developing this budget recommendation, county-wide real property taxable value is conservatively estimated to further decline slightly by 1 percent in 2013, remain flat in 2014, and then increase by 1 percent in 2015.
Another issue is the proposed phase-out of the Personal Property Tax (PPT) which is expected to pass the full Michigan Legislature later this year. Currently, commercial and industrial personal property represents 5.86 percent of total taxable value in Oakland County and generates approximately $12 million of tax revenue. That tax revenue will be eliminated in three phases, most beginning in 2016.
A positive jobs outlook may mitigate some of the losses in tax revenue. In 2011, Oakland County experienced the beginning of an economic recovery locally, experiencing its second best year for job growth since 1994. The 23,426 new jobs created last year in Oakland County – more than double the number that economists had projected – exceeded expectations and constituted almost one-third of all new jobs created in Michigan in 2011.
University of Michigan economists George Fulton and Donald Grimes projected that under Patterson’s job creation initiatives such as Emerging Sectors, Medical Main Street, and Automation Alley more than 33,700 new jobs will be added in Oakland County over the next three years. That is why Patterson expects the county to reach full employment in 18 months.
“’Full employment’ is a Herculean effort but we believe it is within Oakland County’s reach,” Patterson said. “What is 18,174? That’s the number of jobs that need to be created in Oakland County to get its unemployment rate down to 5 percent, a rate which economists call ‘full employment.’”
Patterson credited cooperation among elected county officials for the success of his recommended budget. “It was accomplished through a partnership of all Oakland County elected officials who have embraced the prospect of reshaping our county government to become stronger and even more efficient in the long run,” Patterson said.
Department of Management and Budget staff will present the budget in full detail to the Finance Committee at 9 a.m. Thursday, July 26. The Board of Commissioners will vote on Patterson’s budget recommendation at 9:30 a.m. Thursday, September 20. For a list of additional committee hearing dates, go to www.oakgov.com/boc. To view the budget message, go to www.oakgov.com/exec. To view the budget documents, go to www.oakgov.com/fiscal.