Press Conference: Solutions for Fixing Broken System for Funding Communities

The League, during a news conference Tuesday, Jan. 24, 2017, talked about the value of placemaking and current impediments to making placemaking a reality. Holland Mayor Nancy DeBoer described the positive influence of placemaking on her West Michigan community. Howell City Manager Shea Charles, chair of the League’s Municipal Finance committee, also discussed placemaking benefits, but detailed the financial struggles facing cities.

Related: Press release about Tuesday’s press conference

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Look up how much revenue sharing the state has diverted from your community

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Media Coverage of news conference – list below

The Michigan Municipal League had a highly successful news conference Tuesday outlining our proposals to fix the state’s broken system for funding municipalities.

As part of the League’s initiative, the event officially unveiled a new League report, called “Michigan’s Broken Municipal Finance System: Issues and Proposed Actions,” which you can view here. The news conference also featured Holland Mayor Nancy DeBoer, Howell City Manager Shea Charles, League CEO and Executive Director Dan Gilmartin and League COO and Associate Executive Director Anthony Minghine.

Press conference speakers League COO Anthony Minghine, Howell City Manager Shea Charles, Holland Mayor Nancy DeBoer and League CEO Dan Gilmartin

“We can’t simply measure leadership in the state by how well we manage the decline,” Gilmartin said during the news conference. “We need to do more. We need to look around us and find out why some places are outpacing us. … This (broken municipal finance system) is slowly strangling our state. We fix this and we figure out a way to move this sucker forward and we have got a puncher’s chance to doing some really good stuff. We continue to ignore it, we continue to say it’s too big a lift, it’s too hard to do, we will do so at our own peril.”

Gilmartin and Minghine explained how Michigan’s current system for funding municipalities is broken and doesn’t track with the economy. Michigan is recovering from the recession and housing crisis, but property tax revenue to communities doesn’t rebound as quickly as it fell.

In addition, as property tax revenue declined, the state also reduced to communities another major income source, called revenue sharing. The state cut anticipated revenue sharing to communities from 2002-2015 by $7.5 billion. From 2002-2012, Michigan was the only state in the nation where municipal revenue actually fell, and there has been little improvement since then. That means cities have laid off first responders and been unable to maintain roads and infrastructure, let alone provide the services that attract college graduates, the lifeblood of today’s middle class.

Holland Mayor Nancy DeBoer discusses the importance of placemaking at League news conference.

Holland Mayor DeBoer explained her city lost $10.5 million in revenue sharing since 2002 and five years ago gave the new, incoming city manager a list of 50 cuts that they’ve since accomplished to help the city stay financially solvent. But had the state adequately funded local municipalities, the parks in Holland would be better developed, the renovations to its Civic Center would be done and the city would be better connected with its business community.

“There’s so many things we could have done better, but we did what we could with what we have,” she said.

DeBoer also thanked Governor Snyder for comments made in his recent State of the State address where he  recognize the importance of placemaking, which is the concept of revitalizing downtowns and neighborhoods to meet the needs of residents. The League and communities like Holland have been supporting this concept for years. DeBoer told of a recent Hope College graduate who could have moved anywhere in the world after graduation and chose to stay in Holland because he liked the community and what it has to offer. The graduate works from home as a writer for a company in San Francisco.

“People choose the place they want to work and the place they want to live, and the best place wins,” DeBoer said. “We want that to be Holland. We want that to be Michigan. We are glad that the Michigan Municipal League is partnering with cities to help craft a way back and that we can work with the Governor and the Legislature to figure out a way to restore some of the revenue sharing and to be able to embrace a little brighter future for all the pieces because know the whole is going to be the sum of the parts and if the parts are hurting the whole is not going to come across they way we want it to.”

Howell City Manager Shea Charles talks about the state’s broken system for funding municipalities at League news conference.

Howell City Manager Shea Charles said the financial struggles are being faced by all communities in the state due to the broken system. Charles explained how a community’s revenue doesn’t track with the economy. Housing prices have gone up, the city’s industry base has dramatically increased yet the city’s taxable value is about the same as in was in 2000 – 17 years ago. To stay financially afloat amid declining property values and a cut in $3.1 million in revenue sharing by the state, the city has cut 25 percent of its staff, did a wage freeze for seven years, eliminated retiree health care and did a number of regional cooperation efforts to reduce costs and increase efficiencies.

“We want to thirve, we want to be vibrant to help our residents and business owners and our state,” Charles said. “But it’s very difficult if not impossible to do so under our current system.”

Also at the news conference, Minghine reviewed the new easy-to-digest report that explains why the system is broken and outlines solutions. It points out:

  • Michigan’s municipal finance system fails to track with the economy: The state has cut revenue sharing by $7.5 billion since 2002. There was another reduction in revenue sharing in 2015-16.
  • State policy limits the ability to control many costs: Local governments need more tools to allow regional infrastructure sharing and controls to retirement costs, particularly retirement health care costs.

The report provides solutions. It calls for:

  • State authority to help cities contain certain costs, particularly retirement health care. Cities want to be able to provide competitive benefits to their retirees. But in order to provide modern health care benefits, we need modern health care plan designs.
  • State policies aimed at regional infrastructure: Service delivery in the state is fragmented by geographic lines that have little to do with the lives of people served. We need to fully utilize our existing infrastructure.
  • More revenue stability and options for local revenue: The state needs to recommit to supporting revenue sharing and allow growth from property taxes that are commensurate with the state’s economic growth.

The League’s Anthony Minghine explains how the state’s municipal funding system does not track with the economy as it should.

“We are very excited that this was talked about so extensively as part of the State of the State,” Minghine said. “It’s clear Michigan plays a key role in driving Michigan’s economy and moving us forward. But for that really to happen we’ve got to correct our municipal finance system. Our system simply does not track with the economy. Our model, our system, does not allow our communities to share in prosperous times. In hard times we do our fair share. But we got to be able to grow as the economy grows. We have a system that absolutely prevents that.”

Minghine said one way to help communities income better track with the economy is to change how the Headlee Amendment and Proposal A are implemented at the legislative level.

“What we have come to find post-recession is the combination of those two things doesn’t work the way we all thought,” he said. “That is not a result of the constitutional amendment. It’s a result of how it was put in place through implementation legislation. We can fix those things.”

Here are links to the media coverage of Tuesday’s news conference:

Route Fifty: Fiscally Strained Michigan Municipalities Face ‘Perfect Storm’

Holland Sentinel: Holland Mayor Talks State Funding During Michigan Municipal League Press Conference

WILX TV: Michigan Municipal League Priorities

Politically Speaking Blog: City Leaders Praise Snyder’s New Economic Message

MIRS (subscription required): “Broken System” has Cities “Drowning” in Fiscal Troubles

Gongwer (subscription required): MML Doubling Down to Fix ‘Broken” Finance System

WHMI News Radio: Howell City Manager to Speak at Michigan Municipal League News Conference

For additional information, contact the League’s Matt Bach, director of media relations, at (734) 669-6317 (office) and