Farmington officials got a look Thursday at how the COVID-19 pandemic and other factors may affect the city’s budget over the next five years.
City administrator David Murphy said the 5-year financial forecast includes plenty of assumptions and some red ink. It does not include the anticipated sale of the Maxfield Training Center, which would eliminate about $90,000 a year in debt payments.
“I’d rather have it more grim than give you a rosy picture that I know will not come to fruition,” he said.
The 2020-21 general fund budget is expected to end with a $260,000 surplus that will offset an anticipated deficit in 2021-2022. Finance director Chris Weber said the city landed $662,000 in federal COVID relief grants, more than triple what was expected.
“Oakland County has done a great job of making money available to help with COVID expenses, and we’ve been aggressive going after what money was available,” he said.
While the projection shows six-figure deficits starting in 2021-2022, Weber said, the city typically spends much less than budgeted. Department heads will submit budgets over the next few months, and he expects more accurate figures by the end of April.
Revenues include 1 mill of a voter approved 3-mill levy, with the other 2 mills allocated for capital expenses. Weber said the city could use .5 mills of the remainder to help balance the budget. The city will also see additional property tax revenues from new construction, like the Liberty Hill development on 10 Mile Road.
Weber said retail property values may be affected by the pandemic. If owners experience long-term vacancies, they can dispute the value of their assessment. He said that would largely affect the Downtown Development Authority (DDA), which derives its income from property taxes within the downtown district.
Revenues from licenses and permits, 47th District Court, the Maxfield Training Center sale, and interest income are hard to predict, Weber said, as are pension and staffing costs. If COVID restrictions continue, the city may also end up providing as much as $100,000 in annual support for the Farmington Civic Theater.
Mayor pro tem Joe LaRussa asked how the current forecast looked in light of estimates around the city’s 2018 millage campaign.
“I’m curious to see how this stacks up,” he said. “How close were we at guessing right when we said 1 mill would get us back to increasing our fund balance?”
“The forecast represents 1 mill in the general fund, so really, this shows how close we were,” Weber said. “We said 1 mil would balance our budget in near term and that would deteriorate in out years.”