Detroit Free Press: Cities dip into their savings accounts

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Cities dip into their savings accounts
Budgets look like rainy days are here
BY DAN CORTEZ • FREE PRESS STAFF WRITER • May 4, 2008



An increasing number of metro Detroit cities will have to do what so many Michigan residents are already doing to make ends meet -- tap into their savings.

Red ink will flow next year, for example, in Roseville, where the city expects to be short $400,000. Down in Wayne, there's an estimated $260,000 hole in the upcoming year. And in Warren, expenditures are outstripping revenues by $8.5 million.

Municipal financial experts consider the cities' savings -- known as fund balances or rainy day funds -- indicators of financial viability that should only be tapped in the toughest of times. But leaders of many communities say they'll have to do just that, even though borrowing money becomes more expensive and maintaining staffing levels and continuing to offer the same services becomes harder to justify.

"We did not expect a drop in tax revenue," said Roseville City Manager Steve Truman, whose city is one of several that saw property values decrease. "All you have to do is walk outside and see the vacant homes. It's everywhere."

And what can residents expect when a city decides a rainy day is here? If it hadn't already done so, a city might skip a debt payment, hold off on purchasing new equipment or institute hiring freezes. It will also be harder and more expensive to borrow money that would fund new buildings, projects and other initiatives.

"You may try to exhaust everything, and it may well be that they've gotten to this point," Jake Lorentz, an assistant director at the Government Finance Officers Association, said of cities using their savings. ......(more)

The complete piece is at: http://www.freep.com/apps/pbcs.dll/article?AID=/20080504/NEWS05/805040572