CHICAGO — It may not be the best of times but at least it's no longer the worst of times for local governments in Michigan, according to a new report from University of Michigan.
The survey, now in its fifth year, shows a mixed picture for the fiscal condition of the state's 1,856 cities, townships, and counties. It does not include school districts.
Overall, local officials report they were better able to meet their financial needs in fiscal 2013. But the pace of improvement among the governments dropped dramatically in 2013 compared to the last two years.
Property tax revenues are on the rise, especially among larger governments, but continued to fall for almost half of the jurisdictions. Infrastructure demands are rising while debt levels are expected to remain mostly the same. Many local officials, especially in smaller governments, said they are pessimistic about being able to meet their needs over the next year.
The university began the survey in 2009, and found steep declines in local finances in 2009 and 2010. That was followed by a general trend of improvement through 2012. The trend continued in 2013, but at a much slower pace, said Tom Ivacko, administrator at the Center for Local, State and Urban Police, which is part of the university's Gerald R. Ford School of Public Policy, which conducted the survey.
"Even though we continue to see improvement, it really is incredibly gradual and unfortunately it's slowed down," Ivacko said. About half as many local officials said things were improving as did the previous years.
"This slowdown in improvement, that's a pretty big concern that we're going to have to keep our eye on," he said. "We charted a big improvement for the last two years and suddenly it's only half as much — if that's the beginning of a reverse trend it's really concerning."
Of the roughly 1,850 local governments, about 538 report they are still in a state of fiscal decline.
"I think we are in the middle of a very long horizon of a transition period, and it's not clear where that horizon is heading," Ivacko said.
Among the most surprising finds was that the state's larger jurisdictions appear for the first time to be showing the most improvement, while the state's smallest governments are lagging badly.
That's a turnaround from previous years, when the larger communities were facing the most severe stress. Many of the larger cities and counties have imposed spending cuts to handle their challenges, while smaller jurisdictions don't have as many places to cut, Ivacko said.
Local officials from the state's largest communities also reported the most optimism about the upcoming fiscal year.
Overall, 30% of local leaders said they believe they will be somewhat or significantly less able to meet their fiscal needs net year compared to this year, compared to 34% in 2012. Another 28% said they believe they will be better off next year, up from 22% last year.
"In other words, while fiscal health outlooks are improving compared to the past, overall, it is still the case that more jurisdictions expect to be in worse fiscal health next year than expect to be in better fiscal health," the report said. Of governments with more than 30,000 residents, 44% said they are better able to meet their needs this year, up from 36% in 2012, while 33% said they are less able to meet their needs, down from 47% in 2012.
Nearly half, or 48%, of jurisdictions reported declining property taxes, down from 64% last year. The larger governments were more likely to report property tax revenue improvements.
On the debt side, 47% of governments said they do not expect to see a change in their amount of debt during the next fiscal year. Another 16% said they expect to somewhat decrease the amount of debt, including 35% of cities. Another 12% said they expect to somewhat increase their amount of debt, with 25% of cities also saying they expect to see a slight increase. Only 3% said they expect to greatly increase their debt load.
Just under half of local communities said they saw no change in their amount of debt during fiscal 2013, while 20% said they saw a slight decrease.
Half of all jurisdictions said their need for infrastructure increased in fiscal 2013 compared to 2012, up from 45% who reported that in 2012. The state's larger communities were significantly more likely to say they have increased infrastructure needs, with 71% of the state's largest communities saying their infrastructure needs increased, up from 67% the previous year.
The survey also asked local officials whether they saw a change in their ability to repay their debt during the previous fiscal year. The majority of the respondents, 62%, said they saw no change, while 12% said they saw a somewhat increased ability to repay their debt. Another 12% of cities said they saw a somewhat decreased ability to repay their debt.
About 30% of local officials said they think their fiscal health will be worse a year from now while 28% feel it will be better.
"This may reflect their concerns about the economy as well as previously expressed concerns that Michigan's system of funding local governments won't provide the revenues needed to meet future service needs," the report said.
One area of concern is Gov. Rick Snyder's push to eliminate the state's personal property tax, a tax on large equipment that goes directly to local governments. Voters will weigh in on the proposal next summer. The state has also cut local aid dramatically over the last 10 years.
"It would be an enormous task to think about a significant revision to how things are funded, but if nothing is done we've found pretty significant evidence that local leaders think things are going to get worse and worse," Ivacko said. "There's a clamoring out there for something to be done."
Less than half of local governments provide retirement benefits like pensions and health care to their employees. Those that do, however, report their legacy costs are rising. Of those that offer benefits, 46% said they plan to have employees cover more of their health care costs, including 77% of the state's largest jurisdictions. Another 48% of the largest governments said they plan to ask employees to contribute more to their pensions.
But many governments said they plan to increase employee salaries over the next year as well, including 44% of the largest communities.
The report is based on a statewide survey conducted in the spring. The responses are anonymous, and Ivacko said he is not sure if Detroit participated in the report.