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The city of Hillsdale’s general fund is set to go bottom out in 2020 if new sources of revenue are not found. | Wiki­media Commons

Editor’s note: This article was pre­vi­ously titled “City of Hillsdale set to go bankrupt in 2020.” This was a inac­curate rep­re­sen­tation of the facts pre­sented in the article below and was retitled to more accu­rately reflect the story. The city of Hillsdale is not going bankrupt. 

The city of Hillsdale’s general fund balance will be com­pletely empty by 2020 unless it finds new ways to raise revenue, according to its latest budget report.

“We are where we are not because the city was poorly managed, but because of a con­fluence of things that were out of the city’s control,” Pro­fessor of Eco­nomics Gary Wolfram said.

Due to a mixture of a decline in state revenue sharing — which is when the state gov­ernment dis­tributes income from sales taxes to cities and town­ships within the state — and the increase in non-taxable land, the current budget projects the city will have to con­tinue to cut its ser­vices.

Wolfram said the city was able to stay out of debt last year because it cut things like road repair and shrank the size of its public ser­vices.

“The state’s revenue sharing in 2014 was 26 percent below what it was in 2001. And it’s not just Hillsdale — it’s every­where in the state,” he said.

Wolfram also said that the state con­sti­tution is another cause for the decline in the city’s revenue. An amendment made in 1994 limits the annual increase in taxable value of property sold to no more than the rate of inflation or five percent, whichever is less, until the property is sold.

Wolfram said this amendment was not designed for a decline in property values.

“When you get a sub­stantial decline in property values, like we did in 2008, these property values can’t come back at the rate they went down — they can only come back at like one to two percent,” he said. “So you get a sub­stantial decline in property tax and revenue all at the same time.”

The city col­lects most of its revenue from property taxes, which have been declining in the past few years because the city’s major land holders — the college and the hos­pital — are non-taxable. However, several parcels of land the college has pur­chased in the past few years are taxable because they do not specif­i­cally pertain to the college’s aca­demic mission.

These prop­erties, located on N. Manning St. and West St. are part of an effort led by the college’s Board of Trustees to build a neigh­borhood in which donors and friends of the college can reside.

City coun­cilman Adam Stockford said the city of Hillsdale is already ben­e­fitting from the college’s new real estate devel­op­ments.

“The college is taking ini­tiative to put property back on the tax role,” he said. “Those five lots that the college bought paid $5,000 year in property taxes. Now the Brodbeck house alone pays $20,000 a year in taxes.”

The Brodbeck house is a large house located on N. Manning St. built by Hillsdale alumnus William Brodbeck ’66 as the first installment in the donor neigh­borhood. Chief Admin­is­trative officer Rich Péwé said in an email some buyers have expressed interest in the other prop­erties, but no one has made an offer yet.

Péwé did not respond to mul­tiple requests for comment regarding the college’s intent toward the city’s revenue by building the new neigh­borhood.

Wolfram said regardless of the college’s intent, if its building ini­tiative works, the city of Hillsdale will more likely become an affluent place.

“If we build the com­munity the college is proposing, it will improve property values all around,” he said. “If Hillsdale becomes the cool place, the place where people want to be, you will see happen exactly what is hap­pening in downtown Detroit — rich people will move here, pay taxes, and become cus­tomers at busi­nesses in the city.”

City coun­cilman Bill Zeiser said accu­sa­tions that the college does nothing for the city and that it is buying more non-taxable land are unfounded.

“I’ll call it a zombie fact that keeps coming up from the dead — that the college seems to take more from the town eco­nom­i­cally osten­sibly because it is not a source of tax revenue,” he said. “With regards to the houses that it has been pur­chasing,  since they don’t fulfill the edu­ca­tional mission of the college, we’re taking in more revenue on those prop­erties than we would have.”

Regardless of the college’s con­tri­bu­tions to the city, the budget for the upcoming year does not predict increased revenue. In fact, if the city of Hillsdale out­spends its revenue at all in the next few years, the city’s general fund is pro­jected to bottom out by 2020.

The general fund is revenue the city receives from its property taxes. The fund pro­vides revenue for public ser­vices, most notably the police and fire depart­ments. Other ser­vices receive funds from state revenue sharing pro­grams.

The city’s current revenue is about $4 million dollars, $1.9 million of which come from property taxes, according to city manager David Mackie.

The City of Hillsdale’s 2016 – 2017 budget shows that the general fund has been declining since 2012 — with the exception of a bal­anced fund in 2016 — and projects a steady decline to zero by June 2020. The budget does, however, note that these pro­jec­tions are for demon­stration pur­poses only and reflect what the general fund will look like if the city is unable to balance its budget in the coming years.

Mackie said the city will have to balance its expen­di­tures with its revenue and keep the city debt free, as it did last year, to keep from dipping into the general fund.

“If we spend more of the revenue we bring in, we would have to dip into the fund balance pro­por­tionally, then it will be depleted in four years,” he said.  

The city’s success last year in bal­ancing its budget came only after it pared down the city’s staff and cut equipment and per­sonnel updates for public ser­vices. For example, the city of Hillsdale has cut the fire department’s staff from seven to four full-time fire­fighters. The fire department also owns the oldest oper­ating fire truck in the state of Michigan.

“The oldest fire truck in the state — that’s not a badge of honor,” said city coun­cilman Brian Watkins at a Jan. 24 city council meeting.

Former fire chief Kevin Pauken also said he was con­cerned with bal­ancing the budget at the expense of public ser­vices.

“I think cutting staff to pay for a truck is fixing one problem only to create another problem,” he said at the same meeting. “And I would like to see Hillsdale College pay for a new one. Other com­mu­nities have done this — the Uni­versity of Michigan paid for a new station and trucks for its fire department.”

Mackie said things like cuts to the fire department are not enough to solve a bigger problem — the city of Hillsdale will need to find new ways to gen­erate revenue in the coming years.

“There’s not much more meat to cut off the bone,” he said. “We’re going to need to get cre­ative with how we create revenue.”

Stockford said the city will have to take respon­si­bility for its own problems, regardless of who is to blame.

“We’ve got to focus on eco­nomic devel­opment, but espe­cially edu­ca­tional devel­opment for the next gen­er­ation, so we can recruit com­panies to come here and face the tide of decline,” he said. “That’s only way to solve this. We can’t go running to the state or federal gov­ern­ments for long-term help — they’re not going to help us. We have to handle this problem at a local level.”

 

  • Ellsworth_Toohey

    Zombies.…

  • Penny Swan

    Mr Mackie is saying the city is not set to be bankrupt in 2020. It as just on WCSR radio. As has been with the HDN and this paper, the titles are mis­leading, and kinda doing a dis­service in my mind. Just my opinion.

    • Ellsworth_Toohey

      Nothing in the story says the city is going bankrupt, indeed nothing in the story sup­ports the headline.

      Who picked the headline is my question?

      The problem with a headline that can’t be sup­ported is it can be used to dis­credit the entire story. Yet the story itself is solid. I’ve reviewed the budget and indeed it has pro­jec­tions the general fund will hit -0- in 2020. One can see it them­selves here on page 36:

      http://www.cityofhillsdale.org/media/40829/adopted%202016 – 17%20budget.pdf

      If indeed the general fund does hit zero in 2020 as the budget warns of, that doesn’t mean bank­ruptcy. It means effec­tively the city will need to start to borrow to meet it’s oblig­a­tions. In my eyes the story wasn’t so much about the general fund going to -0-, but that this city is in trouble and people had better start to wake up. That into itself is quite news­worthy without the need for a sen­sa­tional title that can’t be sup­ported.

      But… my greater concern is these Zombies the coun­cilperson warned us about.

      • Penny Swan

        I guess I am one of the Zombies, because Mr Zeiser was addressing my statement 🙄🙄🙄

        The title def­i­nitely dis­credits the entire story, since it is 100% not true.

        I thought titles were sup­posed to be a catch to get you to read the article and then the details how the title is true.

        • Ellsworth_Toohey

          A catchy title can drive alot of impres­sions on a story, but the story always must support the title. Absolutely nothing in the story even sug­gests bank­ruptcy, which is why I thought someone other than the author must have written it.

        • Ellsworth_Toohey

          How is Mr. Zeiser addressing your statement? I don’t see you quoted any­where in the story. In fact I can’t even follow along in that whole ram­bling section. What does the college have to do with the general fund pre­dicted to hit -0- in 2020?

          I just figured the reporter was letting some rope play out and letting his inter­viewees ramble a bit. He got things back on track before he inter­viewed Mr. Mackie… who thank­fully stayed on point.

          However, however you want to spin it, it’s a tough road ahead for the city in the next few years.

          • Penny Swan

            I got up and said the college was buying property, and that property comes off the tax rolls. That’s when he fired back the zombie statement.

          • Penny Swan

            And I wasn’t belit­tling the college, just stating a fact, the college is buying lots and building things like tennis courts, that land comes off the tax rolls.

          • Ellsworth_Toohey

            I never thought you were. The only thing “zombie” in the story was these orphan quotes not really tied into any­thing.

          • Ellsworth_Toohey

            You may have. But that wasn’t in the story nor would the casual reader know that. And if you check the county GIS records you see most of the property the college owns pays no taxes as they are a non-profit. Not a zombie fact, but a real living fact.

            None-the-less it had nothing to do with the story which wasn’t about the college’s land acqui­sition but the general fund trending to zero.

          • Penny Swan

            Exactly, not sure why that was even in the article.

        • Joseph Hendee

          I said the same thing.…

  • DefCon99

    It is the tax rolls, English major.

  • Joseph Hendee

    Ask Mr. Mackie were all the money is going. It doesn’t take a rocket sci­entist to figure it out.

  • Joseph Hendee

    That’s why he left all the graphs and charts off this budget. Where are all the charts and graphs on this budget?

    • Ellsworth_Toohey

      Exactly. No charts… no way to see the con­tinuing downward trend