Flint, MI—Before the holiday break, Mayor Sheldon Neeley and Chief Financial Officer Robert Widigan presented Flint City Council with a preliminary budget for the upcoming fiscal year. Both officials showed great concern over the city’s pension payment obligations.
“The city of Flint has been in a financial crisis for a very, very long time,” Neeley said in his opening remarks.
The preliminary budget, he explained, shows a continued General Fund expenditure of around $71 million, while the city’s collected revenue in the same fund came to around $56 million.
Neeley said a big part of that deficit stems from Flint’s pension obligations.
Since 2018, he said, pension payments had been hovering around $21 million to $22 million, but that amount changed substantially in 2021.
“Now in FY 21, it jumps $10 million to $32 million,” Neeley said. The live stream of the mayor’s presentation swapped from a static image of Neeley to a line graph of the expected pension spending trajectory until 2024.
“In FY 22/23 and also 24, it will take another jump of another $8 million,” he said. “And that is where we have a lot of concern in how to make sure that we can overcome our legacy costs.”
If those projections hold, that means Flint’s pension fund obligations will have nearly doubled in a four-year period: from around $21 million in 2018 to $40 million by 2024.
Neeley also said the FY 22/23 budget has still-changing variables involved in its calculations.
“We’re going to be estimating based upon population loss, state revenue sharing, income tax loss, and other things,” he said.
Robert Widigan, Flint’s chief financial officer, echoed the “preliminary” nature of the preliminary budget.
“It includes several factors that remain highly uncertain,” said Widigan, noting state and federal funding hasn’t been finalized, property values may change, pension interest rates seem to be climbing, and the city’s American Rescue Plan Act funds have not yet been allocated.
The city is required to submit its proposed budget for the 22-23 fiscal year to council on or before March 7, 2022, according to Flint’s city charter Article 7, Sec. 101.
“So, you know,” Widigan said. “Council and residents, please expect there should be significant changes in both revenues and expenditures across several funds between now and March of 2022.”
Widigan said the city’s financial audit for the coming year should be provided to city council soon, but given those numbers the city believes it will end the year with about $8 million more in its general fund balance than the $15 million originally projected.
While that does have a positive impact on the preliminary budget, said Widigan, “in essence the city has pushed off” its projected deficit for one fiscal year.
Widigan said this surplus and delayed deficit is due to “good budgeting practices” but also federal funds of the last year.
“The key is due to one time financial windfalls from federal funds and some temporary stabilization in pension costs,” Widigan said. “It must be emphasized, though, that these one time effects will not be repeated.”
Both Widigan and Neeley asked for city council’s support and cooperation as they worked to transform preliminary numbers into a proposed budget by March. Then, they took questions from council members.
Councilman Quincy Murphy asked about the impact of COVID-19 on the city’s revenue streams.
“Do you guys have a figure amount of how much revenue loss the city has lost or (is) projected to lose due to COVID?” he asked.
Neeley responded that the city does have a number but it’s a running total because “we’re still in the midst of this pandemic.” However, the mayor added, the loss was mostly in “our water revenue areas.”
Neeley also suggested that ARPA funds could be used to “back-fill” some of the city’s lost revenue due to COVID.
Piggybacking off the water revenue concern, Councilwoman Judy Priestley asked about the city’s ongoing water shut off moratorium.
“One thing that really struck me is the fund balance for…sewer and water,” Priestley said.
The sewer fund shows an ending balance of around -$11.5 million and the water fund shows an ending balance of about -$9 million, totaling to an over $20 million fund deficit for FY 22/23.
“Now, how much of the revenue is anticipated being collected for those people who haven’t been paying their water bills for the last two years?” she asked.
“This administration believes water is a human right,” Neeley said. “We’re just working on a flat rate water study right now in another department. That’s why we decided to go to a non-shut off.”
Neeley added that the city will try to collect those dollars, especially from “habitual non-payers,” starting this year.
During his remarks, Neeley suggested there will be a public hearing on the preliminary budget in Jan. 2022, but a spokesperson for the city was unable to provide a date for that hearing.
The city has until March 7, 2022 to present a proposed budget for FY 2022-2023. The council then has until June 6, 2022 to adopt the budget with or without amendment.