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Royal Oak Town Hall Meeting Clarifies City Finances

Monday night's public discussion turns lively over employee pensions as a draw on city finances and services.

A Monday evening town hall-style lesson on Royal Oak's finances quickly turned into a sometimes heated discussion of public safety pensions and their burden on the city's budget.

"We are close to having two retirees for every active city employee," City Manager Donald Johnson told the crowd of about 50 people gathered in a meeting room at the , including city commissioners and department heads.

Johnson went through a presentation explaining terms such as Headlee Amendment, SEV and taxable value as well as how city finances are divvied up into separate funds, like bank accounts, which can only be used for their intended purpose. For example, the city can’t take money from library operations or road projects to spend on police officers.

“The city is not a single economic entity,” Johnson said. “It consists of over 40 separate funds.”

Johnson explained that the majority of spending comes from the city’s general fund, which 53 percent of revenue comes from taxes and 82 percent of expenses are spent on salaries and benefits.

Johnson demonstrated that at the general operating levy of 7.3947 mills, Royal Oak has one of the lowest tax rates for cities in Oakland County. He warned repeatedly that as the city comes up with a new two-year budget to go into effect July 1, many things can and likely will change depending on what happens with Gov. Rick Snyder's new budget proposal.

The Q&A session between the public and city officials quickly turned into an inquisition on how public safety pensions are draining the city’s fiscal welfare.

The issue has been boiling to the forefront since Royal Oak Police Chief of two years Chris Jahnke announced he would retire effective March 5 at the age of 50 to begin another career with Michigan Gaming Division, while drawing his Royal Oak pension. Jahnke served 21 years with the city's police department.

Royal Oak resident Bill Shaw cautioned it is not pensions driving up city costs. “It’s not a pension problem, it’s a health care problem,” he said.

City officials and residents pointed out that changes in the city's hiring system will save money, but because there has been little hiring it could be 10 years or more to realize any benefits from those changes.

Nancy Bahlman, a 23-year resident of Royal Oak, said she found Monday's meeting informative, but she didn’t like how people kept insinuating police officers are a drain. She said she supports unions and is concerned public safety will be cut. “I’ve always considered Royal Oak to be such a safe place,” she said. “I’d hate to see the quality slip for the sake of the budget.”

Johnson pointed out some bright spots in the budget. "What we are seeing for next year is better than what we expected," he said, referring to the $2.5 million grant the city recently received to retain eight firefighters and hire two more and increased fees from keeping Advance Life Support services. About 15 firefighters will be eligible to retire by the end of the fiscal year, so Johnson anticipates hiring some replacements.

gg10 March 01, 2011 at 04:22 PM
If the city offered pensions and health care when the workers hired in, then yes, these retirees and current workers deserve these benefits. If the city and union agree that any future workers do not get a pension and health care upon retirement this works too. As long as a person knows what to expect when it's time to retire then they can plan accordingly over their career.
Victoria Mitchell March 01, 2011 at 04:39 PM
gg10 - Thanks for commenting. We've talked to taxpayers believing even though a city worker was offered a certain pension and health care benefits, they shouldn't take advantage of these benefits until they are retiring for good and not taking another full-time job. It is interesting to hear different viewpoints on this issue.
Mark H Stowers March 01, 2011 at 04:53 PM
I agree with gg10. Unions have outlived their usefullness by several decades. The cost of doing business in today's 21st century doesn't include unions.

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