Here is the entirety of Mayor Jim Ellison's State of the City Address:
Good afternoon, ladies and gentlemen, and thank you for joining me here today. Before I begin my remarks, I would like to thank the Royal Oak Rotary Club and its new president, Barbara Wheeler, for once again hosting the State of the City address. I’d also like to thank the Royal Oak Emagine Theatre, and its president, Paul Glantz, for opening up their facility for our presentation today. Emagine has been open for only a year and has already become a fixture of Royal Oak’s scene.
For the greater part of two decades, Southeast Michigan has suffered economically and culturally as a result of an overdependence on a diminishing manufacturing sector. Now, more than many of our neighbors in Oakland, Wayne, and Macomb Counties, Royal Oak’s economy is tied to its unique character and to its downtown – nevertheless, we too have felt the effects of falling wages and rising unemployment, especially when tied to the limitations placed on our primary sources of revenue by Headlee and Proposition A. So when, four years ago, the world economy suffered a serious trauma upon the bursting of the subprime lending bubble, Southeast Michigan was hit particularly hard. Royal Oak weathered this trauma by trimming down; adhering to a diet of Melba toast and ginger ale; and turning in early: austerity measures, drastic cuts in staffing and services, and earnest cost-benefit analyses.
Thanks to tough decisions from the City Commission, City Manager Don Johnson, our department heads, and the various bargaining units and departments, our prognosis has been better than any of our neighbors. Due in large part to the sacrifices of city staff and to serious cuts to services, Royal Oak has maintained financial viability without surrendering cultural vitality. On the strength of our financial management practices, we have remained in the top 10 percent of all governmental entities rated by Standard & Poors. But as the economic situation in Europe is only too clearly demonstrating, austerity measures are unsustainable and in the long term hinder economic recovery rather than fostering it.
So we have come to the point where this diet of toast and broth can no longer sustain us; it is time for stronger medicine. I told you last year that Royal Oak was in a state of transition and that how the city would turn out, would be the result of all our hard decisions and hard work. Since that time, our housing market in Royal Oak has only strengthened compared to Southeast Michigan as a whole and existing and new investors have continued to materially demonstrate their support for our community: together this indicates that sustainability and growth are possible in the long term; but contingent upon maintaining the viability of city services
The last time I gave this address, I spoke of Royal Oak transitioning to a leaner, more efficient city, and a model of recovery throughout the metropolitan area. We have come to the point where these two clauses are no longer compatible. There is no more fat to trim, and without additional revenue, the strides Royal Oak has made relative to the rest of the area will quickly fall away. The relative prosperity of Royal Oak has preserved its citizenry from the worst of the ravages of the economic downturn, but our own buffers are exhausted, and so we are forced to ask you to return to pre-2008 tax levels to help us sustain and slowly rebuild our own service infrastructure.
Ladies and gentlemen, my friends, my neighbors: Royal Oak remains on track to grow stronger and more vibrant, but our prosperity and our vitality are contingent, as ever, upon our citizenry. City staff, the Commission, and I, all remain devoted to moving this city into the future: but we all serve at your direction, so come November, it will be up to the voters how we will finance city government and what that government will look like. We’ve been walking down a certain path since we rolled up our sidewalks at 5 p.m. 40 years ago, neither my parents nor I would have suggested Royal Oak to vacationers; just 30 years ago, we wouldn’t have thought Royal Oak would be a name known in Hollywood. The Royal Oak of today has transitioned from a bedroom community and has hitched its star to its unique and vibrant downtown, to the efforts of the creative class, and to a continued commitment to stable, stimulating, green neighborhoods. All of these feed and strengthen the others, and without any one of them, each of the others and our community as a whole will suffer. This is the path that we have chosen; we must have the strength of conviction to stick with it.
Last year, we projected losses to taxable income at 3.5 percent for the year; the good news is that property values and property tax revenue declined by only 1.5 percent -- this is an improvement worth about $350,000 across all funds. Comparatively, property values across Oakland County fell by 3 percent. Better yet, property values are projected to hold steady through next year: with new construction, we may even see a slight increase. However, because of limitations imposed by Headlee and Prop A, even if the real estate market recovers completely, taxable value will not: taxable value of existing property can never increase by more than the rate of inflation or 5 percent, whichever is less. So while we of course eagerly anticipate the revitalization of the City’s housing market, this cannot solve our financial problems.
The other piece of “good” bad news is that Lansing has so far refrained from repealing the personal property tax, but it looks probable that this will happen at some point soon. This tax accounts for about 6 percent of Royal Oak’s property tax revenue, $1.6 million, and making up these monies would necessitate a .75 mill increase. So considering how these developments play into last year’s projections, we are in a better financial state than anticipated, but this is ‘better’ like ‘diesel is better for the environment than gasoline’, not ‘better’ like “Taste Love’s cupcakes are better than any others”. And they are – Food Network said so.
So we have reached a critical juncture in planning Royal Oak’s future. After many years of staff reductions, salary and benefit cuts, and other cost cutting measures, we have reached a point where we can do this no more. In the past eight years, the city has lost through attrition and staff reductions over 25 percent of all full-time positions. We are already severely understaffed in several areas. This is most evident in the police department where a study by the International City Management Association has recommended we add 20 positions (including non-uniform personnel to increase efficiency of service and response). The commission has already authorized increasing the number of sworn officers from the 65 included when the 2011-12 budget was adopted to 69 officers who the Department has begun integrating in this last month or so.
Especially given the strained financial straits that this region of the state has been in for the better part of two decades, Mr. Johnson and the Commission endeavored to have the city absorb the brunt of the economic fallout from the 2008 downturn rather than impose a further financial difficulty on our citizens. To keep from having to raise taxes in a tough time, the city tried to do more with less, tapping into the general fund and implementing painful cuts to staffing and nonessential services. In spite of these cost-reduction successes, in trying to reduce the tax burden on our citizens during the worst economic downturn since the Great Depression, we have burned through nearly $9.5 million of our general fund balance. Even still, attempting to maintain services at current bare-bones levels will eat up $3.3 million of the general fund balance through 2013 – effectively emptying the fund.
This may be a good time to remind you again that the city isn’t a single financial entity. Rather, it consists of many entities we call “funds.” Many of these, such as recreation, water and sewer, ice arena, and the farmer’s market, are operated as businesses and only receive the revenue they earn through fees and charges. Some, like the library, solid waste, and road funds, have dedicated taxes that can only be used for designated purposes and they receive none of the general operating levy. The general fund consists of public safety, parks and forestry, and most of city hall. It gets revenue from many sources but by far the largest is the general operating levy which is part of your property taxes. When we talk of Royal Oak’s budget problems, we are almost always talking about the general fund. We have issues in some other funds as well but none are as significant as the general fund.
The Commission has been very clear that financial sustainability must be built upon both increasing tax revenue and on reducing expenditures, and has therefore been adamant that we would not entertain a tax increase referendum until we had achieved significant wage and benefit concessions from all bargaining units. Our people sat down in good faith on both sides of the table and so I think I can say that we have attained that goal. City Attorney Dave Gillam, with assistance from HR Director Mary Jo DiPaulo and working with Labor Attorney Howard Shifman and the leaders of the respective bargaining units, were instrumental in negotiating significant contract concessions; and total impact to the city will amount to over $2.6 million per year in savings. I want to extend my deepest thanks and appreciation to our public employees and Department heads for your continued dedication to collective bargaining and your willingness to defer your own self-interest for the good of your community.
But that brings me to the ‘stronger medicine’ I mentioned before. Monies saved through union concessions alone are inadequate to solve our immediate financial problems. The Commission has unanimously voted to start the process to put a referendum on the ballot this November asking the voters for a public safety millage of 3.975 mills over five years. If this millage is passed, it will return city property taxes to their pre-2008 levels. For the average household this millage will mean an additional $270/year; for the city this millage will allow us to maintain current service levels, implement the ICMA police recommendations and make other minor needed improvements, including continuing to fund senior programs. It’s time to put our money where our mouth is and show that – as a community – we are willing to financially support the services that we want, that we need, and that we’ve come to expect.
We know money is still tight, and so the city has been serious about implementing austerity measures, trying to do more with less. But it is an immutable fact of the universe that ultimately, one can only do less with less. Without the monies raised through the passage of this millage, the City will not be able to function effectively, so I must urge you all in the strongest terms to consider passing this referendum. Even still, this levy represents a minimum reasonable revenue stream to guarantee public services (not factoring in the repeal of the personal property tax), and won’t serve to fund our OPEB obligations or infrastructure improvements.
Many will try to tie this millage request to the number of Class C liquor licenses that the city has currently approved or may grant in the future. This tack fails the smell test. In November of 2009, the question of a liquor moratorium was put before the citizens. This moratorium was rejected by a factor of 2:1, and so the City Commission has continued to carefully consider every request brought before it. There are those who would have you believe that the commission has a tendency to approve all such requests, but it would be more accurate to say that those applicants whose requests are unlikely to pass approval are advised against coming before the commission unless and until our requirements are met.
Let me be earnest in saying that I reject most strongly the intimation that the grant or number of Class C licenses is making Royal Oak less safe or more lawless as a community by drawing too heavily upon our public safety infrastructure. Rather, the commission and I agree with the voters that those establishments we have granted Class C licenses are contributing positively to the feel of downtown Royal Oak, to our ability to draw new residents and new investments to the city, and to our financial sustainability into the future. Therefore, please do not let your feelings about liquor licenses unduly influence your choice come November as to whether to pass this needed public-safety millage or not.
As I have said, this millage will guarantee that we can maintain current governmental service levels; even still, the Fire Department’s Cary Thompson in particular has been tenacious about pursuing additional grant funding. The Fire Department is in the second year of a $2.5M SAFER grant which guarantees monies to maintain current staffing (until the millage can take effect) and replace the twelve firefighters who retired this last year. They have also just received a Federal grant for the purchase of more than 50 sets of firefighting gear, EKG’s for the ambulances and laptops for the fire vehicles.
Additionally the Fire Department conducted an ICMA study this year which recommended the purchase of a Compressed Air Foam System, which we’ve included in the budget. They are in the process of acquiring this system to be installed on one of our current fire trucks as we speak. This system will be a great tool for helping reduce property loss from fires.
Cary is also writing grants for the purchase of 5 v-tach radios for fire trucks, 20 Self contained breathing apparatus, five thermal imaging cameras for use in fires, Video Monitors for training at each station and a new rescue truck. If these grants are approved, the federal government will pay 80% of the cost and the City 20 percent.The Royal Oak Fire Department is always looking for ways to save money while providing the safest and most efficient way to do business. We’re especially appreciative of this problem-solving spirit since the ROFD is currently on track to outpace last year’s run count. And, as a little aside, our dear Mr. Thompson has become so adroit at writing these applications that we constantly find ourselves around City Hall resisting the urge to refer to them all as ‘just another Cary grant’.
For several years, financial considerations have resulted in cutting of Police Department positions through attrition and elimination – the last four years has seen the ROPD lose nearly 40 percent of its staff. Nevertheless, with Royal Oak becoming increasingly prominent in the region, we have hosted special events nearly every summer weekend and our police have successfully stepped up to the challenge of overseeing these events in addition to their normal duties. To repeat a point I made last year, the fact that it would appear that handling these events is so easy is because of professionalism and competence in preparing for them. Like I said, no other city does anything like it and there is a reason these events choose to come to Royal Oak as opposed to going elsewhere.
The men and women in blue must be lauded for their ability to get the job done with far too few people. For example, last year, in September and November, we saw two homicides committed in Royal Oak. In each case, the individuals responsible had been ferreted out and apprehended. From the points that these respective homicides were reported until the perpetrators were apprehended, all available officers remained on-call to better ensure that no lead could go unpursued. The professionalism and expertise of the investigators cannot be understated, but such effectiveness is dependent upon sufficient staffing.
It is the professional opinion of Interim Chief Corrigan O’Donohue that police operations are unsustainable at current staffing levels, so the City recently contracted with an outside agency to audit police operations. The results of this independent audit included recommendations for modest personnel increases and major structural changes to make the police department as efficient as possible. This independent audit was a major instrument in calculating the size of the millage we are requesting in November.
It is important to note that provided the millage is passed and the police department is brought up to recommended staffing levels, it will still be a far leaner and more streamlined department than we had 5, much less 10 years ago. Rather than simply replace positions, the department will be restructured to guarantee the right force size for the job.
But speaking about the right force size for the job, much has been made of the draw on public safety by our vibrant downtown. The facts do not support the contention that downtown makes use of more police on a regular basis than any other part of the city. While there are instances when an incident may require extra personnel, this contingency is neither unique to downtown nor singularly common vis-à-vis any other sector of the city. The key is to ensure sufficient staff on duty to deal with any public safety issue that might come about – and it is in staffing as a whole that these misconceptions about downtown would seem to arise.
To that end, then, some public critics have suggested that downtown should contribute more to offset public safety costs. Should anyone require the specific details, Mr. Johnson is perfectly willing to sit down and talk through them; to keep from holding you all here longer than is necessary, I’ll stick to the broad strokes. Tied into the cost of doing business in the DDA are personal property taxes and an additional millage not levied against the neighborhoods – and in addition, non-residential property isn’t eligible for the nearly 15-mill Principal Residence Exemption on school taxes that Royal Oak homeowners receive.
These monies, when combined with the portion of the funds from our downtown parking system allotted to the general fund and proceeds from downtown parking tickets, fund the equivalent of 22 officers. At current staffing levels, our Police Department has 66 full-time officers – so downtown pays for a third of them, while rarely requiring the services of that many at the same time. (They also pay an additional million dollars to pay down the debt on the court building and the South Lafayette Parking Structure) I find it hard to equate these numbers to the downtown not paying its fair share for public safety.
That downtown is able to provide such a large portion of the police budget is representative of the relative growth and prosperity of our unique scene. Investments and proposals in Royal Oak are hip, chic, and boutique. Jason Craig of the Building Department reports having issues 4600 permits and performing more than 17,500 inspections on such notable projects as 526/Tequila Blue, Cantina Diablo, and an expansion of the Beaumont Emergency Center.
The housing market in Royal Oak is booming in many ways. From sale of existing homes to building of new homes, we are seeing growth that we haven’t seen in many years. Last year the building department issued 29 new home permits. So far this year (as of yesterday), they have issued 63, with 5 months yet to go. Realtors are telling me that buyers of new and existing homes are younger professionals drawn to Royal Oak for our reputation as a safe, active, vibrant, accepting community. Home values in Royal Oak have held much stronger than many of our neighbors. Overall, assessments last year were anticipated to drop about 3.5 percent but instead fell only 1.5 percent and are expected to hold steady next year.
One of the major factors helping to keep the housing market in town relatively strong is our Farmers Market, which continues to be a major draw for Royal Oakers of all generations. The major renovation carried out on the Farmers Market a few years ago shows that we recognize how central to Royal Oak’s image it is, and we’re happy at the advances being made there to make the Farmers Market even more essential. Since last year, we’ve done more to hook up our residents with a larger and more diverse selection of locally grown and organic produce. Additionally, we’re seeing the Farmers Market used increasingly for family-friendly and community-focused special events.
In an effort to streamline customer service and eliminate possible conflicting advice developers might get, it was decided this year to consolidate the Planning, Engineering, and Building Departments into an umbrella Community and Economic Development Department. These three departments have seen serious cuts in staffing and funding the last few years, so this reorganization should hopefully cut down on unnecessary or redundant work that sometimes arises as a result of overlapping areas of responsibility. I am happy to affirm Mr. Thwing in his role as director of this new umbrella department.
This consolidation comes on the heels of good news for the Building Department and a year of infrastructure improvement for Engineering. You will recall that Building was hit particularly hard by the recession and subsequent lack of building activity. Two years ago we transferred $600,000 from the general fund to keep that department solvent and implemented wide-ranging policy revisions which immediately staunched the financial hemorrhaging. With the returning construction activity throughout town, we are able to repay the remaining debt to the General Fund in this budget year.
Engineering undertook several minor infrastructure improvement projects this past year, including water main improvements and repaving projects, several funded via Block Grant and Local Funding. Perhaps their most exciting announcement is the commencement of the major city-wide sidewalk repair schedule, begun this year with improvements to Main, Campbell, 12 and 13 Mile, and Stephenson.
We saw extensive externally funded renovations and community building expenditures as well. CDBG funds have been used to fund operations for the City’s two senior centers which together see 100,000 visitors annually; to assist Royal Oak residents who were victims of domestic violence or sexual assault with temporary shelter via HAVEN; and through the Homeowner Rehabilitation Program to offer low- and no-interest loans to qualified residents to assist with home improvements. Additionally, the City received Recovery Act funds to prevent increase energy efficiency and to help recently displaced residents gain stable housing while seeking employment or experiencing financial instability due to the recent economic downturn.
I also want to give a special thank you to our community boosters who are fostering cooperation and working with our Parks, Forestry, and Recreation Departments to keep some of our youth and senior programs up and running. The Sandlot League provided the city with $50,000 of field improvements at Memorial Park and has been providing the manpower for opening and closing Memorial Park. ROYSA has been working with Parks and Forestry to fertilize, seed, and paint the fields they use to play. And our Pickleball volunteers are opening up Whittier Park to help give our kids and seniors another fun way to stay up and active.
Likewise the Friends of the Library worked together with Director Mary Karshner and Library staff to put on weekly program including live music performances, writing workshops, self-improvement seminars, and programs for younger residents of all ages. I was happy to be invited to participate in two particularly exciting projects from this last year coordinated by the Library. On October 1, a Time Capsule that included memorabilia reflecting what life is like in Royal Oak today was buried outside the Library. The Time Capsule was buried during Royal Oak’s 90th year as a city and is due to be unearthed 35 years from now, at Royal Oak’s 125th anniversary.
The second event was the Butterfly Garden and Art Dedication held in June. This all volunteer effort established a lovely garden on the south side of the Library designed to attract and provide a habitat to support the life cycle of monarch butterflies. I was lucky enough to release one of them – although I have to admit there was a frantic moment where I wasn’t quite sure my little one would emerge still among the living.... This garden inspired the Friends of the Library to use some of their funds that had been designated for artwork to commission butterfly-themed art which has been installed in the room overlooking the butterfly garden.
The assistance of the Friends of the Library and our citizens’ donations are particularly appreciated because the Library operating budget is based on a dedicated millage which declined dramatically with falling housing prices while Library usage has increased every year since 2008. The Library is considering different courses of action that can be taken to keep from having to cut services which are proving instrumental in getting Royal Oakers back to work. However, at this point they will have to use part of their fund balance to pay for operating expenses – which we saw from the Building Department and others is unsustainable in the long run. So in consideration of these economic hardships, the Library will be reducing hours from 60 to 56 per week.
So the City, the booster organizations, and our bargaining units have all taken responsibility for keeping our community vibrant and functional. I’ve laid out how the City has continued to grapple with the continued economic difficulty. Our housing market has stabilized, especially compared to our neighbors, but because of the limitations imposed by Headlee and Prop A, tax revenues will never match the levels they were at in 2008. The City has never deluded itself, and I hope that none of you feel that the City has deluded you about the services that we have had to cut. The City that Royal Oak has had to grow into is as lean a body as we can make it, and we are edified at how civic-minded and understanding the citizens of this fair city have proven, how seriously they take the social contract.
So many of the services that we have had to cut are gone for good, and it will take a good long while and a great deal of economic recovery to restore some of the others – but that doesn’t mean that we’re stuck treading water. We have the capacity to continue to grow as a city and as a community, but that will depend upon all your votes in November. Let me give you an example. Two years ago Arts, Beats and Eats moved from Pontiac to Royal Oak. Its first year here we had nearly half a million people show up to enjoy some great food and some great music – and to give money back to Royal Oak vendors and businesses. Last year numbers were down due to horribly turbulent weather, but attendance was still estimated to have at least equaled Pontiac’s best year.
So far this event has been fun, successful, and most of all – safe. Thanks to our public safety personnel’s professionalism and dedication, we were prepared for just about any contingency. This year, weather permitting, we’re likely to see our biggest crowd yet, and our people are going to make sure it runs as smoothly and peacefully as any of the events we host most summer weekends.
Folks, that will not be able to happen next year if we don’t get the revenue from that millage this November. Without money to re-up our safety infrastructure, we won’t be able to afford the manpower to support this event or many of the others that help to draw people to our fine city and convince other investors to consider adding their strength to our own. Mr. Johnson, the rest of the commission, and I, have been adamant that until we could negotiate concessions from all our bargaining units we would not seek a tax increase, and we’ve stuck to that pledge.
This last year I’ve found myself being stopped increasingly often on the street by citizens urging us to propose a millage; and many of you in the audience today number among those citizens. And it’s definitely not too soon. Because without this millage we will empty our general fund by next year; and there’s nothing left to sell, nothing left to cut, that will allow us to maintain relevance or vitality into the future. So what we are facing with this millage, ladies and gentlemen, is ultimately an existential question – whether we are happy staying where we’ve been and gradually receding in significance, or if we have the conviction, the force of will, to continue down the path we’ve chosen. We cannot go back, we can only go forward or fall by the wayside. Ladies and gentlemen, you can’t rely on chicken soup to treat a gunshot and pretend it’s just a head cold. Stronger medicine is called for; it’s time for us to really improve our prognosis.
So to you in the audience, thank you for taking the time to attend today; I hope I have given you some points upon which to reflect and to act. You are our civic leaders, you are the people with the ear of our community, so you are the people who have the cachet to translate both the gravity of our situation, and also the corresponding fact that this economic crisis is not intractable. The millage we are requesting will help to stabilize city services and lay the groundwork for greater improvements heading forward. We could have requested this tax increase several years ago: but we agreed at that time, and I continue to believe now, that asking more of you then, while the housing market was still in free-fall and before we had done everything we could have to trim operations, would have proven detrimental to the recovery of the city and of her citizens in the long term. The proper time is now, and I look to you all to do your part to aid in rehabilitating our fair city.
Finally, this speech would not have happened had it not been for the input of many people. To City Manager Don Johnson and his staff, my heartfelt thanks for reporting what has been happening in their respective corners of the city. My friends in the business community that keep me up to speed on what is and isn’t happening in their world. Residents who have contacted me with both good news and bad news, all of which help to make us make positive improvement to what we do. You all display the traits that define a successful community spirit, and I am always in awe of your enthusiasm and commitment.
Finally to my family, who have to put up with the ups and downs that I bring home with this job, but most importantly my wife Jodie and my son Jake who are able to take my thoughts and frustrations and put them in context and form that allows me to deliver a cohesive and understandable presentation today. You both have my deepest appreciation and love. Thank you both!