Mayor O’Reilly

DEARBORN — Mayor Jack B. O’Reilly, Jr. spoke clearly and directly in his State of the City address on Wednesday, Feb. 23, saying that Dearborn’s tremendous financial challenges are real and need to be immediately addressed. The evolving vision for Dearborn is still desirable and doable, he said, but realizing that vision requires balancing revenues with expenditures. That means uncomfortable, even painful, changes to services and raising taxes at least temporarily to pre-recession levels, he added.   O’Reilly’s speech aimed to convince those in attendance and watching at home to support plans to achieve that vision.

“We will fail without this support because as always, you — residents, business owners, and city employees here and at home — are the crucial component to our community’s success,” O’Reilly said.

In four years the city lost a quarter of its revenues or $25 million. Partly due to the dramatic loss, city officials expect a $20 million deficit for the next fiscal year if the changes are not made now, and $20 million for each of the next five fiscal years if the budget continues unaltered. The annual shortfall represents a structural deficit which means reduced revenues won’t cover even the city’s essential expenditures.

“We’ve been hit by a projected loss of 25 percent in our taxable property values over a five year period. A $6 million decrease in state shared revenue. An anticipated loss of $16 million in personal property taxes, due to state action and changes in the economy. And an overall tax system statewide that can’t respond to cities’ new realities,” O’Reilly said.

  Over the past 10 years 168 fulltime non-public safety positions were eliminated. Another 40 similar positions will be reduced this July. 

The reductions have played an important role in the comprehensive efforts to cut structural costs annually by $12 million. The number would be greater if police and fire departments which generally have higher cost positions were included. Although the city has other, limited sources of revenue, it heavily relies on operating tax which is 13.62 mills.

Because of the decline in property values the tax rate generates about $48 million annually. The cost of running the police and fire Departments is close to $51 million. “This sobering fact means we are not taking in enough operating tax dollars to cover all of the costs of running our two public safety departments—let alone all of our other services  that add to your quality of life. Believe me, we will never compromise on public safety,” O’Reilly said. A Dearborn spokeswoman said police and firefighters would not be laid off despite massive cuts. 

To deal with the deficit, this year a three-year budgeting process will be adopted. The mayor’s goal is to address the structural deficit equally with continued strategic reductions and with the pursuit of revenue enhancements, including tax rate increases or even a new tax model. “This balanced approach also acknowledges that pain must be shared and sacrifices made across the board by residents, property owners, businesses and city employees,” he said.

Additionally, O’Reilly says the city needs to look into whether it should be providing particular services if others are doing them equally well, or even better. “We can’t afford duplication,” he said.

If the cuts are accepted along with different models for service delivery the city still won’t conquer the $20 million structural shortfall; consequently the millage rate is considered being raised.

O’Reilly is going to suggest to the city council that in the next budget year the rate is increased by 1.38 mills. “If we later need to ask for voter approval of the additional 3.5 mills recommended by the Task Force, we would include a sunset provision, making the tax rate temporary, with an ending date, established by law,” he said.   

The mayor and the city council plan on meeting soon to develop a plan. “Much can change, but if our commitment to one another as neighbors and to our sense of community remains true, I’m confident Dearborn will leverage its powerful potential and continue to be a very special place to live.”