“The Good Old Days”

1. “The Good Old Days” Are Fading for Michigan’s Local Governments

2. The “New Normal” for Michigan’s Local Governments

3. Presented by: Larry Merrill Michigan Townships Association Executive Director Michigan Local Government Fiscal Conditions 2014 and going forward

4. Post-War Twentieth Century The “Good Old Days”

5. Good Old Days • Unparalleled Prosperity • Michigan’s Per Capita Income: Top 5 • Detroit Fourth Largest City in United States • Manufacturing Jobs Galore • Population Growth • Robust Economy (for the most part) • Sales and Income Tax Revenue • Housing Starts • Income Tax Revenues • New Revenue Sharing Program 1971 • Recessions Infrequent, Short Duration

6. 1950-1999 2000-and on For Local Government • Manufacturing Sector Growth • Property Tax Revenues • State Shared Revenues • Federal Revenue Sharing • Expanding Role of Local Government • Federal Categorical Grants • Dot.Com Bubble • Capital Gains Growth • Global Economy Emerges • Manufacturing Declines • Population Declines • State Revenues Plunge • Mild Recession 2001-2003 • Severe Financial Sector Recession 2008-2011

7. And Michigan’s Image Went from This…

8. To This…

10. There is no “Michigan” Economy The governor’s Regional Prosperity Initiative We are a state divided: • Resources • Expectations • Traditions • Infrastructure

11. Diversity of Michigan’s Local Governments

12. the Good Old Days are Not Returning…Any Time Soon Then Now

13. Why the economy is not self correcting: • Still heavily reliant on declining industries and products • Aging work force lacks skills for emerging jobs • Entrepreneurial spirit is lagging • Lackluster immigration • Poor attraction, retention of knowledge workers

14. The Data Tells the Story.. The Data Tells The Story…

15. Source: Bureau of Labor Market Information, Local Area Unemployment Statistics (LAUS)

16. Source: Bureau of Labor Market Information, Local Area Unemployment Statistics (LAUS)

17. Source: Bureau of Labor Market Information, Local Area Unemployment Statistics (LAUS)

18. Source: Bureau of Labor Market Information, Local Area Unemployment Statistics (LAUS)

19. Source: Bureau of Labor Market Information, Local Area Unemployment Statistics (LAUS)

20. Source: Bureau of Labor Market Information, Local Area Unemployment Statistics (LAUS)

21. Source: Bureau of Labor Market Information, Local Area Unemployment Statistics (LAUS)

22. Source: Bureau of Labor Market Information, Local Area Unemployment Statistics (LAUS)

23. Source: Bureau of Labor Market Information, Local Area Unemployment Statistics (LAUS)

24. Source: Bureau of Labor Market Information, Local Area Unemployment Statistics (LAUS)

32. How the Economy Impacts Michigan Local Governments

33. Property Tax Collections

34. Source: Michigan State Tax Commission

35. Source: Citizens Research Council

36. Source: Citizens Research Council

37. State Shared Revenues

38. Source: Citizens Research Council Source: Citizens Research Council

41. Let’s look at some of the expenditure issues

46. Unfunded Liabilities • 311 Local Governments Have OPEB Liability • Total Liability is $13.5 billion; • Funded at 6% • Net Unfunded Liability is $12.7 billion • City of Detroit’s OPEB is $4.9 billion (2009) 39% of total for all local governments • 47% are starting to prefund • Equates to 20% of all general fund revenues • Total Unfunded Pension Liabilities $3.1 billion (10% of general fund revenues) • Average Annual Benefit per Retiree $8,887 • Governmental Activities Total Debt approx $5 billion

47. Performance Measure Per State Capita Ranking • U.S. Bureau of the Census data, except where noted

48. Performance Measure Per State Capita Ranking

49. Performance Measure Per State Capita Ranking

50. Appropriate Indices of Fiscal Problems • Levels versus changes • Local government debt • Cash solvency (current assets divided by current liabilities) • Debt service divided by total revenue • Inflation-adjusted taxable value growth