1. Southeast Michigan Council of Governments

2. SEMCOG University: Restructuring Under Shrinking Revenue January 27 & 29, 2009 The workshop begins at 9 a.m. Southeast Michigan Council of Governments

3. Agenda • 9:00-9:05 Welcome and Introductions • Paul Tait, SEMCOG Executive Director 1/27/09 • Mark Vanderpool, Sterling Heights City Mgr. 1/29/09  • 9:05-9:30 Property Tax Revenue Outlook for 2009 and 2010 • Xuan Liu, SEMCOG Data Center Manager  • 9:30-10:00 Restructuring Techniques and Best Practices • Dave Boerger, SEMCOG Efficiency Consultant  • 10:00-10:10 Break  • 10:10-11:00 Case Studies • Discuss your fiscal issues and successes in breakout sessions  • 11:00-11:40 Report out from Breakout sessions • Representative from each breakout session  • 11:40-11:50 Q&A • 11:50-12:00 Closing remarks and evaluation - Dave Boerger

4. Property Tax Revenue Outlook for Southeast Michigan Xuan Liu Manager of Data Center SEMCOG University: Restructuring Under Sinking Revenues January 27, 2009 Southeast Michigan Council of Governments 535 Griswold St., Suite 300 Detroit, MI 48226 www.semcog.org

5. Revenue Sources for All Michigan Local Governments2005-2006 Source: Census Bureau

6. Change of Housing Units

7. Home Prices, SEVs, and Taxable Values • Home Prices: S&P Case Shiller Index • SEVs: State Equalized Values • Taxable Values: Impact of Proposal A, approved by the voters of the State of Michigan on March 15, 1994

8. Home PricesYear-by-year Percent Changes

9. Home Prices, SEVYear-by-year Percent Changes

10. Home Prices, SEV, Taxable ValueYear-by-year Percent Changes

11. Percent Change in SEV 2007-2008Real Property Large loss, -5% to -11.7% Moderate loss, -2% to -4.9% Small loss, down to -1.9% Gain, up to 13.7%

12. Percent Change in Taxable Value 2007-2008Real Property Loss, -2% to -6.9% Small loss, down to -1.9% Small gain, up to 1.9% Gain, 2% to 28.2%

13. Percent Change in Taxable Value 2007-2008Residential Property Loss, -2% to -11.6% Small loss, down to -1.9% Small gain, up to 1.9% Gain, 2% to 7.8%

14. Taxable Value as Percent of SEV 1999-2008Real Property

15. Changing Assessing Practice • Using one-year study of home sale prices instead of two-years • Including foreclosed housing sales in the study Consequences: Greater decline in assessed values

16. Forecast Home Prices

17. Forecast Home Prices, SEV

18. Forecast Home Prices, SEV, and Taxable Value

19. Taxable Value as Percentage of SEVReal Property 2005 2008 80% or less 80.1% to 85% 85.1% to 90% 90.1% or more

20. Taxable Value as Percentage of SEVResidential Property 2005 2008 80% or less 80.1% to 85% 85.1% to 90% 90.1% or more

21. Percent of Parcels with Taxable Value to SEV Ratios of 90 Percent or GreaterTop Communities

22. Analysis by Parcel Community Total Taxable Value = 75% SEV Smallville A Smallville B Assuming: (1) SEV decreases 10%, and (2) Inflation rate is 5% Smallville B: 5% loss Smallville A: 5% gain

23. Example Assuming -10% SEV change, 5% inflation, and no new construction Aggregated Taxable Value/SEV = 92% If tax rate is 10 mills, it will lost 1 million in tax.

24. Summary • Significant loss of taxable values in SE Michigan in the next two years • Following types of communities will lose more: • High concentration of residential • High rate of newly developed property • High rate of recently sold property • Local governments will have tough choices to make.

25. Brian Parthum Senior Planning Analyst Parthum@semcog.org 313-324-3432 Xuan Liu Manager, Data Center liu@semcog.org 313-324-3441 Southeast Michigan Council of Governments 535 Griswold St., Suite 300 Detroit, MI 48226 www.semcog.org

26. Restructuring Local Government Dave Boerger Local Government Effectiveness and Collaboration SEMCOG University: Restructuring Under Sinking Revenues January 27 & 29, 2008 Southeast Michigan Council of Governments 535 Griswold St., Suite 300 Detroit, MI 48226 www.semcog.org

27. Fiscal Challenges • Poor economy reducing home prices • Property tax collections down • Expenses for energy & healthcare up • State revenue sharing flat at best • Municipal revenues shrinking

28. And it’s getting worse! • Credit crunch continuing • Stagflation – negative growth with rising costs • More auto restructuring risks • Further drop in housing prices • State TxV restrictions if SEV’s drop • State revenue sharing losses

29. Bottom Line: Somehow survive ~20% revenue reduction over the next 3 years?

30. Typical First Steps • Hiring/pay freezes • Layoffs • Benefit reductions • Service cuts • Tax increases • Tap fund balances • More debt • Etc, etc, etc…..

31. Fiscal Alternatives • Improve efficiencies ~3-5% and • Restructure your local government ~10-20%

35. Improving Efficiency • SEMCOG AgileGov searchable database of >400 successfully implemented ideas • Self assessment tool – 25 characteristic of the best local governments • Long range financial plan • Benchmarking comparisons • Accelerating service delivery processes

41. Value Matrix Focus here 1st - Reduce , eliminate or privatize High Cost/Low Importance Services Focus here 3rd - Improve efficiency of High Cost/High Importance Services Focus here 2nd – Reduce or eliminate Low Cost/Low Importance Services Focus here 4th – speed delivery of Low Cost/High Importance Services Program Cost Prioritized Importance

42. Benchmark Comparisions

45. Sterling Heights expenses up 40% vs. CPI of 34% since 2000

49. For additional help or more information contact: Dave Boerger SEMCOG boerger@semcog.org 248-875-7120 Southeast Michigan Council of Governments 535 Griswold St., Suite 300 Detroit, MI 48226 www.semcog.org

50. Restructuring Worksheet • Complete the worksheet in your folders in preparation for the breakout session • Include an example of a successfully completed cost savings approach within your local government • Indicate the current challenges/areas of greatest restructuring need for your local government • Take a 10 minute break when you are done