Hazel Park’s new budget shows caution over rising costs

HAZEL PARK — This month marked the start of a new budget cycle for the city of Hazel Park. Officials say the city continues to run on a very tight budget, despite an increase in housing values and commercial values.

Ed Klobucher, the city manager, said that Hazel Park is feeling the effects of inflation, by way of increased costs for employee wages, health care and post-employment benefits, as well as fuel, construction materials and utilities. He noted that the Michigan Employee Retiree System also changed their actuarial assumptions, further increasing costs.

“Because we lost population as a result of the 2020 census, our revenue sharing payments will be down approximately $260,000 per year,” Klobucher said in an email. “We did increase our taxable value due to new construction, so that will help to cushion some of the impact of rising costs, but there is no room for additional expenses.” 

He also said that Hazel Park continues to have its finances complicated by Proposal A and the Headlee Amendment, two state-level policies that sharply limit the amount of tax revenue the city can capture from its base.

“As a result, our property tax rates have actually been reduced,” Klobucher said.

The overall budget clocks in at $39.2 million, of which roughly $18 million has been allocated for general fund expenses. Among the most expensive items are the Police Department ($6.5 million, or 36.1% of the budget), the Fire Department ($3.3 million, or 18.7%), and retiree health care and other insurance ($2.4 million, or 13.7%).

A total $600,000 in federal American Rescue Plan Act money is being used to offset public safety costs. The beginning fund balance for the new fiscal year was nearly $5.6 million, which is also what it’s projected to be at the end of the year.

The city’s total millage rate for fiscal year 2022-23, including special assessments, is 39.2616 mills. This is a slight reduction from the FY 2021-22 total of 40.364 mills. The city collects $1 for every $1,000 of taxable value, times the millage rate. In the new fiscal year, the total taxable value for all property within the city is about $293 million, an increase from about $247.8 million in FY 2021-22.

The city draws nearly 50% of its revenue from property taxes, 19% from state and federal sources, 12.8% from service fees, 9.5% from licenses and permits, and 8.9% from interest rates.

“This budget maintains service and staffing levels,” Klobucher said. “Also, Hazel Park will begin making repairs to side streets and cross streets. The needed repairs will take place over a multi-year time frame.”

Mike McFall, the mayor pro tem of Hazel Park, said in an email that despite the limited funds, the city has been trying to invest more in its staff.

“We’ve been working with (the Department of Public Works), the Police Department and the Fire Department to bring their pay up to levels of other communities, or as close as we can afford,” McFall said. “They all do a great job, and I’m very appreciative of all the sacrifices they’ve made over the years keeping our city running. But we need to be competitive (in terms of pay) — otherwise we risk losing good people to other communities, and we will have a very difficult time replacing them.”

Looking ahead, McFall said he’s excited about a new development coming to the south end of John R Road, where a long-vacant city-owned lot will be used as a space for local entrepreneurs to sell their handmade goods, including a space for food trucks and a farmer’s market with an awning.

“We worked with Congressman Andy Levin’s office, who helped secure the federal dollars for the project,” McFall noted.

Overall, the mayor pro tem said he’s “cautiously optimistic” as the new fiscal year begins.

“That’s how we approached the new budget, as well,” McFall said. “Much like the wallop that families are experiencing from inflation, the city is also experiencing increased costs at every level and in every department. From gas for police cars to the office supplies at City Hall, everything is more expensive. I’m hopeful that inflation will come under control soon, but we will need to keep a very close eye on the budget.”