City General Fund Health Takes a Bumpy Ride

Wondering how much your community takes in for revenue each year? Curious as to how much debt it carries? You can find that information and more on the MI Community Financial Dashboard.

Published by the Michigan Department of Treasury, the dashboard not only includes raw numbers but also stacks communities against one another in a number of rankings. According to the dashboard, the City of Lowell’s General Fund health hovered near the bottom of the pack for years before leaping to the 95th percentile in 2016. That wasn’t to last though, and the city’s rank dropped substantially in 2017.

Here’s a look at the actual rankings for the City of Lowell General Fund health from Fiscal Years 2010-2017, as reported by the MI Community Financial Dashboard. Fiscal years are not the same as calendar years, and the city starts its fiscal year on July 1 and ends it on June 30. As a result, Fiscal Year 2010, for example, started on July 1, 2009 and ended on June 30, 2010.

  • Fiscal Year 2010: 239 out of 280 (15th percentile)
  • Fiscal Year 2011: 240 out of 280 (14th percentile)
  • Fiscal Year 2012: 238 out of 280 (15th percentile)
  • Fiscal Year 2013: 222 out of 279 (20th percentile)
  • Fiscal Year 2014: 273 out of 280 (3rd percentile)
  • Fiscal Year 2015: 205 out of 280 (27th percentile)
  • Fiscal Year 2016: 13 out of 280 (95th percentile)
  • Fiscal Year 2017: 201 out of 274 (27th percentile)

To learn more about the challenges facing the City of Lowell budget, as well as to learn why the city saw that significant improvement in health in 2016, Lowell’s First Look spoke to the three men who have led the city during these years: city managers Dave Pasquale, Mark Howe and Mike Burns.

Great Recession Hurt Lowell Economy

Dave Pasquale spent more than 24 years at the helm of the City of Lowell. He was the city manager from 1987-2011 and served as interim city manager for eight months in 2016 as well.

During his tenure, Pasquale oversaw a number of improvements, including the renovation of the city hall, addition to the police department, contributions to the development of a new library building and significant street projects such as the reconfiguration of Bowes Road, creation of South Valley Vista Road and addition of two stop lights on Main Street. “There’s always constant pressure to do more with less.” he says is one challenge of running a small town.

When the housing market collapsed in 2007, taking the overall economy with it, the City of Lowell felt it acutely. Atwood, one of the city’s major manufacturers, had been a subsidiary of furniture manufacturer Steelcase. However, that business arrangement ended, moving expensive equipment out of the Atwood facility and resulting in a significant loss of personal property revenue for the city. While Atwood, with help from the state, would reinvent itself as a subsidiary of boat maker Brunswick, another Lowell manufacturer, Newell, would close for good.

Despite the challenges, Pasquale says the city was able to weather the financial storm without laying off any workers and keeping public facilities in good condition. “What we really tried to do is make sure we were living within our means,” he says.

Pasquale also points to the Downtown Development Authority as helping to keep the city in prime condition with lighting and landscaping projects during this time. Then, when Flat River Grill decided to locate along the Riverwalk, Pasquale says that helped position the city to take advantage of the economic rebound. “The Gilmore [Group] came in, totally renovated their building and brought a lot of people into the community,” Pasquale remembers.

When Pasquale announced his retirement in 2011, the Lowell City Council set about looking for a new city manager with a background in finance and found Mark Howe.

Improving the General Fund Health

Howe describes the budget situation as “not good” when he took over in 2011. A fund balance in the General Fund was being used to compensate for deficits in revenue, but that balance would run out in a year. What’s more, the equipment fund had a negative cash balance, and the Michigan Department of Treasury had sent a warning letter to the city about its status.

However, Howe is quick to point out that none of this should reflect poorly on Pasquale. “Dave did the best he could with the resources he had available,” Howe notes. The loss of tax revenue during the recession meant city leadership was left in the position of trying to maintain services with less money coming in.

What’s more, declining taxable values in the city continued even years after the recession officially ended. According to the Michigan Department of Treasury, the total taxable value of properties in the city was $114.3 million in 2010 and declined steadily until they bottomed out in 2013 at $102.8 million.

When it came to how to fix the city’s budget problems, Howe knew the challenge would to find adequate revenues without alienating residents with higher taxes. “Most of the budget relies on property taxes, and Lowell [had] the second highest millage rate in the county,” he says. “It was about how do you grow the community when you have this high tax rate?”

The answer was to look at places where savings, both big and small, could be found within the budget. The most significant savings were realized by refinancing bonds taken out for the City Hall renovation and water system. That resulted in an interest rate reduction and $1 million in savings. The refinancing didn’t extend the term of the bonds either.

Then, there were a number of smaller changes that added up to help swing the General Fund health from the bottom 14 percent to the top 5 percent in the state. The Downtown Development Authority picked up a little more of the cost of the City Hall bond, the Lowell Area Fire and Emergency Services Authority started paying for administrative costs that had previously been absorbed by the city, the Lowell Police Department took over zoning enforcement from a private contractor and an agreement with Cascade Township resulted in some building inspection revenue coming back to the city. A clerk with the police department even volunteered to take over some janitorial duties to save money.

Meanwhile, Howe looked to grant programs to fill in the gaps in revenue. A $1 million Stormwater, Asset Management and Wastewater (SAW) Program grant was obtained from the Department of Environmental Quality, and the city instituted a system to maximize the money it could receive through the Community Development Block Grant (CDBG) Program. The county would open up funds from lapsed grants in other communities, and Lowell made sure it was first in line to receive those by having its grant applications already queued up and ready for submission.

“Overarching all of this was council leadership,” Howe says. “We spent a lot of time on strategic planning and goal setting.” That, in turn, made it easier to go through the budget process and fund priorities first. Howe also cites collaboration with the police department, city staff and other agencies as helping to improve the overall situation in the city.

By Fiscal Year 2016, the budget was bearing the fruits of that labor. “I felt great about where the budget was,” Howe says. “[Finances] were healthy. We were on our way.”

Not everyone was pleased though. A new city council was elected in November 2015, and that body terminated Howe’s employment in January 2016, citing concerns with the handling of union negotiations with city workers. Pasquale returned to the city manager post on an interim basis from February-September 2016. In September, Mike Burns picked up the mantle of the city’s chief administrative officer.

Challenges Persist for City of Lowell

When Lowell’s First Look spoke to Burns, the 2017 data was not yet available so he did not have an opportunity to address why the General Fund health dropped significantly from 2016 to 2017. However, it should also be noted that since Fiscal Year 2017 began on July 1, 2016, Burns was not part of the budget process for that year. The Fiscal Year 2018 budget will be the first budget overseen entirely by the new city manager.

Burns was surprised to hear the city’s General Fund health ranked so high for 2016 but added, “My predecessor did a very good job of building up the fund balance.” Having that fund balance allows the city to address emergencies and unexpected expenses.

Still, Burns says there are challenges continuing to face the city. He notes many city facilities have been neglected over the years, and the city streets are of particular concern. Approximately 85 percent of city roads are rated as poor right now. He estimates the city has anywhere from $10-$30 million in infrastructure and facility needs. Plus, Burns says the Lowell Police Department could use another full-time officer, there are equipment needs and the wastewater plant may need an upgrade soon.

“I’m trying to address some structural issues right now,” Burns says. He’s looking for ways to get assistance from neighboring jurisdictions or community funds for city amenities, such as the library building, which are used extensively by township residents. The city also recently purchased some financial software to help with budget forecasting going out five years into the future.

When asked about the challenges facing the City of Lowell, Burns points to roads and property taxes. “One of the biggest problems is there is no money to fund local streets,” he says. While the City Council has instructed him to investigate the use of a city income tax to fund those and other projects, Burns knows many in the community might not be receptive to that idea.

While the city does have one of the highest millage rates in the county, that doesn’t necessarily translate to a General Fund flush with cash. That’s largely because taxable values in Lowell are much lower than in other communities. Burns notes one mill in Lowell brings in $99,000 of revenue. That compares to $217,000 of revenue per mill in Hudsonville and $650,000 of revenue per mill in East Grand Rapids.

“I just want people to understand that we’re trying to live within our means,” Burns says. “I don’t think we waste money here.”

Residents who want to read more about how the City of Lowell spends its money can find budgets from Fiscal Year 2009 through Fiscal Year 2017 on the city website. The Fiscal Year 2018 budget has not been posted yet.

The MI Community Financial Dashboard also provides detailed data on city expenditures, broken down by fund and expense type. Township residents can also find information about their municipality on the dashboard as well.


Editor’s Note: This article has been updated to state that the city receives $99,000 per mill, not that average property values in the city are $99,000, as was previously stated. Data for Hudsonville and East Grand Rapids has been updated as well.

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