Backers Say Income Tax Would Avert Cuts

Ann Arbor's financial and service-level ■ iuture will be determined in large part tomorrow by fewer than one-fifth of the ' I 105,000 citizens living here. Voters are being asked whether or not I they wish the City Council to levy a one per cent local income tax. It is estimated no more than 30 per cent of the city's registered voters will go to the polls tomorrow. This would mean a turnout of some 16,000.' persons, with 53,355 registered voters eligible to cast votes. Those persons who would most help I solve city financial woes should the inI come tax be adopted won't be permitted I to vote in the election. These persons are ■ the large block of non-city residents who I work in Ann Arbor. City finance officer Kenneth Sheehan I estimates the income tax derived from I these non-residents would be $1,277,280. I Under the local income tax legislation, I non-residents working here would pay I one-half of one per cent on their income. Ann Arborites would pay a Ml one per I cent on their income, but would also )be I given relief on property taxes. Should I the income tax be adopted, that portion I of the property tax bill going toward ■ general government operations would be "I eliminated. This means a 7.5-mill cut in ■ property taxes for Ann Arbor citizens. With the 7.5 mili property tax reducI tion, Sheehan estimates the net yield to city_government from an income tax would be $1,174,754. This figure includes I some $313,000 more in state-shared taxes and a deduction of $130,000 for costs of I collection of the new tax. Sheehan estimates the total revenue I from Ann Arbor citizens from the inI come tax would be $3,417,974, while the I 7.5-mill property tax reduction would I mean a savings of $3,922,500 city-wide I for Ann Arbor taxpayers (including comI mercial, research and industrial busiI nesses). Nearly half (some $1.6 million) of the I revenue derived from Ann Arbor citizens I would come from families with a yearly I income of $20,000 or more, while only I $362,550 would come from families with P an annual income below $10.000. City Administrator Guy C. Larcom Jr. now says the income tax would permit the present level of city services to continue for at least two or three more years without any additional source aL revenue. The income tax would not, however, permit any substantial increases in the levéis of services, he L says. B The immediate problem facing city ofj ficials is the 1972-73 fiscal year when anticipated revenues for general operating expenses will total only $9,750,000 (compared to $9,439,000 this year). If an agreement can be worked out with the I University on the Pólice Department I unit to be located on campus, city I venues may increase another $200,000. BuLarcomnotesthat the costs of I ■■■■■ general government in fiscal 1972-73 will be $10,532,000 without any increases in service levéis or personnel. So, depending on the contribution f rom the U-M, Ann Arbor City government will be between $600,000 and $800,000 short of continuing the status quo in City Hall. The increases in costs will be largel for city employé raises, based on 5V2 per cent, which would total some $600,000. This would also include built-in merit raises. Also during the coming fiscal year the city will be forced to meet an extra pay day which occurs once in every 11 years. This extra pay day will cost some $256, 000. Officials are allowing $130,000 extra for the cost of materials and supplies based on a three per cent inflation figure, are providing an additional $100,000 for pólice overtime (which would bring this appropriation to just about what is being paid this year), are budgeting an additional $25,000 for election costs, and estímate street lighting costs will increase $94,000. Add all this together and without a new source of revenue it spells cutbacks in city services. And these cutbacks would come on the heels of service reductions necessitated by budget difficulties during this fiscal year. Even if the city does achieve additional revenue to cover the $10.5 million general fund budget, the lack of additional personnel will actually represent a cut in services becuse of the city's expanded population and area. Without an income tax - or other source of revenue such as a voted property tax increase - the additional revenues available to city government for operating expenses next year will be i only $311,000 or $511,000 if the ; ty contributes $200,000 into pólice I vices. I Larcom notes substantial cuts in the i Parks Department and refuse collection programs were necessitated this year, adding "We're paying the piper on the ! refuse program." Pólice overtime appropriations were also cut substantially and a number of limited duty pólice personnel had to be laid off. City officials emphasize the income tax would permit the city to continue only the current level of services. If the city were to meet the level of services for fiscal 1970-71 the cost would exceed $12.2 million. Projections for a period show this gap between available revenues and those needed to continue the 1970-71 service level increasing to more than $7 million. What will happen without added venue next year? Larcom says it will mean a 10 per cent cut in departments from top to bottom. Many opponents of the income tax say the city is spending too much on unnecessaryprograms- City officials note that if you M ly eliminated the Human Rights I ment, the subsidy to the Transportation I Authority, the Housing Commission, I Model Cities, human resource programs, I the Historical Commission, and the I grievance officer, the total "savings" to I Ann Arbor would be only $404,950. But I they question this "savings" compared I to the impact on citizens. No one has advocated eliminating I these programs completely. But if they I should be cut out of the budget entirely, I the revenues available in 1972-73 would I still fall short of meeting the rest of the I costs of government. U Of the city's current $9.4 million bud-M get, some $4.2 million (5.5 per cent) goesB to the Pólice and Fire Departments. If ■ you add Ihe Parks Department, the ■ Building and Safety Department, and the ■ Health Department the cost increases to ■ $6 million. The courts and Traffic ■ ment bring this figure to $6.5 million. If some of the city programs criticized ■ by ■ income tax opponents were to be I eliminated, the "savings" of a few I sands dollars would cost the city I lions in federal grants, city officials note. Larcom points to the city property tax I rate has increased only 40 cents over the past four years. The city's financial problcms have been caused to a large extent ty events I beyond control of the current adminis-. tration. Most devasting was Gov. WiV liam Milliken's insistence t h a t t h e University discontinue its payments to the city for fire and pólice services. Last year the University contributed some $1.2 million, while for the current fiscal ' year the figure was trimmed to $350,000, and will be even less next fiscal year. This represents a $1 million loss in revenue which has not been made up from any other source. And the city is limited to 7.5 milis property tax for general government operations. Larcom says this figure is historical for the city, adopted sometime in the 1920s and continued in the 1956 City Charter. Ann Arbor levies a total millage of only 14.8, compared to the 20 milis allowed under state law. The city is in the lower third of Michigan cities on the total property tax levy. Another blow to Ann Arbor - and most other cities - was the inflationary spiral starting in the second half of the 1960s. City officials agree with charges that government costs have increased astonishingly over the past 10 years, but they also note that wages have also shot I skyward. They estímate that a lower percentage of a persons paycheck is paid for city services today than it was some six or seven years ago. Many have attributed the spiral in city government costs to the programs of the present Democratie administration. But the largest percentage increase from one year to the next came under a Republican administration a year before Democrats took control. I Thère is no way ot balancing the ■ I budget by reducing overhead," Larcom I says. "People have to realize if they ■ I don't appropriate tht money they're say[ ing they don't want the service." "It's difficultto see how people can be ■ ! saying get along within your income ■ I when we're already trying to figure what we have to cut to stay within that I income," Larcom added. Mayor Robert J. Harris notes that without a new source of revenue the city ■ will not be able to hire more policemen, I' will have no contingency fund, will have j i nothing additional for parks, and will ■ I have no more revenue to meet refuse ■ I collection problems. "I don't see how we can get a 26 per ■ cent increase in calis to the Pólice ■ ■ Department and not increase the ■ I nel," Harris said. I ■ The mayor also said the financial I ture for 1972-73 becomes more bleak I when it is realized there may well be a I deficit carried over from this year (estimated to be at least $200,000). If the income taxfails, Harris says he will doubtless attempt to have a millage issue passed by the voters. But he says he sees less chance of an increase in m property taxes passing than an income I tax. . .. There are bond issues waiting in line which, if approved, would increase the property tax. These include road improvements, a public safety building, and non-voted projects such as storm I sewers and sewage plant expansión (or I the costs to tie into the Wayne County system). "In the long-term, I get the impression people don't like to see property taxes increase," Harris said. The mayor sees as the alternative to the income tax (or a millage increase) an endless series of cuts in services. ■ Tomorrow's advisory vote on the I come tax will not be binding on City ■ Council, although it is expected the council will follow the dictates of the elector■ ate. , ■ Much will depend on the margin of H victory or defeat. If it passes tomorrow and council I adopts the income tax, citizens would ■ have the opportunity for another vote ■ via the petition route. That vote would I be binding. The income tax proposal has been en■ dorsed by the county AFL-CIO Council ■ and the Chamber of Commerce (al■ though the Chamber asked for a one per I cent limit on income), while the League I of Women Voters took no position on the I issue saying they favored a graduated I income tax (which is not permitted unH der state law.) I I ■- i- ïranrt