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Latest Attempt to Remove Saginaw’s Tax Cap Reprises Myth & Falsehood By Mike Thompson Additional reporting by Robert Martin Saginaw’s City Council unanimously is “celebrating” the 30th anniversary of our local property tax revenue cap by again asking voters to remove the 1979 provision from the City Charter. Heading toward the Nov. 3 election, council members once more are spreading the misnomer that City Hall unfairly has been forced “to live on a 1979 income” during these past three decades. This most recently took place during the council’s Sept. 14 meeting. In reality, nothing could be further from the truth. There are several valid reasons to argue that City Hall indeed is financially strapped; but the problem is that “surviving on a 1979 paycheck” isn’t one of them. This year’s combined budgets for basic services, including public safety and trash pickup, add up to $42.8 million. That’s nearly double the 1979 general fund of $21.7 million for identical purposes – a far cry from mere ‘survival’ on 1979 dollars. Review Magazine in October will present far more in-depth coverage of the pros and cons of removing tax limitation in Saginaw, so at this point we will reserve our major opus until then. Our singular purpose with this piece is to debunk all of this “1979 income” misinformation.
‘Salt Talks’ Create Latest Distraction Councilman Bill Scharffee launched the latest 1979 nostalgia on Sept. 14 when he took note of a steep increase in the price of road salt. Scharffee said he would aim to make a whole lot of 1979 vs. 2009 cost comparisons prior to the vote on Nov. 3. Councilman Paul Virciglio enjoined that he is working with a citizens’ support group that hopes to produce yard signs and an informational DVD (with private funds, of course) to illustrate these points. Other members, even those who may know better about this false premise, offered support with their silence. In fairness, we will note that the cost of living has nearly tripled (270 percent) during that time span. This means the 1979 total of $21.7, in today’s dollars, would be worth $58.6 million, which translates into the fact that similar to the majority of citizens, City Hall has lost purchasing power, $42.8 million versus $58.6 million. Unlike most citizens, however, City Government has yet to make fundamental adjustments and sacrifices to address the situation, apart from holding their hand out for more money. Why the need to exaggerate with the “1979 income” canard? Are these misleading portrayals intentional, or simply the result of failing to comprehend? Either way, they don’t reflect well on the civic leaders who make such statements. Let’s be real. If City Hall truly were living on a 1979 income, with a $21.7 million general fund instead of $42.8 million, Saginaw would have about 50 police officers (compared to 200 back then) and probably two fire stations (compared to six back then). Instead, today we have about 100 cops and four fire stations - nothing extravagant, but at least basic and reflective of the city’s diminished population over the decades.
‘Tax Cap’ Covers 10 Percent of Basic Spending
There is no adjustment for inflation, which may seem unfair on Schmid’s part. This particular general fund property tax category indeed remains at the 1979 level. But this isn’t the whole budget; in fact, it’s only about a dime on the dollar. Schmid, who passed away last December, often explained that his City Charter amendment was rigid on this point because he expected City Hall to raise other taxes by other means. And whether you’re a liberal or a conservative, whether you disagree or agree with the tax cap, you can’t deny that Allan Schmid was correct in this regard. Following are the primary examples:
Here in 2009, our property taxes for City Hall are a tad above 14.5 mills. They were 7.5 mills when the tax cap took effect. As Attorney Schmid used to sarcastically joke, “That’s some tax cap, isn’t it?” Plus, we have higher income taxes and the trash fee. This doesn’t mean that we have Fat City at City Hall. On the contrary, there has been a whole lot of belt-tightening, even while occasional missteps still are exposed. No government and no person are perfect. There are dozens of examples of City Hall effectively doing more with less, and similarly, there are some severe budgetary hardships.
Here Are The Genuine Budget Challenges City Council members could press valid points about a lack of funds during the past 30 years. Here are some samples: (1) Erosion of the tax base amid economic hardship, which hits City Hall harder than county government or the suburbs. (2) Dramatic cutbacks in federal and state aid, starting with the 1986 removal of federal general revenue sharing, which today would be worth $6 million annually. (3) Skyrocketing health and liability insurance costs. (4) Sharp hikes in gasoline prices and utility expenses. (5) Excessive pensions for modern-day (not older) police and fire retirees, caused in part by unwise past labor negotiations but also by binding labor contract negotiations. Those five items, not property taxes, are among the true sources of Saginaw’s financial woes. The problem is council members are virtually powerless to do much about them. About the only thing that the council can change are local property taxes, by attempting to lift the tax caps. If council members would state this case to the public, rather than casting the property tax cap as a bogus villain with that old “1979 income” saw, perhaps more voters would understand and give sympathy. Even Al Schmid was starting to agree that maybe the tax cap could be adjusted, just a little bit, but clearly not carte blanche. The latest venture to remove the property tax cap from the City Charter on Nov. 3 is strikingly different than past proposals, because the immediate effect is far more conservative. The property tax rate actually would fall by nearly 3 mills, in exchange for higher fees for rubbish pickup. Owners of higher-end homes (and also business facilities, both small and large) actually would pay less in the exchange. And for those among us who still are into the river’s divide, West Siders as a whole would pay less than their current city taxes and fees, and East Siders would pay more. This could cause some folks who previously have voted “no” on tax cap removal to surprisingly like what they see leading up to Nov. 3. The problem for skeptics is that future councils, with the tax cap gone, could keep taxes lower for a year or two, but then raise the levy even higher down the road. Proponents will answer that it’s up to voters to elect responsible future councils. Like we have a crystal ball on that one. That’s all the more reason to ask: Can’t we get rid of the “1979 income” myth, once and for all, so that we can focus on the more pertinent facts and figures? Please, council members, don’t resume bragging that Saginaw has lower city property taxes than selected other mid-size communities, when those communities don’t have Saginaw’s income tax and/or user fees. That’s just as misleading as the 1979 income bit.
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The shaky basis of
the “living on a 1979 income” argument always has been that the tax cap,
authored and advocated by the late Allan Schmid, freezes general
fund property tax revenue at $3.83 million.