city manager Vince Pastue believes he can deliver a balanced city budget for the 2012-2013 fiscal year.
But the year after, and the year after that, he said, "We're going to be challenged."
Pastue said Oakland County estimates a 6.4 percent reduction in taxable value in Farmington, which is higher than his estimate of between 3 and 5 percent. While the longer term forecast is less clear, a 3-4 percent decline is anticipated for the next three to four years. That translates into a serious reduction in anticipated revenues for the coming year.
"The other thing that's of concern is our continuing costs for retiree health care," Pastue said, noting the city currently has 35 retirees. "You just can't keep having double-digit increases every year."
Last year, by shifting millage that had been set aside for debt retired in 2010 to the general fund budget, increasing the city's operating millage from 12.1524 mills to 14 mills. Pastue will likely ask them to consider another increase.
In 2011-2012 budget talks, Pastue warned officials that red ink in the city's budget could top $170,000 by 2015.
"I have given (council members) a scenario where you recover 75 percent of the taxable value lost by increasing the millage rate," he said. "I would guess almost every property owner would still see a reduction in their property tax bill (due to declining property values)."
While reductions in staffing, a 5 percent pay cut and other measures have gotten the city through the past few years, Pastue added, "You get to a point where you've got no more rabbits to pull out of the hat." He's concerned that the city risks its competitive edge in hiring staff if compensation cuts go further.
There has been a "minor uptick" in housing values since he made his presentation to city council members earlier this month, and the city has seen a slight increase in some revenues from the state. But the city is so dependent on property tax revenues, Pastue said, "even if other revenues are going up, our ability to fund services will be strained."
The 2012-2013 budget is still in development. Officials must pass a balanced budget by June 30, 2012.