Houghton planning for worst-case scenario with budget

City spending hinges on Walmart valuation expected in early June

HOUGHTON -- Houghton is hoping for the best but planning for the worst in next year's budget.

At the city's first budget session Wednesday, City Manager Eric Waara outlined spending cuts in capital improvements that could occur if Walmart receives a lowered tax valuation from the Michigan Tax Tribunal. A five-day hearing on Walmart's request to lower the property taxes on its Houghton store is scheduled in early June.

If Walmart's request is granted in full, it would see its future property taxes drop by 60%. Houghton would also have to reimburse Walmart for the difference between the tax levels, taking an estimated $330,000 out of next year's budget.

Half of the city's revenues in the TIFA district could be taken up by payments to Walmart and the city's legal fees, Waara said.

"Those numbers are sobering, and we've got to plan for it," Waara said.

In the city's Tax Increment Financing Authority fund, the amount contributed to public safety in the general fund is being reduced by a third to $80,000. However, things will be shifted in other funds to compensate, Waara said.

The police department is being run efficiently, leaving little to cut there, Waara said.

"It's not like we have five officers on duty at all times and we can cut it to four, so you really have to look at other things," he said in an interview Thursday.

That means some events and improvements that would be done on a full budget -- such as a new to lot at East Houghton Park, maintenance at Dee Stadium, or a public event on the pier -- might not be funded next year.

"We have to concentrate on the core mission issues and unfortunately forgo the quality of life/placemaking things we're able to do with the general fund," Waara said. "Unfortunately, that's the part that people love. But we still have to keep the water on and plow the roads, and things like that ... we're still going to try to do those things, but we won't be able to do as much of it."

Houghton is required to approve its budget before June 30. If the state decides in Houghton's favor, the budget can still be adjusted, either before its final passage or with a larger budget amendment.

Some larger projects are still on tap for this year, including the impending demolition of the parking deck. The city will also do a "considerable amount" of paving this year, Waara said.

"We didn't do a lot last year, simply because prices were too high for materials," he said. "We basically stuck our money in the piggy bank and added it to this year's money so we can do more work and get an economy of scale."

The city budgeted more than $250,000 for improvements in the major street fund, and $70,000 in local street. Some Michigan Department of Transportation programs might allow the city to leverage the major street funds into larger projects.

Planned paving on Lakeshore Drive between Kestner Waterfront Park and Roy's Pasties could be delayed a year to enable the city to use an additional $250,000 for new curbs and storm sewer drains.

The TIFA budget also includes a federal grant to repair and improve the outfall at Huron Dam, along with the annual environmental monitoring the city agreed to as part of the permitting process for the Walmart expansion in the 2000s.

The city also budgeted for a 3% increase in salary across all departments, in accordance in recent bargaining agreements.

Taxable value in the city has continued to increase, though rising costs could neutralize most of those gains. Property tax revenue grew by more than 5% over last year, while sales tax revenue grew by 6.6%.

Assessed value in the city has gone up by 30% since 2018. Because of Headlee rollbacks, the increase in taxable value over the same span is lower at 22%.

That growth has been happening each year, meaning it can't just be chalked up to inflation, Waara said.

"We're certainly on the right side of those equations, but that also takes a community willing to do what it can to stay growing, even if it is modest growth," he said.

Two more budget hearings are scheduled for May 3 and May 17.