The 2023 budget utilizes the new State of Michigan prescribed chart of accounts. This does not affect total budgets, however, presentation of various categories has changed from 2022 to 2023.
The 2023 budget faces pressures of continued increased inflation, capital plans, and grant programming while maintaining position allocations at levels that are sustainable long term.
The overall budget was developed utilizing the framework of 10 goal areas of Imagine Kalamazoo 2025. The City Commission identified specific goal areas to increase focus for the 2023 budget including:
- Youth - Places and programming to help young people succeed.
- Housing - Improving affordable housing, addressing homelessness, and assisting with arrearages and repairs.
- Infrastructure - Motorized and non-motorized transportation systems, utilities, and water and wastewater.
- Safety - Preventing crime and violence, including gun violence and other safety measures.
- Economic Impact - Promote economic health, economic and business development, and addressing job loss.
The City of Kalamazoo 2023 Budget includes expenditures of $300 million, representing an increase of 22.2% from the 2022 Adopted Budget total expenditures ($245.4 million). The citywide budget is made up of various funding groups. The highlights of the recommended spending plan are discussed below in greater detail. The increase in expenditures is primarily due to additional capital improvements in the City's various Capital Improvement Programs and expenditures within the American Rescue Plan Act (ARPA). See the Capital Improvement Program and America Rescue Plan Act sections of the budget for a listing of the City's 2023 planned projects.
General Fund Overview
The 2023 General Fund budget has a deficit of $1,511,400. The deficit is intentionally budgeted for one time expenditure items in order to spend unallocated fund balance over 20% of operating revenues per City budget policies.
General Fund Revenue
General Fund revenue is projected to be $75 million in the 2023 Budget, which represents an increase of 5.14% from the Adopted 2022 amount ($71.3 million). The three largest revenue sources for the City come from Property Taxes, Intergovernmental Revenues (State Grants), and Foundation for Excellence funding (Other Revenue). These three sources represent 79% of all estimated General Fund resources.
General Fund - Revenue by Type
Property taxes are the largest funding source for the City's General Fund. Property tax values are anticipated to increase approximately 5.22% from 2022 estimated taxable values.
In 2017, the Property Tax Rate was cut from 19.2705 mills to 12.0000. This reduction continues to be funded by the Foundation for Excellence, which is discussed further below.
Intergovernmental Revenue - State Revenue Sharing
The estimated Revenue Sharing payments of $10.86 million in 2023 is a 1.47% decrease compared to 2022 projected receipts of $11.03 million. The decrease is expected as State sales tax receipts are expected to level off.
2020 included a one time reduction of $506,921 from the August Revenue Sharing payment. This was replaced by a State grant through the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Over the past few years Revenue Sharing has had incremental growth, but remains reduced from the 2001 level of $12.5M.
Foundation for Excellence
The 2023 General Fund budget continues to include Foundation for Excellence (FFE) funding to support the property tax reduction implemented in 2017 to reduce the City property tax millage from 19.2705 mills to 12.0000. In 2023, General Fund revenues include $4.5 million of budget stabilization as part of the total $18.5 million in support from the Foundation for Excellence.
Charges for Services are 13.7% of General Fund Revenues. Revenues for Charges for Services are estimated to decrease by 4.49% in the 2023 Budget. The decrease is due primarily to fluctuations within the cost allocation between fiscal years.
The remaining estimated revenues includes permits, licenses and fees, fines and forfeitures, other revenues, and transfers from other funds. Revenue for License, Permits and Fees are anticipated to remain stable in 2023.
General Fund Expenditures
The 2023 Budgeted expenditures for the General Fund is $76.5 million, representing an overall increase of 4.67% when compared to the Adopted 2022 Budget.
The City’s programs are divided into Governance Programs and Community Programs. Governance Programs are primarily served by the City Commission Appointees, including the City Manager, City Attorney, City Clerk and Internal Auditor. The City Manager oversees the Community Programs of the City and the remaining Governance Programs. The General Fund has four departments that facilitate the majority of community programs of the City: Public Safety, Public Services, Community Planning and Economic Development, and Parks and Recreation. The remaining departments that primarily serve governance programs include: Management Services, Human Resources, Information Technology, and 311 Customer Service. Certain expenses included in the General Fund are general in nature and are therefore not assigned to a specific department or governance program.
General Fund - Expenditures by Type
General Fund - Expenditures by Department
Projected General Fund
Long term revenues and expenses in the General Fund are projected to exceed a target fund balance of 15% of operating revenues through 2027. Projected revenues continue to anticipate support from the Foundation for Excellence (FFE) based on funding levels outlined in the by-laws. The City continues to implement new initiatives and City programs in order to implement the strategic goals outlined in Imagine Kalamazoo 2025 and initiatives to become a High-Performance Organization.
2023 General Fund Five Year Fiscal Plan
The General Fund targets to exceed a fund balance of 15% of Operating Revenues. The fund balance is projected to exceed this target by $2.41 million at the end of the five year plan in 2027.
General Fund expenses are projected to exceed revenues in 2023. The projected unreserved fund balance in 2023 is $14.8 million which is 17.67% of estimated operating revenues, exceeding the target of 15% of General Fund projected revenues.
The projected fund balance does not include the Contingency Reserves and Park Reserves, which have balances of $562 thousand.
The 2023 Budget includes 674 full-time positions and 7 part time positions, for a total of 681 allocated positions. The city-wide increase in staffing is to better meet the needs of the community. The Position Comparison schedule included within this budget document provides further detail of the positions and changes by department.
Full-Time Positions - Headcount by Department
Part-Time Positions - Headcount by Department
Non-General Fund Overview
Major & Local Streets
The Major & Local Streets operations are primarily funded by Statewide Gas & Weight Taxes, which are apportioned to the State and Local road and transportation systems through State of Michigan Public Act 51 formulas. Act 51 revenue (as it is known) is expected to see a 4.49% increase from 2022 budgeted amounts, primarily due to increased gas tax revenues.
The Local Street Fund will require an operating subsidy of $1.39 million from the Major Street Fund for 2023. Major Streets and Local Streets are budgeted to receive $152 thousand and $62 thousand, respectively, of American Rescue Plan Act (ARPA) funds due to lost revenues from 2021. These funds will be utilized to continue to fulfill the City's streets plans.
Cemetery operational revenue is projected to remain steady in 2023. Operational revenues are not designed to cover operations and capital improvements, therefore a recurring subsidy of $326 thousand from the Perpetual Care Fund supports the cemetery activity.
Solid Waste operations are funded by a dedicated millage of 1.8 mills. Property Tax revenues of $3.8 million are estimated in 2023. This represents an increase of 4.89% due to anticipated increases in tax values.
The 2023 Budget anticipates an increase of approximately 14.5% in Wastewater revenues as compared to 2022. Revenues are derived from a mix of rates and projected usage. The final budget may be amended to conform to rate consultants reviews of projected system usage and rates that were approved in 2022.
The 2023 Budget anticipates an increase of approximately 23.6% in Water revenues as compared to 2022. Rates are dependent on final ratemaking calculations and will be presented in January 2022 for City Commission action. The final budget may be amended to conform to rate consultants reviews of projected system usage and rates that were approved in 2022.
2023 Capital Financing - Percentage by Funding Source
The detail of the City’s Five-Year Capital improvement plan for the General Capital Improvement Fund, Major Streets, Local Streets, Wastewater, and Water funds are included in the budget document under the section Five-Year Capital Improvement Summaries.
The City’s total capital improvement for 2023 is $111.1 million. The improvement plan anticipates $15.0 million of General Obligation bond proceeds to be funded by the General Fund, Major Streets, and Local Streets. The Water and Wastewater Funds plan to utilize a mix of bond reserves, State of Michigan Drinking Water Revolving Fund bonds and system reserves to fund the ongoing capital plan.
Click here for a PDF file of the 2023 Capital Improvement Program List
General Fund Capital
General capital projects, which are funded in the Capital Improvements Program (CIP) Fund, total $6.8 million. Capital projects in the CIP Fund include $1.5 million in heavy equipment and vehicular equipment, $2.7 million for farmers market and park improvements, and $2.6 million for facilities and improvements.
The General Fund transfers funds annually to cover the debt service payments required by the City’s General Capital Improvement program that is not otherwise funded by other sources. In 2023, the total transfer is $4.6 million as compared to $5.7 million in 2022 adopted transfers.
The Five-Year Fiscal Plan for the Capital Improvement Fund is included in the Budget Summary section of this budget document.
Improvements to various local streets total $4.5 million which is 100% bond funded in 2023.
Improvements to various major streets total $17.1 million in 2023. The capital improvements are to be funded with $8.0 million in federal funds, $6.7 million in new capital improvement bonds, and $2.4 million in funds from the State of Michigan for the transfer of streets to the City of Kalamazoo.
Water & Wastewater
Capital improvements of $24.6 million and $58.0 million are planned in the Wastewater and Water Funds, respectively. Capital investment in the Wastewater and Water systems is necessary to ensure the supply and quality of drinking water and the flow and treatment of sanitary sewer. This includes new & replacement mains, service connections, hydrants, meters, pumping station upgrades, capital maintenance, and improvement of existing infrastructure.