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Ann Arbor officials preview FY27 budget amid revenue shifts and planned utility rate increases
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Summary
City finance staff told council the administrator's recommended FY27 budget will arrive April 20 and highlighted revenue assumptions — modest state shared revenue growth, ~4% taxable value growth and parking recovery — plus proposed utility rate increases and a new enterprise fund for a Sustainable Energy Utility.
The Ann Arbor City Council work session on March 23 centered on the fiscal year 2027 budget timetable and key assumptions city finance staff used to build the draft plan. Marty Prechon, the city's chief financial officer, told council the administrator's recommended budget arrives April 20 and that council will consider first readings of utility‑rate ordinances the same evening, followed by public hearings and adoption steps in May.
Prechon said the budget process follows the city's financial policies, including a 15–20% general fund reserve target, and projected taxable‑value growth of just over 4%, which he estimated as roughly $2.8 million in additional revenue. He noted parking revenue is rebounding, with an anticipated 6.8% increase, but warned that state changes to revenue sharing and volatile consumer behavior make some streams uncertain.
Prechon summarized three recent Michigan bills that affect local revenue flows: House Bill 4183 (motor fuel tax changes that redirect certain receipts to road funds), House Bill 4951 (marijuana wholesale tax and a new neighborhood roads funding mechanism) and House Bill 4961 (amendments that help direct funds to the new neighborhood roads account). He said the net effect reduces some shared revenue for the general fund while increasing road‑dedicated funding, and that the city conservatively modeled those changes.
On the expenditure side, the FY27 central assumptions include utility rate increases (Prechon cited 6% for water and 3% for sewer and stormwater), near‑term personnel‑cost growth (under 7% driven largely by wages), and higher replacement costs for fleet and large equipment. The proposed budget will also create a small enterprise fund for the Sustainable Energy Utility (SEU) and transfer existing ARPA‑funded solar assets into that fund.
Prechon emphasized flexibility: if revenues underperform, staff will recommend spending adjustments or budget amendments. He also reviewed procedural details, including vote thresholds for adoption and amendments.
The council engaged on details about the revenue projections, the timing of DDA tax‑increment financing changes that the administration conservatively included in models, and whether replacement‑cost increases for vehicles were one‑time or ongoing. The session closed with reminders about the question submittal process to ensure staff collect and publish responses ahead of formal budget action.
