Ipsilante faces structural budget gap as council reviews two-year plan

City officials on May 5 presented a two-year budget framework that warns the city is operating with a structural deficit and will draw on reserves unless action is taken.

The city manager and finance staff said the current-year amendment reduces an original shortfall of $3.73 million to about $3.4 million, in part because of one-time revenues and reimbursements. But they cautioned that without additional, recurring revenue or spending cuts the unassigned general fund balance could fall from roughly $12.4 million today to about $4.9 million after 2027–28, below the city’s policy target.

The presentation front-loaded the mechanics: about 60–63% of general fund revenue comes from property taxes, but state limits under Proposal A restrict how much taxable value—and thus tax revenue—can grow (staff used a 2.7% inflation factor for 2026). An additional millage-reduction fraction required by law reduced the city’s aggregate millage, constraining revenue even as assessed values rise.

Expenditures are driven by personnel: roughly 70% of the budget is salaries and benefits, and staff reported health-care costs spiked about 24% this year. Other cost pressures include rising litigation expenses and contract services. Staff also emphasized vacancies—particularly in police and public works—that both reduce service capacity and temporarily mask ongoing cost pressures.

Several enterprise and restricted funds were singled out as budget risks. The garbage/rubbish fund projects its balance will drop from about $612,000 today to approximately $31,000 by 2028 without policy changes; council heard three broad remedy options: a Headlee override (up to three mills, estimated at roughly $300,000), increased user fees or special assessments, or reducing service levels (for example, less frequent pickups). Staff warned bringing trash collection in-house would require significant upfront investment and long-term legacy costs and likely be more expensive than contracting.

Parking and capital funds also rely on transfers; the parking fund requires roughly $300,000 in general-fund transfers in 2026–27 to cover capital needs while staff pursue metering and reconstruction (including a potentially grant-funded Frog Island project). Debt service and a planned $2.1 million fire truck (planned delivery FY27–28) were noted as future obligations that should be incorporated into long-term planning.

Council members asked for scenarios and models to understand deeper cuts and revenue options. Staff offered to prepare policy options and modeled alternatives ahead of the council’s budget adoption schedule (department-level presentations are set for May 12; adoption is tentatively scheduled for May 19, with budgets effective July 1).

The council did not take final budget votes at the meeting; the presentation served to frame trade-offs facing policymakers as the two-year budget process continues.