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City manager: Sterling Heights projects $6.2M addition to fund balance, holds one-time property tax reimbursement pending state changes
Summary
Assistant Budget & Finance Director Nick Mackey told council the final 2025–26 amendment projects $7.1M more in general fund revenues and proposes reserving the unexpected tier‑3 property tax reimbursement pending clarity on state legislation that could eliminate personal property tax.
City staff presented a final amendment to the 2025–26 appropriations ordinance that projects stronger-than-expected year‑end revenue but recommends holding some receipts in reserve pending state action.
Assistant Budget & Finance Director Nick Mackey told council that general fund revenues are now projected to finish roughly $7.1 million (about 5.3%) higher than originally budgeted, driven primarily by a tier‑3 property tax reimbursement received in May and stronger investment income than anticipated. Mackey said those one‑time receipts have typically funded one‑time capital projects in prior years but the administration proposes reserving the funds until there is more certainty around pending state measures that could eliminate personal property taxes.
"This proposal alone could create an annual $4.6–$6 million hole in our operating budget," Mackey said discussing possible outcomes if state action reduces local revenues. The budget office reported it expects to add about $6.2 million to the general fund balance for the fiscal year, preserving a fund balance above 30% of expenditures and maintaining the city's strong bond rating.
Staff also reported other fund movements: police and fire expenditures are projected to run about $400,000 higher than originally budgeted (largely reimbursed security details and overtime/payouts), while savings from vacancies and reduced irrigation lowered costs in other departments. The amendment moved as a first reading; adoption is scheduled for the June 16 council meeting.
Why it matters: The council's decision to reserve the unexpected reimbursement reflects caution while the state debates changes with potential fiscal impacts. If state action reduces or eliminates a revenue stream without replacement, cities could face structural shortfalls that would force service cuts or local compensating actions.
What’s next: The ordinance is scheduled for adoption at the council’s June 16 meeting. Administration will return with recommended project uses for any funds only after more certainty about state legislative activity.
