Michigan’s staggering economy has had an impact on Ann Arbor’s once financially insulated community, leaving the city with a projected deficit of more than $2 million for 2010 and $5.4 million in 2011. Washtenaw County has an even bigger gap to fill, projecting to run a $26 million deficit for the next two fiscal years.

Both county and city officials point to a decline in property tax revenues due to lower assessed land values and the departure of Pfizer Inc., which was the previously city’s largest property taxpayer. Pfizer had accounted for 4.8 percent of Ann Arbor’s total property tax revenue in the 2008 fiscal year.

According to city and county officials, the recent budget problems have been exacerbated by the economic slowdown at the national level.

At last night’s City Council Work Session, City Administrator Roger Fraser presented council members with his budget recommendations, including a four-phase program to add some stability to the city’s economic situation in hopes of dealing with the $2 million shortfall for the fiscal year 2010.

To handle the decline in tax revenue, Fraser recommended the installment of additional parking meters on some of the city’s service drives — a change that would raise an additional $380,000. Fraser also recommended a 16- to 18-person reduction in the city’s police force that he said would likely come in the form of an early retirement program.

If the city’s budget problems persist into fiscal year 2011, Fraser recommended an additional round of budget cuts that would include permanently closing the Ann Arbor senior center — a change that would save $141,000 — and turning over the city-owned Mack Pool to the Ann Arbor Public Schools, which would save $59,000.

City Council is expected to approve the city’s 2010 budget by the end of its meeting on May 18.

Ann Arbor’s Chief Financial Officer Tom Crawford told the Daily in an interview in January that city officials do not want to take money from the city’s $16 million in reserve funds to relieve the financial deficit because it would use a one-time source of funding for recurring expenditures.

While it is possible that the city could receive stimulus funding from the federal government, Fraser said the city does not have plans to depend on federal funding for the 2010 budget.

“It’s not something that’s turning around quickly as everybody envisioned,” Fraser said of the stimulus bills approved by Congress in recent months.

At last night’s working session, Ann Arbor Mayor John Hieftje said that based on the state of Ann Arbor’s economy, it is unlikely the city will see additional revenue from stimulus funds.

“If money is handed out based on need, we will be the last on the list because so many communities have greater need than we do,” Hieftje said.

At the county level, Washtenaw County Administrator Robert Guenzel gave a bleak forecast for the 2010 and 2011 fiscal years in terms of the county’s property tax revenue.

“I don’t know when we’ll hit the bottom,” he said. “That’s almost a weekly or monthly observation.”

Property taxes currently make up 66 percent of the county’s general fund.

Washtenaw County Commissioner Mark Ouimet, District 1, said because property values contribute to so much of the county’s revenue, there’s no way around cuts in order to balance the budget.

Departmental reductions and reorganization are part of the county officials’ strategy to increase revenue, but the plan won’t be finalized until Sept. 1.

Ouimet said in addition to departmental changes, the county’s financial situation could improve if the state’s economy rebounds from its recession quicker and if property values start to rise.

However, Ouimet stressed that the county would not try to increase revenues by dipping into the county’s approximately $8 million fund balance, a sort of emergency reserve fund. He believes that would only be a short-term fix.