State approves IM’s plan on benefits

IRON MOUNTAIN — A state panel has approved Iron Mountain’s corrective action plan to deal with underfunded retirement benefits, putting the city in compliance with a law enacted in 2017.

“Although the approval is good news, there is plenty of work to complete,” City Manager Jordan Stanchina told the city council Monday.

The biggest liability is for retiree health benefits, underfunded at $42 million according to the newest estimate.

“It’s a number, but it’s not coming due today,” Stanchina said. “It’s going to get better,” he added, as the majority of current employees aren’t eligible for retiree insurance.

The Protecting Local Government Retirement and Benefits Act sets guidelines to identify pensions and retirement health plans that are underfunded. Iron Mountain applied for a waiver in April but was denied, and in November submitted a plan to the Municipal Stability Board, a three-member panel appointed by then-Gov. Rick Snyder.

The remedy is to contribute $139,000 annually to a trust fund for 30 years to bring the funding level up to about 40 percent. Although the city has been operating on a pay-as-you-go basis for retirement health benefits, it does have about $500,000 set aside for health insurance that can now be tapped to provide a few payments to the dedicated fund, Stanchina said.

The trust fund allocation, however, is in addition to the annual obligation for retiree premiums, which was more than $1.3 million for the 2018-19 budget year. The city’s total general fund budget, by comparison, was $6.82 million.

“These legacy costs are huge for the city,” observed Scott Sternhagen of the accounting firm Schenck SC, who summarized the city’s annual audit at Monday’s meeting.

Even with the underfunded retirement benefits, the city’s finances are “in fairly decent shape,” Sternhagen said, noting reserves in the general fund totaling $2.6 million.

A corrective action plan for the city’s Municipal Employees’ Retirement System pension plan also was approved by the Municipal Stability Board, the council learned. The pension plan is 38 percent funded but must be 60 percent funded within 20 years.

Stanchina said the city can meet that threshold by making the actuarial required contribution, as it has in the past. The current level is about $700,000 annually. Under the corrective plan, the city’s payment is projected to increase each year and grow to about $1.1 million by 2033, at which point the pension plan would be about 60 percent funded. Overall, the underfunded pension liability is about $15 million.

The liability for retiree health benefits was formerly pegged at $34 million, but Sternhagen said revised state standards helped push that number $8 million higher. Retiree health benefits were phased out for new employees beginning in 2009 and that adjustment, among others, should eventually shift actuarial tables to the city’s advantage.

In other action, the council:

— Adopted a retirement resolution saluting Michael Papp, deputy director of police services, for more than 28 years of “extraordinary efforts to make Iron Mountain a better and safer community in which to live.”

— Authorized Director of Police and Fire Services Ed Mattson to replace a detective’s unmarked vehicle at a cost of up to $15,000.

— Agreed to move forward on a request from Kyle Fortier to purchase about three acres of city property off Hillcrest Drive for construction of a home. A survey, appraisal and site plan would be needed before a price is determined.

— Heard Stanchina report that 51 deer were culled during the city’s managed archery hunt.

— Learned that a managed timber harvest in the Millie Hill area netted $55,723 for the city. Another cutting could potentially be made in 10 to 12 years, Stanchina said.

— Reappointed David Santi to a three-year term on the Board of Review and Marilyn Schultz and Barbara Spooner to four-year terms on the Iron Mountain Housing Commission.

— OK’d the sale of a damaged plow truck to Dickinson County for $3,000 for use at Ford Airport.

— Approved a request from Rebecca Lilienthal to vacate two unused alley right-of-ways north of the former Mountain Motors on North U.S. 2 in Kimberly’s Fourth Addition. She is in the process of selling some of the property and the alleys are complicating the process. No objections were raised during a public hearing.

— Rescheduled a public hearing for 6 p.m. Jan. 21 on a proposed tower lease renewal with SBA Communications.

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