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IRON MOUNTAIN -- Water and sewage charges will rise under Iron Mountain's proposed 2023-24 fiscal year budget, but property tax rates will stay nearly the same despite a huge bump in health insurance premiums.
A hearing on the spending plan is set for 6 p.m. today at City Hall during the regular council meeting.
The budget calls for a 10% hike in sewage usage rates and a 5% increase in water usage rates. According to City Manager Jordan Stanchina, an average user at 3,740 gallons per month will see a monthly increase of $2.72.
A recent survey by the Michigan Department of Environment, Great Lakes and Energy showed Iron Mountain's water and sewer charges are among the lowest in the Upper Peninsula, pegged at $70.45 per month for 5,000 gallons of usage. The city's rates have increased by 19% over the past five years but remain far below many other U.P. cities, the EGLE survey shows. At 5,000 gallons of monthly usage, Escanaba's charge is $124.88 while Marquette's is $149.18.
Stanchina, meanwhile, has recommended incremental rate increases to keep pace with inflation and build a fund balance for capital projects -- preventing huge increases in future years.
The city recently applied for $29.7 million in Michigan Clean Water and Drinking Water aid, hoping to receive at least 50% grant funding for system improvements. It may get a preliminary notification from EGLE by August for work that would start in 2025.To make the projects possible, more increases may be needed. "A successful application will require a full review of the current utility rates," Stanchina said in a memo to the council.
The total proposed millage rate for city purposes, including garbage collection, is 21.236 mills, or $21.24 per $1,000 of taxable value. That's up by 0.0095 mills, or less than a penny from the current rate. The increase is due to an adjustment in the rate for a full-time liaison officer at Iron Mountain Public Schools, which will be levied at 0.4551 mills, or about 46 cents per $1,000 of taxable value.
Voters in 2019 had authorized a millage of up to 0.55 mills for the officer, or 55 cents per $1,000 of taxable value.
The overall levy includes 3.3321 mills, or $3.33 per $1,000 of taxable valuation, for police and fire pensions, which is the same as the current millage.
After a health insurance increase of just 0.44% a year ago, the city will take a 13.84% hit beginning July 1, Stanchina said. The city's cost of health insurance to the general fund is $1.44 million, with obligations to retirees representing about $1 million of the total.
Although the city began phasing out retiree health for new employees in 2009, an actuarial study estimates the legacy cost at $45 million. Sate law requires some of the obligation to be pre-funded and the budget sets aside another $240,000 for that purpose.
On the plus side, the city is eligible for an $8.16 million grant through the Protecting MI Pension Grant Program to help pre-fund benefits for retirees who opt for a cash payment in lieu of insurance. The Department of Treasury will report on the city's application in July, but it will have no impact on the 2023-24 budget.
Proposed general fund spending totals $8.29 million, an increase of about $289,000, according to Chief Finance Office Heather Lieburn. The projected fund balance for June 30, 2024, is $3.47 million -- about $130,000 more than for the end of this fiscal year.
The city's budgeted taxable value has increased by 3.74%, rising by about $10 million to $274 million, Stanchina said. This is below the 5% inflation rate that was applied to the taxable value of all parcels, he said.
The shortfall is partly due to assessment appeals to the Michigan Tax Tribunal, resulting in a loss of $1.8 million in taxable value on seven properties, Stanchina explained. Personal property tax adjustments, some of which may be recovered in future years, caused nearly $1.5 million in taxable value reductions.
Property tax exemptions for disabled veterans accounted for another $500,000 in new losses in taxable value from 2022 to 2023, Stanchina said.
"The Michigan Legislature continually says they will pass legislation to reimburse locals for the veterans exemption but nothing as of yet," he said. The exemption results in a taxable value loss of about $4.2 million annually, according to the city's calculations.
State revenue sharing is estimated at $1.02 million in 2023, a 2.4% increase from this year. Property taxes are expected to generate $5.34 million for the general fund, an increase of about $186,000, or 3.6%.
The city plans to spend $650,000 on local street paving in the next fiscal year, an increase of $250,000. Of that total, $136,869 is generated from the Dickinson County Road Commission's county-wide paving millage. Some of the paving will be done in conjunction with water projects, as the city has an estimated 1,800 lead service lines in need of replacement by 2038.
Iron Mountain hopes in the next year to replace a 2005 loader and a 1996 plow truck. The purchase of replacement pickup trucks is also requested, along with a new squad car. A $449,328 transfer from the general fund to the equipment replacement fund is planned.
The budget calls for 43 full-time employees, with an additional full-time firefighter. The breakdown is 14 in public works, 13 in the police department, seven in the fire department, six in administration, two office clerks and a police clerk. Nine permanent part-time workers are also included -- eight in the fire department and one in the Downtown Development Authority.
Apart from other funds, the city has decisions to make on American Rescue Plan spending. With $765,022 in federal funds available, $204,234 has been used for a conversion to LED street lights. Local governments have until the end of 2026 to fully use the aid, but funds must be allocated by 2024.
Jim Anderson can be reached at 906-774-3500 ext. 226 or janderson@ironmountaindailynews.com.