City Finalizes Budget -- Cancels Special Meeting

IRONWOOD, MI - Tuesday, May 19, 2009 - EDITORIAL COMMENT: A special meeting of the Ironwood City Commission to finalize the long-awaited police union contract was scheduled and canceled for yesterday afternoon and the Chronicle was kept in the dark about both. Is it discrimination or incompetence that continually favors one media over another? Press releases were given to the Daily Globe when the meeting was scheduled and when it was canceled. Nothing was ever sent to the Chronicle. Nonetheless, the final budget workshop was held last night at 5:30 PM.

In attendance at the workshop were all five members of the City Commission: Bob Burchell; Tom Laabs; Bruce Noren; Gemma Lamb; and Suzanne Toth. Also in attendance were City Manager Scott Erickson; Assistant Community Development Director Jane Bowman; Financial Director Julie Frederickson; Utilities Director Bob Tervonen; City Assessor/Building Inspector Dennis Hewitt; Ironwood Public Safety Director Bob Erspamer; Department of Public Works Working Foreman Joe Madgziak; and Community Development Director Dan Petersen. Representing the press at last night's workshop was yours truly.

Julie Frederickson went over the "smaller item details" of the budget last night. She began her presentation with a disclaimer -- the budget is a "living document" that can change throughout the year depending on fluctuations in revenues and expenditures. She told the Commission to keep in mind that amendments to the budget can be done throughout the year as needed.

She cautioned that the State, although temporarily flush with cash due to Stimulus assistance, will be in trouble once those funds run dry. She also stated that the State's fiscal year runs from October to October so the State's financial situation could be very week in the months to come.

MAJOR STREETS - Frederickson started off by highlighting the "Major Streets" fund. She explained that the three main funds (as far as dollar amounts go) are "Major Streets," "Local Streets," and the "Equipment Fund." This year $852,000 will be budgeted for "Major Streets" Frederickson said. $1.8 million was budgeted for the current year mostly due to the fact that Alfred Wright Boulevard and Greenbush were redone. Lake Street is the only major street project scheduled for the coming year. The City match for the Lake Street project is $140,000.

Frederickson told the Commission that she went through the budget, making cuts, and fine tuning it to save money wherever possible. She said, however, that certain items cannot be trimmed -- salaries, benefits, and equipment usage.

She said $40,000 was put aside for crack sealing for the coming year. She explained that such maintenance is important on major streets.

Commissioner Laabs asked if the City saved money of snow removal this past winter. Frederickson told Laabs that it was down slightly from last year, but the way we received snow -- many storms on Sundays and it being so cold that nothing melted -- the amount was "average."

$15,000 was set aside for construction of a salt storage shed. Between the last two years and this year, about $80,000 will have been set aside for the City's share of the construction of a salt storage shed closer to the City garage.

The debt on the McLeod and Ayer Street projects, for which bonds were issued in 2000, will be paid off in the coming year. That represents $100,000 yearly that the General Fund has been subsidizing for the bond payments.

Commission Burchell asked if any of the upcoming projects will require funding similar to the Ayer and McLeod Street projects. City Manager Scott Erickson explained that the Jessieville project's loan funding through the USDA Rural Development would be paid through water utility revenues, and would not affect the General Fund. Erickson noted that it was mentioned in the pasts that once the bonds are satisfied, those funds previously used to pay the bonds would be earmarked for major street funds. He pointed out that the funds don't have to go to major streets, depending on the desires of the City Commission at that time.

LOCAL STREETS - Frederickson noted that very little State money was available for local streets -- approximately $150,000. She said there was a little money allocated through the State of Michigan for snow removal, but not a significant amount. Because of that, the General Fund (local taxpayers) subsidize the lion's share of the "Local Street" fund. The budgeted amount for the coming year for the "Local Street" fund is approximately $266,000.

Frederickson noted that the fund is down from the current year, however, between last year; the current year; and the coming year; the City will have set aside close to $500,000 to do some local work on our streets.

The remainder of the "Local Streets" fund is consumed by day-to-day operations, Frederickson said -- including salaries; equipment rental and supplies. According to Frederickson $12,000 will be set aside for the salt storage shed from the "Local Street" fund.

Commissioner Lamb asked what made up the "Contractual Services." Frederickson explained that the City often contracts with independent contractors for minor street paving, repairing, etc.

MINOR FUNDS - Frederickson explained that the next topic of discussion was to be several minor funds within the budget. She told the Commission that she was going to go through the "Minor Funds" quickly because many of them were separate from the City, although they come from and are subsidized by the General Fund. The funds included:

The Ironwood Volunteer Fire Department (IVFD) - Budgeted $10,500. Frederickson explained that the IVFD does their own fundraising and they have their own checkbook. The City contracts with the volunteers, however, to provide assistance to the Ironwood Public Safety Department (IPSD). The current year's budget for the IVFD was $8,500.
Building Inspections - Budgeted $42, 805. According to a report by City Assessor/Building Inspector Dennis Hewitt, his department issues roughly 185 building permits per year at an average cost of $60 each, generating a revenue of roughly $11,100 annually. According to Frederickson, unless some "big projects" come up, this amount will be relatively constant. Hewitt told the Commission that last year, the City was hoping for Hovey project and Josephson's Nursing Home expansion to materialize, but that never happened. Those two projects would have generated additional revenues through the permitting process. Frederickson explained that the budgeted amount accounted for half of Hewitt's salary, benefits, and some minor operating expenses.
Drug Enforcement - Budgeted $3,700. Frederickson explained that three or four years ago the request was for $10,000 per year for drug enforcement. Now with the implementation of the GIANT program, the amount needed each year has been reduced due to shared costs.
Community Development - Budgeted $15,000. Frederickson told the Commission that Community Development, through grant matches by residential home owners generates a revenue of approximately $272,600. Frederickson noted that the $15,000 budgeted through the City's General Fund is earmarked for administrative costs.
Downtown Facade Grant (Phases I and II) - According to Frederickson the grant accounts for $171,100 plus a business owner grant match of an equal amount.
Memorial Building Debt Service - Budgeted $170,000. Bonds were issued to allow for renovation of the Memorial Building and 2.2 mils have been assessed the taxpayers. Commissioner Lamb asked when the debt would be repaid. Frederickson told Lamb that the City will have the debt repaid by 2015.
Economic Development (Revolving Loan Fund) - Frederickson said approximately $10,000 annually is raised in interest on loan payments. She noted that minor expenses such as advertising and administration are taken out of the fund.
Equipment - Frederickson explained to the Commission that it is important to view the City Garage as "an equipment rental business." Every time any equipment is needed by any department, a rental charge is assessed to that department. The projected income from the rentals for the coming year is $675,000. Frederickson also added to the budget $4,000 for the sale of old equipment. She said that selling old, unused equipment is going to be a regular practice by the City in order to help balance the budget and control costs. Part of the cost for the Equipment Fund are 2.25 employees. Frederickson was quick to point out that a large portion of the expenses in the Equipment fund are wages, benefits, supplies, and overhead (including building rent).

Purchases - Frederickson highlighted the following suggested purchases:

Gas Tanks - Frederickson pointed out that something needs to be done with the City gas tanks. She didn't say it had to be done in the coming year, she just wanted to remind the Commission that action would need to be taken soon.
1 ton 4-Wheel Drive Truck Chassis - Budgeted $30,000 - According to the DPW Working Foreman Joe Magdziak, one of the City trucks has a nearly new box, but the truck itself needs to be replaced. He suggested purchasing a new chassis only, saving the box from the old truck.
Front-End Loader or Oshkosh Snow Plow - Cost approximately $200,000 - A decision needs to be made as to whether to purchase a front-end loader for plowing or to purchase a new Oshkosh snow plow. Magdziak suggested replacing the oldest, worst worn snow plow with a front end loader that could serve double duty. The loader would be used for plowing the City north of the highway. Magdziak said plowing would change from a two-man operation to a one-man operation north of the highway. Frederickson noted that the loader would be purchased on payments so it wouldn't be a budgeted item. She stated that she included extra funds under "Interest Expenses" should the City opt to purchase a front-end loader in the coming year. Principle payments would be deducted off of "Depreciation."

Cemetery Costs - Budgeted $100,000 - Frederickson told the Commission that fees and charges at the cemetery have increased to fit the new budget. She said typically just over 100 people are buried each year in the Cemetery. She said since the revenues have not been where they should be, the General Fund will need to subsidize the operation to the tune of about $30,000. She said the bulk of the expenses are labor costs (3/4 of an employee plus 1/2 of the benefits), and operating supplies. She said that plans are to develop Block 105 this coming summer which will result in engineering fees. Mayor Bruce Noren offered a suggestion to offset the costs and to augment the perpetual care revenues. He suggested that the City sell Street or Block Names within the Cemetery to family members that wished to purchase them. He suggested selling the name for $2500 each. The funds could be added to the $500,000 perpetual care fund. Suzanne Toth mentioned that the cost of Street signs would be minimal so that the sale of the names could be profitable. Bob Burchell told the Commission that a similar plan was attempted in Ann Arbor's Historic District where people were asked to pay for signage within the district. For $25, he said, in an affluent area of the City, people could have their name placed on a sign and they struggled to get any participation. Noren admitted he didn't know if they would sell either, but in times passed he believes it would have been relatively easy to generate income doing this. It was noted that burials are down as more and more people are opting for cremation.
Millage Requests - The budget requests for the coming year total $10.2 million. Frederickson highlighted the 31.3 taxable millages for City Operations in all departments requested. The taxable value within the City increased to $82 million. The taxable millage requests are as follows:

City Operations - (19.2 mills)
Library - (.96 mills)
Police and Fire Pensions - (6.1 mills)
Memorial Building Bonds - (2.1 mills)
Civic Center - (1.0 mill)
DIDA - (No change for Downtown Businesses Only)

Debt Service - Frederickson noted that the City's debt service has significantly decreased since she started working for the City. She said the debt service used to be between six and seven million dollars. The current debt services is around the $2 million mark. She noted that much of the existing debt service will be rolled into the Rural Development project for the Jessieville area. The only existing debts are the Memorial Building and the Drinking Water Revolving Loan. She noted that the Drinking Water Loan is low interest and through the State so there is no hurry to clear up the balance.

Scott Erickson told the Commission that someone left an article on his desk. Not knowing who left the article, he asked Dan Petersen if he had done it. Not wanting to own up to the deed unless it would be beneficial to his career, Petersen responded, "Was it a good idea?"

Anyway, Erickson said the article showed a community that sold streets to corporations and those corporations would pay to have the streets paved and maintained in exchange for advertising revenues placed on the street signs.

Erickson explained how the State funds will dry up once the Stimulus money is no longer available. He noted that the City of Ironwood is doing its best to prepare for lean times, and that adjustments have been made to save and be fiscally responsible within the City.