Nate Heffron, city manager, city of Negaunee

NEGAUNEE — The Negaunee City Council will consider in May its options to fund its retirement plan.

The council voted unanimously during a special meeting Monday to table its consideration of a plan that would increase payments into the city’s employee retirement plan under the Municipal Employees Retirement System in order to bring it to a 60% funded level.

The city was notified in 2019 by the Michigan Department of Treasury that its $12.5 million pension liability is 49% funded, which considered “underfunded” by the state.

A municipally held employee pension system that is less than 60% funded and requires an annual contribution that constitutes more than 10% of the municipality’s general fund operating revenue falls into an “underfunded status,” under Public Act 202 of 2017.

According to an agenda supplement, the city’s required contribution was $486,713 in 2019, as compared to its annual government fund revenues of $5.6 million.

The city requested a waiver from the department of treasury in September, asserting that a portion of the retirement liabilities were attributable to its water, sewer and electric funds.

These enterprise funds are not calculated into the city’s annual revenue under the retirement liability formula used by the state, Negaunee City Manager Nate Heffron said.

In conjunction with the waiver, during its Sept. 12 meeting, the city council approved a payment in lieu of taxes from its electric fund that is not to exceed 7% of its annual operating revenue, which would be transferred to the general fund.

The waiver request was denied by the state in October.

Heffron said the state had originally required the corrective action plan to be submitted by the end of April, but has extended the deadline due to the COVID-19 pandemic, which gives the city staff the opportunity to explore and present options to the council.

“We don’t feel we need to cross the finish line in five years at that 60% mark like the state was suggesting,” Heffron said. “We may take a longer approach, but we want to research that a little bit more before we present our final recommendations to the council.”

He said ultimately, the goal is to fund the pension as required by the state, while continuing to maintain a sustainable operating budget.

“Our goal is to fully commit to our pension, make sure we do it in a reasonable way that council can support, so that we don’t have to dip too much into our electrical fund,” Heffron said. “And if we need to get funding from our electrical fund for other projects to help support things, we would have that money available to do that. Because there’s a lot of things that need to be fixed in the city. We would like to use as many of our pots of money as possible to focus our attention on the here and now and not wait 20 years to try to fix something, which would not be acceptable.”

Lisa Bowers can be reached at lbowers@miningjournal.net.