MARQUETTE - Beyond outlining problems managing available county building space, a recent Space Needs Ad Hoc Committee report produced over several months reveals several financial challenges facing Marquette County over the next few years.
"Marquette County has some known financial challenges ahead, which will continue to be monitored. Non-mandated services will be reviewed and prioritized," the report concluded. "Should the county board find it necessary to make program changes the data gathered for this report should provide a good foundation on which to base those decisions."
As part of the report, county staff sought the help of accountants to project Marquette County revenue and expenses five years into the future. The committee was trying to determine, among other things, whether the county has the ability to fund or bond build-out costs identified by the group.
If Cliffs Natural Resources closes the Empire Mine in Palmer by 2015, as previously announced, Marquette County stands to lose about $550,000 in taxes each year. The reduction in available funding is one of several issues county leaders will have to consider in providing services or planning any building expansion. (Journal file photo)
"Forecasting is difficult and not an exact method because numerous assumptions are built into the process," the report stated.
Some factors baked into the forecast included projected Municipal Employees' Retirement System defined benefit increases; a 10 percent annual increase to retiree healthcare expenses; a 2 percent annual increase in ad valorem property tax revenue and no changes to infrastructure needs or operating expenses.
There were also several factors not considered in the forecasting including declining tax revenue from the anticipated closure of the Empire Mine, any increase or decrease in federal and state revenue, depletion of the Sawyer Airport Stabilization Fund in 2016, reductions from a new personal property tax law or other potential revenue stream losses or reductions, including potential closure of the Presque Isle Power Plant or the outcome of a Michigan Court of Appeals decision on valuation of "big-box" retail stores, which could significantly reduce revenue to county, township and school district coffers.
"The result of the modeling is that there is little to no additional funding to support a bond without budget or program reductions or a millage," the report stated. "Given the financial picture, the county board will need to prioritize the programs and services that will continue to be funded."
Over the past 14 years, the county has put several cost saving measures in place, according to the report. Among them, the county has reduced 20 percent of its workforce (58 positions) since 2002. Technological enhancements have increased efficiency and allowed the staff reductions through attrition.
Since 2000, all new employees have enrolled in a defined contribution - rather than defined benefit - retirement program. The annual MERS payment is expected to increase by $550,000 in 2014 and those payments -to fund retirements- will continue to increase another $1.5 million, peaking in 2020, before being reduced significantly in 2021.
As of Jan. 1, 2013, new hires no longer receive health insurance after retiring. As of Dec. 31, 2011, the county's unfunded liability for retiree health insurance totaled $57.2 million.
Other county costs have been contained with the help of elected officials and department heads keeping good oversight on spending, according to the report.
Positive developments affecting the county's budgets into the future include Marquette General Health System announcing plans to build a new hospital and Bell Hospital recently becoming a taxable facility through its sale to LifePoint Hospitals. The Eagle Mine is scheduled to begin production in the coming year and reach full production by 2015.
The report said additional commercial development is continuing in the city of Marquette and Marquette Township and property values are continuing to increase.
Among the challenges, the personal property tax small parcel exemption takes effect Dec. 31. According to the new law, industrial and commercial properties that qualify and have a combined personal property with less than $40,000 taxable value will not have to pay property tax. The report estimates Marquette County will lose $97,000 in tax revenue in 2014 from the small parcel exemption.
In state revenue sharing, the county will continue to automatically receive $800,000, which is 80 percent of the revenue sharing money provided to fund state-mandated services. The remaining 20 percent is earned through compliance in four categories mandated by the state. Those categories include County Incentive Program, Accountability and Transparency, Consolidation of Services and Employee Compensation.
If the county fails to comply with any of the categories, about $67,000 is forfeited for each, according to the report.
If the Empire Mine closes by 2015 as previously announced by Cliffs Natural Resources, the county stands to lose about $550,000 in taxes each year. That amount is an average received over the past three years, according to the report.
"If the mine closes, it will take approximately five years before the full impact of the loss will be determined," the report stated. "Furthermore, there will still be an ad valorem value on the property so taxes will not be fully lost."
If the Presque Isle Power Plant closes, the county stands to lose $539,000 in general operating fund revenue. Earlier this month, a potential deal between owner We Energies and Wolverine Power Cooperative to upgrade pollution controls and prolong the life of the plant fell through.
Depending on the "big box" court ruling, the potential impact to the county is unknown. However, $228,818 is received currently from millage revenue.
The committee determined that without making changes in the county's healthcare plan or increasing cost sharing of employees, "the current health insurance benefit is not sustainable for the long term."
The budget for 2014 includes a 20 percent increase for health insurance and wages, but that percentage falls short of meeting the costs, the report said.
"Measures will need to be taken to bring this within the budgeted amount," the report said. "Consideration for a long-term strategy should be developed to attempt to reduce the impact of future increases."
After 2015, the Sawyer Airport Stabilization Fund will be out of money. For the last three years, the fund has covered an annual operations shortfall of about $360,000, the report stated.
A recent facility analysis was completed for the Marquette County Courthouse complex. The analysis identified maintenance and capital improvement projects totaling several million dollars. A schedule for the projects will impact budget decisions beginning in 2015, the report said.
John Pepin can be reached at 906-228-2500, ext. 206. His email address is email@example.com