Ironwood finalizing fiscal budget

By TOM LAVENTURE

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Ironwood — The Ironwood City Commission held its last of several budget workshops in the past few months as members will consider approval of a proposed 2021-22 fiscal year budget on June 14.

There is $3,660,000 in total general fund revenues, which is a 23% decrease from the $4,752,000 in 2020-2021. At the same time the city’s overall fund balance is a 5% increase of $14,308 over the previous year, said Paul Lind, city treasurer and finance officer.

There will be a 3% decrease in general government expenses from $965,000 to $994,000 due to staff restructuring after retirements. There will be an additional $45,500 in the city budget from recreational marijuana license permits that are scheduled to be approved later this year.

The city is projecting more street projects for 2021-2022 and with it will be additional transfers from general fund to street fund. The major street fund increase was with fuel sales tax revenue of $1,709,000, a 17% increase from the previous year.

During the regular meeting the city commission approved a 2% cost of living adjustment pay increase for non-union employees to match the contract agreement for union employees.

The Gogebic County Equalization office made inflationary adjustments to city millage rates through the Headlee millage reduction fraction where it would produce more tax dollars, Lind said at the May 24 meeting. There is a slight reduction for the 2021 city millage rates where the accounts were at the maximum allowable voter approved levy.

The amount that can be levied was 19.20 mills for an estimated $1,850,000 in revenue. The millage reduction is minimal and does not require budget readjustments, he said.

“It’s a very minimal reduction in the max and it does not affect our general fund operating millage because we are not charging the max on that,” Lind said.

Mayor Annette Burchell asked how the city or county can reduce a voter-approved levy amount. She asked whether the millages would readjust moving forward and return to the voter-approved amount.

Under Michigan common law the Headlee reduction fraction calculation applies when the current operating millage must be reduced if it would produce more tax dollars when adjusted for inflation than the previous year, Lind said.

The millage reduction is calculated each year and it is uncommon for there to be a reduction based on the inflationary component, Lind said. This year the city’s taxable values went up at a higher rate than inflation did. The city must adjust millage levels where it is charging the maximum so that the assessing rates are not above inflationary levels, he said.

“The millage reduction is calculated each year and it is uncommon for there to be a reduction,” Lind said, noting this has occurred only once before during his time as finance officer. “This year taxable values went up at a higher rate than inflation did, which is in essence what happened. It essentially forces the maximum amount down that we can charge so that we are not increasing our rates by more than the inflationary amount.”

The millage adjustments will not affect the city general fund (19.2 mills), the Department of Public Safety pension (6.50), and the Downtown Ironwood Development Authority (1.9414). Some of the affected millages include the Ironwood Carnegie Library (0.9611 from 0.9658), the 2015 Street Bond Debt (1.9904 from 2.0), and the Pat O’Donnell Civic Center (0.9952 from 1.0).

The annual budget shows the 2021-22 city water utility fund is projected to be $2,607,000, a 17% increase over the previous year due to the Consumer Price Index increase and adjustments for grants to build the new water treatment facility. The information was from a budget workshop prior to the regular meeting — with final budget approval due in June.

Ironwood and Hurley residents should expect an average $4 a month increase on water bills for each residential dwelling. Average user is considered to be about 2,100 gallons per month.

The increase is also for construction of the new water treatment facility, according to Scott Erickson, city manager, along with standard CPI adjustments over time rather than adding large increases every few years.

The city was able to get a reduced 1.25% interest rate on a $4.2 million federal loan for the treatment facility that helped to reduce the anticipated increase from $6.45 to $4, he said.

The proposed business rate increase prompted concern from the board members. The rates range from a $4.75 increase for a 5/8 inch meter to an average $25.30 per monthly billing all the way to a $245.64 increase for a six inch meter to an average $2,259.12 per month.

The water and readiness service charge is disproportionally unfair for customers with larger lines, Burchell said. The rate increases are not that significant from the 5/8 inch and 3/4 inch lines but the chart gets “crazy” on increases from the one inch to six inch lines, she said.

Basing the service and readiness rates on meter size rather than use is not as constructive as basing billing on water use alone to provide an incentive for efficiency and conservation, she said. This billing structure should have a rate comparison with other communities to find ways to address this rate disparity, she said.

The sewer line increase is a 1.2% monthly fixed rate, but somehow the water fund increased 12.2% when it was already very high, she said. A business might want to relocate rather than pay that much for monthly water rates, she said.

Erickson said he would arrange for a third party independent rate study to determine how to more fairly shift costs across the board. The process to evaluate and redistribute costs could take several months and shifting the burden from one area will likely come up in another.

Burchell said the board needs to make a well informed decision. If Ironwood is out of the norm for charging businesses more then the city should be addressing that issue.

“We know that we want to keep residential rates as low as possible,” Burchell said.