Marquette’s financial dilemma: Raise taxes or cut city services

MARQUETTE, Mich. (WLUC) - The city of Marquette has a choice to make this month: raise taxes or make major cuts to city services?

While the state of Michigan is leaning toward tax cuts and rebates, Marquette City Manager Karen Kovacs explains the reasons behind the city’s dilemma.

“They are seeing things within the state and even the county saying that there’s surplus and there are extra funds and yet the city and the local level is experiencing the exact opposite - a shortage, less funds and real financial concern,” Kovacs said.

The city has utilized its Fund Balance to offset the shortage of revenues to meet expenditures, but the seriousness of the problem became very clear when finalizing the budget for the current fiscal year.

“The rough numbers, as we were entering into budget prep, we discovered that it’s about $6 million. We were able to kind of whittle it down, refind some of those numbers and limit a few things that we planned on doing and get it down to just shy of $2 million. So we are using $2 million of Fund Balance,” Kovacs said.

The Fund Balance was $14 million in 2018, Kovacs assessed when the current balance would be depleted if the city continued on its present course.

“If we continue on the trend that we’re projecting at this point without increasing the millage, without cutting expenditures we would run out of our reserves completely by 2024,” Kovacs said.

While residents are seeing significant development in the city, they have not yet contributed to revenue because they are Brownfield projects. Kovacs says it takes a few years to start seeing some benefit to the General Fund from those projects.

“You start seeing it around 2031, although it’s small, then it continues on after that. Some of these Brownfields are 30-year Brownfield repayment periods. Some of them are a little smaller, the one that we’re looking at potentially is a 15-year investment for a Brownfield,” Kovacs said.

To pay for Brownfield and other capital projects, the city has borrowed to provide the financing. The manager addresses concerns about the city’s rising debt level.

“We do see that we have gone out for debt, we are nearing that limit that we can borrow. However, every year we do see paying back. I think some of our debt payments annually, in the General Fund, could be close to $4-6 million, and that’s a lot. We do see that, we’ve noticed it and we’re starting to try to find a way to pay back more than what we borrow each year,” Kovacs said.

Kovacs said the city’s main objective is to maintain core services.

“There’s nothing new or shiny that’s going to be coming out of this. This is going to really, truly be preserving these core resources that we provide. This is plowing the streets, this is preserving our parks and cleaning up our park areas and having that beautiful, pristine 10-miles of public shoreland,” Kovacs said. “We’re really trying to say that our core services are what we’re best at and that’s what we need to maintain.”

Kovacs also explained what the city is proposing and what it would mean for taxpayers.

“Staff is recommending that we increase the millage, our operating millage, to the maximum amount that we’re allowed. This is something that is needed right away in order to preserve the Fund Balance that we have, which is a policy and required,” Kovacs said. “And that would be increasing it close to 2.67 mills, which is significant and we as city staff understand that and the commission has really taken quite a few hours to talk with me, to talk with city staff, but also to talk amongst each other about the need for this or if there is any other way to accomplish the missing revenue that we so desperately need.”

In June, the city could levy a maximum of 17.5956 mills which is an increase from 14.9225. The additional 2.6731 mills would equate to $1.5 million in revenue for the city.

Kovacs says the average taxpayer in Marquette has a taxable value between $80,000-$85,000, the proposed millage increase would add $285 annually for someone in that range. She says the city is working on creating resources for people to calculate their annual increase based on their taxable value. Those resources should be available soon. The city is also looking at other options.

“It really is a revenue issue, not necessarily an expenditure issue. Also, looking at making sure our expenditures are efficient and that we are using all of our money wisely and to the maximum capability that we can,” Kovacs said.

The decision about how to deal with the city’s financial dilemma rests with the City Commission. The commission will make a decision on June 21, if they choose to increase the millage, it would be effective in July 2022.

Watch the complete interview with Kovacs this Sunday morning at 7:30 on the Ryan Report on TV6.

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