Part 1: Marquette City talks reducing expenses, generating revenue

Marquette still has a budget shortfall, in part one of three TV6 Investigates how the city is trying to cut costs and generate more revenue.
Published: Apr. 18, 2023 at 7:08 PM EDT
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MARQUETTE, Mich. (WLUC) - After passing a tax increase the city of Marquette still has financial problems. The city has been faced with a budget shortfall that’s been building for nearly a decade.

When Karen Kovacs took the reins as Marquette City Manager in June 2021, she brought her years of municipal financial experience and put it to use right away. In preparation for budget work, Kovacs and her Chief Financial Officer discovered a significant shortfall.

“I can remember it very vividly with my CFO coming in and saying I’m missing something because we are six million dollars the hole, and at that point, our fund balance was just over nine million so a six million dollar use of fund balance is not possible or not feasible,” Kovacs said.

Since then, Kovacs and staff worked to reduce expenses and increase revenue. In October 2021 the city announced it was reducing unnecessary overtime for city workers. Last June, the City Commission passed an increase of 2.67 to the city millage rate, an effort to generate more revenue.

City property owners have seen the increase on their summer and winter property tax bills. The city is currently levying 14.9225 mills. As an example on the city’s dedicated millage website, a home with an $80,000 taxable value is paying $1,193.80 in city taxes each year, an increase of about $226 per year. Kovacs estimates the millage increase will generate an additional $1.5 million for the city annually.

“We are able to say that we can sustain our services, but now we’re looking at the long-term, what can we do in order to continue down this road with minimal increase to our taxpayers,” Kovacs said.

The city cannot collect revenue from sales tax, motor fuel tax, motor vehicle license tax, alcohol tax, tobacco tax or public utility sales tax. As it stands now, the city has reduced its six million dollar debt down to two million.

One of the major problems the city still faces, about half the land in the city is non-taxable.

“That surprises a lot of people but, about 50% of the actual land acreage in the city of Marquette is non-taxable or tax-exempt property,” said Dennis Stachewicz, Marquette Director of Planning and Community Development.

That means the city has been looking to generate revenue through additional means including seeking grant funding. The city is in the middle of reviewing its community master plan. Staff hired a consultant and advised them to keep the budget in mind during this process.

“What I’ve asked the consultants to do is do some tax projections on that to see how do we pay for it and that will be part of the future exercise of educating the community of ‘ok if you want this, then this is required,” Stachewicz added.

Stachewicz also says the community will be faced with some tough decisions soon regarding density, which means possibly building up within the city, rather than out to surrounding land.