2011-04-09 / News

New City Budget Reflects Legal Issues, Franchise Revenues

By Karen Gould

Mackinac Island’s newly adopted budget reflects an increase in its franchise revenue, but not the full amount the city could realize. Facing ongoing legal challenges that could impact its new the ferry franchise fee and an uncertain economy that could reduce the number summer travelers, the city council has budgeted conservatively. The budget edges up the franchise revenue from $300,000 last year to $500,000, although the city could realize about $1 million in fees from the ferry companies asking for a franchise.

The city adopted its 2011/2012 budget Wednesday, March 23, with its fiscal year set to begin Friday, April 1. At a hearing prior to adoption, the public made no comment.

Alderman Jason St. Onge said the Finance Committee had made the right decision to underestimate revenue in the budget.

Mayor Margaret Doud agreed, saying the city hasn’t ruled out having to make cuts in all departments as the summer unfolds. “It’s just the way it is,” she said, “depending on what kind of a season we have and what does happen” in the courts.

Last year, the city earned about $300,000 from gross receipts from Arnold Transit, Star Line, and Shepler’s. Then, Arnold paid 2% of gross receipts while Star and Shepler’s paid 2.5%. This year, franchise terms call for 7% of gross passenger receipts from all franchisees. Shepler’s has asked the Michigan Public Service Commission to halt any changes for a year.

This year the city is budgeting $351,994 for legal services, compared to $318,732 last year. Also in the budget is $25,000 to cover legislative contracted services for a lobbyist the city hired as part of the legal action regarding the ferry franchise and the city’s charter.

In the budget, the city is projecting a slight increase in property tax revenue of $16,585 based on a 1.7% rise in taxable value. The general fund budget of $2,432,994 is $113,117 more than the city’s amended general fund budget from fiscal year 2010.

The new budget follows recent trends of fewer businesses operating on Mackinac Island and a drop in construction activities. Revenue from business licenses is predicted to drop by $6,000 and motor vehicle permits issued for construction work are estimated to fall by more than 62%, from $39,360 to $15,000.

The city is projecting a $15,000 reduction in electrical expense, although rates by Cloverland Electric are estimated to climb about 8%. Last year the city budgeted $75,000, and this year the municipality is estimating costs will total $60,000. Plans to keep costs low, said Kelly Bean, assistant to the mayor, include lowering thermostats in city buildings during the heating season and reducing the use of air conditioning in the warmer months.

Also to save money, City Recreation Director Leanne Brodeur will add mowing and keeping things in order at Great Turtle Park to her list of responsibilities. Ms. Brodeur attended the meeting and said the arrangement is fine with her.

Finance Chairman Mike Hart proposed combining parks and recreation departments with an increase to Ms. Brodeur’s salary to reflect the added responsibilities. The salary increase was not incorporated into the budget, but Mayor Doud said the budget could be adopted and the matter taken up by the council at a future meeting.

Salaries remain frozen for the second year, with the exception of the fire department. The addition of two fire department jobs are needed to handle the increasing amount of state-required paperwork, officials say, so $18,000 in wages will be added there for a fire marshal and administrator, plus pay increases to all other members of the department, except entry-level and auxiliary firefighters.

The increase raised the fire department budget from $48,500 to $66,500.

“They’re falling way behind in their paperwork and everything else, so these are positions that are not set in stone yet,” said Ms. Bean. “They are set by the new chief when he comes into his appointment.”

Fire Chief Dennis Bradley retires in May.

Raises were not issued to elected officials and some city workers. Council turned down a 3% pay increase request from contracted assessor Joe Stakoe.

DPW Budget

The Department of Public Works (DPW) budget includes a 1.6% pay hike in a budget prepared by the city’s public works board. The raises drew criticism from the city council, which took no action on the budget, but agreed to set a meeting with public works, likely to include discussion on the DPW millage, its budget, and the planned $4 million wastewater plant upgrade project which was not reflected in the budget.

DPW Director Bruce Zimmerman presented what he called an “austere” budget at $17,108 less than last year at $2,146,000. The department is projecting 2010 will end with an amended budget of $2,163,000, which is $19,000 above what the city approved in 2010.

Council criticized the late delivery of the budget, a proposed pay increase, and no plan to reduce the 2006 millage, and ultimately took no action but to set up a joint meeting with the Board of Public Works (BPW).

Accounting for the upcoming wastewater treatment renovation project was not included in the budget, aside from some engineering and legal fees. The budget was adopted by the BPW March 18.

The budget includes a 1.6% increase in salaries, amounting to $7,300. In 2010, employees received 0.5% increase. No raise was given in 2009.

“There’s no magic to that number,” Mr. Zimmerman said. “That number came from the auditors. We ask them every year the CPI [Consumer Price Index] change from one calendar year to the next. That’s where that number came from, the board agrees.”

The BPW would like to keep the annual community hazardous waste clean up project in the budget, even though its expense has reached $14,000. It serves as an important benefit for residents, said Mr. Zimmerman.

The BPW agreed the program is good for Mackinac Island and Mr. Zimmerman asked the city council how they felt about keeping the program, even though its costs have climbed from $5,000 to $14,000.

“Not everybody does this,” he said of the program.

Hiring a company to run the project, including collection, paperwork, and transportation, makes the program manageable and cost effective for residents and businesses, he said.

Council agreed it is a good program that should continue.

Councilmen, however, questioned the plan to reduce the DPW’s millage.

Mr. St. Onge said he was under the impression that the one-mill levy that raises about $192,000 a year would be reduced until it was retired. First levied in 2006 for solid waste handling, the millage was intended to be temporary to help reduce a revenue shortfall. Mr. St. Onge has made the request of the DPW for several years.

As reported in the Town Crier, last year BPW Chairman Tom Lewand promised the city council a plan by September for how the millage would be trimmed.

“My contention is it is not fair that the taxpayers pay that and everybody else who uses that facility doesn’t necessarily pay that rate,” said Mr. St. Onge.

The budget, which was handed to council members at the meeting, left little time for review, said Alderman Sam Barnwell. He noted that if the department included depreciation in the budget, it would show about a $77,000 positive balance.

“They’re showing you this year’s appreciation so they are showing a $560,000 loss,” he said. “When you add back all the depreciation, they are positive 77- grand...”

With the positive balance and the proposed salary increases, he questioned why the levy is not being reduced.

Alderman Hart asked the status of the wastewater treatment facility plan, noting its absence from the budget.

“We have funding in place. We have a design of plant improvements that has come to this table,” said Mr. Zimmerman. “I’m not including the bond payments of the upcoming funding, I’m not including the revenue stream, and I’ve not tried to guess about the operations of the new plant when the project would be completed. That’s all I’m saying.”

The last time the city council met with the BPW was May 2010, yet the city had agreed to hold joint meetings every six months.

“I’d like the minutes to reflect disappointment in both the council and DPW board for not having their six-month meeting in . . . I don’t know how long it’s been,” said Mr. St. Onge. “We were supposed to meet every six months and I would like to recommend the first order of business on this set up meeting is to set the next meeting, as well, so it is on stone and paper. This cannot go on like this. We cannot get handed a budget two minutes before we are expected to approve it and know what is going on. It is their fault. It’s our fault.”

Council voted to set up a meeting as quickly as possible.

The Mackinac Island Board of Public Works (BPW) says more time is needed before meeting jointly with the city council and a 1.6% pay increase for employees, included in the department’s 2011/2012 budget, is on hold until the meeting takes place, said board chair Tom Lewand in a letter presented to Mackinac Island City Council Wednesday, April 6. “Within the next 60 days the BPW expects to review final recommendations from our consulting engineer concerning the wastewater plant improvements project,” he said in his Tuesday, April 5 letter. “We will then request a joint meeting with city council to discuss and make any necessary adjustments to our 2012 fiscal year budget.”

Adjusted Income

Mr. St. Onge suggested that if additional revenue is received by the city this year, some of it should be spent on the Mackinac Island Medical Center.

“I’d sure like to see the ferry franchise fees come in closer to projections, as opposed to what we’ve budgeted,” he said. “I’d sure like to see the medical center contribution bumped up from $15,000 to about $40,000. The medical center, I would say, is one of the organizations that benefits not only the Islanders but summer residents, tourists, everybody… I think that is very much in the spirit of what the ferry franchise fees were designed to compensate for, so, at the minimum, I would like to see that bumped up $25,000.”

Mr. St. Onge, who is not running for reelection, also noted that the city’s fire truck debt would be retired in 2013, and suggested council use the funding to prepare for replacing equipment. The city’s ladder truck is nearing 20 years old, he said.

Ferry Business

In what was called a housekeeping matter, the council approved an amendment to the ferryboat ordinance.

The ordinance adopted last week does not go into effect for 20 days, which would be Tuesday, April 5, creating a gap in service, said city attorney Tom Evashevski. The current franchise expires Thursday, March 31, and new franchises will not be issued until after Tuesday, April 5.

Council approved allowing Arnold Transit, Star Line, and Shepler to operate during the time between franchise agreements.

Also, any franchise issued would be under the new ferryboat ordinance, he said.

“Just to make real clear any franchise that we do grant is going to be pursuant to the new ordinance,” said Mr. Evashevski.

Attending the meeting from the ferry companies were Jim Wynn of Arnold Transit and Chris Shepler of Shepler’s.

The city received notice from the Department of Natural Resources that Ryba Properties has applied for a permit to add an addition to the Star Line dock. The 32-foot by 43-foot addition would be placed on pilings and added to the existing dock on the east side at the shoreline. The project is sought to provide a safer and larger area for pedestrian traffic taking the ferry.

No action was required of the countil.

Other Business

Permit fees and rates remained the same as last year with the addition of fly control costs and a $300 increase in a non-resident lot at the cemetery to $2,000.

Council approved travel reimbursement rates for 2011 with no changes. Mileage payment will remain at 45¢ per mile. Per diem food remains at a reimbursement of $35 per day at most, with allocations of no more than $7 for breakfast, $10 for lunch, and $18 for dinner.

The council is proud of the St. Ignace Saints girls basketball team for finishing first in the state in Class C, said Mayor Doud, who promised a resolution noting the team’s accomplishments at the next meeting.

Council approved six temporary motor vehicle permits for Belonga Excavating of St. Ignace and two for Grand Hotel for an 80-foot lift to paint the front of the hotel. Mr. St. Onge, whose company is doing the work, abstained from the vote. A temporary trailer permit was approved for Boy Scout Troop 623 of Stevensville for their service camp at Fort Mackinac in July.

In a letter to council, Richard Bolander said an account had been set up at First National Bank to collect tax-deductible donations for the Shiga region in Japan. The governor of Shiga visited the Island last fall. Mr. Bolander serves on the Michigan- Shiga Sister State board, which is a cultural exchange organization.

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