Alpena ahead of the pack on retiree costs

News Photo by Steve Schulwitz Straley Lamp & Kraenzlein accountant Phil Straley presents the 2017-18 audit report to the Alpena Municipal Council during Monday’s council meeting. The city has been able to lower its pension debt, but fell a little behind on health care benefits for retirees. The city’s fund balance remains strong, as it has more than $2.5 million in it, enough to fund city operations for 91 days.

ALPENA — The City of Alpena had a good year, financially, in 2017-18 and it would have been even better if it wasn’t for one unexpected expense.

At Monday’s Alpena Municipal Council meeting, the accounting firm Straley Lamp & Kraenzlein presented the city’s annual audit report to council members. The audit had good news about how finances panned out last year.

According to accountants Phil Straley and Mark Sandula, although the city took a loss of $232,859 from its fund balance, or cash-on-hand account, it was able to make up some ground in terms of what it owes toward pensions.

The city’s liabilities for retiree health care, however, increased by $183,000.

According to Straley, at the end of the budget year, the city had enough money to cover 80 percent of its projected pension obligations — above normal when compared to municipalities around the state — but the city’s projected obligations for retiree health care are only 20-percent funded. Those figures are calculated by looking at the amount of money the city has set aside for retirees when compared to the number of current and projected future retirees, the benefts those retirees are entitled to, and complicated actuarial figures that take into consideration life expectancy and several other factors.

As of June 30, the city’s balance for pensions was about $7 million and it was about $4.5 million for retiree health care.

Although that liability seems high, that total would only come due if everyone entitled to collect from the funds retired at the same time. City Manager Greg Sundin said that, because that will not be the case, and the city can continue to make up ground well into the future to catch up even further.

“It is impossible for everyone to retire at the same time and these payments can be stretched out 20 to 30 years,” Sundin said.

Straley said the city is doing better in terms of unfunded liabilities than many other cities.

“That is better than many municipalities right now,” Straley said. “They are still big numbers, but nothing I would be overly concerned with at this point, because you have made some pretty good progress and are continuing to work on it.”

Sandula said the city came in below revenue projections, but was able to keep that shortfall somewhat in check by spending prudently. He said fund balance at the end of the July 1 to June 30 fiscal year was about $2.5 million, equal to about 25 percent of the city’s annual expenditures from it’s general fund.

That amount is enough to fully fund city operations for 91 days.

“The city is in super good financial condition,” Sandula said. “This really shows how healthy the the city’s finances really are.”

Sundin said there was one incident in 2017 that had a significant impact on fund balance. During the summer of 2017, the boardwalk at North Riverside Park collapsed and needed to be rebuilt. The boardwalk collapsed because currents and wake eroded the soil of the riverbed, which caused the protective rip-rap to fall apart. Rip-rap is a barricade of large rocks that are used to protect objects of infrastructure.

“It cost like $165,000 or something in that range and it came out of fund balance, because insurance wouldn’t pay for it,” Sundin said. “When you take that into consideration, we actually did well. It was just one of those things that we really had no control over.”

Sandula also praised Treasurer/Clerk Anna Soik, Deputy Clerk Leilan Bruning and the staff for the work they did in helping while the audit was taking place. It was Soik’s first time through the audit process solo after former treasurer Karen Hebert retired.

He also complimented Straley Lamp & Kraenzlein Auditor Chelsea Meeder, who assisted Straley and himself.

“Those three ladies did a fantasic job,” he said. “They did a super job.”

Steve Schulwitz can be reached at 989-358-5689 at sschulwitz@thealpenanews.com. Follow him on Twitter @ss_alpeanews.com.