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RC ends pensions for future employees

ROGERS CITY — The Rogers City City Council on Monday ended pension plans for employees hired after July 1, 2019.

The city wants to sell bonds to cover its pension debt and state law requires the city to stop offering pensions to newly hired employees to do so. Current employees and retired city employees will get the benefits they have been promised and current employees on pension plans will continue to accrue benefits, Mayor Scott McLennan said.

“At this point, the pension plan that has been in place for a number of years has now come to a close for any new employees, new hires,” McLennan said. “That is one of the elements of being able to move forward with the issuing of the bonds.”

McLennan said employees understand the city’s pension plans are unsustainable. He said it was quite the concession for the police union, as well as the union covering parks and recreation and sanitary treatment plant workers, but employees knew the trouble Rogers City is in.

New employees will now be eligible for a defined-contribution plan, in which employees’ payments toward their retirement are set, but ultimate benefits are not. McLennan said city officials will consider a retirement plan that requires a match from the city, such as a 401(k), for future employees.

The City Council on Monday allocated up to $15,000 for Standard and Poor’s to evaluate the city’s credit rating, which must be an A or better for the city to issue bonds.

The city’s pension obligations are only 48.5 percent funded. That means that, if all retirement benefits were claimed today, fewer than half of the retirees would receive what they are owed.

The city’s annual costs to catch up are eating an ever-growing share of the budget and could hit more than $1 million a year, officials have said.

That’s why officials would like to issue about $5.8 million in bonds, which would stabilize the city’s payments to about $500,000 a year over a 22-year period.

Public Financial Management, the city’s financial consultant, reviewed the city’s finances and projected the city would receive an A+ rating from Standard and Poor’s and an A3 rating from Moody’s, according to City Manager Joe Hefele.

He recommended council members hire the firm that looks like it will give the better rating.

“This puts us in a good position and looks, at least tentatively, as though we would be able to achieve the A rating,” McLennan said. “So everything is on track, at this point.”

Council members also rescheduled the meeting time for its April 9 meeting to 5:30 p.m. at City Hall, located at 193 E. Michigan Ave. Consultants with PFM will participate in a council workshop during that meeting. Hefele said there’s still a lot that needs to take place in a relatively short amount of time.

Hefele said that, following the workshop, the council will be asked to adopt a comprehensive financial plan. The board is also expected to take action on filing a notice of intent for issuing the bonds.

Crystal Nelson can be reached at cnelson@thealpenanews.com or 989-358-5687.

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