News Photo by Steve Schulwitz Alpena Clerk/Financial Officer Anna Soik works at her desk on Thursday.

ALPENA — Alpena officials are projecting a nearly $1 million shortfall for the upcoming fiscal year because of a sharp increase in health care benefit costs, investment into public infrastructure, and rising prices.

The city believes some of the deficit can be made up, as Clerk/Financial Officer Anna Soik said the revenues and expenses were budgeted conservatively.

Alpena’s budget runs from July 1 through June 30.

In order to run the city with a deficit budget, it must have enough money in its fund balance to cover the shortfall.

The city’s savings, which were at $4,868,950 million at the end of fiscal year 2023-24, are expected to shrink to $3,961,032 million at the end of the current fiscal year.

The city projects its savings could dip to about $2,968,054 at the end of the upcoming budget cycle.

City policy dictates that the city must have between 10% and 20% of budgeted expenses for the general fund, and the city would easily fall in that range, 17%, even with having to use a portion of its savings to stabilize the budget.

Soik said the city had a 23% increase in the cost of the health insurance it offers its employees. She said typically the staff budgets for a 10% increase, which set the 2024-25 budget back significantly right away.

Also, the city is investing hundreds of thousands of dollars to match large grants it received for local projects, such as the reconstruction of Culligan Plaza, which includes a new restroom facility, a pavilion, and a restroom building near the bandshell at Bay View Park.

The city also received a federal grant of more than $1 million to help pay for a new aerial truck for the fire department, but the grant and all the other ones like it were withdrawn. The city already ordered the more than $2 million rig and is responsible for paying for it.

Fire Chief Rob Edmonds said the city was told to submit the grant request, and the city may still get the funds, which would help preserve fund balance.

Soik said the city is not at the point where big cuts are needed, but a close eye needs to be kept on finances.

“Is it concerning, yes, because our fund balance is dropping considerably, but we also know we have all of the projects in there,” she said.

The proposed budget is currently on display and can be reviewed on the city’s website at alpena.mi.us. A public hearing for the budget will be held on Monday during the Alpena Municipal Council meeting at 6 p.m., and a vote by the council is expected to adopt the new budget on June 2.