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ESCANABA -- Delta County Administrator Ryan Bergman provided an early look at an outline for the county's 2018-2019 budget during the Delta County Board of Commissioners' regular meeting Tuesday.
While some elements of the budget have not yet been finalized, Bergman said he felt it was important to start the county's budget process and to share the information he had with the board and incoming county administrator Philip Strom before he leaves.
"We do know enough to say that next year will be a solid financial year, if not a good financial year," he said. Bergman will be leaving the county administrator position at the end of this week.
Bergman began his presentation with a look at recent changes in Delta County's property tax value.
"We were very conservative in the FY (2017)-18 proposed budget," Bergman said. He noted property tax revenues were estimated as $5.61 million in the budget for the current fiscal year, and a similar conservative estimate for the 2018-2019 fiscal year would have these revenues listed as $5.9 million.
Other revenue changes listed in Bergman's presentation included a $20,000 federal reimbursement for the Friend of the Court office, a $20,000 increase in register of deeds services, a $15,000 real estate transfer tax increase, a $10,000 increase in federal payments in lieu of taxes, a $7,000 increase in room and board for inmates, an $8,100 decrease in state revenue sharing, a $10,000 decrease in out-of-county inmate revenue, and a $29,000 decrease in interest earned.
"The treasurer had to take some money out of investments to deal with some of our major financing … over the last year," Bergman said in regards to the last of these decreases.
Bergman went on to look at the Delinquent Tax Revolving Fund, noting the fund (which purchases delinquent taxes from the county's taxing entities and earns money on penalties) has had strong surpluses in recent years. This fund's surplus in the 2016-17 fiscal year was $323,238, and its total was $4,338,330.
The county could eventually use all of the profits from the fund to cover operations, Bergman said. In the shorter term, a portion of these surpluses could cover one of the county treasurer's three positions, which cost about $50,000 each year.
Bergman's outline for the county's 2018-19 budget included a general fund budget of $10,136,100 -- $387,100 higher than the 2017-18 general fund budget of $9,749,000. However, he noted that this is subject to change.
"That'll change a little bit based on a few other things, such as grants, for next year," he said.
According to Bergman, about two-thirds of this increase in revenue should be put towards contractual salary increases, health insurance increases, and pension/retirement increases. A large amount of the remainder (estimated as being $127,100) could be put towards increasing corrections costs.
Bergman's outline listed $329,100 in new corrections costs.
"We've known for years that, once we get the new correctional facility up and running, we're going to have a lot of new costs," he said. As $264,842 of these costs will be offset by the end of the county's courthouse renovation loan, the net cost increase will be $64,285.
The amount of general fund dollars put towards corrections has been increasing over the years, Bergman said. In the 2014-2015 fiscal year, 18.8 percent of this fund was allocated to corrections; in the outline for the 2018-19 budget, 24.6 percent of this fund would go to the same cause.
"When resources are limited, you have to prioritize what the county's core things they do are," Bergman said.
Other expenditure changes listed in the outline for the 2018-2019 general fund budget include $12,500 for circuit court indigent defense funding, $5,000 for road patrol civil work, $5,000 for an employee assistance program, and $50,000 in contingency funds.
While Bergman spoke briefly about major non-general funds, including the road patrol, airport, and building and zoning funds, he said it is harder to predict the revenues for these funds at this point in time.
According to Bergman, the county's financial goals are to have strong financial reserves, strong budgetary performance, a strong debt profile, and strong management conditions.
"We are strong in all four of those areas now," he said.
Bergman also spoke about the impact that pension cost increases over the next several years could have on the county. He said while these costs are expected to increase through 2025, the county's pension stabilization fund alone would be able to cover the cost of these increases for many years -- even if the board does not add to this fund after the next fiscal year.
"We would be able to pay our pension costs through FY (2023)-24," Bergman said.
As the peak for these pension increases is in sight, Bergman encouraged the board to change how they approach pension stabilization in the future.
"At this point, what I would recommend is that you use the pension stabilization fund, but don't replenish it anymore," he said. Instead, he said future county surpluses should be used to make direct payments to the Michigan Municipal Employees Retirement System (MERS).
Bergman also advised the board to keep salary increases for county employees at or under the assumed rate of 3 percent, take steps to minimize spiking (the use of excessive overtime by retiring employees to increase their average pension), and to make sure that the county's non-general funds "pay their fair share" towards upcoming pension increases.
In the 2016-2017 fiscal year, Delta County had a surplus of $1,504,691. As Michigan caps local governments' pension stabilization funds at 20 percent of their general fund budgets -- a cap the county has hit -- this surplus cannot be put into the county's pension stabilization fund.
"What I would recommend we use this for is ways to reduce future budget costs," Bergman said. Initiatives he said could fit this goal included paying off the county's loan on an energy project early, investing in the City of Escanaba's new solar farm, and making a direct payment of $1 million to MERS.
Bergman said he is cautiously optimistic about the county's financial future.
"I think that while you guys always have to watch the financial picture, and while you guys have to make sure you don't make things worse and create a financial problem … the financial stability over the next 4 or 5 years is (going to) give you an opportunity to look at programs not from a 100-percent 'what does it cost us?' lens, and you can do a little bit more on what you're trying to achieve," he said.
Bergman also said he would be happy to help Strom with the continued development of the budget. The board voted to authorize Bergman to serve as an unpaid financial consultant to Strom.
In other business, the board:
– approved an agreement with the probate court union after discussion in closed session. The agreement will extend the union's current contract by two years.
– voted to allow a millage proposal that would support Pinecrest Medical Care Facility to be included on the county's August 2018 ballot after a public hearing. Though this proposal originally called for the county to levy 0.45 mills for five years to support Pinecrest, the suggested amount for the millage has since been decreased to 0.37 mills.
– gave the Delta County Airport authorization to purchase an operations truck with a plow for about $35,980 and to approve a federally-reimbursed $37,600 contract with Clean-Kill Pest Control for vegetation/obstruction clearing.
– accepted a contract extension with MGT of America Consulting, LLC.
– approved annual leave payouts for Kelly Smith and Dianne Gartland, who will both be retiring on May 11.
– authorized a request to fill a grant-funded victim advocate position at the prosecutor's office. Kim Rudden, who currently works in this role, will be entering a position at Escanaba's new child advocacy center.
– voted to support Senate Bill 860, which would prevent Gov. Rick Snyder from requiring counties to pay a portion of new indigent defense costs.
– appointed Strom to all of the boards Bergman currently serves on.
– gave their thanks to Bergman for his work as Delta County's administrator.
"You've been a super guy to work with -- absolutely no question," Chair David Rivard said. Other county officials also expressed their appreciation of Bergman during general public comment.