ESCANABA, Mich. (WZMQ) – November 4 is an Election Day. Rather than asking voters to approve new funding, the City of Escanaba is asking voters to approve a change to the way certain funding is used.
The ballot proposal Escanaba voters will be deciding on revolves around funding restrictions established 60 years ago.
“The voters decided in 1965 to take the proceeds from the gas utility and restrict it so that the principal can never be spent, and the interest can only be spent on capital improvements,” said City Manager Jim McNeil.
While working on recent budgets, the City found that the fund had become ineffective.
“The interest earned hasn’t really kept up with inflation, so the fund really hasn’t had practical use,” McNeil said.
Rather than restricting that money to capital improvements, the City wants to use it to reduce unfunded pension liabilities.
“What we’re thinking is the pension fund should earn a higher rate of return over time and also should relieve some of this kind of generational inequity of a lot of the unfunded liabilities from many years ago,” said McNeil. “This would be taking funds from many years ago to help pay for that unfunded cost today.”
According to McNeil, that pension plan holds about $1 million. He says the unfunded cost has been a strain on citizens.
“In the pension plan, there’s about $11 million that remain unfunded,” he explained. “There’s about $40 million of overall liability and close to $29 million of assets in the plan. We have about a nine-year plan to pay off the unfunded portion. That’s something the City has the ability to do; it is just a big burden on taxpayers and ratepayers today.”
If the proposal passes, McNeil assures voters that the funding will be restricted to just the pension fund.
“One of the questions we’ve been receiving is, ‘Is the City going to use these funds in any way other than the pension?'” he said. “The answer is absolutely not. The ballot proposal is strictly for unfunded liability as it exists today. It is a closed pension plan, so it also won’t be used to provide any benefit improvement. It’s strictly to pay for the debts of yesterday.”
The pension fund also targets a 7.25% rate of return, so McNeil says the change would be a more efficient use of City funds while helping Escanaba residents save money in the coming years.
“If it’s a no vote, nothing really changes,” he said. “However, that burden to pay it off remains solely on the taxpayers and ratepayers today. This will hopefully accelerate that payoff and lessen that burden a little bit.”
For more information on the ballot proposal, click here.
