City Council Recap: Annual Audit, Fund Balance Reviewed

During an approximately one hour and 45-minute meeting on Monday night, Lowell City Council covered a dozen pieces of business. With public health orders limiting indoor gatherings, councilmembers met on the Zoom videoconferencing platform. All members were present, including new member Leah Groves who was selected last week to fill a vacancy on the council.

Audit Review, Fund Balance Discussion

A representative of the accounting firm Vredeveld Haefner was present during the meeting to review the city’s annual audit, which didn’t reveal any serious deficiencies. The water and sewer funds showed a decline in their net positions, but the general fund increased by nearly $200,000.

Later in the meeting, City Manager Mike Burns recommended using that fund balance to cover pension liabilities and the city’s portion of a new fire truck that will be purchased in 2022.

In the past, excess fund balances have been set aside to serve as the city’s rainy day fund. However, that rainy day fund currently sits at approximately $1 million, which is equivalent to 31% of the general fund. Cities are advised to keep a fund balance of no less than 15% of the general fund levy and since Lowell already far exceeds that threshold, Burns did not believe it necessary to set more money aside for savings.

He recommended the council use $125,000 to make a principal payment toward the city’s unfunded pension liabilities and set aside $73,000 for the fire truck. Councilmembers agreed and unanimously passed a motion to make those allocations.

Pension System Changes Ok’d

The city’s defined benefit retirement system provides a traditional pension to eligible retirees. As retirees live longer, these systems have become costly to maintain, and the City of Lowell currently has a $3.4 million unfunded pension liability for its obligations to current retirees and employees enrolled in the current retirement system.

Burns said he had been negotiating pension system changes with employee unions and an agreement has now been reached. All new hires made after July 1, 2020 will be placed in a defined contribution system, similar to the 401(k) plans used by private employers, rather than a defined benefit plan. The city will contribute 10% of an employee’s base wage to the account, and the employee will be responsible for contributing 6%.

To address rising costs in the current pension system, the unions have agreed to reduce the future retirement multiplier from 2.5 to 2.0. In exchange, the city will reduce employee contributions to the system from 7% of their wages to 5%.

Lowell City Council unanimously approved three motions needed to put these changes into effect.

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Wastewater Study Review

Representatives from engineering firm Williams&Works attended the meeting to discuss a report they completed regarding city options for expanding the water and wastewater systems. The report was apparently completed in March 2019 but never presented to councilmembers formally. Given current discussions with Lowell Charter Township about facility expansions, Burns felt the report should be reviewed now.

According to Williams&Works, the cost to double the capacity of water plant was calculated at $2.6 million last year. However, prices have increased about 40% since then so councilmembers were told the same project would likely cost $3.5 million this year. These prices assume the water plant will be expanded using the same technology currently in place.

Should Lowell Township create its own water system, expanding capacity at the city plant would be unnecessary. However, there are still capital improvements that should be made. Williams&Works says the cost of those improvements would be less than $1 million.

For an analysis of wastewater treatment needs, Williams&Works looked at potential developments in Lowell Charter Township and Vergennes Township which could eventually tie into the system. Lowell Township, in particular, identified five areas of expansion that may need service in the coming decades.

“If the township decided to do their own thing, my understanding is that you wouldn’t have to expand the plant,” Burns said.

However, a representative from Williams&Works said even without new service areas being added, the current wastewater treatment plant is already operating at capacity. The city is currently working to address infiltration of storm and flood water into the system and if that water can be curtailed, it may reduce the need for a large expansion of the wastewater facility.

The report included four expansion options with prices ranging from $11.84 million to $17.25 million.

Showboat Fundraising Update

Showboat Committee member Mark Mundt shared the latest news on fundraising efforts to complete work on the new Showboat. He noted that sales of bricks, which will be installed on the Riverwalk, have been brisk. Approximately 80 have been sold so far, and both bricks and naming rights to some sections of the Showboat are still available. In total, the Showboat Committee has raised $485,000 so far.

“We’re in good shape,” Burns said. While the Showboat Committee still needs to raise approximately $300,000 to reach their goal, enough has been collected and pledged to pay the Showboat contractor. The additional money being raised now will fund renovations to the former DPW garage on the Riverwalk to add restrooms among other upgrades.

Other Business Discussed

Other items and action taken during the meeting included the following:

  • An introduction and update from Shannon Witherell, the new fire chief for the Lowell Area Fire Department
  • Approval of two resolutions to waive state penalties for late filing of a property transfer affidavit and to establish poverty guidelines, as required annually by the state
  • A review of Arbor Board activities
  • Review of commission and board appointments for councilmembers

The next regular meeting of Lowell City Council will take place on Monday, December 21, at 7pm.

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