City Council Recap: City Pension Fund Shortfall Discussed

With Governor Gretchen Whitmer once again restricting indoor gatherings to 10 people or fewer, Lowell City Council moved back to the Zoom videoconferencing platform for their meeting last night. All councilmembers were present, and about two dozen people in total logged in to the meeting.

The council covered a wide range of topics during the nearly one hour and 40 minute session, but the bulk of the conversation centered on a presentation by MERS, the Municipal Employees’ Retirement System, which gave an overview of Lowell’s unfunded liabilities within its pension system.

Citizen Comment: Request for Change to Noise Ordinance

However, before getting to the MERS presentation, councilmembers first heard citizen comments regarding items not on the agenda.

Trevor Workman, pastor of the Lowell Church of Nazarene, was recognized for comments and explained his concerns with the current noise ordinance. The church held an outdoor service recently, and the city received a noise complaint about the event.

In discussing the ordinance with the police, Workman discovered it limits noise on Sundays and near churches as well as prohibits any amplifying of noise past 100 feet. “Right now, 100 feet doesn’t even exceed our parking lot,” the pastor said. “In order to comply with this, we can’t do any sort of outdoor service.”

The police noted that the ordinance was written in 1971 and suggested Workman bring his concerns to the council. He asked about either amending the ordinance or getting some sort of special exemption on a temporary basis.

Councilmembers seemed agreeable to reviewing the ordinance, and City Manager Mike Burns said he would look into the issue further.

Lowell City Pension System: Underfunded by $4.3 Million

Next, Mike Overly from MERS provided a review of the city’s pension fund. He noted the city provides its retirees with a traditional pension which offers guaranteed payments for life. “You cannot outlive this benefit,” Overly said.

By state law, municipal pensions must be prefunded. In other words, even though the money isn’t needed immediately, a city must have enough cash set aside to pay all its expected pension costs in the future.

Currently, the pension system for City of Lowell employees is only 60.2% funded. According to a report presented by Overly, the city’s unfunded liabilities totaled $4.3 million as of December 31, 2019. This figure is only for the city system and does not include Lowell Light & Power workers.

The city pension system is funded in three ways:

  • Employer (city) contributions
  • Employee contributions
  • Investment growth

In recent years, MERS has adjusted down its expected investment growth from 8% to 7.75% about five years ago to 7.35% this year. The City of Lowell has also added two new retirees in the past year. Plus, life expectancies are longer now which Overly says is good for participants but means more money from the city for pension payments.

Councilmember Greg Canfield expressed some frustration that the city’s pension fund has gone from 76% funded in 2009 to 60% funded in 2019. He did not seem to think that changes to the expected investment growth percentage could explain the 16% drop in the city’s funded pension liabilities. Canfield has advocated in the past for the city to move away from a traditional pension for new hires and use a defined contribution system, similar to the 401(k) plans used by most private employers.

Overly says it will take the City of Lowell about 19 year to fully fund its pension liabilities, and according to the current MERS amortization schedule, the city will need to pay a total of $850,000-$900,000 into the system during the final years of that payment plan. That amount represents about a third of the city’s general fund.

“That bottom line is pretty ugly,” Canfield said.

“Yup,” Burns replied.

Burns said he was working to address the problem by re-amortizing the payments and negotiating down the multiplier used when calculating new retirees’ benefits.

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Marijuana Business Hours

The only other item on the agenda that generated significant discussion was a request by Meds Café to extend their sales hours.

Under Lowell’s adult use marijuana ordinance, businesses must close by 9pm each evening. However, Casey Cole of Meds Café said his business has 10-15 cars that show up after 8:30pm on Thursdays, Fridays and Saturdays, and there is no way to complete all their transactions by 9pm.

“This is not like going to the grocery store and ringing stuff up,” Burns said. He noted that all products have to be matched up through a state tracking system which can mean transactions take 5-10 minutes to complete. Cole was requesting that Meds Café continue to close to new customers at 9pm but be allowed to finish processing transactions until 10pm.

“From my discussions with Meds Café, this seems like a reasonable request,” Burns said.

However, not all councilmembers were in agreement. “On Planning Commission, we talked long and hard about [hours of operation],” Councilmember Marty Chambers said. Chambers is the council representative on the commission. “I think if we do this now, where does it end?”

Other councilmembers seemed to agree, noting that it appeared to be a customer education issue in letting people know they couldn’t arrive immediately before closing and expect to make a purchase by 9pm. Mayor Mike DeVore added that he thought the problem was probably related to the extra time needed for curbside service.

Chambers said part of the reason for the 9pm closing time was because many of the marijuana facilities abut residential properties. However, Councilmember Cliff Yankovich noted the neighboring Taco Bell was open much later.

Ultimately, there was no consensus to revisit the adult use marijuana ordinance, and the closing time for these businesses remains 9pm.

Other Council Action: RiverView Flats, Garden Sale, Yarn-Bombing

For the remaining agenda items, Lowell City Council unanimously approved the following:

  • A revision to the RiverView Flats Planned Unit Development which had previously been OK’d by the Planning Commission
  • Closure of a portion of Riverside Drive on August 8 for a Pop-Up Market hosted by North Star Antiques
  • An initiative of LowellArts to yarn-bomb downtown trees as was previously done in 2013

Councilmembers also agreed that DeVore would represent the City of Lowell at the Michigan Municipal League annual meeting.

Manager’s Report: New Hires in Police Department

In his manager’s report, Burns noted that work was completed on Suffolk Street, and he believed the project had come in under-budget. The city was also in line to receive $92,000 in reimbursements through a provision of the CARES Act to cover public safety payroll expenses during the pandemic. The Lowell Police Department also has two vacancies, and Burns said one has been filled and interviews are underway for the other.

“I’m a little disappointed that we are hiring full-time employees when a couple months ago we could get by without them,” Canfield said, referring to a plan discussed in the spring to furlough workers. “We’re spending money we don’t have, and we’re going to be bankrupt pretty soon.”

Burns took offense to the comment. He replied that the two positions in question had been budgeted, and no one raised an objection to them during the budget sessions. “To say that we’re wasting money, I take offense to that,” Burns said. “I am very diligent of our money…To be called reckless, I am offended by that.”

“I didn’t say reckless,” Canfield clarified. “The budget meetings were held before it was stated that we could operate at 80% [of our workforce], but we can agree to disagree.”

No other councilmembers had comments, and the meeting adjourned at 8:37pm. The next regular meeting of the Lowell City Council will be held on Monday, August 17 at 7pm. The council will also hold a special meeting with the Rebuild the Showboat Committee on August 11 at 7pm at Creekside Park.


Editor’s Note: This article was updated on August 5, 2020 at 8:20am to clarify the type of event being hosted by North Star Antiques on August 8.

1 Comment

  1. Actually the MERS report has our payments going from $162,000 to $692,000 starting in Fiscal Year beginning July 2021 (as shown on screen during the meeting) and taking 19 years to become fully funded. Just to fund our current and future retiree’s for the city and LL&P employee’s. That is a huge piece out of an annual budget just over three million. Hence my Bankruptcy comment. Sticking our heads in the sand is not the answer.

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