Ontonagon Village Council welcomes new year, same old MERS problem

Photo by Dennis Buchner on Unsplash

A major part of the Village Manager William DuPont’s report to the Ontonagon Village Council was in reference to the seemingly eternal problems with the Municipal Employee’s Pension System. This item is the growing obligation to the pension fund of the former employees of Ontonagon Memorial Hospital which the village sold the Aspirus of Wausau in 2007.

The purchase agreement between Aspirus and the village of Ontonagon specifically listed under “Liabilities not Assumed,”  stated “Seller and Buyer acknowledge and agree that except as specifically set forth….Buyer has not assumed and will not assume any liabilities or obligations of Seller or the Business arising from the Hospital employee retirement plan or the Municipal Employers Retirement System (MERS) of Michigan….” This purchase agreement included a provision that Aspirus would maintain “critical access or a substantially similar cost-based reimbursement hospital within the Village limits of Ontonagon….through October 31, 2012.”

In short, the assumption of the MERS pensions was understood to be the Village’s obligation and this was effective Nov. 1, 2007.

DuPont reported that the village currently owes MERS $203,670.84 of which $82,165.52 was due on Oct. 20, 2021. The village made a payment of $15,000 on Dec. 1, 2021.

Regarding the MERS buy-outs, only seven individuals eligible have requested information. A total of 28 former employees are eligible for buy-outs.

The village manager also had a Zoom meeting with Senator Ed McBroom (R) and Rep. Greg Markkunen (R) on Dec. 17 and their recommendations were for the village officials to put together a narrative that would build a case for assistance from the legislature. It should point out that the MERS situation is a result of circumstances beyond the village’s control or planning.

It turns out that there are more than a few other municipalities in the same situation with MERS pension plans and MERS treats these as businesses rather than non-profit municipalities. Possibly forming an alliance with some of these other communities would strengthen the case for help for all.

US Senator Gary Peters (D) has made a commitment to help the village through an amendment to the Butch Lewis Act.

Village President Tony Smydra pointed out that Congressman Bergman (R) has voiced support for the village, but he has voted against the Butch Lewis Act that established funds for helping pension funds that are in trouble. 

Enacted as part of the American Rescue Plan, a plan passed by the Democratic majority in Congress, the current Butch Lewis Act provides a bailout to fund multi-employer pension plans for 30 years. The bill restores pensions to their full amount and increases the national pension insurance cap. Finally, it requires regular reports to Congress on the status of these pension plans as a preventative measure against future collapse.

The plight of the Village of Ontonagon with MERS goes on, but now it appears that Ontonagon is not alone in those problems.

Another council openly opposes state-level STR rentals

The Ontonagon Village Council adopted resolution 2021-21 in Opposition to Short Term Rentals as identified in Michigan at their Dec. 13 meeting, with all six of the present council members voting yes. The vacant seat of former Trustee Mike Mogan has not yet been filled.

The STR bill has been of grave concern to village officials since it was passed by the Michigan House and then sent on to the Senate. The issue is that “short-term rental” is defined as a residential use of the property and a use permitted in all residential zones.  This house bill was co-sponsored by 110th District Rep. Greg Markkanen, (R). State Senator Ed McBroom, (R) has not voiced support for this bill, though it is about to be placed before the Senate.

The Ontonagon Village Council wants to be able to regulate the short-term rental of residential properties and is very much opposed to HB 4722 as it now exists.

Smydra pointed out that Rep. Markkanen had intimated that Hancock was in favor of HB 4722 but Smydra said that this was not quite true. A large number of other communities in the region have come out as opposed to HB 4722 including Houghton, Hancock, and others.

A similar bill in Arizona was made into law and this has had a negative effect on the economy of that state.

It was moved by Councilor John Hamm, with enthusiasm, to approve Resolution 2021-21 and this was carried on a unanimous roll call.

In unfinished business that the Council addressed;

The Ontonagon Memorial Hospital MERS status

The village currently owes the Municipal Employees Retirement System $218,670.84 of which $5,887.51 was due on Sept. 20. The village managed a payment of $15,000 on Dec. 1 and it is planned to make an additional $15,000 payment by the end of December.

A meeting with State Senator Ed McBroom and 110th Dist. Rep. Greg Markkanen took place on Nov. 22 and the MERS situation was called to their attention.  The Senator suggested contacting several members of the State House Appropriations Committee.

An additional meeting with McBroom and Markkanen has been scheduled on Dec. 17.

The village manager also reported that he had a discussion with Terra Langham, the MERS representative, regarding the village’s past-due status with the result that a tentative arrangement whereas the village will pay $15,000 per month until the tax season.

East Pier Walkway

A letter from Matt Wiesen reminded the council that at a meeting with an ad hoc committee representing the village, he had been assured that steps would be taken to effect repairs to the walkway which borders Wiesen’s riverfront property in the village. Wave action coming up the Ontonagon River has all but destroyed the concrete walkway. The US Army Corps of engineers do not recognize that the damage was really caused by modifications they made to the breakwaters some years ago.   Wiesen stated;

“repairs need to be made, or the easement must be released. Here we are at the end of 2021 and the only thing that has changed is more erosion has occurred and not been corrected. As I have watched the river rolling over the walkway the last two weeks I am afraid of what springtime is going to look like down there. Everyone agreed over a year ago that this cannot go on for another year. Respectfully, I request this be remedied ASAP.” 

The Manager has contacted the MDNR about the matter. The general consensus of the council is that the easement that allows for the walkway should not be surrendered, but the village is in no position to pay for repairs/restoration at this time. Though the village has promised to rectify the situation, there are no promised timelines in which to get this done.

Under new business;

The Ontonagon Village Council now considered adoption of Resolution 2021-20 entitled Deficit Elimination Plan.  Previously, the council had adopted deficit elimination plans to address issues with the Marina Fund and the Street Fund. A third fund deficit involving the General Fund was much more comprehensive and Village Manager William DuPont needed to work through budget amendments in order to complete this plan, which the council now had before it for consideration.

Without going into detail, the plan moves from a deficit of $223,514 as of April 2021 to solvency in 2025. The nearly three-page list of adjustments laid out specific line items to be adjusted, and the deficit will actually increase until 2023 and then be all but eliminated in the last two years.

This, of course, does not eliminate the chronic MERS problem with the pensions of employees of Ontonagon Memorial Hospital, which is a separate and very special issue.

The resolution before the council addressed the General Fund insofar as it maintains village services. 

It was moved by Rebholz, supported by Chastan, and on a roll call vote, the resolution 2021-20 was adopted, fulfilling the mandate by the Treasury Department to correct the three fund deficits.

In another matter, illegal parking was discussed. Vehicles in the way of snow removal have been a problem. The authority to have the vehicle towed will be researched.

The Dec. 27 meeting was canceled on motion by Hopper and this was carried by a voice vote.

Ontonagon council confronts financial instability

Ontonagon President Tony Smydra made a quick adjustment to the agenda at the regular meeting on Oct. 26 and introduced Joe Verlin of Gabridge & Company, the auditing firm that had completed the village audit. Verlin was present, via video conference, to discuss the recently completed audit and to answer questions.

Verlin informed the council that the audit report had been submitted to the Michigan Treasury Department, on time.

The assets of the village total $4.7 million dollars, but there is a deficit (liability) of $6.4 million.

In the current year, the village has a general fund deficit of $232,346. The general fund balance decreased by $525,117 from last year.

In summary, there isn’t enough in the way of assets to generate enough revenue to offset what is being spent.

“Your revenues remain flat and our expenses are going up,” Verlin told the council.

Since March 31, the village has increased property taxes from 11 mills to 15 mills, a slight increase in revenue for the new fiscal year.

The pension liability was mentioned and Verlin told the council the obvious—that they have little flexibility in the general fund. The MERS pension liability is a virtual albatross around the fiscal neck of the village.

The general effect of Verln’s review of the audit on those who were present was one of almost shock.

“Coming up with some sort of long-term solution is paramount,” were final words of advice from the auditor.      

Verlin said that he sees some signs of improvement with the tightening of internal controls in more recent times. Several findings from the auditor have already been addressed by the council and the new village manager.  He also cautioned the council that the Michigan Treasury Department may well take action to force the village to take corrective action.

And in fact, the treasury department has taken an interest. Following the auditor’s presentation, the village manager began his report, during which he informed the council that the village has received a request from the Michigan Treasury Department commenting on the recent audit which they have reviewed.

The department noted the obvious: actual expenditures exceeded the amounts authorized in the budget; deficiencies were mentioned in the audit report, and it was noted that expenditures have exceeded revenues for the last three years. Treasury is asking for an explanation for this trend.

The treasury is now demanding, within 30 days, a detailed Corrective Action Plan or else specified penalties will be applied which could include imposing the Revised Municipal Finance Act of 2001 which could prevent the village from borrowing money, and submit to an audit to be performed by the Department of the Treasury (at the village’s expense).

In addition to what appears to be an ultimatum from the Treasury, the village was also notified that the Treasury intends to withhold state revenue sharing funds until an acceptable deficit elimination plan is in place.

Specifically alluded to were the following village funds:

GENERAL FUND—$232,346 over budget

LOCAL STREETS FUND—$309,140 over budget

MARINA FUND—$267,172 over budget

Again, the Treasury Department is demanding receipt of a plan to eliminate the above deficits within 30 days from Oct.5 or the penalties will be imposed.

Manager William DuPont will attempt to work out some understanding with the Treasury department. The MERS liability now exceeds the total revenue of the General Fund.

Smydra expressed the position that the village will do what is necessary to work things through—there is still room for optimism.

Under Financial Reports, which is a new addition to the regular council meetings, more details about the financial status of the village are now available, thanks to new accounting practices that have been put in place. This very comprehensive report informed the council, almost to the penny, of the revenue and liabilities of the village.

         Also under general reports were:

         •  Water and Sewer Committee: A meeting with the state park will be scheduled. Water rates have not been increased or adjusted since the park was first provided water service through the regional water system.

         • Building Committee: Don Chasten reported that a house on the corner of Mercury Street and Old Rockland Road now belongs to the village through the regular process of non-payment of taxes. This property was the former Southside Elementary School built in 1906. The property has long been neglected and it may have to be demolished.

         Under unfinished business:

•  Hospital MERS Update:  the ever-present liability for the pensions of the former employees and retirees of the Ontonagon Memorial Hospital (now owned and operated by Aspirus of Wausau).

Village Manager DuPont informed the council that the village currently owes MERS $137,165.52 of which $45,887.51 was due on Sept. 20. A partial payment of $15,000 was made on Oct. 12 and it is planned to make a further payment of $25,000 in early November.

An information meeting regarding the MERS buy-outs will take place on Nov. 8 from 10 to 11 a.m. There has been some interest shown in this alternative.

Congressman Bergman had met with the village manager to discuss the MERS situation, but there has been no word as a result of this meeting.

DuPont is the new Village Manager, MEDC loan forgiven

Interim Manager William DuPont is now the regular Ontonagon Village Manager, as of the Sept. 13 Ontonagon Village Council meeting.

Following the closing of the posting, the personnel committee had reviewed the applications. The choice was boiled down to two candidates, however, it was determined that only one of the two final candidates met the minimum requirements for the position. The personnel committee recommended offering the position to Willliam DuPont. This was moved by Trustee Elmer Marks Jr., supported by Trustee Mike Rebholz, and this was carried with a no vote from Trustee John Hamm.

Village President Tony Smydra remarked that DuPont, a former bank manager, has worked wonders with the village’s finances and cleaned up a number of loose ends that were left by previous village administrators. The council, for the most part, were quite pleased with the progress that has been made in the months since DuPont was appointed as interim manager on a temporary basis. In the months that he has been in charge of administering the village finances, he has managed to recover owed funds, caught up with MERS back payments, and built a good working relationship with other village employees for a more harmonious working climate.

With the hiring of DuPont as village manager, the position for which he was originally hired, that of clerk/treasurer, is now officially vacant. The council will now have to post the clerk/treasurer position. Kori Weisinger has been working as the acting clerk/treasurer since DuPont was moved to the interim manager’s position.

Other matters that came before the council:

• OMH Hospital MERS update: Interim Manager Dupont reported that the Village still owes MERS $121,689.94. A payment of $70,081.77 was made on Aug. 1 and a further payment of $60,845.15 was made on Sept. 10.  The Aug. 20 payment of $60,802.43 is remaining past due. DuPont informed Council that this should be made by the end of September and this will catch up with all past due payments at this time. DuPont also informed Council that the proposed buy-outs are taking longer than originally expected but are expected to be in the hands of those qualified to take part by the end of September.         

• Agreement Addendum, Marina Grant: This spells out the specific terms of the Marina Dredging grant. A new ending date of Dec. 31, 2022, is part of the agreement and the village may receive $256,000 for the cost of the dredging.

It was also reported by the new village manager that:

• The Michigan Treasury Department owes the village $42,374.81 in revenue-sharing funds. This was money withheld because of delinquent reports. DuPont said that he has been going round and round with Treasury about this money for months, and the Treasury Department finally agreed to release some of the funds to the village. Of the amount owed, $16,026.38 was withheld for reasons other than the delinquent reports. DuPont is trying to ascertain the reason for Treasury holding these funds, however, the village will be getting $26,348.43 which would have been forfeited.

• MEDC loan: It seems that the village took out a Community Development Block Grant loan back in 1998 and the balance owed was $193,647.48. Fortunately, the MEDC has forgiven this loan as of Aug. 19. 

• Coronavirus Local Fiscal Recovery Fund (CLFRF):  The village has received a letter from the Treasury Department on Sept. 3 approving the request that was made for CLFRF funds in the amount of $130,836. These funds must be spent on specific projects that deal with infrastructure. The current plan is to use this money for expenses associated with the Tin Street Lift Station Project.

Ontonagon Village Council adopts Conflict of Interest Policy on a split vote

The Ontonagon Village Council met in a regular session on June 28. The full Council was present, along with the Acting Clerk and Interim Manager, William Dupont.

Carried over from the June 14 meeting was:

•  Conflict of Interest Policy: The purpose of this policy is to ensure that no officer of the village will gain personal advantage from their work with the village.

Trustee John Hamm felt that the wording of the proposed policy is too cumbersome and hard to understand. He felt that in light of the relationships, both family and organizational, within the village, the proposed policy could make it impossible for council members to vote on anything.

The Treasury Department has mandated that a policy on conflict of interest be on record, and Village President Tony Smydra wanted to know what was the deadline for adoption. Manager DuPont informed him that Treasury wants this in place soon. Smydra suggested adopting the policy, as presented, but to set up a committee to revise it.

It was moved by Trustee Sarah Hopper to adopt Policy #2021-008, but to establish an ad hoc committee to explore changes and recommendations.  The motion carried by a 4-3 vote.  Mike Rebholz, who voted in favor; John Hamm, who was opposed, and Elmer Marks, who had refused to vote, were immediately appointed to the ad hoc committee to study possible changes in the policy.       

•  Blight Committee: Bob Hartel, Chairman of the Blight Committee, was present to discuss the assigned role of his committee. The former manager had assumed the key role as the contact person, and the Blight Committee was simply to handle referrals from him. Hartel pointed out that the Blight Committee never received any referrals from the Manager. It was suggested that the former manager did not want to become involved with enforcement of the Blight Ordinance and was only concerned about the grass being cut and ignored other issues. President Smydra promised to follow up on this situation and to clarify the role of the Blight Committee.

•  OMH Hospital Municipal Employees’ Retirement System (MERS) status:  Interim Manager DuPont informed Council that the village currently owes MERS $202,836.12. The March payment of $36,809.41 was made, as promised, on June 24.

DuPont projected that, based on estimated revenue sharing, the village should be able to completely catch up with the past due MERS payments by the end of September.  The interim manager cautioned the council that two factors could impact this projection. First, the Treasury Department owes the village some $46,373.81 in prior year revenue sharing payments, and it is not determined when these funds may be received.  Secondly, the estimated taxes of $407,808.86 may not be received in a timely manner. 80% of this figure must be collected to make the catch-up date in September.

Finally, DuPont warned the council that the MERS liability is consuming the general fund and the MERS payments may soon comprise roughly 95% of general fund revenue this year.

•  County Road Commission Offer: Five years ago, the Ontonagon County Road Commission offered to purchase the SPEC building for $75,000 This was to be paid for with $50,000 in cash and $25,000 in services to construct an extension of Giesau Drive from the village water tower through to U.S. 45.

The road commission has offered to simply pay the village $25,000 to conclude the transaction. Originally, the sales contract specified that the road would be completed within five years, and that timeline has expired.

The council voted to accept the $25,000 in final payment for the SPEC building. The SPEC (speculation) building was constructed some years ago by the Downtown Development Authority at a cost of over $225,000 in hopes of being able to offer the large structure to a prospective employer.  After standing vacant for several years, the Road Commission expressed interest in purchasing it to use as a shop and vehicle repair facility.  The June 28 transaction transfers final ownership to the Ontonagon County road commission.        

Under NEW BUSINESS:

•  Policy 2021-009 Financial Activities Policy: Strongly recommended by the auditors, this new policy was approved.

•  Dog Park: It was suggested that finishing the fence around the old softball diamond would make this area suitable to use as a dog walking/park area for the time being.  The street foreman also agreed to provide an old fire hydrant for the use of the dogs.

The Recreation Commission will set up rules and administrative policies for the dog park.

•  Village real property: The village owns roughly 6% of the real property in the Village. The usual municipal property ownership is 2%. President Smydra asked that the matter be studied with the possibility of selling off excess properties, which would return said parcels to the tax rolls. It was moved by Trustee Marks to inventory village real property and consider action at a later time, and this was approved.

Ontonagon pursues federal MERS relief, approves more sidewalk dining

A full Council was present as well as Interim Manager William DuPont at the Ontonagon Village Council’s May 24 meeting.  

DuPont reported that the village currently owes the Municipal Employees Retirement System (MERS) $139,563.76. The village will manage to make the Feb. 20 payment of $35,400 within the next 30 days. DuPont also added that the possibility of receiving funds from the Butch Lewis Emergency Pension Relief Act is being pursued. On March 11, as part of the American Rescue Plan Act, President Biden signed the Butch Lewis Emergency Pension Relief Act into law. The law will preserve and restore the pensions of more than one million retirees and workers in an estimated 200-225 severely underfunded multi-employer pension plans.

Another restaurant in the village, the UP North Cafe has made an application to conduct sidewalk dining on River Street. The necessary insurance and other required permits are in place.

In the ‘new business’ portion of the meeting, the following items were discussed and acted upon:

•  Resolution 2021-14: A resolution to designate May as Motorcycle Awareness Month in the Village of Ontonagon was approved.  This resolution would call attention to motorcycle and moped traffic from this time forward during the month of May in recognition of the increase in two-wheel traffic in the village.

The local ABATE organization supports this resolution and the council wishes it to be known that motorcyclists are welcome in Ontonagon

•  River’s Edge Boat Rental: A request from Bryan Hamilton and Donna Nethery to use the former State Police Post and JJ’s Tackle Shack Building near the marina as a base for their boat rental business. Plans are to also offer kayaks and canoes and the sale of fishing tackle and other recreational items. The matter was referred to the Building Committee to work out the details.

•  Heritage Antiques Request:  Penny Jilbert and Pattie Roehm propose to hold a one-Saturday–a-month sale of antiques, or miscellaneous items, and homemade goodies on the vacant lot next to the current antique store location. The first sale date was scheduled for May 29 from 10 a.m. to 3 p.m..   Permission to also use the adjoining former site of the Wagar Restaurant which was demolished last fall,  was requested. 

There will be no fees charged to sellers. It is to be considered something of a flea-market/garage sale enterprise.  

• The Ontonagon Eagle’s Club #2239 requested the closure of the street in front of the lodge building in order to provide for outside street dancing, once a week or on the occasion of special events. As this is not a state road, no road closure permit is necessary, however, proof of liability insurance will be required. 

•  County Road Commission offer:  Some years ago the former SPEC building, which was built by the Ontonagon Village Downtown Development Authority,  was sold to the Ontonagon County Road Commission for $75,000. A part of the purchase was an agreement that the village would receive $50,000 in cash and $25,000 in services to extend Giesau Avenue through to the Rockland Road thus connecting M-38 to US 45. 

 The street extension has not been undertaken and instead, the County Road Commission is prepared to simply pay the Village $25,000 in cash and terminate the commitment to extend the street.  

The matter was tabled in order to review the contract. The road was to be put through by 2021. 

•  Kori Weisinger rehiring: Weisinger had resigned as Village Clerk and Treasurer in the fall of 2020 and William DuPont was hired to replace her effective Jan. 1. In the meantime, Weisinger had been retained on a part-time basis to continue serving as clerk until DuPont was available to assume his new duties and then continued to work part-time until DuPont became familiar with his new duties.  

Subsequently, then-Village Manager Joseph Erickson was discharged and DuPont was retained as interim viIlage manager and Weisinger continued part-time as clerk on a contract basis.

Weisinger has now completed college coursework and is now available to resume full-time employment with the village, adding, “With the amount of items we are trying to correct and move forward on, I have been working nearly full time since March. I can’t see leaving the village when we are moving forward in such a positive way.” 

The Personnel Committee, all of whom were present, were in agreement to recommend reinstating Weisinger’s full-time status and this was carried on a roll call. 

•  Housing Commission Vacancy and Appointment: The Village Housing Commission has had a vacancy for some months.  The housing commission, which oversees the operation of the Cane Court federally subsidized housing complex in the Village, consists of five commissioners who are appointed by the village council.

Currently, the Housing Commission consists of President Rich Ernest, Dorothy Phillips, Robert Seid, and Steven Maass. 

An application was received from Danielle Reath of White Pine for an appointment to the vacancy.  It was moved and approved to appoint Reath to the Village Housing Commission.

• An inquiry from a council about the severance benefits to be paid to the former village manager was explained. As Erickson was terminated without cause, he is entitled to specific benefits which could be a total of $81,910.36, which includes insurance, however, if Erickson secures paid benefits from other employment, these costs could be less.