FRANKFORT — Local government pension debts are like financing a house, or so Frankfort Police Chief Rob Lozowski said he's been told.

"Yeah, there is a liability, but nobody's calling the note in right this second," he said, adding there's time to fund them.

Reports from municipalities statewide are starting to reveal how they're keeping up with that obligation — or not. State Treasury Department employees have taken a first look at whether 17 local governmental units in northwest Michigan have underfunded pension programs, state reports show. Numbers from others are under review or haven't yet been submitted.

Primary government units like cities and counties should have at least 60 percent of their pension liabilities covered, according to a new state law. Their required annual pension plan contributions also cannot be more than 10 percent of their total governmental funds — that figure doesn't include enterprise fund revenues like water and sewer, Traverse City Treasurer Bill Twietmeyer said.

Those that fall short of both are considered to have underfunded pension plans — the law establishes different cutoffs for retiree healthcare plans.


Frankfort's numbers show its city leaders have work to do, as do a few other locales in the region. Its pensions aren't considered underfunded — assets cover 49 percent of the city's liabilities but its annual payments are small enough to avoid the status, state figures show.

City Superintendent Josh Mills said the city's current retirees are fine, but that number shows the city at some point couldn't meet its obligations to future retirees.

That's why the city is paying an extra $12,000 per year into MERS, plus whatever is left in its general fund at budget year's end, Mills said. Both totaled to $52,000 above the city's minimum payment in 2017.

"As a community, we've dedicated ourselves to putting ourselves in a position to minimize the long-term impact of our liability associated with our pension plan," he said.


Grand Traverse County likely will fall short, county Finance Director Dean Bott said. He's waiting for the latest MERS report, but 2016 figures state the county has 45 percent of its retirement liabilities covered. Bott said county commissioners are tackling the issue head-on, but he doubts their efforts will be enough to avoid underfunded status.

Those efforts include an additional $5.8 million paid to MERS in 2017, plus a $5.9 million payment in February, Bott said.

"I think there's been a very good effort on the county's part to make the additional payments to MERS," he said.

Both were part of a deal commissioners approved in July 2017 to address $53 million in pension debt over 16 years. The plan allows payments to stay steady versus one with a shorter time frame and ballooning payments.


County commission Chairwoman Carol Crawford said she thinks the county is in a "good spot," while acknowledging there's work to do. That goes both for the county's pension plan and its retiree health benefits, which also need more money.

Grand Traverse County should be able to pay $5.9 million per year into MERS, plus find the extra funds for retiree healthcare, without cutting county services. She'd also like to pay in even more when possible.

"It would be my intention to keep reevaluating each year our fund balances and see what excess fund balances we could give towards the pension," she said.


Traverse City Light & Power so far is the only nearby governmental unit to receive an underfunded determination. TCL&P's assets cover 56 percent of pension liabilities, according to the state.

Tim Arends, the city-owned utility's executive director, disputed that finding. For one, the utility's latest MERS report shows TCL&P has 61 percent of its liabilities covered. Other numbers in the state's report don't seem right, either, he said.

"We don't believe that we as a utility should be on that list, not at all," he said.

Utility management met with Treasury Department officials to discuss the issue, Arends said. He had hoped to avoid sending a corrective action plan, as state law requires for local governments meeting the underfunded threshold.

The utility board has already moved to address the issue, including kicking $1 million extra to MERS for the past two years, Arends said. The utility is on track to have 100 percent of its retirement liabilities covered within seven years — Arends said 80 percent would meet his comfort level.

But TCL&P must still submit a corrective action plan, Arends said. He'll let the Treasury Department know what the utility has already done.


A state law passed in late 2017 requires local governments to reporting on retirement liabilities if they offer pensions or retiree benefits, state Treasury Department spokesman Ron Leix said. Roughly half of those required to report have so far.

Treasury department employees review the numbers, and local governments considered underfunded must submit a corrective action plan, Leix said. Those set to resolve the issue within a year or less can obtain a waiver.

Leix said the law and its annual reporting requirement is about transparency and ensuring local governments can meet obligations both to their retirees later and constituents now.

"It's interesting, because it really provides a snapshot about where our local units of government are at for these for funding retirement benefits," he said. "Some do it fine, some are funded and have no issues, but other entities do have some underlying funding issues with their benefits within the state law."


Leelanau County's numbers show it's an example of a local government doing fine.

County administrator Chet Janik said retirement assets cover 80 to 86 percent of liabilities, depending on the employee group. He credited county commissioners with keeping the issue in the fore throughout his seven-year tenure.

"Every year, they have taken proactive approaches and paid additional money into MERS, so this is on top of what our annual payments are," he said.

Other steps go back a decade or more, like reducing the multiplier used to determine county employees' pensions, Janik said.


Traverse City's numbers fall just above the threshold — its public safety employee pensions, which have their own dedicated millage, are doing better. City assets with MERS cover 60.5 percent of pension liabilities, and annual payments amount to 12 percent of its annual governmental revenues, state figures show.

City Manager Marty Colburn said Traverse City's retirement assets were battered by the 2008 recession, as were those of many other communities. But the city is meeting the state's funding requirements and no additional payments should be needed.

Twietmeyer said the city's assets-versus-liabilities ratio is holding steady. Changes from 2009 and 2014 that cut what city employees can earn for a pension should help in the long term as well.

"I think we're holding our own," he said.


Lozowski said he's watching to see how Frankfort city leaders address the pension issue. He's put in 18 years at the department and will be eligible for a full pension in 2025. He's counting on that, and drastic cuts to future retirees' benefits could affect his quality of life later on.

"Hopefully we can resolve this issue on a statewide or national level, or at least get it under control," he said.

Local government Pension assets Unfunded % funded

Bay Area 5.69M 205,653 96.5Transp. Authority

Benzie County 11.2M 6.3M 64

Benzie County 6.6M 1.9M 77.3Medical Care Facility

Benzie Leelanau 714,840 267,948 72.7District Health Dept.

Benzie Shores 305,147 (22,797) 108.1District Library

Benzie Transportation 805,451 (74,510) 110.2Authority

Central Lake 187,164 14,413 92.8

Clearwater Twp. 96,134 30,613 75.8

Elk Rapids 1.7M 656,891 72.4

Frankfort 1.74M 1.75M 49.8

Grand Traverse 43.5M 53.8M 44.7County

Village of Kalkaska 2.6M 2.8M 48.4

Kalkaska County 21.67M 5.8M 73

Kalkaska Public 1.8M 310,257 85.3Transit Authority

Leelanau County 29.0M 4.0M 86

Traverse City: MERS Pension 23.0M 15.0M 60.5Act 345 Retirement 28.78M 14.7M 66.1

TCL&P 16.49M 12.9M 56

Sources: Mich. Department of Treasury; Benzie, Grand Traverse, Kalkaska and Leelanau counties

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