Serving Gogebic, Iron and Ontonagon Counties
Serving Gogebic, Iron and Ontonagon Counties
KARL "GUS" Ahonen presents results of a 2016-17 audit to the Wakefield City Council on Monday evening. Richard Brackney, city manager, sits in front of Ahonen. Around the rest of the table, counter clockwise from left, are: city attorney Ray O'Dea, city clerk Sue Ahonen and council members James Anderson, Pat Mann and Amy Tarro. Mayor John Granato and council member Kay Wiita are not shown.
By P.J. GLISSON
Wakefield - At its first meeting of the year Monday, the Wakefield City Council received good and bad financial news, based on an audit of the 2016-17 fiscal year.
Certified Public Accountant Karl "Gus" Ahonen said that the city has a total net pension liability of $2,379,511, a situation that many other cities and counties also face in varying degrees.
In addition, he said the council should hire an actuary to update the city's "other post-employment benefits" (beyond pensions), which for Wakefield means retiree health insurance.
In a written statement, city manager Richard Brackney said the liability for the city's retiree health insurance was last estimated in 2016 at $892,000.
The statement says the city had been opting for a "pay as you go" approach, meaning that "current monthly premiums are paid, but no funds are set aside for future costs."
The combination of the city's pension liability and its liability for retiree health insurance totals more than $3 million.
As a result, the council voted unanimously for two motions made by council member Pat Mann on the advice of Ahonen:
-To put $5,000 per month in a restricted fund to be used for OPEB.
-To hire an actuary to update the city's retiree health insurance liability.
Ahonen said that actuarial precision is needed because, as of the fiscal year ending on June 30, 2018, new legislation will require any unfunded liability for OPEB be listed in the financial statements of city audits, instead of only as a footnote.
Further bad news was Ahonen's claim that the city's water fund operated at a loss for the fourth year in a row. He reported a $35,000 loss as of the audit; after losses of $62,000 in 2016, $15,000 in 2015 and $77,000 in 2014.
"What I'm strongly recommending is a raise in the water rate," said Ahonen, who added all utility rates should be raised on the grounds of costs continuing to rise.
He said rates should be set up so as to allow the city to be "self-sustaining" in that it can cover operating expenses, as well as any needed improvements.
"It's been notorious in this town that the water department has never generated enough income," said Mayor John Granato. "The problem in this town is we have no industrial load, and the rate payers are paying the way."
Moreover, said council member Mann, "Our labor goes up, our supplies go up, our insurance goes up," and there's nowhere to cut costs, as staff already operates at "bare bones."
Ahonen's good news was the general fund increased by $189,243 during the fiscal year ending in 2017.
He said as of the fiscal year end (June 30, 2017), the general fund balance was $629,858. In addition, there were no budget violations, all debt payments on long-term liabilities were made during the year, sewer and electric funds operated in the black and street funds were sound.
In commending city treasurer Sherry Ravelli, Ahonen concluded, "Sherry does a good job with your books, and your office staff does a good job with the records."
Ahonen is employed by Makela, Pollack & Ahonen, PLLC of Ironwood.
