Plante Moran CPA partner Stacey Reeves (right) explains the city’s annual financial audit at the July 6 City Council meeting, as City Administrator Richard Ortiz (left), Mayor Wheeler Marsee, City Attorney Lawrence Coogan, City Councilmembers Joe Jackson and Steve Densmore, and Treasurer Michel Belch listen.
By SUE SUCHYTA
Sunday Times Newspapers
MELVINDALE – Funding pension liabilities, the field house and capital investment continue to challenge the city, Stacey Reeves, Plante Moran certified public accountant, said during the July 6 City Council meeting.
Following Plante Moran’s annual audit of the city, she explained the three predominant and ongoing challenges to the city’s financial stability.
Reeves said city pensions and other post-employment benefits are significantly underfunded, with a $30 million net pension liability and a $16 million other post-employment benefits liability.
She said that the city is not in compliance with its general employee pension and OPEB plans with respect to the funding percentages that should be used.
Reeves said the city has corrective action plans and a judgement levy to address with respect to pensions and OPEB.
“Pension and OPEB funding are a conversation that every community has every year, and it is a continuing area of focus for the city,” she said. “You are under a corrective action plan with the state for the funding of the general pension and health care plan, and you are compliant with that corrective action plan, but it does require that you continue to make contributions every year in order to stay compliant.”
Reeves said pension status compliance is measured every year, and OPEB every other year.
She said another challenge is the significant advances to the field house from the water fund. In 2021, the general fund contributed $294,475 to the Kessey Field House Fund to cover operations and payments.
“The field house has a payment plan established with the water fund, which will require payments starting next year, approximately $170,000 a year for the next 10 years,” Reeves said.
She said if the field house is unable to do so, the city will need to transfer more money from the general fund to cover the obligation.
Reeves noted that a third area of concern is the deferment of capital investment for both infrastructure and equipment.
She said that water loss in the system continues to increase, and in 2021 exceeded 30 percent, while the budget for capital expenditures was less than $200,000 for the same period.
“Capital spending continues to be really low as it relates to the investments that you need to make currently in your buildings and infrastructure and to general activities as well,” Reeves said. “This is an area to continue to focus on as you move forward.”