After several years of doom-and-gloom discussions regarding Grand Traverse County’s financial health, county commissioners received what Chair Carol Crawford called “very good news” this month: The county’s finances have improved to the point commissioners will now consider how to spend down the fund balance.

Commissioners will meet Wednesday at 5:30pm at the Governmental Center to discuss several proposals by the county’s interim administrative team on how best to utilize the fund balance. Commissioners previously requested staff to prepare the recommendations at their April 4 meeting, when Finance Director Dean Bott told the board the county experienced “the best of both worlds” regarding its 2017 budget.

“Revenues were higher than anticipated or budgeted, and your expenditures were less,” he said. “Cash positions are very, very strong at the end of the year. I think everybody should be very pleased with the budget performance for 2017.” While the county had planned to use almost $2.9 million of its fund balance last year, less than $600,000 was actually used, Bott said, leaving the balance at $11.9 million. How much commissioners will want to spend will depend on the fund balance they want to maintain – the county’s policy is 15 percent, though the interim administrative team suggested it could be raised to 20 percent to safeguard against emergencies – but several proposals describe spending at least $1.6 million.

A memo from Undersheriff Nate Alger, part of the interim administrative team along with Bott and Deputy Civil Counsel Christopher Forsyth, outlines how the county’s finances turned around in a relatively short period of time. “There are many reasons why the county’s finances are in such good condition,” he wrote. Requiring all employees to begin contributing 20 percent to their healthcare plans – a move implemented in 2016 – and freezing cost-of-living adjustments “had a positive impact on the budget,” Alger wrote. “Reorganization of certain departments (e.g. the elimination of the planning department and the combination of equalization and GIS) has also reduced costs."

Large local, state, and federal grants that helped pay for the Boardman River Dams Project also reduced the county’s anticipated debt load for that project, Alger said. “The fear that removing Boardman and Sabin dams would be an expensive project for the county has not materialized,” Alger wrote. “Simply put, actual expenditures have been less than budgeted expenditures."

At the same time, revenues have exceeded projections the past three years, according to Alger. New construction boosted the county’s tax base, with $600,000 more in revenue coming in from the tax base last year than was anticipated. State revenue sharing has also stabilized, Alger said, and voter approval of surcharges and/or millages supporting Central Dispatch, the Commission on Aging, and the Traverse City Senior Center have reduced the county’s general fund obligations for those programs. Grand Traverse County is also set to make $350,000 off the pending sale of land in Blair Township to Blain’s Farm & Fleet. And one form of the county’s retirement debt – other post-employment benefits (OPEB), or retiree healthcare costs – could be half of what the county originally estimated, Alger said. “The board has heard reports that the OPEB liability was approximately $8 million,” he wrote. “However, a recent valuation estimates the amount at $4 million.”

All of those factors combined contributed to a rosier financial picture this year than past commissioners have faced. Alger credited former county administrators Tom Menzel and Vicki Uppal for their contributions along the way. “The efforts of prior county administrators over the last three years have helped reduce expenditures,” he wrote.

Alger said that “given the above circumstances, the board of commissioners has the financial ability to consider” several options for spending some of the county’s fund balance. Those could include addressing the county’s retirement debt – either its pension costs with the Municipal Employees Retirement System (MERS), or its OPEB obligations. The county made a $5.9 million payment to MERS earlier this year; making another $1.6 million payment could help the county meet a state-mandated requirement of funding at least 60 percent of its defined benefit retirement plan. The state has a similar funding requirement for OPEB, though that threshold is set at 40 percent; a $1.6 million payment could similarly help the county meet its OPEB requirements, according to Alger.

Other suggestions from the interim administrative team include addressing costs at the Grand Traverse County Jail. “A short term and critical concern is providing more mental health services for inmates,” Alger wrote. “At this point, the cost of retaining the appropriate mental health services is unknown, but the board should consider setting aside funds to pay for such costs.”

A final suggestion on the team’s list – investing in county employees – has received early support from some commissioners. Alger wrote in his memo that for at least three years, many employees “have not received wage increases and now pay more toward their health care. Although these changes were necessary, the board of commissioners should consider investing in employees. Otherwise, morale will continue to drop and employees will leave.” Alger said options could include pay increases and benefit changes, as well as improved working conditions by “providing more funds for training, technology, and employee wellbeing initiatives.”

Commissioner Cheryl Gore Follette told her fellow commissioners at the April 4 meeting that she hoped the upcoming conversation on fund balance spending would focus on “how we can perhaps do something for our employees,” noting commissioners had been discussing since at least October how to budget for investing in staff. Gore Follette said employees “haven’t had raises” and are “people who are leaving because they don’t have significant contributions to how they have to pay for their health care.”

“I just think that any solution we’re looking at with regard to fund balances needs to include a conversation about our employees,” she said.