Skip Schulz/For the Gazette Ontonagon’s appointed Village President Tony Smydra, and the Village Council will be addressing agreements with the Michigan Municipal Employees Retirement System at tonight’s Village Council Meeting.

A financial problem that dates back about 100 years continues to face the Village of Ontonagon. An issue that has been in front of elected officials, tax-payer funded Village employees, and Village residents.

It deals with the past ownership of Ontonagon Memorial Hospital and the hospital’s ownership transfer to Aspirus Hospital, based out of Wausau, Wisconsin.

In a printed release from Ontonagon Village Manager, Joe Erickson states what he considers is the history of the issue, and delves into what he feels is the financial woes facing the Village.

He states that in 2007 the hospital faced financial difficulties, thus the sale to Aspirus.

“When the hospital was sold, the hospital employees’ pension plan was closed. The Village assumed the responsibility for the hospital pension liability for 103 retirees and 50 vested former employees.” Erickson then goes on to state, “Regardless if the hospital was sold or not, the Village was obligated to continue funding the pensions of the former hospital employees in the hospital was not sold. The Village of Ontonagon is responsible for any unfunded employee pension liabilities to MERS.”

MERS is the Municipal Employee Retirement System of Michigan. A program past Village officials voluntarily signed up for decades ago to establish a pension system for Village employees, including the hospital.

Erickson states that when the hospital was closed, MERS accelerated the funding of the unfunded portion.

“MERS required that the Village pay to fully fund the closed hospital plan in 10 years. In 2998-09, the Grant Recession hit the MERS pension funds hard. The MERS pension funds lost 25% of their value,” Erickson states. “The MERS pension funds lost 25% of their value. The pension fund for the former hospital employees lost $2 million in value.”

The MERS system requires the Village to make up the losses that created an unfunded pension liabilities according to Erickson, “In 2010 the payment was about $80,000, now it is nearly $350,000.”

At the Feb. 24 meeting, Ontonagon Village Council appointed president, Tony Smydra stated, “That takes up half of our general operating fund.”

In Smydra’s lengthy President’s Report dialogue he commended all that the Council members do for the Village, but did not address any specific solutions to the financial problems surrounding this issue, instead focusing on other issues.

An issue that Erickson states can also be attributed to the closure of Smurfit-Stone Container paper mill in the Village in 2010.

“The loss of the mill and the subsequent loss of jobs and population resulted in a huge reduction in property tax revenues. The Village lost $14 million dollars in property tax values and $200,000 in general fund revenues,” Erickson writes. “With reductions in State revenue sharing added in, the Village lost 1/3rd of the general fund revenues.”

Erickson calls all this ‘the perfect storm’ for the Village. “The hospital pension obligations, the MERS fund losses in the ‘great recession’ and the closure of the paper mill, created this ‘unique financial situation.’ No one could have foreseen these events, nor the resulting consequences.”

The Village worked with MERS to find ways to keep the escalating costs manageable, Erickson states. This deals with different plans to spread out and ‘catch up’ over a 20 year period.

“The Village has likely exhausted any of the usual plan adjustment or funding options with MERS. The Village has also been working with the Michigan Department of Treasury to explore options to resolve the funding issue.”

The Village has an actuarial consultant through the Treasury in reviewing the Villages pension obligations to provide guidance on how to deal with the situation, according to Erickson.

“The Village, with the consultant’s report, will be exploring other options with MERS.” Erickson goes on to state that there may be an opportunity to explore the possibility of lump sum buy-outs or rollovers into other individual pension plans, “especially with those that are currently receive or will receive small monthly payments. This could result in a significant reduction in the number of retirees and would reduce our pension liability.”

Erickson concludes with how the Village Council made the decision in 2007 to keep a hospital in Ontonagon County. “They could not have seen, nor anticipated, that a ‘perfect storm’ was brewing. The obligation to the pensions of the former hospital employees takes precedence over other discretionary activities of the Village.”

In regard to discretionary spending, it was at the Jan. 27 Village Council meeting that Smydra added to the agenda the hiring of a newly created Village position of ‘Development Coordinator.’ A position given to Michael Burzynski.

According to Smydra at that meeting the funding will come from money that was budgeted for the Building Inspector position. A position the Council voted to give to Richard Ernest, until Ernest can get his State Certification License. The Building Inspector position had 2 applicants.

Smydra said that since the Village did not have to pay for the Building Inspector position, they can adjust the 2019-2020 Fiscal Year Budget to cover Burzynski’s salary. A salary not to exceed $6,000 for 8 weeks.

Also at that meeting the Council voted to fund the transportation, lodging, and all other fees to cover any and all Council members to go to Michigan Municipal League Conference in Lansing on March 24 and 25. No details on the spending of ‘discretionary funds’ for this was given.

MERS is on the agenda at tonight’s Village Council meeting. The meeting starts at 6 p.m. Smydra stated at the last Village Council meeting strict guidelines as to what and how the public can comment on during public comment.