TRAVERSE CITY, Mich. — City officials are asking commissioners to allow the city’s reserve fund to exceed policy limits, citing mounting pension obligations, infrastructure needs, and budget pressures that have pushed the city’s savings well above intended targets.
At a Monday study session, City Manager Benjamin Marentette and City Treasurer Heidi Scheppe presented options to address a fund balance that has grown to 33.5% of annual operating expenses — far above the city’s maximum policy threshold of 20%.
The presentation comes as community members have voiced concerns about what some view as a proverbial pot of money that was collected from taxpayers and is not being used.
According to Scheppe’s presentation, the city’s General Operating Fund holds an unassigned balance of $8.79 million as of June 30, 2025. To align with commission policy, that figure should be $5.26 million, meaning the current balance exceeds the maximum by $3.54 million.
However, city officials say those excess funds may be needed for pressing obligations. “Policy thresholds exceeded due to uncertainty, not excess capacity,” Scheppe’s presentation concluded.
Pension Crisis Looms:
The city’s pension funded ratio stands at “55.2%” as of June 30, 2025 — “below State of Michigan required minimum” of 60%.
Scheppe warned that additional contributions will likely be needed to comply with state funding requirements. The situation is complicated by the fact that “recent negotiated wage growth not yet reflected in the actuarial report.”
Staffing Costs Rise:
Recent personnel changes have created fixed costs that will persist indefinitely. The city has added “multiple new and converted full-time positions added across Planning, HR, IT, Public Works, Utilities, Police, Fire, and Facilities to support service demands.”
Additionally, the city’s ACT pay schedule expanded, and a “job analysis resulted in grade changes for 31 positions, increasing ongoing wage and benefit costs.” Union contracts for Police, General, and Fire contracts include multi-year market-rate adjustments through FY2028, compounding annual personnel costs.”
Infrastructure Needs Mount:
A January 30, 2024 TowerPinkster facility assessment identified total upgrades of “$11.16 million,” broken down as: “Governmental Center: $8.81 million,” “Department of Public Services: $1.60 million,” and “Brine management (MS4/CIP): $750,000.”
A new facility will also be needed for the recently approved Advanced Life Support ambulance services
The city is working with Grand Traverse County to evaluate future options for the Governmental Center (Boardman Ave) and the Joint Law Enforcement Center (Woodmere Ave).In December 2025, the city engaged Plante Moran Realpoint for facilities analysis, with a final report expected in 8–12 months.
Revenue Uncertainties:
The potential expiration of Tax Increment Financing district TIF 97 poses a major risk. The FY 2026-27 CIP projects “$26 million in DDA TIF 97 revenue over the next six years,” but the district’s potential expiration creates “major capital funding risk” and “may limit feasible projects.”
The city has also expanded tax concessions for affordable housing through Payment in Lieu of Taxes agreements as part of its new focus on affordable housing.
Current PILOT impact on city property tax revenue totals “$600,000 annually” with $6 million cumulative in concessions.
Staff Recommendation:
Rather than immediately allocating the excess $3.54 million, staff recommended the commission “suspend fund balance policy for FY 2026–27” to “allow time for comprehensive planning and evaluation.”
Marentette wrote that waiting until September would be helpful “when we have more of a complete analysis as to the city’s financial position,” noting that significant accounting cycles will be complete by then.
He proposed establishing an ad hoc committee of three commissioners to work with staff on developing a spending plan.
The presentation emphasized that while the “fund balance is strong,” it remains under pressure from “significant risks ahead,” including pensions, facilities, capital funding, and revenue concessions.
Officials concluded that “preserving flexibility is critical.”
No final vote was taken on Monday. The commission will consider the recommendations as part of budget deliberations scheduled for May.