August 7, 2018: Village of Bear Lake Referendum Vote Proposal 2

On August 7, 2018 Village registered voters will see two Proposals on the Ballot called as the result of voters asking for a say on two items passed by the Village of Bear Lake Council. [The threshold is 10%. It is believed @25% of current registered voters signed]

In both Proposals the result will impact the financial position of both Village government and Village tax payers long into the future.

  1. For a full list of Manistee Proposals select the following link august_2018_official_list_of_proposals (1)
    See prior post by clicking here.
    Shall the Village of Bear Lake, Manistee County, Michigan, be authorized to issue municipal securities pursuant to Act 34, Public Acts of Michigan, 2001, as amended, in one or more series, in an amount of not to exceed Three Hundred Fifty Thousand Dollars ($350,000) for the purpose of acquiring and constructing a new department of public works building, together with site work, parking facilities, fixtures, furnishings, equipment, and all related appurtenances and related work?

The maximum number of years the municipal securities may be outstanding, exclusive of refunding, is thirty (30) years.

The Village intends to use water system revenues, park fund revenues, major and local street fund revenues and general fund moneys as the primary source of revenue to be used to retire the municipal securities. The municipal securities will be limited tax general obligations of the Village and no new taxes will be levied for their payment. The Village estimates that of its current Village millage levy, 0.193 mills (19.3 cents for each $1,000 of taxable value) will be allocated in the first year to pay the municipal securities and the estimated simple average annual amount of millage allocated to retire the municipal securities is estimated to be 0.5019 mills (50.19 cents for each $1,000 of taxable value).

The Village’s power to levy taxes to make the payments of principal and interest on the municipal securities is limited by applicable constitutional and statutory limitations on the taxing power of the Village and no new taxes are authorized to pay the principal of and interest on the municipal securities.

At this stage, being so close to the August 7 Election, the Village is constrained by MICHIGAN CAMPAIGN FINANCE ACT Act 388 of 1976

AN ACT to regulate political activity; to regulate campaign financing; to restrict campaign contributions and expenditures; to require campaign statements and reports; to regulate anonymous contributions; to regulate campaign advertising and literature; to provide for segregated funds for political purposes; to provide for the use of public funds for political purposes; to create certain funds; to provide for reversion, retention, or refunding of unexpended balances in certain funds; to require other statements and reports; to regulate acceptance of certain gifts, payments, and reimbursements; to prescribe the powers and duties of certain state departments and state and local officials and employees; to provide appropriations; to prescribe penalties and provide remedies; and to repeal certain acts and parts of acts.
(2) “Ballot question” means a question that is submitted or is intended to be submitted to a popular vote at an election whether or not it qualifies for the ballot.
169.206 “Expenditure” defined. 
Sec. 6. (1) “Expenditure” means a payment, donation, loan, or promise of payment of money or anything of ascertainable monetary value for goods, materials, services, or facilities in assistance of, or in opposition to, the nomination or election of a candidate, the qualification, passage, or defeat of a ballot question, or the qualification of a new political party. 
Bear Lake News will not render an opinion of how people should vote.
Rather these are the questions being raised by residents themselves.
1. Is the Village of Bear Lake sufficiently financially sound and resilient to shoulder both a 40 year $1.463m loan AND a $350,000 30 year loan to run concurrently?
2. As a qualifier, the requested amortized Bond schedule for the Water System loan not having been published, Bond payments for the Water system will be due twice year totaling $53,000 . The only prior document that explained how water rates would be raised to cover O&M, plus debt repayment is shown here.
The actual water loan interest rate is lower but the amount is higher.
[NOTE: No actual schedule following the May 15, 2018 Bond sale, has been published in spite of numerous requests]
This directly relates to Maintenance Building Bond payments because both will fall due at roughly the same time: March 1 and September 1.
Financing of the water system debt is based on total water revenue – how $7200 can now be also allocated to meet the Maintenance Building repayment is an unanswered question. Will this require raising water rates?
Following a lengthy and persistent FOIA campaign the actual Maintenance Building documents were received on June 30 following a direct appeal to USDA. You may read them here as PDFs
Here is the amortized repayment schedule for the ‘DPW’ Building.

A rough calculation show a total interest payment of @$204,500.
These were posted to the Village web site a week later under a new tab ‘DPW Building.’
A reminder that a Petition to hold a Referendum vote on this matter was submitted and accepted on May 14, 2018 in time to be placed on the August 7 Primary Ballot. [The Village placed a display ad for the Notice to Issue Bonds in the Manistee News Advocate on April 2, 2018.]
A transcript of the history, Minutes and request concerning a replacement Maintenance Building is available here.DPW_History [names have been redacted]
An alternative option exists which could dramatically reduce the interest paid – financing locally and guaranteeing the loan through a Special Assessment levy – the mechanism used by Bear Lake Township to finance its fire vehicles.
This option was suggested in past communications.
A reader has commented that the current fiscal operations in the Village seem to be based on constantly amending the Operating Budget with little effort to rebuild reserve funds – a trend reported by the Michigan Department of Treasury.
While this may be legal – once a loan agreement has been entered into with the federal government – default or late payment is no longer an option.
Headlee Amendment Article IX, Sections 25 to 34 of the Michigan Constitution are often referred to as the “Headlee amendment”.
These provisions, adopted by the voters in 1978, constrain growth in property taxes. The Headlee amendment does the following:
1. Requires that, if the base of a tax is broadened, the tax rate be reduced to levy the same amount of tax revenue as was received on the prior base.
2. Prohibits a local government from levying any new tax (one not authorized by law or charter in 1978) or increasing the rate of a current tax without voter approval.
3. Limits the annual growth in property tax revenue due to increases in taxable value (excluding new construction and improvements) to the rate of inflation in the prior year. Under the “Headlee rollback”, if the increase in taxable value would cause the tax revenue to grow by more than the rate of inflation, then the millage rate must be reduced to a level that results in revenue growth of not more than the rate of inflation. These limits do not apply to millage levied for the repayment of voter-approved bonds.
The Village is currently operating at the allowed property tax level. Water and Park revenues, in addition to the often unreliable level of State Road funds, are the only additional sources of revenue.
Do reserve funds exist to cover unexpected bills, other than the fund required by USDA as part of the Water System loan agreement? Having now received the design and billing documents for the proposed Maintenance Building, several duplicate billable services seem to overlap with those already covered by the Water Project? Does the Village need 2 pickups, 2 blade trucks? What plans are in place for the previous Village Hall?
It has been stated that these projects are vital to making this community flourish and thereby improve the future for our children. Why then are so many businesses currently for sale?
Village voters will approve or decline to take on this level of debt. Our children and their children will still be paying for the decision made on August 7, 2018.