Marquette managers present preliminary 2026 budget, warn of infrastructure backlogs and modest utility rate increases

City Manager Karen Kovacs presented the Marquette City Commission with a preliminary 2026 budget and a multiyear financial outlook on Aug. 7, urging cautious use of reserves while recommending targeted investment in roads and infrastructure.

The proposal shows the general fund is balanced for fiscal 2024 after staff and commission actions in recent years but would run a gap if all department requests are approved. "These are preliminary numbers," Kovacs said, "and they will change," adding that staff is recommending priority cuts and alternative funding for discretionary requests.

Why this matters: the city depends heavily on property tax revenue (about $15 million to the general fund) and payment-in-lieu-of-tax (PILT) arrangements, which together represent most unrestricted local revenue. City leaders said constraints tied to Michigan law and large nontaxable land holdings limit local options for raising revenue.

Key figures and recommendations

- Fiscal context: staff reported fiscal-year 2024 general-fund revenues of about $24.9 million and expenditures about $24.4 million, with a year-end fund balance around $8.8 million. Kovacs told the commission that the current preliminary 2026 requests, if all funded, would create a roughly $1 million gap and require using fund balance.

- Fund-balance proposal: staff recommended postponing about $507,000 of discretionary projects and instead using roughly $506,000 of fund balance. That would reduce fund balance by about 5.7%, rather than a larger draw that staff said would be less comfortable amid state and federal uncertainty.

- Streets and capital: city engineer Mick said the city’s road network needs a mix of preservation and reconstruction. He described the PASER ratings used to evaluate streets and presented a $1.4 million capital plan focused on pavement preservation and targeted reconstruction. "We're looking at $260 to $900 a foot for reconstruction," Mick said, and he recommended a mix of resurfacing and selective reconstruction to avoid faster network decline.

- Debt and bonding: staff spelled out a conservative bonding approach, noting the commission paid down about $6 million in debt last year and is considering up to $1.4 million in bond issuance for street work that would stay within the commission's debt-management intentions. Deputy Manager Sean Habbins and finance staff cautioned against over-borrowing but said limited, responsible bonding is common for capital work.

- Utility rates: staff recommended modest increases in water, sewer and stormwater charges to sustain planned plant and system work. Finance staff (Mary) said the long-range financial plan smooths multiyear needs into smaller annual adjustments. For a typical household using 4,000 gallons, combined water and sewer charges would rise by about $5.28 monthly under the proposed schedule; stormwater and sanitation fee adjustments add roughly another dollar to the sample monthly bill.

- Brownfields and economic development: Deputy Manager Sean Habbins reviewed the city’s brownfield (Act 381) portfolio and said those efforts have leveraged more than $400 million in private investment and helped remediate challenging sites. Some brownfield captures are still paying debt obligations; Habbins noted state law changes and plan amendments can affect timing and revenue flows.

- Special funds and other items: staff reviewed multiple special-revenue and enterprise funds, including marina operations, Lakeview Arena operations (a projected operating shortfall of about $103,000 under status-quo assumptions), the DDA budget and the tourist-park fund. Tara (DDA staff) summarized the DDA’s adopted draft budget: about $2.12 million in revenue and $2.21 million in expenditures, with an anticipated net draw on DDA reserves for planned projects.

Votes at a glance (procedural)

- Motion to excuse an absent commissioner (personal reasons): motion seconded; recorded outcome: "Motion passes 6 2 0." (as recorded in the minutes) - Motion to approve the meeting agenda as presented: moved by Commissioner Davis, seconded; outcome recorded "Motion passes 6 to 0." - Motion to approve the consent agenda as presented: moved by Commissioner Ottaway, seconded; outcome recorded "Motion passes 6 to 0."

What commissioners pressed staff to clarify

Commissioners asked for a prioritized one-page list showing which discretionary projects staff recommends postponing versus funding, revised estimates for the proposed bonding options, and clearer comparisons of Marquette’s residential utility charges with peer communities. Kovacs said staff will return with a refined recommended budget, bonding options after counsel input, and a public-notice schedule leading to a public hearing Sept. 29.

Next steps

Staff plans to return with an updated proposed budget and refined capital/debt options, and the commission will set a public hearing on the proposed budget for the Sept. 29 meeting. Kovacs said staff will produce outreach materials and a one-page project prioritization to aid public review.

Ending note: Kovacs and staff emphasized that the recommended approach is conservative: preserve a buffer in fund balance while selectively pursuing bonding for infrastructure and smoothing rate increases for utilities to fund required maintenance and replacement work.