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FERNDALE — At its Jan. 26 meeting, the Ferndale City Council approved a deficit elimination plan for its auto parking fund.
According to city documents, the city’s auto parking fund has shown a negative fund balance. This came after Ferndale’s construction of its mixed-use parking structure, The dot.
City Manager Colleen O’Toole told the Woodward Talk that when The dot was being built, the general fund loaned the auto parking fund $2 million to help partially with the cost of that construction. Since that time, the auto parking fund hasn’t followed the trajectory that they anticipated for revenues.
“Parking is down in general in kind of (the) post-COVID world still, and as a result the full payment that needed to be made over a five-year period — it’s a five-year payment plan — haven’t been able to be met,” she said. “When they haven’t been able to be met, it just leaves the principal balance of the debt higher.’
The state now requires the city to submit a deficit elimination plan “for any municipal funds which show negative fund balances as part of the annual audit report.”
“During the last fiscal year audit, that fund had expenditures in excess of revenue that was not sufficient to be covered by its reserve balance,” O’Toole said during the meeting. “What that means is it’s in a state of deficit with which we need to submit a corrective action plan. The corrective action plan that we’re submitting to the state is nonbinding. We do have to take separate actions specific to enacting that plan, but what the plan does is it provides an outline for how we could eliminate that deficit within the statutorily required five years.”
Ferndale’s plan calls for three strategies. The first is to reduce expenditures, which the city stated it has done through council actions to include credit card processing fees as part of the transaction fee for customers. The second is to increase revenue, with Ferndale aiming to make revenue adjustments as part of its triennial budget-setting process.
The last part of its plan is to forgive a portion of its $2 million interfund debt that was issued from Ferndale’s general fund to the auto parking fund in 2020. According to the city, approximately $500,000 has been paid off.
“Multiple alternatives were examined,” O’Toole said. “We looked at various cost-cutting and revenue-generating measures. We looked at (the) larger consideration of debt forgiveness, but really those three measures are kind of the only tools in the toolbox for a fund that’s this specific in purpose. So, a combination of the three felt like the most prudent course.”
O’Toole stated that Ferndale would seek to forgive a minimum of 35% of the remaining roughly $1.5 million. The creation of the plan would not automatically enact it, however, and the City Council still would have to take action each fiscal year to issue any forgiveness.
Mayor Pro Tem Laura Mikulski brought up how there was supposed to be a residential component to The dot, but it has yet to be constructed by its private partner, Versa Wanda LLC. O’Toole said they haven’t received communication of any movement on any additional portions of the project, but Ferndale does have legal levers it could use to start that conversation anew.
“I feel like it would be prudent at this point for us to reexamine what the last agreement was that we had with them and what our remedies are under that agreement, because I know there was a very distinct timeline on them getting that residential up and functional, and I believe we are past that timeline, and that does impact our overall revenue into the structure,” Mikulski said.
Versa Wanda LLC could not immediately be reached.
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