Milan Eyes $7.1M Budget, Faces Higher Insurance, Lower Revenue

Milan officials have proposed a roughly $7.1 million general fund budget for fiscal year 2027, a 1% increase from the current year, as rising health insurance costs and inflation continue to strain city finances.

The proposal would require the city to draw just over $300,000 from its fund balance amid an expected 3% decline in revenue.

The City Council will adopt the budget and set tax rates May 19, following a public hearing May 5.

The general fund covers day-to-day expenses, including police, fire, elections, and public works.

Several factors are driving changes in the proposed budget.

Insurance

Health insurance costs are among the biggest pressures. After rising 14% in the current fiscal year, costs are expected to increase another 15.26%—about $90,000— in 2027.

“They continue to rise way faster than we can keep up,” Lancaster said, adding that potential cost-cutting measures that shift more expenses to employees could affect retention.

Elections

Election costs are also increasing, with the state requiring the city to purchase about $55,000 in new equipment, accounting for much of the 31% increase in that department’s budget.

Pension

At the same time, pension contributions are declining, dropping from $1.2 million to $722,688 as funding levels improve. Contributions are expected to fall further to $423,000 next year before stabilizing.

Finance

The city is also planning internal changes. After contracting with Plante Moran over the past year, officials have budgeted to hire a finance director in July. The position is expected to help train the assistant treasurer for future roles.

Senior Center

A key uncertainty at press time is the future of the senior center. The proposal includes a contingency plan for a city-run senior center if a lease agreement is not finalized. Under that scenario, the city would allocate $279,060 on expenses, offset by roughly $273,560 in state, county and city revenue the city would apply to obtain. Approval of the lease agreement between MSHL and the City of Milan is on Tuesday’s May 5 city council agenda.

“The hope is that we can come to an agreement and I can back that out of the final budget,” Lancaster wrote Thursday April 30.

Building

Looking ahead, officials expect construction activity to slow as work in Uptown Village  comes to completion and builders have to obtain permitting before building homes in Eagle Springs Subdivision.

Local and Major Street Funds

Road funding remains uncertain until state figures are released. The budget currently includes $854,780 for major streets and $623,710 for local streets, with the city relying heavily on state funding and grants. 

Planned projects include work on Redman Road from Platt to out of town and accessibility improvements through a TAP grant. The city is also awaiting word on funding for improvements to Second Street.

City Income

Milan City relies heavily on property taxes, receiving about one-third of total collections. Due to the Headlee Rollback, the city currently levies 16.4 mils of the 20 mils allowed under its charter.

“Our taxable value base is smaller so each mil brings in significantly less money than in places like Saline or Chelsea,” Lancaster said.

State revenue sharing is expected to decline this year as Gov. Gretchen Whitmer redirects fuel sales tax to transportation.

In February, the city received its first $54,017 payment in marihuana state-shared revenue, in addition to the annual $5,000 permit fee from JARS Cannabis Dispensary.

Costs

Long term, officials say expenses are outpacing revenue growth. Since 2018, expenditures have risen 91% compared with a 77% increase in revenue. 

“We need to grow commercially and residentially,” Mayor Ed Kolar said. “We talk about residential growth and people freak out that they don’t want [that], but that’s why we do it because we need to keep up with expenditures.”