Major projects are about to break ground—but Milan leaders say the budget is still tight

With millions of dollars in grant-funded work set to begin, Milan city leaders say most residents won’t feel how tight the 2025-26 budget really is.

“Our biggest challenge is to maintain the services we currently have with increasing prices and decreasing revenues,” City Manager Jim Lancaster said.

Lancaster said he aimed for a lean budget, noting many residents are also feeling the pinch of inflation. The goal:  Protect services and avoid raising taxes—though increases to water and garbage rates are still on the table.

Funding:

This year the city no longer has access to American Rescue Plan funds which were distributed during the COVID-19 era. Over the past three years, those funds helped cover operational costs, but now the city has had to adjust its budget to fill the gap, said Lancaster.

Milan City receives most of its revenue from property taxes. For every $100 residents pay, about $30 goes to city operations and local roads. In 2024, the city brought in $6.6 million and spent $7 million. For 2025, revenue is projected at $6.84 million, with expenditures expected to reach $6.97 million. The city plans to use $135,000 from its fund balance to make up the difference.

A new source of income this year is $57,000 in state shared revenue from the city’s first marijuana business, which opened in February. 

Spending:

Even completed projects bring ongoing costs. The city expects to spend $40,000 on water for its splash pad, and has budgeted extra water costs for new flush bathrooms coming to Wilson Park later this year.

People–both current and former employees—are the city’s biggest expense. As the city works to retain staff, most employees will see a 3 percent salary increase, with some union positions receiving a 4-4.5 percent increase.

Currently, the city is spending about $30,000 on police overtime, in part because it’s short one officer, and Lancaster hopes “to find a good hire to help save the city money.”

To cut costs, the city’s leaving its treasurer position unfilled for now. Instead, Milan City has contracted with Plante Moran out of Ann Arbor to do much of the work, with city staff handling the rest—a move estimated to save $25,000-$30,000.

“I’d really like to get back to where we’re fully staffed,” Lancaster said. “But, we can only spend the money that we have.”

In addition to overseeing city operations and finances, Lancaster also leads the Department of Public Works. Mayor Ed Kolar said Lancaster’s experience in that area—and his water operator license—were part of what made him a strong candidate for city manager.

The city has also combined some roles and hired a few employees at lower salaries to help reduce costs.

Priorities:

Going into the next budget year, city priorities include:  infrastructure, completing the city’s master plan, determining the future of the community house, and Nature Park improvements.

Kolar said his number one priority is funding secondary roads, which is extremely challenging due to how funding is set up in Michigan.

Grants:

While this is a tough year for the city budget, Kolar said he expects the decisions the city has been making to open up more funding in future budgets. He said the city previously applied for and received a nearly million dollar Protecting Pensions Grant through American Rescue Funds which helps pay down the pension fund, eventually freeing up money for other expenses.

Kolar hopes that as the city pays down its pensions they can invest more into roads and water projects – including replacing some 4-inch water mains with 8-inch or bigger pipes.

Despite the tight budget, Kolar thinks as a result of around $7 million in previous grant money this will also be an exciting year. Grant-funded projects to look forward to include:

• Wilson Park improvements
• Wastewater Treatment Plant upgrades
• Reconstruction of East and West Michigan Avenues
• Anne Marie Street improvements
• Path between Milan Children’s Preschool and the fire station, along with other upgrades to crosswalks and sidewalks
• The Center Upgrades:  $360,000 USDA grant to upgrade the Center’s bathrooms and windows, plus install a deck and a new floor in the great room.

A big part of the city’s strategy for getting major projects done with a small budget is grants.

Lancaster says he has additional projects shovel ready awaiting the right grant opportunity. One of those is 2^ndStreet. The city would also like to purchase a new police vehicle, a Falcon Patching Machine and upgrade the Council Chambers IT.

“There’s just so much to do,” Lancaster said. “Unfortunately, there’s always going to be more infrastructure projects than there’s going to be funding.”

Read more about the city’s transportation projects and Wilson Park improvements in The Sun Times News. See the budget at the bottom of the May 6 council packet.