Audit report: great bookkeeping, hard work and a deficit
Posted January 7, 2013
ROSEVILLE — The city of Roseville received an “outstanding” rating during an audit report presentation at the regular City Council meeting Dec. 19.
“I’ve told the council in years past, and this year was no exception, the quality of the books and the records that we came in and audited are really excellent, outstanding,” Mark Hurst, an auditor from Plante & Moran, told the council during the meeting.
“We were able to give the city an unqualified audit opinion. … It is the best opinion we can give in a financial document — period.”
Hurst indicated there was one partial adjustment needed to a journal entry in the city’s books, but other than that, he said the books were clean.
“We had a minor adjustment, but we have communities where we will have 50-60 journal entries we will have to get the books right,” Hurst said.
“The audit report was near perfect,” said Councilman Bill Shoemaker. “I guess only half a journal entry was incorrect and that’s incredible.”
The presentation included details of Roseville’s financial situation, from a breakdown of revenues and expenditures in the 2011-12 budget year to the structural deficit the city faces and tips on how to whittle it away.
In Roseville, revenue has decreased by approximately $6 million — or by 8 percent — in three years, from $38.9 million in 2010, to $36 million in 2011, to $33.1 million in 2012. Property tax still makes up the majority of revenue for the city, bringing in 64.8 percent, or $21.4 million, of the city’s total revenue in 2012.
The rest of the city’s revenue comes in from three different areas: fines, fees and licenses make up 10.1 percent and brought in $3.3 million, state and federal revenues make up 14.1 percent and brought in $4.6 million, and interest makes up about 11 percent and brought in $3.6 million in 2012.
Expenditures in the city have decreased, as well. From 2010 to 2012, expenditures in Roseville have decreased by $5.5 million from $41.5 million in 2010, to $38 million in 2011, to $36.1 million in 2012. However, the decrease in expenditures is offset by the decrease in revenues.
Each year since 2010, the city has been in a structural deficit. In 2010, expenditures exceeded revenues by $2.6 million, in 2011 by $2 million, and in 2012 by $3 million, meaning the city must dig into its general-fund balance to cover expenses.
“You’ve really reached a point now where you can’t go lower in your general fund,” said Hurst, but not without complimenting the city and council’s efforts.
“Everyone is basically in the same boat and the question is, ‘What have you been able to do to reduce expenses?’ And you’ve probably had your most productive year doing that to date, in terms of ultimately striking new contracts and making material adjustments to expenditures going forward.”
During the 2011-12 budget year, Roseville settled contracts with four union groups, implemented structural changes to their prescription drug plan for employees, reduced city staff by 30 positions and received voter approval for separate millages for the library and parks and recreation.
“These were all very meaningful, very significant accomplishments,” Hurst said, explaining for residents that the city wasn’t at fault for the structural deficit.
“In 2001, there was an expectation that revenue sharing from the state was going to increase, at least by the rate of inflation each year,” he said. “If you would have polled anyone in municipal finance at the time, we all would have said the same thing. No one would have ever imagined the state would be making the size of cuts they have to state-shared revenue.”
He estimated that the city’s state-shared revenues have decreased by about $22 million since 2001 and called the decline in property taxes another sneak attack.
“If we could have predicted that, we probably all would have sold our homes in 2007,” Hurst said, estimating that Roseville was bringing in about $14 million less annually in property taxes than it would be if the market had remained steady or increased with inflation.
Hurst ended the presentation by offering the city a few tips, including that it should continue to focus on negotiating contracts with the remaining city unions, monitor health care and legacy costs and to reduce the cost of outside vendors.
Residents attending the meeting seemed to sympathize with the city’s position and offered gratitude to the city and council.
“I just want to thank the City Council and everyone at City Hall for doing a spectacular job preparing the budget,” said Roseville resident Dave Chesney.
“Considering property values have dropped off and then the stuff Lansing is doing. … When it comes to cutting, though, you can only cut so much. You got to have police. You got to have fire. You got to have garbage pickup. You got to have streetlights. You got to have a DPW force. You can only cut so much.”
Mayor John Chirkun agreed, saying the city budget has been cut clean.
“Roseville has got about as mean and lean as we can,” Chirkun said. “We’ve kept our services up and reduced our budget.”
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