Audit shows Grosse Pointe City in good financial order

By: K. Michelle Moran | Grosse Pointe Times | Published January 24, 2018

GROSSE POINTE CITY — Grosse Pointe City’s financial house is in order.

That’s the verdict from the City’s auditors with Plante Moran, who issued the findings from their audit of the 2016-17 fiscal year during a presentation Dec. 18 in front of the City Council.

“It was once again an unmodified opinion,” said Pamela Hill, of Plante Moran. “So, it was the highest level of assurance you can receive from your auditors.”

The City’s financial records were “free of material misstatements,” continued Hill, but the audit “does not speak to (the City’s) financial condition at all.”

She said the majority of the City’s revenue — roughly 60 to 70 percent — is from property taxes. Because property tax increases are limited to 5 percent or the rate of inflation — whichever is lower — the City, and other communities in Michigan, are rebounding slowly from the recession, despite a strong uptick in home values.

“When the economy dipped down in 2008, there was a drastic reduction to revenue,” Hill said.

As a result, she said the City’s general fund won’t return to 2009 levels until around 2030.

Still, in recent years, the City has managed to build its unassigned fund balance. As of June 30, it stood at a little over $1.521 million.

“The unassigned (fund balance) remains pretty consistent,” said Kaitlyn Powers, another auditor with the Plante Moran team.

Powers added that the unassigned fund balance remains around 25 percent of the general fund budget, as per the City’s policy.

The auditors praised City administrators for their cooperation and assistance.

“We spend over 300 hours every year auditing the (financial) books of the City,” said Daniel Block, the manager on the audit. “We do want to thank (Finance Director/Treasurer) Kim Kleinow and (City Manager) Pete Dame for the professionalism we received during the audit.”

Unlike many other municipalities, the City is doing fairly well with regard to its legacy costs. Hill said the City is the only municipality she audits that had a pension asset this year.

“That is a good thing,” she told officials. “You’ve really had some great investment returns. … The City’s positioned well. That’s why you haven’t had to make a pension contribution in quite a few years.”

Proposed state legislation on legacy costs — retiree pensions and health care — would call for municipalities to report liabilities in those areas to the state treasury, and if the liability is more than 60 percent, Hill said, the municipality would need to submit a plan to correct this. She said this isn’t a problem for the City.

City Councilman Andrew Turnbull, a member of the Pension Committee, said that the City has “tried to be as proactive as possible about adopting these (new financial) rules ahead of time.” He said the City now includes contributions to the pension in the annual budget.