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Grosse Pointe City

City audit shows continued decline in property tax revenue

November 29, 2012

GROSSE POINTE CITY — An independent review of the City’s finances has again found everything to be in order.

The City’s auditors with Plante & Moran delivered their findings for the 2011-12 fiscal year — which ended June 30, 2012 — during a Nov. 12 City Council meeting.

“The most important thing from an auditor’s perspective is the opinion, which is (again) unqualified … which is the best you can get,” said Plante & Moran auditor David Herrington.

Audit Manager Manju Patnaik said property tax revenue — the main source of income for the City — has been steadily declining since the collapse in the housing market; the City has lost nearly $1 million in property taxes since 2010 alone, falling from $4.937 million in 2010 to $4.036 million in 2012.

Patnaik said there’s usually about a year and a half lag between the assessment date and the date on which the revenue is earned, meaning that the City should expect to have a few more years before property tax revenue starts to increase again.

“It appears taxable value is going to stagnate for a while,” she warned officials.

However, one bright spot was interest income, which rebounded nearly to 2010 levels after plummeting in 2011, when it was only $62,881. Interest income was $265,373 in the last fiscal year, according to the report.

“Interest income did bounce back, which was a good thing,” Patnaik said.

Locally raised revenue was also a bit higher, thanks in part to an increase in state-shared revenues and funds for the Mack Avenue water main and streetscape project, she said.

A transfer of $529,000 from the general fund into the retiree health care fund to cover expenses is one of the key reasons the auditors said the general fund’s fund balance fell from $2,778,131 last year to $2,741,385 as of the end of the most recent fiscal year. The drop was offset somewhat by various City departments operating below their budgets.

The new federal health care laws have experts projecting an increase in the cost of health insurance from 5-30 percent, Herrington said. He said employers can generally expect to see double-digit percentage increases in 2013.

“We’re in a new world now. … All we know is, it’s going up” next year, Herrington told officials.

But City Council member Andrew Turnbull said the fact that the City is self-insured should help, because they constitute their own pool rather than find themselves in a higher risk pool.

“The way that we’re currently set up may be our best advantage over the next 16 months,” Turnbull said.

Herrington said that although the City’s retiree health care program wasn’t fully funded, its pension was, which is another good sign.

“You’ve done some things to limit your exposure. … You took proactive steps,” Herrington said. “This is an excellent position to be in as a community, particularly (one of) your size and demographics.”

Still, Herrington cautioned officials about not taking a step back in services or fiscal health as they go forward. In response to a resident question, Mayor Dale Scrace said a possible merger of the City and Grosse Pointe Park Public Safety Departments was only the subject of study now, not a done deal.

Herrington said City officials wouldn’t want to inherit more liability even if they might be saving some administrative expenses. This is expected to be one of the areas officials will be examining in the coming months.

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