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St. Clair Shores

December 11, 2012

Good news from audit report, tough choices still ahead

By Kristyne E. Demske
C & G Staff Writer

The city is in a better position than expected, but there is still work to be done, according to auditors from Plante Moran.

In its annual financial report to the city for the fiscal year that ended June 30, 2012, Plante Moran representatives reported that property tax revenue is still falling.

Although there was about a $300,000 reduction from fiscal year 2011 to fiscal year 2012, property taxes fell by about $4 million during the past three years. Total revenue was slightly higher for 2012 than it was in 2011 — about $42.6 million compared with $41.9 million — because of more money from state sources, charges for services, licenses and permits, and investment income.

In addition, Ali Hijazi of Plante Moran said Dec. 3 that, “the city has done its best to reign in the expenditures.” The city shaved about $5 million in spending from 2010 to 2012.

Mayor Kip Walby said more revenue from licenses and permit fees could mean the economy is turning around.

“I think that might be a good sign,” he said.

But Hijazi said the city isn’t out of the woods — if the police and fire millage is not renewed, there will be $3 million less brought in from property taxes in 2015.

Another Plante Moran representative, Liz Schrader, said that public safety expenditures make up the largest chunk of spending for the city. Total expenditures in 2012 were $40.8 million, down from $41.1 million in 2011 and $45.6 million in 2010.

Because of those cuts, though, the city’s fund balance, or rainy-day fund, actually grew to about $14 million in 2012. But with property tax assessments lagging behind actual sales, there are still tough years forecasted for 2013-2015, when the fund balance could decline to $9.7 million, or even drop to $6.7 million if the police and fire millage is not renewed by voters. The 2-mill levy was approved by voters in November 2010 and will be on residents’ bills for the final time in July 2013, unless it is renewed.

“To see the rainy-day fund go up $2 million is very strategic,” said David Herrington, an audit partner with Plante Moran. “If we don’t have a solid fund balance position, we can run out rather quickly.”

According to a memo from Finance Director Timothy Haney, the city will lose another 7.78 percent in property tax revenue this year. Herrington said total revenues are expected to decline by more than 9 percent. But, he said, the reason for the dire projections is so City Council and staff can make changes.

“The reason these projections are put together is so they don’t happen,” Herrington said. “The fact that you’re sitting at $14 million at June 30 puts you in a much” better position.

Acting City Manager Mike Smith said that a similar projection had showed the city running out of rainy-day fund money in 2012 “if we did nothing.”

“We don’t sit by and do nothing,” he said. “Council has taken action.”

Herrington said St. Clair Shores’ position is unique for a community in southern Macomb County.

“You’ve been out in front. … To respond the way you have is extremely impressive,” he said. “You’ve made a lot of changes to your operating structure (while making) a commitment to who you are.

“You offer a full level of services and, being fiscally stable, you’re not bogging down the next generation of homeowners with … debt.

You can reach C & G Staff Writer Kristyne E. Demske at kdemske@candgnews.com or at (586)498-1041.