St. Clair Shores adds to fund balance according to 2020 audit

By: Kristyne E. Demske | St. Clair Shores Sentinel | Published January 11, 2021

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ST. CLAIR SHORES — Issuing an unmodified opinion, the highest level the auditor can bestow on the city, Yeo and Yeo presented its 2020 audit report to City Council Dec. 21.

“The city faced a lot of challenges this year (but) came out with a very strong year,” said David Youngstrom, principal with Yeo and Yeo.

The unmodified opinion is the highest level of opinion an auditor can issue, meaning that the city’s financial records were free of errors and misstatements.

From July 1, 2019, through June 30, 2020, St. Clair Shores had just under $40.3 million in revenues and just under $37.8 million in expenditures, enabling it to add about $2.5 million to the fund balance. Youngstrom explained that state-shared revenue was down about 1%, but a 3% increase in revenue occurred because the city initially paid for the renovations at the Senior Activity Center itself. The money is now being refunded through a loan from the federal government that is being repaid for with Community Development Block Grant money.

Expenditures were down in 2020 because of less spending in recreation and culture, as well as community development. Public safety spent less in the 2020 fiscal year because there were fewer vehicles purchased, as well. That was all offset by the fact that general government expenditures were $1.4 million more than in the 2019 fiscal year due to the completion of a project to repave the City Hall parking lot.

“Obviously, economic activity and recreation is down a little bit, to no one’s surprise,” Youngstrom said. “We’ve been very consistent in the last couple years with our expenditures.”

With the addition to the fund balance, St. Clair Shores has about 175 days worth of expenses in its rainy day fund, something Youngstrom said showed its value this year.

“The challenges we have dealt with in the last eight months are unprecedented,” he said.

The city’s two pension systems, however, for general employees and police and fire personnel, had dipped below 60% funding as of June 30, he said.

“We’re working on it. We put the right amount in here, but we fell a little behind from prior years,” Mayor Kip Walby said.

Youngstrom said, however, that the fact that St. Clair Shores was aware of the issue would help in the long run.

“Being proactive is the way to go. Sometimes we don’t always get the results we want,” he said. “It’s something to continue to work on.”

Councilman Ron Frederick pointed out that, as a member of the Police and Fire Pension Board, he has seen that fund clear the 60% threshold since June 30, a fact that wouldn’t be reflected in the audit.

Councilman John Caron said the city had to pay out more benefits than it received in contributions from taxpayers for the police and fire pension fund.

“Our liabilities went up by $4 million. We actually took a double hit,” he said.

But Frederick pointed out that at the end of June, “the percent you’re looking at was probably at the worst time. It’s a long-term proposition, too. There’s no way to time the market.”

Youngstrom said challenges for the city moving forward include going over budget on some items, although, “it was a pretty tough year to budget, all things considered.”

Escalating health care costs, retirement costs, unfunded pension obligations and post-employment benefits are some of the challenges the city faces.

“Some of that’s out of our control but (good to) continue to look at,” Youngstrom said.