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Grosse Pointe Farms audit shows city remains in solid Financial position

By: K. Michelle Moran | Grosse Pointe Times | Published January 29, 2020

GROSSE POINTE FARMS — Grosse Pointe Farms started 2020 on a positive financial note.

The city’s audit for the 2018-19 fiscal year — which ended June 30, 2019 — showed that the Farms saved more than $600,000 during the last fiscal year, money that was placed into the general fund balance, aka the rainy day fund. Officials received the good news when auditors from Plante Moran delivered their annual report during the Dec. 9 City Council meeting.

Auditors confirmed that the city’s financial records remain in order.

“Your audit opinion is an unmodified opinion, which is the highest level of opinion we can give you,” said Kari Shea, of Plante Moran. “It’s considered a clean opinion.”

Shea added that the auditors found “no material weaknesses or significant deficiencies,” which she said is “a testament to Debbie and her staff.” Debra Peck Lichtenberg is the city’s controller and treasurer.

Lichtenberg said city leaders and their “ongoing fiscal responsibility” have enabled the Farms to maintain its AAA bond rating — the highest possible — while continuing to “invest in capital assets and infrastructure.” During the 2018-19 fiscal year, she said, the city spent almost $1.7 million on capital projects, including public safety vehicles, roadwork and Kerby Field improvements. That marked a 10% increase from the 2017-18 fiscal year, Lichtenberg said.

The total fund balance increased from $5,359,851 at the end of 2017-18 to $5,976,814 at the end of 2018-19, while the unassigned fund balance — which can be used for emergency expenditures — increased from $3,991,910 at the end of 2017-18 to $4,124,274 at the end of 2018-19.

The unassigned fund balance remains at 26.2% of the subsequent year’s budget. The Farms has a policy of maintaining an unassigned fund balance equal to 20% to 30% of the subsequent year’s general fund budget.

“Right now, we are in great shape,” Lichtenberg said. “We are right where we want to be.”

Because of new construction and the sale of existing homes, Lichtenberg said, the city’s taxable value rose by 3.7% last year. The rate of inflation, which caps the taxable value of properties that haven’t been sold in a given year, was 2.1%.

“Properties in the Farms continue to hold and increase their value,” Lichtenberg said.

Property taxes remain the top source of revenue for the city — accounting for 73% of the total — while public safety and public works account for almost half of the city’s expenses, at 34% and 14%, respectively. Because residents’ tax bills contain millages other than the city’s — for schools, Wayne County, the library and other governmental entities — Farms officials like to point out that for every dollar on a resident’s tax bill, only 30 cents goes to the city.

As to pensions for Farms employees, the general employee retiree system pension was 89% funded as of June 30, 2019, while the public safety retirement system pension was 105% funded as of that date.

Retiree health care and other benefits were not as well funded; they were at 34% for general employees and 48% for public safety at the end of the 2018-19 fiscal year. The state now requires that municipal pensions must be at least 60% funded, while retiree health care and other post-employment benefits must be at least 40% funded.

The Farms has been steadily improving its retiree health care funding, which was at 21% as of June 30, 2017, and at 23% as of June 30, 2018, for general employees. For public safety, it was at 46% as of June 30, 2017, and at 45% as of June 30, 2018. Even though the Farms hasn’t met the recently instituted state standard, Lichtenberg said they are “already ahead of the curve” and better funded than most other municipalities in Michigan.

“Many, many communities have zero … and they pay as they go,” City Councilman Joe Ricci said.

As part of its corrective action plan with the state, Lichtenberg said the Farms puts additional money into the retiree benefits accounts whenever funds are available. Even at 34%, she said the Farms is “definitely near the top” among other communities when it comes to retiree benefit funding.

“The vast majority of communities are pay as you go,” Lichtenberg said.

2019 marked the 26th straight year the Farms has received an award for its Comprehensive Annual Financial Report, a more detailed audit report that includes historical and other data and offers readers a thorough look at the city and its finances. The honor is called the Certificate of Achievement for Excellence in Financial Reporting and is awarded by the Government Finance Officers Association of the United States and Canada. Shea said the Farms is one of the longest-running recipients of this honor in Michigan.

This winter, residents should watch for a copy of the city’s Popular Annual Financial Report, a brochure-sized summary included inside the most recent issue of the Farms newsletter. It provides a concise, user-friendly overview of the city’s finances. Lichtenberg said the city will be applying for awards again for its 2019 CAFR and PAFR. If it receives an award for the PAFR, this would mark the eighth year the city has been honored for this document.

“You and everyone around you have done a great job again,” City Councilman Lev Wood — chair of the Budget and Audit Committee — told Lichtenberg.

The council voted unanimously Dec. 9 to accept the audit.

To see the audit or the PAFR, click on the Finance tab on the city’s home page at www.grossepointefarms.org and look under the Budget and Comprehensive Annual Financial Report section.
http://www.grossepointefarms.org