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Home My WebLink About2005 Annual Financial ReportCity of Livonia, Michigan Financial Report with Supplemental Information November 30, 2005 City of Livonia, Michigan Contents Report Letter 1-2 Management's Discussion and Analysis 3-9 Basic Financial Statements Government -wide Financial Statements: 57 Statement of Net Assets 10 Statement of Activities 11-12 Fund Financial Statements: 57 Governmental Funds: 23 Balance Sheet 13 Reconciliation of Fund Balances of Governmental Funds to Net Assets 26-56 of Governmental Activities 14 Statement of Revenue, Expenditures, and Changes in Fund Balances 15 Reconciliation of the Statement of Revenue, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 16 Proprietary Funds: Statement of Net Assets 17 Statement of Revenue, Expenses, and Changes in Net Assets 18 Statement of Cash Flows 19-20 Fiduciary Funds: Statement of Net Assets 21 Statement of Changes in Net Assets- Pension and Other Employee Benefits Trust Funds 22 Component Units: 57 Statement of Net Assets 23 Statement of Activities 24-25 Notes to Financial Statements 26-56 Required Supplemental Information 57 Budgetary Comparison Schedule - General Fund 58-60 Budgetary Comparison Schedule - Major Special Revenue Funds 61-62 City of Livonia, Michigan Contents (Continued) Required Supplemental Information (Continued) Pension System: Schedule of Funding Progress 63 Schedule of Employer Contributions 63-64 Postemployment Benefit Plans: Schedule of Funding Progress 65 Schedule of Employer Contributions 65-66 Notes to Required Supplemental Information 67-68 Other Supplemental Information M Nonmajor Governmental Funds: Combining Balance Sheet 70.73 Combining Statement of Revenue, Expenditures, and Changes in Fund Balances 74-77 Fiduciary Funds - Pension and Other Employee Benefit Trust Funds: Combining Statement of Net Assets 78 Combining Statement of Changes in Net Assets 79 Independent Auditors Report To the Honorable Mayor and Members of the City Council City of Livonia, Michigan We have audited the accompanying financial statements of the governmental activities, the business -type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Livonia. Michigan (the "City") as of and for the year ended November 30, 2005, which collectively comprise the City's basic firancial statements as listed in the table of contents. These financial statements are the responsibility of the City of Livonia, Michigan's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standard's, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Livonia, Michigan as of November 30, 2105 and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended, in conformity with accounting principles generally accepted in the United States of America. The management's discussion and analysis, pension system schedule of funding progress and employer contributions, postemployment benefit plans schedule of funding progress and employer contributions, and the budgetary comparison schedules, as identified in the table of contents, are not a required part of the basic financial statements but are supplemental information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management, regarding the methods of measurement and presentation of the required supplemental information. However, we did not audit the information and express no opinion on it. To the Honorable Mayor and Members of the City Council City of Livonia, Michigan Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Livonia, Michigan's basic financial statements. The accompanying other supplemental information, as identified in the table of contents, is presented for the purpose of additional analysis and is not a required part of the basic financial statements. The other supplemental information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued our report dated February 14, 2006 on our consideration of the City's internal control over financial reporting and on our tats of its compliance with certain provisions of laws, regulations, contracts, and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. February 14, 2006 City of Livonia, Michigan Management's Discussion and Analysis Overview of the Financial Statements The City of Livonia, Michigan's 2005 annual report consists of four parts: (1) management's discussion and analysis, (2) basic financial statements, (3) required supplemental information, and (4) other supplemental information that presents combining statements for nonmaior governmental funds, proprietary funds, and fiduciary funds. The basic financial statements include two kinds of statements that present different views of the City. The first two statements are government -wide financial statements that are intended to provide longer-term information about the City's overall financial status. The remaining statements are fund financial statements that focus on individual parts of the City's government, reporting the City's operations in more detail than the government -wide statements. Government -wide Financial Statements The government -wide financial statements report information about the City as a whole using accounting methods similar to those used by private -sector companies. The statement of net assets includes all of the government's assets and liabilities. All of the current year's revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The two government -wide statements report the City's net assets and how they have charged. Net assets, the difference between the City's assets and liabilities, are one way to measure the City's financial health or position. The government -wide financial statements of the City are divided into three categories: • Government Activities - Most of the City's basic services are included here, such as the police, fire, public works, parks departments, and general administration. Property taxes, state -shared revenue, and charges for services provide most of the funding for these activities. • Business -type Activities -The City charges fees to customers to cover the costs of certain services it provides. The City's water and sewer system, golf course operations, and non- federal senior housing are treated as business -type activities. • Component Units - The City includes two other entities in its report, the Plymouth Road Development Authority and the Economic Development Corporation. Although legally separate, these "component units" are important because the City is financially accountable for them, including debt, which is issued on behalf of the authorities by the City. City of Livonia, Michigan Management's Discussion and Analysis (Continued) Fund Financial Statements The fund financial statements provide more detailed information about the City's most significant funds- not the City as a whole. Funds are accounting tools that the City uses to keep track of specific sources of funding and spending for particular purposes. Some funds are required by State law and bond covenants. Other funds are established to control and manage money for particular purposes. The City has three kinds of funds: • Governmental Funds - Most of the City's basic services are included in governmental funds, which focus on how cash and other financial assets that can be converted to cash, flow in and out, and the balance left at year end that is available for spending. The governmental fund statements provide a detailed short-term view that helps you determine if there are more or fewer financial resources available to spend in the near future to finance the City's programs. • Proprietary Funds - Services that are intended to be entirely self-supporting by customer fees are generally reported in proprietary funds. Proprietary fund statements, like government -wide statements, provide both short -and long-term financial information. • Fiduciary Funds - The City is responsible for ensuring that the assets in these funds are used for their intended purposes. We exclude these activities from the government -wide financial statements because the City cannot use these assets to finance its operations. City of Livonia, Michigan Management's Discussion and Analysis (Continued) The City as a Whole In a condensed format, the table below shows a comparison of the net assets as of November 30, 2005 to the prior year. Net Assets (in millions of dollars) Liabilities Gownimental&bmtes Busiresstype&hvhes Total 2005 2004 2005 2004 2005 2004 Assun 215 127 Long-term liabilibes 448 543 C assets $ 509 $ 322 $ 225 $ 248 $ $ 608 phial ssetother Cap9sl assets 163E 1616 62.9 82.3 463 2363 440 2340 93 65 10 06 103 Total assets 2143 2088 1104 1022 3247 3160 Liabilities Current liabilities 160 92 55 35 215 127 Long-term liabilibes 448 543 144 126 592 719 Total liabilities 608 635 199 211 807 846 NetA b Invested in cagtal assets - Not ofrelat debt 1219 1188 61.6 661 1895 1849 Restnded 22.3 200 219 194 442 39.4 Unrestricted 93 65 10 06 103 21 Total net assets $ 153.5 $ 145.3 $ 90.5 $ 96.1 $ 2 .0 $ 231.4 City of Livonia - Net Assets The City's assets exceed its liabilities at the end of the fiscal year by $244.0 million (net assets). However, a major portion (78 percent) of the City's net assets represents its investments in capital assets (e.g., land, roads, infrastructure, buildings, and equipment) less any related debt used to acquire or construct these assets. The City uses these physical assets to provide services to its citizens. These assets are illiquid and not available for future spending. Unrestricted net assets of the City increased from $7.1 rrillion at November 30, 2004 to $10.3 million at the end of this year. The amount represents the part of net assets that can be used to finance day-to-day operations without constraints established by debt covenants, enabling legislation, or other legal requirements. Further, the City is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental and business -type activities. 5 City of Livonia, Michigan Management's Discussion and Analysis (Continued) The following table shows the changes in net assets during the current year, and as compared to the prior year. Changes in Net Assets (in millions of dollars) Governmental Activities Busincss4ape&hmbes Total 2005 2004 zoos 2004 2005 2004 Revenue Program revenue: Charges for services $ 166 $ 167 $ 287 $ 25.6 $ 453 $ 423 Operating grants and contnMons 99 91 - - 99 91 Capital grants and contnMons 02 05 26 13 28 18 General rownue: Propartytaxe=. 517 500 - - 517 500 StaRshared nownue 92 92 - - 92 92 Rental income and tees 14 14 - - 14 14 Interest 19 09 04 02 23 11 Transhr and miscellaneous (02) 06 05 (01) 03 05 Trial nownue 907 88.4 32.2 21.0 122.9 1154 Program Expenses Geneal govemment 91 94 - - 91 94 Public sahty 331 340 - - 33.1 340 Publicwork 230 235 - - 230 235 Community and economic development 18 18 - - 18 18 Recreation and culture 131 132 - - 131 132 Interest on bn term@ht 24 23 - - 24 23 Water and sewer - - 252 23.3 252 233 Goltcuurse - - 17 16 17 16 Housing 09 09 09 09 Total pogrom expenses 825 842 278 25.8 1103 110.9 Change in Net Assets 82 42 44 12 126 54 Net Asseb-Beginning d War 145.3 1411 861 84.9 2314 2268 Net Asseb-EidofWar $ 10.5 $ 145.3 $ 98.5 $ 86.1 $ 2A4.8 $ 231.4 0 City of Livonia, Michigan Management's Discussion and Analysis (Continued) Governmental Activities In reviewing the above table, it can be noted that revenues increased by $2.3 million and expenses decreased by $1.7 million. The significant factors impacting revenue include increases in operating grants and contributions ($.8 million) and property taxes ($1.7 million). The most significant factor impacting the expenses were decreases to personnel costs, caused by the hiring freeze which resulted in an additional 17 vacant positions. Business -type Activities Livonia has three business -type activities. These include the water and sewer system, the operating fund for the Fox Creek, Idyl Wyld, and Whispering Willows golf courses, and non- federal senior housing at Silver Village, Newburgh Village, and 13 scattered site homes. The following table shows the operating income (loss) before contributions, transfers, and interest for each of these activities in the current and prior year. (in thousands of dollars) WaRr antl Sewer Goff Courses Hwsim 2005 2004 2005 2004 2005 2004 Operating Revenue $ 25,979 $ 22,946 $ 1,692 $ 1,757 $ 1,258 $ 1,244 Operating Expenses (24,874) (23,503) (1,734) (1,730) p49) (979) Operating Income(Lms) $ 1,105 $ (557) $ (42) $ 27 $ Sag $ 94 Capital Assets and Debt Distribution At the end of fiscal year 2005, the City has $373.1 million invested, before depreciation, in a wide range of capital assets, including land, buildings, infrastructure, public safety equipment, computer equipment, and water and sewer lines. Debt of $41.5 pillion related to the construction of the above-mentioned capital assets is reported as a liability in the governmental activities in the statement of net assets. Debt related to the water and sewer system totaling $10.7 million and debt related to the housing and golf course activities of $4.4 million is recorded as a liability in the business -type activities in the statement of net assets. This debt represents construction of and improvements to existing water and sewer lines and improvements to the golfcourse and City residential rental facilities. 7 City of Livonia, Michigan Management's Discussion and Analysis (Continued) Significant additions to capital assets during fiscal year 2005 include $5.7 million invested in the construction of and improvements to roads and $3.5 million invested in the construction of and improvements to water and sewer lines. There were no significant disposals of capital assets during fiscal year 2005. The City's Funds The fund financial statements begin on page 13 and provide detailed hformation on the most significant governmental funds - not the City as a whole. Funds are created to help manage money for special purposes, as well as to show accountability for certain activities, such as special property tax millages. The City's major governmental funds for 2005 include the General Fund, Community Recreation Fund, and Refuse Disposal Fund. The City's governmental funds reported a combined fund balance of $31 million. This is an increase of approximately $2.4 million for the year. The increases were caused primarily by ongoing cost containment efforts to restrain spending at a level below expected revenues. General Fund Budgetary Highlights Over the course of the year, the City administration and City Council monitor and amend the budget, primarily to prevent expenditures in excess of budget, as required by the State of Michigan Budget Act. The final amended budget included $475,000 more revenue and $500,000 more expenditures than the original adopted budget. The primary causes of the budget increases were a result of amending the General Fund budget to reflect better than expected interest income and building permit revenues, as well as an increased contribution to the Capital Improvement Fund. Actual General Fund revenues were approximately $851,000 below the final budget. Specifically, state -shared revenues were $145,000 less than the final budget because of mid -year reductions implemented by the State of Michigan, court fine revenue was $415,000 less than the final budget because collection of traffic fines was lower than expected, and miscellaneous revenue was 5646,000 less than the final budget because of reduced transfers from otherfunds. Actual General Fund expenditures were approximately $1.2 million below the final budget. All departments held expenditures below the final budget. Major savings were achieved by continuing an across-the-board hiring freeze that began in 2002. At year end, approximately 89 positions were vacant, resulting in nearly $5.0 million in reduced wage and benefit costs city- wide. City of Livonia, Michigan Management's Discussion and Analysis (Continued) Current Economic Conditions The City continues to maintain positive fund balances in each of its funds. However, concerns arse when considering the revenues and expenses that the City is facing in upcoming years. The majority of the City's revenue base is constrained by factors outside the City's control. Property taxes, state -shared revenue, and interest income total 69 percent of the City's total governmental activities revenue. Property tax revenue increases are limited to very small increases because of Proposal A and Headlee state constitutional limitations. The State of Michigan has experienced budget deficits and has significantly reduced revenue-sharing payments to local governments to help reduce their deficit. Interest rates that are extremely low have diminished the City's return on investments. On the expense side, certain expenses continue to rise at a ate far in excess of inflation. In particular, health care expenses have continued their trend of double-digit increases. Hiring and capital outlay freezes, among other measures, have been implemented to reduce expenses to the level of available revenue. We are committed to living within our means, although the result may be diminished programs and service response capabilities. Contacting the City's Financial Management The financial report is designed to provide our citizens, taxpayers, customers, investors, and creditors with a general overview of the City's finances and to show the City's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Director of Finance at the City of Livonia, 33000 Civic Center Drive, Livonia, Michigan 48154. City of Livonia, Michigan Statement of Net Assets November 30, 2005 The Notes to Financial Statements are an 10 Integral Part of this Statement. PrlraryGosemram (iwemmmrrd aelnao-rvpe Morris Musser Tool Cprtppnerc Lands Consa ea s il,WC61P s 1e&1 Ms 54339513s 959,312 persuadlasirreae(Nae3) P ded deadTa®' 151 151 Owders 9182,31] 9182,31] - Tontine 1515 raps1936 - 1515 raps - Deeper Spaalae 511,99 - 1903 511,E - irpers NbMaSmrtpeoafim 159191 - 158,191 - metrprnadpgWernraanart 3099,266 - 39266 - P49areiR4p@maM VE80 047279 827019 - Drops ONa ]314]9 301212 1027,491 - Ircaraly (13138]) - pass mtlinenpreWl6WendResanddaov6 Ila49rremmmmm issues) 152,659 314Ari056 1851,128 - ee1,� - Padassus(5INae8) 1fi9,fiU 957470 145]3]0 3621112 - ['allondee¢Maea): Noable 29,181310 6 095 @4276 4026632 1]d 118 sempltedN 8epre®file mplGl�'ers-NN 129,21125 No ]fi 65,5]3 205,22618 11 P3,511 Taal ae'e6 214287491 110309,620 324677111 129),2]1 Itl Ilia F¢ar@stable 4)1 374M 4452,450 131 we Artists and other l ai 4492,745 222627 4715351 22,91 Dudes Name(Nae 13) M414 1183835 219,2'4 - Duefoothergovernrterraluniti - 1776219 1716219 - BondsanddepoelC - Ad Ned 463,355 - Nonmrmminor mt(Nore ]). Du a wUh n one saw appears1, 1601,216 8129,161 310," Due In rare than one saw B onds and mpld I Ned pa,abl a $117W 138n,591 52,291,917 542309 Contended do pass and Wnndepope 5681651 19,319 61ee,973 - Undfiutlmpelmbmh 369672 - 369672 PmpeRyfmllabllTy - - - 515M Tod looked 978317 1987(09 964337 6497M NaAaeet Invested In mplhl dead Ned rates seat 121358833 6743,81 1943189 610799 Pstr16ed CortrtunM1yre7earon 5631320 - 563139 - Munopalrefiee 4]0828] - 47(1 - Sbs[rmds,andsdefelk 5359835 - 53&,835 - Grant and 59D4rs[IIgINrO loaded - 196,09 - Dbmry 671722 - 41.]22 - Pubumalavmarsnonson 2031382 - 291,82 - 4dNdladloRerus 1,405.59 - 119,583 - Dem3ervlm dean - 106,99 - CmRBullstimprove enk 531498 - 97499 - Drtl2gepmle0a 116210 - 116210 - apAelprolensmatruilm 15985] 15985] - Roar sed for attend requirements - 135],17( 19],17( - Voderandeewer - addressee 901292 Emnomc DaeloWrerc coropalpn 2159 Unred ed 927185 91618 1022718 2918 Tons a[apsare S 153$9174 S 911i19$fill S 24498734 $ 638116 The Notes to Financial Statements are an 10 Integral Part of this Statement. City of Livonia, Michigan The Notes to Financial Statements are an 11 Integral Part d this Statement. Program Revenues Operating crania Charges Jar am cartel Grantsand Egresses Smaces Contribution contriwtions wrctinmlPragrans Primearygovernment Gwernini asihtin: General government $ 9,038,326 $ 3,989920 $ 10,160 $ - Pubtcsakty 33,iZi818 6,265,120 2061560 - Pubicwmb 23,003607 1,535905 6,Y I,E01 P6,855 Community and economic aeeelorment 1,762,814 351,950 I,31,326 - RecreationandcuRure 13,13f211 0,061523 358n6 - interestonlong-term chat 2399,336 Total governmental activities 82j¢,it0 16,630,402 99zo263 n6,8w Busineal activities: Waterandsexer 25201y2 25800,490 - 2617,339 Gcffcwrse 1,658,331 1687500 - - Housing 915,056 1 zs6,3ot Total Ishmae type whales 27,814639 28,108291 2617,339 Total $ 110,356153 S 05,318,693 $ 9,920263 S 2190,195 Comperes units: Ecawmc resentment Coriumatch s 300- threanhR®noeelnpnesAsh" 15 '906 7% Total cownpaient units $ 15661;106 $ $ 190 $ General revenues Prnpedrtaxn State shared revenue Unrestricted %asam suer Interest Miscellaneous Tundra Total general revenues and transkrs Change in Net Aceta Net Assets- Beginning of Net Asse6- End ofyear The Notes to Financial Statements are an 11 Integral Part d this Statement. Statement of Activities Year Ended November 30, 2005 Nei(EKpnse) Revenue andChanges h Ne1A¢ek PrinnaryGovernment Gvvemmental Businesiypz MIMbes MIMtes ]dal Come entUnne s (4,989,262) $ - $ (4,989,262) $ (24,751138) - (24,75118) (14,969,406) - (14,969,405) (359j38) 29,109 (8,315,912) - (8,31,912) (2999318) (2.399318) (300) (1,5 11 (1,565,412) 51656924 - 51696324 - 3,180A 3,1805 ] - - 29,109 23,169 - - 31120.5 311245 1,M,5 3520,931 3,520991 (55,78Q593) 3520,931 (52263W2) - (300) (1,5 11 (1,565,412) 51656924 - 51696324 1,7M,751 9,215983 - 9,235983 - 1M,187 - 132187 - 1,M,5 389.445 22]9,099 25%1 126,716 188486 33,122 - (34695]1 346 357 6397653 9162➢8 F 898715 1,769,812 8,189916 6,0.37,199 12,627,11 2M,400 145919260 %,882361 231401621 6,193116 S 153589174 $ 911,519,560 $ 244,828,734 $ 6,397,516 12 City of Livonia, Michigan Governmental Funds Balance Sheet November 30, 2005 The Notes to Financial Statements are an 13 Integral Part of this Statement. Major Special Revenue Fund Other Nomination Total Community Reuse Dispel Governmental Governmental General Fond Recreation System Fund Ford Avenida Current asets: Cash and investments 8 6,465,812 8 6,756501 8 6,837,626 8 12807,880 8 32897,822 Reconvenes Tares rrt 5 ii M5 27,086 156831 slaecialamesmends - - - 511,96£ 511 Wwkerz <omtematim 158,191 18,191 Due from other governmental units 2,007,082 - - 1,891,]81 3,893266 Emoorns' Retirement System and VE84 82],019 - - - S2r,0E9 Other 685818 1N dudcr 46,917 76]2]9 Due from other Linda R1 de 5) - 76r - 11 132,131 Inventory, around expenses, and dpmita SM,218 W218 Restricted meta (Note 83 1,663,642 1,661,612 Total ase6 S 10,792,153 S 6,]]8,1]] S 6,887,406 S 17,080,662 S 41,5381398 Hadlites and Fund Dalanca Liabilities eaccounts pi $ 1,115,262 $ 11 $ 1463,132 $ 1,360615 $ 4,077514 Due to other und(Note S) ]4] - - - ]4] eaccmedand other loblities 4,81,331 6189 1],81] 130106 4291,369 Detained revenue (N ote 13) 26084 91 26,493 526913 1751,052 Total liablitis 5,45],]42 1,160,8A 1509,467 2,011 10125,712 Fund Nalama Reservadrw prepaid andinvedory 431,036 - - - 431,086 Reservadrnr artal domination - - - 180,65] 1588657 movement Uncontested 4,903,325 5,97,K0 5,3wee - 15918,606 Unreserved-Repwtedin Special Revaue Fund - - - 10795,659 10]95,659 Den sella Fmd - - - 106,098 106,098 Cartel Projects Fund 2,80582 25ri Total find glances 5,334,411 5,97,K0 5,3wee 15,062,996 31012686 Total liablitis and and balances S 10,792,153 $ 6,]]8,1]] S 6,80],406 $ 17,000,662 $ 41,5381398 The Notes to Financial Statements are an 13 Integral Part of this Statement. City of Livonia, Michigan Governmental Funds Reconciliation of Fund Balances of Governmental Funds to Net Assets of Governmental Activities November 30, 2005 Total Fund Balances of Governmental Funds $ 31,412,686 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and are not reported in the funds 163,398,385 Certain receivables are expected to be collected over several years relating to special assessments and delinquent personal property taxes 757,638 Fines and fees are not available to pay for current year expenditures 1,245,166 Compensated absences are not due and payable in the current period and are not reported in the funds (6,963,517) Long-term liabilities are not due and payable in the current period and are not reported in the funds (42,209,219) Accrued interest payable on long-term debt is not recorded in the funds (199,376) A portion of the Internal Service Fund (self-insurance) is included as part of governmental activities 6,067,411 Net Assets of Governmental Activities $ 153,509,174 The Nates to Financial Statements are an 14 Integral Part d this Statement. City of Livonia, Michigan Governmental Funds Statement of Revenue, Expenditures, and Changes in Fund Balances Year Ended November 30, 2005 Much Special Revenue Ema; 8 21681219 8 3jM,62E 8 11619,633 Other IN creator Taal Cmarmily Pieces Defrost Govern;rental Governmental Recreation More Fund Funds Pleasure Properly taxes 8 21681219 8 3jM,62E 8 11619,633 8 8,901,738 8 51.613211 Li<ens¢antlpzrmAs 251359] - - - 2,513,59] Special assessments Intergovernmental revenue: Slate sources 92351983 - - call 16,053,031 Federal sources 26',181 - - 2060,71 2,328,z Charges M services 3}48,891 3516903 ri 1,415574 8,393,510 Interest 1032,313 163,839 67,861 3'80]9 1,742,192 Einesand Mkitures 3,63],]39 - - 832,022 4,319,79i Miscellaneous revenue 2.130335 2,443 12.109 917215 3.052.122 Trial revenue 19,300610 ]25],826 li'vi 6 22280575 91M,787 Expenditures General government 8291931 - - 10,160 8,401,031 Pubicsdety 38137,183 - - 9Uj36 31,311211 Pubic works 3895,654 - 11;133,516 11$18,026 26,907,196 Recreation andmltule 1'eall 4,489,47 - 1,953201 11069213 Corry ly and dmound drelopnent 128,853 - - 1,833961 1,162,814 Erni burette, insurance, add other 2,31655 - - - 2,316,55 Captal moat - - - thro,18z 1,50,782 Debt serves - - - 51(]7,316 5,55,346 TdA expenditures 17,29151t 4,489,47 11;133,516 25621,011 S GGPt;F5 Excess of a¢venue Over(Under) Expenditures 2503296 2,168,355 118,260 (3,313p39) 2,676,472 Other Flnancing Sources (Uses) Issuance of long-term debt(Note 7) - - - 3,138000 3,138000 Payrrentsto escrow agents Jar bntlrehnds; - - - (3,009,300) (3,689,300) Transfers in (Note 5) 10,000 - - 1,9152041 6,015,201 Transfers cut (Note 5) ({5235) (2,112801) - Fina 595) (8351551) Total other Turnouts sources(most ,44235) 2112801) 3989509 (2956511 Net charge in Fula Balances 380931 595,54 168,260 646010 2,00),815 Fund Balances- Beginning ofyear 4953,481 5,041]5 6,629,6% 16616,926 29,041811 Fund BalancesEndofyear $ 5,34.411 $ 5,63'}20 $ 5,311959 5 15,062996 5 31,412606 The Notes to Financial Statements are an 15 Integral Part of this Statement. City of Livonia, Michigan Governmental Funds Reconciliation of the Statement of Revenue, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Year Ended November 30,2005 Net Change in Fund Balances - Total Governmental Funds $ 2,370,815 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures; in the statement of activities, these costs are allocated over their estimated useful lives as depreciation 8,456,312 Depredation, net of disposals, is recorded as an expense in the statement of activities but not in the governmental funds (6,316,295) Loss on disposal of fixed assets is recorded in the statement of activities but not in the governmental funds (323,283) Certain revenue reported in the governmental funds was recorded as revenue in the statement of activities in previous years (228,357) Repayment of bond principal is an expenditure in the governmental funds, but not in the statement of activities (where it reduces long-term debt) 7,025,865 Interest expense is recorded when incurred in the statement of activities 36,575 Bond proceeds are not reported as financing sources (uses) on the statement of activities (3,730,000) Net decrease in accumulated employee sick and vacation pay is recorded when incurred in the statement of activities 88,528 Increase in landfill liability is recorded when incurred in the statement of activities (17,892) A portion of the Internal Service Fund (self-insurance) is also included as governmental activities in the statement of activities 827,646 Change in Net Assets of Governmental Activities $ 8,189,914 The Notes to Financial Statements are an 16 Integral Part of this Statement City of Livonia, Michigan Proprietary Funds Statement of Net Assets November 30, 2005 Assets Current assets Cash and investments A« aeimbe: Cmtom m m Omer Invantoy, aortia esgenamme,asa dgmim Installment Real assets Note B) Tda<urrent mob Noncurrent assets (N de 6): Nmdlareciatee assets Belxeaaleeasets Net Total noncurrent assets Tdal assets Nommior bApr Enterprise Fund: Enterprise Fund Ida Fntergrse Internal Senate Yeaterandcower Norms CdfCmrse Ford Fund $ 13,117269 $ 619,8413 $ - $ 13,]3],112 $ 8,236,606 9682,317 - - 9682.317 - 29357FF - 7,635 301212 - Z2,158 - 41263 256,621 1,053,690 6l - - 6l - 1957,6]0 - - 1,95l - 2.76Ti 86] 619,&3 11598 26,398586 9,288096 920606 1581,968 3582686 6,065012 - 69.]39.]11 6.716.006 2399.856 ]6.8555]3 120,150 70.69,317 6297.9% 5.982362 82.960615 1223230 669,561 13,422 1Bs6216 Tidal current liadlties 96021,161 6917,799 5,9e1260 109,339,203 9,288,036 Liabililias Current handles A«nmmrty�be x,923 a,sx 290,126 376,906 - Accrued and dher habli8es 152,181 al 9598 MGM - Due mdhergoemirentalunits 1n6219 - - 1716,213 - Due mother Linda (Note 5) 131,387 - - 131997 - Bebrrearmnue(Ndo1A 1183565 - - 1,183,8415 - Bmdanadposts 163205 120,150 - 263,355 - CurrentpoNionoflmg-termclegatw 1223230 669,561 13,422 1Bs6216 Tidal current liadlties 6,661$90 660,600 311 5,631 - Noncurrentloblities Long-term debtNotof current portion (Note n 186'M019 6010051 40,053 16166126 2276% Total liabifties 16,759,009 6670651 353,197 19,]82668 2299,6£ Net Assts Invested In cartel assets IN at of related debt 5916arm 1592956 5982312 6]5]3,821 - RSVi<@afor ordnance requirements 1957,610 - - 195l - Ilnrestriidea 20012,962 351,306 (311236) 20826052 7,030630 Tidal net rids $ 81,668,155 $ 226],365 $ 5661,863 89,556,513 S 7,830p 11 Amounts reported for boreal activates In the statement of net assets are libeled because baon of the Internal Service Fundis In<ludetlas boreal xtirties 963,017 Nel Assisd Businesslype Activilim S 911,519,560 The Notes to Financial Statements are an 17 Integral Part of this Statement. City of Livonia, Michigan t lariesandwages - Mood Proprietary Funds Statement of Revenue, Expenses, and Changes in Net Assets Suireies - Year Ended November 30, 2005 59,]29 178,791 Nm;mJa Otherservicaandclarges XAjw Entertese Funds Enterprise Fund! 1,139,859 1413,581 - Taal Eaertrrise lntemalsencce Mterandsewer Housing Gotl Funds; Fund Operating Revenue 1]34]23 2]]56888 Custwner rings $ 26,932]9] $ - $ - $ 26932,798 $ - Theo and del ]28653 - - Men - Servicecwnectons 91,056 - 97,096 aeons hes - - 1,543576 1,543,5]55 - Golf cart hes - - 9!520 9!520 - Cily<mlriWtims (227552) ({635) 9,38],]12 Rental Income - 1)559tt - 1,255912 - Otherreuenue 22],]81 I,EW 5!,185 283,746 - Taalcreatingreuenue 25978648 125],]R 1,®2285 28,926697 9,38],]12 Operating Extrema beomi- Before cmiriMiom and transfers 9514'4 29480] Cat ofwater 7,086,958 - - 7,488,896 - Cost Gi cistr®I 9}15921 - - 9,315,921 - 6yatemmaintenanceand otreraion 0pn,e58 - - 0,477,e53 - Generalandadmnistraive 1;195,5417 - - 1,191 - Oepeciation 2,464,156 1652® 176,189 2,315,554 - reimurameclargesadddai;rs - - - - 8,043,184 t lariesandwages - Mood 249,426 549,358 - Suireies - 9,9R 59,]29 178,791 - Otherservicaandclarges 270,522 1,139,859 1413,581 - Taalcreatingexpema 2431]08Th 1]34]23 2]]56888 8443180 Otan i;g Incane(Loss) 1;IMted 588,979 (02,838) 1,41817 904528 NoroperAing Reven ie(Expeme) Interest inco;re 376,821 13,424 - 389,445 150936 Interest extreme (`49,409) (227552) ({635) (]591636) - Totalnonoperatingreueme (extreme) (53,4m) (214,128) (zcas) (no,re1) 116,596 beomi- Before cmiriMiom and transfers 9514'4 29480] (M,613) 1,201,626 1,091 Canter Contribute! food Developers ate Grants 2617.3E - - 2,67,339 - Thaafersln(Bae5) 316.357 346,357 - CM;geinNet&sets 3568,791 29480] 381680 0,55,322 1,899.524 Netiesele Besnningoi 78.099,364 19526'% 5,35.359 85.391221 5,938986 Netiesele Endoi $ 81,668,155 $ 224],345 $ 5,64A,843 $ 89,5$,43 $ ],0(1 NetCMngein Net Assets- Taal Enteryise Fund 8 0,55,322 Anants reloaded Jon I,esrea-iytreaaihties in the statement ofaaih6esare afferent teausethe Internal Sema Fund iaagoaiedfeirt bsnesztrje aaim6es 271,357 Change in Net Asetmf Busineartil Activities $ 4A37,199 The Notes to Financial Statements are an is Integral Part of this Statement. City of Livonia, Michigan Proprietary Funds Statement of Cash Flows Year Ended November 30, 2005 The Notes to Financial Statements are an 19 Integral Part of this Statement. Namejor XAjw Enterpise Fund Enterpise Fund Taal Enteraise Internal Serece Water andSewer Hmaing GdfCourse Funds Fund! Cash Fbvrs man Operating Activities Receipts from customers $ 2559.797 $ 1,27,881 $ 1,705,569 $ 28683237 $ 9,387,712 Paymmntstosuparers (18,013933) (M.991) (1(121,493) (19L9L17) (81795,49) Payrmntstoempoyees (3,965,820) (Dg862) (244812) (4,501514) other receipts 144,657 2,646 147,503 Net ash aodidetl by opzraing atliMies 3,834691 696,454 35,264 4,]20809 '92249 CashF iron Nmn pitalRmncing Acoria -Net transfers to other funds - - 346,357 346,357 - CmM1 Fbws iron Capital and Related! Financing Activities ConlriMiw hom<ustomers 214,920 - - 211 Grant reimbursements 348,419 - - 848,419 - Principelandin@rest iatl on long-term RN (1501519) (641 (2506,098) (2,410546) - PurchaseofcaPtalasets (1,456,TI1) (150813) (1,834524) Net ash used In fzptal andrelaled imncilg alaties (1,434,891) (64$929) (4e26,911) ({964,]31) Cash Flaws from Investing Activities Interest received on investments 316,021 13,424 - 389pts 154996 Net purchases of investment activities (645548) (19930) (253710) (924238) (341756) Netash usetlln investing aArrrdes (829527) (6556) (253710) (534,793) (46,760) Net Increase in Cash and Cash Equivalents 1`902]3 47,369 - 1567,502 5 ,489 Cashand Cash Equhtlents-0ecerrberl,2004 10,0897] 49,321 10,462298 541 Cash and Cash Equhalene; Nwennissa 20ffi $115]9250 5 450,690 5 - 512,029,940 5 6,011262 Balance Sheet Classification ofCash and Cash Equivalents Cash and investments $ 13117269 $ 619,1343 $ - $ 13,]3],112 $ 8,234,606 Rearichdasets(Note 8) 1718.091 1]18.091 Tota' ash antlash erysalents 11 619,813 - 11 8,234,606 Les Investments (3256110) (59,153) - (3,42529) (2223,344) Net ash antlash e4iwlents $ 11579250 $ 450,690 $ $ 12029940 S 6,011262 The Notes to Financial Statements are an 19 Integral Part of this Statement. City of Livonia, Michigan Proprietary Funds Statement of Cash Flovgs (Continued) Year Ended November 30, 2005 Nonaaia sister Fmernrise Fund Fmernrise Fund add Fmernrise enteral sense Waterand3ewer Howno GdfCourse Fund Fund Reconciliation of Operating Iincona ms)to Natrona fran Operating Activities oceratig inane per) s 1101$80 s 50l s (12,038) s 1571$17 s 911528 Adudments forecmale onerdng incense (los) to net ash fran onerdirg adiMies: Oelareeiation 2a61..155 1l P6,169 2,805,55! - ChageslnasetsandhadNis: Receisades (332718) 112 13285 (319,381) Inventory, lxeReid, and dpaik 6,752 - - 6,752 (711793) Accounts rat 355,691 - - 355,091 - Hamedanddherlialohlis 95,01`9 19,366 181 303,913 359510 Detailed revenue (9889) 333 2,]e0 (6,]82) - Baidanddpaits 2,815 2,815 Net ash pwidd by operating actnaties S 3,611,691 S 696,8.51 S 239,261 S 4,T0,86 S 592249 Norcxh Imesting,Gpldl, and Final Oti retia- Ounng the year ended NwewIXr30,206i, Rselc¢vs cm9rvdedwaterand sewer lines war an sAnnated vLue of $1,554,000 and dMvtedtrenn to the Olys Water amSeiver Fund The Notes to Financial Statements are an 20 Integral Part of this Statement. City of Livonia, Michigan Fiduciary Funds Statement of Net Assets November 30, 2005 The Notes to Financial Statements are an 21 Integral Part of this Statement Pension and Other Employee Benefits Agency Funds Assets Cash and cash equivalents (Note 3) $ 1,006,705 $ 2,813,174 Investments (Note 3): - U.S.government securities 43,852,194 - Common stock 108,271,773 - Corporate bonds 42,887,696 - Foreign stock 3,232,097 - Mutual funds 24,067,411 - Real estate investment trust 10,000,000 Bank investment pools - 4,606,197 Investments held by broker-dealer and banks under securities loans: U.S. government securities 435,203 - U.S. corporate fixed income 367,773 - U.S.equities 10,867,653 - Securities lending short-term collateral bank - investment pool 12,118,448 - Other receivables 1,031,271 4,050 Total assets 258,138,224 $ 7,423,421 Liabilities Accounts payable 349,924 $ 24,505 Due to other governmental units - 4,932,783 Accrued and other liabilities 669,974 - Bonds and deposits - 2,466,133 Amounts due to broker under securities lending agreement 12,118,448 Total liabilities 13,138,346 $ 7,423,421 Net Assets - Held in trust for pension and other employee benefits $ 244,999,878 The Notes to Financial Statements are an 21 Integral Part of this Statement City of Livonia, Michigan Fiduciary Funds Statement of Changes in Net Assets Pension and Other Employee Benefits Trust Funds Year Ended November 30, 2005 Pension and Other The Notes to Financial Statements are an 22 Integral Part of this Statement Employee Benefits Additions Investment income: Interest and dividends $ 7,815,253 Settlement income 1,209,947 Net appreciation in fair value of investments 15,021,698 Less investment expenses (541,727) Net investment income 23,505,171 Securities lending income: Interest and fees 613,457 Less borrower rebates and bank fees (586,237) Total securities lending income 27,220 Contributions: Employer 5,534,608 Employee 529,975 Total contributions 6,064,583 Total additions 29,596,974 Deductions Benefit payments 11,062,429 Medical benefit payments 4,946,285 Administrative expenses 164,109 Refunds of contributions 330,438 Total deductions 16,503,261 Net Increase 13,093,713 Net Assets Held in Trust for Pension and Other Employee Benefits Beginning of year 231,906,165 End of year $ 244,999,878 The Notes to Financial Statements are an 22 Integral Part of this Statement City of Livonia, Michigan Component Units Statement of Net Assets November 30, 2005 Assets Cash and cash equivalents Capital assets (Note 4): Nondkpeciade capital assets Deatumable capital assets - Net Total assets Liabilities Accounts paWinle Accrued and other liabilities Nocoumantliabilites: Property tax liability Due within ore year Due in more than one }ear Total liabilites Net Assets Invested in capital assets- Netof related @bt Unrestricted Total net assets The Notes to Financial Statements are an Integral Part of this Statement 23 Economic Plymouth Road Development Development Total Component Corporation Authority Units $ 2,450 $ 956,862 $ 959,312 - 474,448 474,448 11 3]3,511 11 3]3,511 2 450 12 804821 12 807271 131,009 131,009 22.807 22.807 515,939 515,939 310,000 310,000 5430000 5430000 �74UA1Fb7�74UA1Fb] - 6,10%9 6,10%9 2,450 287,107 289,557 $ 2,450 $ 6,395,066 $ 6,397,516 City of Livonia, Michigan Total governmental activities $ 1.566,206 $ $ $ General revmues: Taxa Interest Miscellanwus Total general revenues Change in Net Assets Net Assets - Beginning o$ear Net Assets - Enn ofyear The Notes to Financial Statements are an 24 Integral Part of this Statement Program Revenues Operating Capital Grants Charges for Grants and and Expenses SerHces Contributions Contributions Economic Development Comorabon- General government $ 300 $ - $ - $ - Plymouth Road Development Authonty Community and economic development 1290,041 - - - Intemstonbngtemidebt 275,865 Total Plymou0i Road Development Authoro 1,565,906 Total governmental activities $ 1.566,206 $ $ $ General revmues: Taxa Interest Miscellanwus Total general revenues Change in Net Assets Net Assets - Beginning o$ear Net Assets - Enn ofyear The Notes to Financial Statements are an 24 Integral Part of this Statement Net (Expense) Revenue and Changes in Net Assets Economic Rymouth Road Dowlopmenl Development Corpomtim A hority Total $ (399) $ - $ (399) - (1 259,941) (1 zs9,941> (z�s,ass) (z�s,ass) (1565,996) (1565,996) (399) (1565,996) (1566,296) - 1,744,751 1,744,751 44 25,917 25,961 94 794 44 1,MW 1,M,666 (256) 264,656 294,466 2,796 6,196,416 6,193,116 $ 2,450 $ 6,395,066 $ 6,391,516 25 Component Units Statement of Activities November 30, 2005 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 1 - Summary of Significant Accounting Policies The accounting policies of the City of Livonia, Michigan (the "City') conform to accounting principles generally accepted in the United States of America (GAAP) as applicable to governmental units. The following is a summary of the significant accounting policies used by the City of Livonia, Michigan: Reporting Entity The City of Livonia, Michigan's legislative branch consists of an elected seven -member council. The City's administration operates under the overall direction of an elected mayor. The accompanying financial statements present the City and its component units. The component units are entities for which the City is considered to be financially accountable. Although blended component units are legally separate entities, in substance, they are part of the City's operations. Each discretely presented component unit is reported in a separate column in the government -wide financial statements to emphasize that it is legally separate from the City (see discussion below for description). Blended Component Units - The Municipal Building Authority of Livonia is governed by a board that is appointed by the mayor. Although it is legally separate from the City, it is reported as if it were part of the primary government because its primary purpose is to finance and construct the City's public buildings. The operations of the Authority are reported as a nonmajor Debt Service Fund. The City of Livonia Employees' Retirement System and the City of Livonia Health and Disability Plan have been blended into the City's financial statements. These systems are governed by a five -member Pension Board that includes three individuals chosen by the City Council and/or the mayor. The systems are reported as if they were part of the primary government because of the fiduciary responsibility that the City retains relative to the operations of each system. The operations of the Employees' Retirement System and the City of Livonia Health and Disability Plan are reported as a Pension and Other Employee Benefits Fiduciary Fund. Discretely Presented Component Units - The Economic Development Corporation was created to provide means and methods for the encouragement and assistance of industrial and commercial enterprises in relocating, purchasing, constructing, improving, or expanding within the City so as to provide needed services and facilities of such enterprises to the residents of the City. The Corporation's governing body, which consists of eight individuals, is selected by the mayor and approved by the City Council. Internally prepared financial statements br the EDC can be obtained from the City of Livonia Finance Department at 33000 Civic Center Drive, Livonia, M148154. PET City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 1 - Summary of Significant Accounting Policies (Continued) The Plymouth Road Development Authority was created to encourage additional economic activity and growth in the Plymouth Road business distinct. The Authority's governing body, which consists of 12 individuals, is selected by the mayor and approved by the City Council. Internally prepared financial statements for the Plymouth Road Development Authority can be obtained from the City of Livonia Finance Department at 33000 Civic Center Drive, Livonia, MI 48154. The City has excluded the Housing Commission from this report. Even though the City appoints the Housing Commission's directors, it does not have the ability to impose its will. Government -wide and Fund Financial Statements The government -wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the nonfdudary activities of the City (the primary government) and its discretely presented component units. The effect of interfund activity has been removed from these statements. Governmental activities, normally supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function (governmental activities) or segment (business -type activities) are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: (1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not applicable to specific programs are reported instead as general revenue. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government -wide financial statements. Major individual governmental funds and major individual Enterprise Funds are reported as separate columns in the fund financial statements. 27 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 1 - Summary of Significant Accounting Policies (Continued) Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government -wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund, fiduciary fund, and component unit financial statements. Revenue is recorded when earned and expenses are recorded when a liability is incurred, regardless ofthe timing of related cash flans. Property taxes are recognized as revenue in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified acomal bass of accounting. Revenue is recognized as soon as it is both measurable and available. Revenue is considered to be available if it is collected within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. The following major revenue sources meet the availability criterion: state -shared revenue, state gas and weight tax revenue, district court fines, and interest associated with the current fiscal period. Conversely, special assessments and certain federal grant reimbursements will be collected after the period of availability; receivables have been recorded for these, along with a "deferred revenue' liability. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, expenditures relating to compensated absences, and claims andjudgments are recorded only when payment is due. The City reports the following major governmental funds: General Fund - The General Fund is the City's primary operating fund. It amounts for all financial resources ofthe general government, except those required to be accounted for in another fund. Refuse Disposal Fund - The Refuse Disposal Fund accounts for the operations of the refuse disposal activities of the City. Funding is provided primunly through a local property tax levy. Community Recreation Fund - The Community Recreation Fund accounts for the activities of the Livonia Community Recreation Center, ice rinks, and certain other recreation activities. Funding is provided primarily by a local property tax levy and user charges. 28 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 1 - Summary of Significant Accounting Policies (Continued) The City reports the following major proprietary funds: Water and Sewer Fund - The Water and Sewer Fund accounts for the activities of the water distribution system and sewage collection system. Funding is provided primarily through user charges. Housing Fund - The Housing Fund accounts for the Newburgh and Silver Village residential rental facilities. Funding is provided primarily through user charges. Additionally, the City reports the following fund types: Internal Service Fund - The Internal Service Fund is used to fund general, workers compensation, and employee health care liability claims and to purchase insurance that provides excess general liability coverage for City employees and property. The fund is financed primarily by charges to the various departments of the City. Pension and Other Employee Benefits Trust Funds - The Pension and Other Employee Benefits Trust Fund accounts for the activities of employee benefit plans that accumulate resources for pension and other postemployment benefit payments to qualified employees. Agency Funds - The Agency Funds account for assets held by the City in a trustee capacity. Agency Funds are custodial in nature (assets equal liabilities) and do not involve the measurement of results of operations. Private sector standards of accounting issued prior to December 1, 1989 are generally followed in both the government -wide and proprietary fund financial statements to the extent that those standards do not conflict with the standards of the Governmental Accounting Standards Board. The City has elected not to follow private sector standards issued after November 30, 1989 for its business -type activities. As a general rule, the effect of interfund activity has been eliminated from the government -wide financial statements. Exceptions to this general rule are charges between the City's water and sewer function and various other functions of the City. Eliminations of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenue include: (1) charges to customers or applicants for goods, services, or privileges provided, (2) operating grants and contributions, and (3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenue rather than as program revenue. Likewise, general revenue indudes all taxa. 29 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 1 - Summary of Significant Accounting Policies (Continued) Proprietary funds distinguish operating revenue and expenses from nonopeating items. Operating revenue and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenue of the Citys proprietary fund (Water and Sewer Fund) relates to charges to customers for sales and services. The Water and Sewer Fund also recognizes the portion of tap fees intended to recover current costs (e.g., labor and materials to hook up new customers) as operating revenue. The portion intended to recover the cost of the infrastructure is recognized as nonopeating revenue. Operating expenses for proprietary funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenue and expenses not meeting this definition are reported as nonoperating revenue and expenses. Property Tax Revenue Properties are assessed as of December 31 and the related property taxes become a lien when billed. These taxes are billed on duly 1 and December 1 of the following year, and are due on September 14 and February 14, respectively. After the final collection date of February 28, real property taxes are added to the county tax rolls. The 2004 taxable valuation of the City of Livonia totaled $9.700 billion (a portion of which is abated and a portion of which is captured by the PRDA). The millages levied by the City and the resulting revenues are as follows: Approximate Revenue Purpose of Millage Millage Rate (in millions) Operating purposes 4.0447 $ 18.37 Police 0.8088 3.67 Police and fire 1.2134 5.51 Library 0.8088 3.65 Refuse and recycling 2.5746 11.62 Industrial development 0.0110 0.05 Debt service 0.2723 1.24 Roads, sidewalks, and trees 0.8893 4.01 Recreation 0.7855 3.54 These amounts are recognized in the respective General, Special Revenue, and Debt Service Funds financial statements as tax revenue. 30 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 1 - Summary of Significant Accounting Policies (Continued) The delinquent real property taxes of the City are purchased by Wayne County. The county sells tax nota, the proceeds of which are used to pay the City for these property taxa. Wayne County remitted its purchased delinquent real property taxes in August 2005. Wayne County delinquent real property taxes have been recorded as revenue in the current year. Assets, Liabilities, and Net Assets or Equity Bank Deposits and Investments - Cash and cash equivalents include cash on hand, demand deposits, and short-term investments with a maturity of three months or less when acquired. Investments are stated at fair value. Pooled investment income from the Investment Agency Fund is generally allocated to each fund using a weighted average of balance for the pdnapal held for each fund on a daily basis. Receivables and Payables - In general, outstanding balances between funds are reported as "due to/from other funds." Any residual balances outstanding between the governmental activities and the business -type activities are reported in the government - wide fimncial statements as "internal balances." All trade and property tax receivables are shown as net of allowance for uncollectible amounts. Inventories and Prepaid Items - Inventories are valued at cost, on a first -in, first -out basis. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. Certain payments to vendors reflect costs applicable to future fiscal years and are recorded as prepaid items in both government -wide and fund financial statements. Restricted Assets -The revenue bonds of the Enterprise Funds require amounts to be set aside for construction, debt service principal and interest, operations and maintenance, and a bond reserve. Unspent bond proceeds have also been set aside for construction. These amounts have been dassified as restricted assets, as well as amounts on deposit at the county and the state being held for the construction and debt service. The Street Improvement Capital Projects Fund, 1990 Street Improvement Capital Projects Fund, and the Municipal Building Authority and Other Debt Service Fund all have unspent bond proceeds that have been set aside for construction and that have been classified as restricted assets. 31 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 1 - Summary of Significant Accounting Policies (Continued) Capital Assets - Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business -type activities column in the government -wide financial statements. Capital assets are defined by the City as assets with an initial individual cost of more than $5,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. Buildings, equipment, and vehicles are depreciated using the straight-line method over the following useful lives: Infrastructure 33 to 40 years Road rights 33 years Buildings and improvements 20 to 50 years Machinery, equipment, and vehicles 2 to 20 years Water and sewer distribution systems 50 years Compensated Absences (Vacation and Sick Leave) - It is the City's policy to permit employees to accumulate earned but unused sick and vacation pay benefits. Under the City's policy, employees earn benefits based on time of service with the City. All vacation and sick pay is accrued when incurred in the government -wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only for employee terminations as ofyear end. Long -tens Obligations - In the government -wide financial statements and the proprietary fund types in the fund financial statements, long-term debt and other long- term obligations are reported as liabilities in the applicable governmental activities, business -type activities, or proprietary fund -type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts are reported as other financing uses. Issuance costs are reported as debt service expenditures. 32 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 1 - Summary of Significant Accounting Policies (Continued) Fund Equity - In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses dudng the period. Actual results could differ from those estimates. Note 2 - Stewardship, Compliance, and Accountability Constmction Code Fees - The City oversees building construction, in accordance with the State's Construction Code Act, indudirg inspection of building construction and renovation, to ensure compliance with the building codes. The City charges fees for these services. The law requires that collection of these fees be used only for construction code costs, induding an allocation of estimated overhead costs. A summary of the current year activity and the cumulative surplus or shortfall generated since January 1, 2000 is as follows: Cumulative shortfall at December 1, 2004 $ (1,584,829) Current year building permit revenue 2,514,877 Related expenses: Direct costs $ 1,529,073 Estimated indirect costs 453,361 Total related expenses (1,982,434) Current year net revenue 532,443 Cumulative shortfall at November 30, 2005 $ (1,052,386) 33 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 3 - Deposits and Investments Michigan Compiled Laws Section 129.91 (Public Act 20 of 1943, as amended) authorizes local governmental units to make deposits and invest in the accounts of federally insured banks, credit unions, and savings and loan associations that have offices in Michigan. The local unit is allowed to invest in bonds, securities, and other direct obligations of the United States or any agency or instrumentality of the United States; repurchase agreements; bankers' acceptances of United States banks; commercial paper rated within the two highest classifications, which matures not more than 270 days after the date of purchase; obligations of the State of Michigan or its political subdivisions, which are rated as investment grade; and mutual funds composed of investment vehicles that are legal fordirect investment by local units ofgovernment in Michigan. The pension trust fund and retiree health care fund are also authorized by Michigan Public Act 314 of 1965, as amended, to invest in certain reverse repurchase agreements, stocks, diversified investment companies, annuity investment contracts, real estate leased to public entities, mortgages, real estate (if the trust fund's assets exceed $250 million), debt or equity of certain small businesses, certain state and local government obligations, and certain other specified investment vehicles. The City has designated five banks for the deposit of its funds. The investment policy adopted by tie Council in accordance with Public Act 196 of 1997 has authorized investment in bonds and securities of the United States government and bank accounts and CDs, but not the remainder of State statutory authority as listed above. The City of Livonia's deposits and investment policies are in accordance with statutory authority. The City's cash and investments are subject to several types of risk, which are examined in more detail below: Custodial Credit Risk of Bank Deposits Custodial credit risk is the risk that in the event of a bank failure, the City's deposits may not be returned to it. The City does not have a deposit policy for custodial credit risk. At year end, the City of Livonia had $34,617,180 of bank deposits (certificates of deposit, checking, and savings accounts) that were uninsured and uncollateralized. The City of Livonia believes that due to the dollar amounts of cash deposits and the limits of FDIC insurance, it is impractical to insure all deposits. As a result, the City of Livonia evaluates each financial institution with which it deposits funds and assesses the level of risk of each institution; only those institutions with an acceptable estimated risk level are used as depositories. 34 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 3 - Deposits and Investments (Continued) Interest Rate Risk Interest rate risk is the risk that the value of investments will decrease as a result of a rise in interest rates. The City's investment policy does not restrict investment maturities, other than commercial paper which can only be purchased with a 270 -day maturity. At year end, the average maturities of investments are as follows: Weighted Average Investment Fair Value Maturity Corporate bonds $ 44,365,714 9.93 years U.S. agency securities 51,402,487 25.59 years U.S. treasury securities 5,529,405 2.95 years Commercial paper 1,987,628 26.5 days The investments listed above are held in the Employees' Retirement System and VEBA. Credit Risk State law lirrits investments in commercial paper to the top two ratings issued by nationally recognized statistical rating organizations. The City has no investment policy that would further limit its investment choices. As of year end, the credit quality ratings of debt securities (otherthan the U.S. government) are as follows: Rating Investment Fair Value Rating Organization Bank investment pools $ 2,506,175 Aaa Moodys Bank investment pools 15,035,052 Al S&P U.S. agency securities 17,636,884 PAA S&P U.S. agency securities 33,765,603 Not Rated N/A U.S. treasury securities 325,890 Not Rated N/A U.S. treasury securities 5,203,515 PAA S&P Mutual funds 19,463,358 Not Rated N/A Corporate bonds 2,777,276 A S&P Corporate bonds 1,720,530 A- S&P Corporate bonds 2,215,780 A+ S&P Corporate bonds 62,880 AA S&P 35 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 3 - Deposits and Investments (Continued) Investment Fair Value Rating Rating Organization Corporate bonds $ 2,312,602 AA- S&P Corporate bonds 12,038,058 AAA S&P Corporate bonds 31,675 B S&P Corporate bonds 2,470,151 BB- S&P Corporate bonds 1,812,129 BB+ S&P Corporate bonds 4,142,903 BBB S&P Corporate bonds 6,941,804 BBB- S&P Corporate bonds 7,839,928 BBB+ S&P Commercial paper 1,987,628 A-1+ S&P Component Unit- Bank investment pools 956,862 Aaa Moodys BET City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 4 - Capital Assets Capital asset activity of the City's governmental and business -type activities was as follows: Balance Balance oeceoner 1, Disposals and Noveraer30, 2004 Redassiraotions Additions Adiustreents 2005 Govemmerdal Activities Capital asets not being depredated Land $ 34,181,310 $ - $ - $ - $ 34181310 Construction in progress 114,593 (114,593) subtotal 34235,903 - - (114,593) 34181310 Captal asets Being depreciated Infrastructure 64,024,962 - 5,756,643 - 69,781325 Road right 15,94,300 - 503,910 - 15,TB210 Buildings and irryroveiren[s 90,391110 - 439fifi0 (W,,23) 90,259,536 Equipment andvehicles 26,059,862 (65,410) 184`1,692 (1,501592) 26,359552 subtotal 195,755954 P410) 8570,905 (2.084.826) 202176,623 Arcunula[ed depreciation: Infrastructure 24,061039 - 1902,406 - 25,989495 Road right 3,783936 - 463,494 - 4,241420 Buildings and inproveiren[s 24,176,822 - 1926,fi88 (506,707) 25596803 Equipment and van Cies 16,422,403 (65,410) 2,023,707 (1254,836) 17,125,870 subtotal 68,410,206 (65,410) 6,316,295 (1]61593) n959,598 Net capital assets being depreciated 121285,748 2254,610 (323,283) 123211075 Net govern mental czptal asets $ 161,591,651 $ $2254,610 $ (431876) $ 163396,385 37 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 4 - Capital Assets (Continued) 38 Balance Balance December 1, Disposals and Novernber39 2084 Beclassificaeons Cddaions Adiusbren[s 2005 Business -type Activities Water and sewer optal assets: Capdal assets not being depredated- Construc8minprogress $ 1539576 $ - $ 1277,W5 $ (1,886995)$ 920,606 Capdal asse6 beingdepredated BuiNings and inproverents 934,205 - - - 964,A5 Vehicles 1(91,228 - 135,482 91,(91) 1,74689 Me& inery and eWlpnent 937,457 65410 149,900 (118,515) 1,034,252 Water and sewer distribution systers 111030260 3,M6,685 114556945 subtotal 114,643,iW 65410 3,752.087 (189586) 118,91,071 Accu nu lded deprede iron: Buildings and inproverents 0.3978(1 - 18,683 - 455,463 Vehicles 1,018,985 - 148,071 91,041) 1,W6,015 Maur ine ry and eW ipnent 725,446 65410 72,7W (118515) 745,(99 Water and sewe r distribution systers 44,019139 2,124,694 46,234,833 Subtotal 46,191350 65410 2,464,1(9 (189,586) 48,531360 Net capdal assets being depredated 68,451800 1,287,911 (9,739,711 Net water and sewer captal assets (9,962376 - 2,564,936 (1,886995) 79660317 Golf course capdal assets: Capdal assets not being depredated - Land 3,582,488 - - - 3,552,488 Capital asset bein g depredated Buildings and inproverens 1,W2,329 - - - 1,W2,329 Land lmprovemens 2,312,792 - - - 2,312,792 Maurinery and ecuipnent 822,538 iW813 (22,786) 9(9,585 Subtotal 4,761659 - iW813 (27,786) 4,905,686 Accurrulared depreciation: Buildings and inprovenen6 486,685 - 32,048 - 518,733 Land improvemens 1,479349 - 93reff - 1,572,433 Maurinery and ecuipnent 389475 - W,977 (22,786) 414,666 Subtotal 2,352,509 176,109 (27,786) 1,505,832 Net capdal asset being depredated 2,415,1(9 (15,295) 2,399854 Net golf course capdal asset 5,991638 - (15,295) - 5,962,342 38 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 4 - Capital Assets (Continued) connponent Unit -pynouth Road Balance oereloprent Adhoaty Balance oecefter1, Capdal asset not being clepecided-Land $ 474,448 $ oisposaband Novedber30 - $ 474,448 CapRal asset being depreciatd- Land 2884 Reclassifications P4daions Adiusbrents 2005 Business -type Activities (Continued) - 15,210,385 Accumi lasted deprecation - Land Housing Fund 3,062,436 - ]54438 - 3,836814 Net cepdal asset being depreciated 12,001030 Capdal assets not being depreaated- 11313511 Net mdgionent a nd cephl asset Land $ 1,551,948 $ - $ - $ - $ 1591,948 Capdal asset beingdepreaded Buikings andadprovediens 6,892,062 - - - 6,892,062 Land idgarovenens 531954 - - - 537954 Vehicles 4,310 - - - 44310 Maas inery and eW ipnent 33,780 39,]80 Subtotal 1514,106 - - - 7,514,106 Accu mdatd depreciation: Buikings antladprovediens 2,227328 - 138057 - 2,? ,,385 Land idgarovenens 3]1,86] - 20,86) - 392,]36 Vehicles 24,667 - 3,%1 - 28,628 Maas inery and eW ipnent 8,947 2,402 11,349 Subtotal 2,632,809 165289 2,798,038 Net cepdal asset being depreciated 4,881297 (165,289) 4,716,008 Net Housin a Fund capdal asset 6463,245 (165,289) 6,237956 Net business- type activity cepdal asset $ 82,443259 $ $ 2,384351 $ (1,886995) $ 82,940615 Capital asset activity for the City of Livonia's component units for the year was as follows: Balance Balance oecedber 1, Disposals and Novedber30, 2004 Reclassifications AedRions Aebustrens 2005 connponent Unit -pynouth Road oereloprent Adhoaty Capdal asset not being clepecided-Land $ 474,448 $ - $ - $ - $ 474,448 CapRal asset being depreciatd- Land idgarovenent 15,083466 - 126,919 - 15,210,385 Accumi lasted deprecation - Land idgarovenent 3,062,436 - ]54438 - 3,836814 Net cepdal asset being depreciated 12,001030 (627519) 11313511 Net mdgionent a nd cephl asset $ 12,4]5,4]8 $ $ (627519) $ $ 11&41959 39 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 4- Capital Assets (Continued) Depredation expense was charged to programs of the pdmary government as follows: Governmental activities: General government $ 496,675 Public safety 1,360,787 Public works 2,925,564 Recreation and culture 1,533,269 Total governmental activities $ 6,316,295 Business -type activities: Water and sewer $ 2,464,156 Housing 165,289 Golfcourse 176,109 Total business -type activities $ 2,805,554 Construction Commitments -The City has active construction projects at year end. At year end, the City's commitments with contractors are as follows: Spentto Remaining Date Commitment Street and sidewalk projects $ 11,026,952 $ 967,840 Storm water retention project 593,651 146,205 Utility related projects 720,726 185,027 Total $ 12,341,329 $ 1,299,072 40 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 5 - Interfund Receivables, Payables, and Transfers The composition of interfund balances is as follows: Receivable Fund Pavable Fund Amount Community Recreation General Fund $ 747 Road and Sidewalks Fund Water and Sewer Fund 131,387 Total $ 132,134 These balances result from the time lag between the dates that goods and services are provided or reimbursable expenditures occur, transactions are recorded in the accounting system, and payments between funds are made. Interfund transfers reported in the fund financial statements are comprised of the following: FuM Transferred From FuM Tanskrretl To Amount Galeal FuM Nonmajorgosemmental Funds $ 1983,654' Goll Course Fund 258,711 Total General Fund 2,162 365 Community Recreation Fund Nonmajorgosemmental Funds 2,172,881 .... Nonmajargosernmantalfunds General Fund 40,000 Nonmajorgosemmental Funds 3,898,749 ... Goll Course Fund 87,646 s Total nonmajor gown -rental Funds 4,826,395 Total $ 8,361561 ' Transfer of unrestnded resaurcesto finance capital projects and general odgaton debt service in accordance with budgetary autrwnzatms " Transfer from a Debt Service Fund to the Goff Course Fund Pnmanly transfers dgas and might tax resenues from the Major Streets Fund and Local Streels Fund to the Road andSi@walk Fundin accordan oe with Ad 51 also imiudes tanskr lordabt service .... Transfer Form Community Recradion Fund for debt seraw 41 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 6 -Leases Capital Leases- The City has entered into a lease agreement as lessee for financing the purchase of police, fire, and energy conservation equipment. This lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the present value of the future minimum lease payments as of the inception date. The future minimum lease obligations and the net present value are as follows: Years Ending Governmental November 30 Activities 2006 $ 1,004,388 2007 677,441 2008 69,422 2009 69,421 2010 69,422 2011 69,420 Total minimum lease payments 1,959,514 Less amount representing interest (124,967) Present value at November 30, 2005 $ 1,834,547 These leases are included in the long-term debt schedules in Note 7. Note 7 - Long -tern Debt The City issues bonds to provide for the acquisition and construction of major capital facilities. General obligation bonds are direct obligations and pledge the full faith and credit of the City. Capital lease obligations are also general obligations of the government. Special assessment bonds provide for capital improvements that benefit specific properties, and will be repaid from amounts levied against those properties benefited from the construction. In the event that a deficiency exists because of unpaid or delinquent special assessments at the time a debt service payment is due, the City is obligated to provide resources to coverthe deficiency until other resources (such as tax sale proceeds or a reassessment of the district) are received. Revenue bonds involve a pledge of specific income derived from the acquired or constructed assets to pay debt service. 42 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 7 - Long -tern Debt (Continued) Long-term obligation activity can be summarized as follows: iter est Hmrpal Me Maurm Beanrng aemrwr Parra' Bugo' Bahr¢ Adsors PeAMIa¢ ErftMans One Year Gwemrte=1 amMla BUII411gAiji bBonds'. 1991 CLYrh Court ineroiBoner rtounLo145ue-SSl Wturmthrot IXb 1996 MB?. B4i2iory Bm6 rtounLo145ue-991}33 Wturmthrot IXb 1999 MB?. B4i2iory Bm6 rtounLOM1Sue-SZ 50a Wturmthrot IXb 1990 MBA Fire3latlm Bonds rtounLo145ue-Sl rM m Maturre threi 10 PW]Peeeew Bmds Arrwmmlrere-spm9.em MamrlmmoAnzmS 2W1 Rwreeon Bmds Arno :i SB5[13" Wturlmthroti PWS MBA PeMdra Bords Arrountollaue-SA M Maturlmthrot 815 So-atand HV91mar Geiam Oo10i Cnllmtel Tax Bonds 19 fired LLproi Bon® Artour of issue -51.5W Wurm trragr 2« 51][% VOror S 135,ror S - $ tb•`,") $ Agra $ TO," 171 Bela 3913 103% 8105W0 955 IN 57113C- S73 589% 1758W 1365" - 5m%- S7Ei" m® 5mse M75BBB 2mO0B0 - sire- Merl" 35[1 525% 31 � Bolo B - 3O]M- $2509 425% Y05WB - 3rFiB" 615)" 6W% M75O33 175" 43 (aim) (IA 01) 185,80] 185,80] (tzm,e99i 1e5,e99 m® (z3g` 083) 45[1 75® MOM) Y633" 35[1 - 3riB" 25 (irei") City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 7 -Long-term Debt (Continued) 44 Red itrturty aernnm Cori Rama Rama Ei ei Radu rs End�m®lance onev®r coaemaertn a¢rvnlea (cormmeat SDst and wgm y Bdrm (Cw[avm) 1293 Road ftroonert Binds MWntofinue-.Sii530flfl) Idnii 1- Wurindthwgd20E 425% .WWW] S 1450,W] S - $ Main $ 11M" $ 375" 2992 General (donation 3efamlm Bow nrrwmmisane-se,395,Om s255,aoB- maturlrgtrcwgd2am 3W% .Aaaaoo i(reCOB - Pi died" 740,000 Sp®f N¢®'rterit Brands 19995penal Psa®srterR Minted Ta Bink nrrounto aoe-s1,m5" maturlrgtrcwgd2005 750% Video 758BB - p5000) - - ne)5pemlunited Tax Bow nrrounto aoe-s1,7m,Om h4NdrythrmO2IX6 fiW% Ri 95 W] - ry5W31 - - Capital line obligations BankCne- Energy CdrseMMEarprred MWrkd115ue-.S3(51i2 $431iw h4Ndrythnvgd2W7 388% $151]03 121Y5I433 - (41028) 895 in 431 WO Fire Trull Fri Anne OM1Sue-We" ¢]105 inudrythrmO2011 3P% w6d) 42920 - 4562881 TF3,915 57105 Conedm Bank Polls mmpu@r nrrounmneue-s1,13K)i h4N9g Nrwg028E 38396 Vann 03M - P10W7) 310CM 310CM Fro Trull Wrruer Frrour6mksue-Wine 312699i F4NIrg Nrngb2W7 379% s31331 51135 rdd T3258817126905 TonalgvianrteRnl aDthty dean 44,835412 3IFY)" (]N5,flie5) 41S Mli 31222W timer loiynerm obl ganm: Geneaukb9lty mlrre worlan mrrpeaaem and b®Im insurance ¢lone sore 9) 1Tin 181 W7fi97 - z 878 - tandnudneureandpordneurelmbmty 01»3 17292 - MC672 - Corrpersatedabseds 'flE21045 grd� X517 3320741 Tonal goeemrrerGl aDtyree $ 9270418 $ 4K5,529 $ 9114M) $ 5121104 $ 3412,915 44 City of Livonia, Michigan Notes to Financial Statements November 3O, 2005 Note 7 - Long-term Debt (Continued) 45 l Poll =., Neal aglnn Deal nes Ranged Bell Al radiator, Ending deal OneVur Bualneatype&INM®: BUII411u A ul Bondy. 1909 MBA Fax Cred Clabtaee Bonds uwmollsue-$lure" Natudrytrtogt2O8 920% MO" $ 50,0.11 $ - $ (Odin) $ - $ - 19% MBA PPinal Bonds Arrourtonaue-VN711 Norturinatrcogn2om em% 1203711 2oe,711 - "Ti) - 19% MBA 3Pinal Bonds Arrount6lave-UME53 e5%- A18099- Maunnpmdoor 915 520% $1801 4319956 - M) 4(Kol 31801 193) MBP 3Pinal Bonds Annual orrery¢-$121Btm 4O]M- $125W]- WurlrOtrcagn2OE 415% s35W3 5Ol,0.11 - (131,0]) 3M 125," Nater 5uppN and N4tefeter eastern Bm6c 2W] N0ter Supply and WffiexMU S enn 3auwe Bm6 ArromLauwe-SS.nYJ.W] 5125%- $1E0]- N4Nlrlurtogn2020 533% $15903 4uFO" - (1301) 442503 125,03 208 Water Supply and We4eraner 50en Reeerue 3elurdlrq Boned MouR above-$9,3D1,W1 259%- W1B0]- Wurrgthrough 2012 401% $1(115,0] 74430" - @a,0]) 45750] 91801 Las deterred al on refund no (dour del) - 1 015) w7, 4O) - Total dew Lead type aalNy debt 1601246 - (17438021 15 w sold 147801 Cony mdradual oblgalore: State Bevpnlre Fund Loan -N. Hurm va)wMaue vall y WssLewater Cmtasytern Arrwmmlaue-$1442379 120"- h4[uligNrggnRRl 225% $2501 MO" - 80,01) 310" 20,01 Omer longterm oblg rroner General ldelly Falre wonRaa mrmeaal and b®Im lauaire 01rre Gal a69) MGM 51310 - 218707 - C rtpersrtedadui®' 431357YP1 M2740196216 Total delnastype a6Mta 17M�&213 G M oe 1604919 1M Taal cover mortal and delnov'.typeadMla $ 71MM $ 41MM $ (3O73N5) $ 920,743 $ B129, 161 45 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 7 - Long-term Debt (Continued) Corrponaaomr 1990 DmImn oaebprtm16m6[: An mmoe -. 500 4(o% $310,Q11- MaWnmtbrmgb2019 470% e9sOM $ 6(05" $ - $ Q Ma $ 57M" $ 310" ahrlm ormublgaeon-Propem rm seeu 515,939 - - 515,939 - Tohl mrt ertunRa uo $ 05550,939 5 $ 4, Ma $ 4255` 939 $ 310" Annual debt service requirements to matudty for the above bonds and note oblgations are as follows: ZU Gowmmental Mhvlaas Busnmssty ActiHties Pnmpal Interest Total Pnmpal Interest Total 2006 $ 3,122,204 $ 1954,167 $ 5,076371 $ 1429,987 $ 655,262 $ 2,085,249 2007 1900,883 1843,809 3,744,692 1479,987 606,007 2,085,994 2008 1,191,175 1767,579 2,956,754 1524,987 552,191 2,071,178 2009 898,274 1119,598 2,617,872 1459,985 493,939 1953,924 2010 1830,445 1614,116 2,704561 1,421,381 428,128 1849,509 2011-2015 6,N2,690 7,467,412 14,460,102 5,784,080 1295,094 7,079,174 2016-2020 9,050,000 5,477,901 14,527,901 2,267,187 358,062 2,625,249 2021-2025 9,103,876 3,246,879 12,350,755 - - - 2B26-2030 8,250,000 1074,564 9,324564 Total $ 41539,547 $ 26,226,025 $ 61,765,572 $ 15,367,594 $ 4,388,683 $ 19,756,277 Conponent Units Principal Interest Total 2006 $ 310,000 $ 262,495 $ 572,495 2007 330,000 247,455 577,455 2008 350,000 231,475 581,475 2009 365,000 214,673 579,673 2010 390,000 196,930 586,930 2011-2015 2,300,000 680,326 2,980,326 2016-2019 1,695,000 121,613 1,816,613 Total $ 5,740,000 $ 1,954,967 $ 7,694,967 ZU City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 7 - Long-term Debt (Continued) Defeased Debt During the year, the City issued $3,730,000 in Building Authority Refunding Bonds with an average interest ate of 3.87 percent. The proceeds of these bonds were used to advance refund $1,155,000 of $1,300,000 for Series 1998 MBA Fire Station Bonds and $2,300,000 of $2,750,000 for 2000 Recreation Bonds. The remaining outstanding liability is $145,000 and $450,000, respectively. The advance refunding reduced total debt service payments over the next 20 years by $180,853, which represents an economic gi in of $125,724. In prior years, the City defeased certain bonds by placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust accounts' assets and liabilities for the defeased bonds are not included in the basic financial statements. At November 30, 2705, $21,135,000 of bonds outstanding are considered defeased. No Commitment Debt - The City has issued Industrial Development Revenue Bonds and Economic Development Corporation Bonds under state law which authorizes municipalities under certain circumstances to acquire and lease industrial sites, buildings, and equipment and lease them to third parties. The revenue bonds issued are payable solely from the net revenue derived from the respective leases and are not a general obligation of the City. After these bonds are issued, all financial activity is taken over by the paying agent. The bonds and related lease contracts are not reflected in the City's financial statements. Information regarding the status of each bond issue, including possible default, must be obtained from the paying agent or other knowledgeable source. As of November30, 2005, there is approximately $61,367,000 of no commitment debt outstanding. 47 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 8 - Restricted Assets The balances of the restricted asset accounts are as follows: Businesertype Governmental Activities Actlwtes Worried Builtlns ureet TAB ureet Authortyand Improverrea Imysvement Total Other Debt Captal Prgeot Captal Project Governmental Water mtlSover Service Fund Fund Fmtl Activities Fmtl Cash and ash e4n'alents Revenue round reserves 8 - 8 - 8 - 8 - 8 1,401,060 Bond proceed: al 110,v9 12]2]02 1pfis,zw 314,051 Taal am andash ecuvalents al 110j69 1,2]2]02 16bl 1,713,091 Assets hold ty Wayne County - - - - 2A,3]9 Receivade from Wayne County 197,406 197,,10(1 Total restricted mob 8 ac,965 $ 11OM9 $ 1,670,106 8 I.663.642 8 1951,670 Governmental Activities - The governmental activities have unspent bond proceeds relating to debt issued for the construction of streets and for police computer upgrades. The City also has a receivable from Wayne County relating to street construction financed by the City on behalf of the County with bond proceeds. Business -type Activities - At November 30, 2005, the City was in compliance with the provisions of the Water Supply and Wastewater System Revenue bonds. Bond proceeds held in the amount of $314,051 in the Water and Sewer Fund relate to excess funds from the 2000 Water Supply and Wastewater System Revenue bonds to be used for future water and sewer obligations. The City also has assets of $239,379 held at Wayne County that are restricted for future water and sewer obligations. Note 9 -Risk Management The City is exposed to various risks of loss related to property loss, torts, errors and omissions, and employee injuries (workers' compensation), as well as medical benefits provided to employees. The City has purchased commercial insurance for medical benefits and workerscompensation and participates in the Michigan Municipal Risk Management Authority (the "Authority"). 48 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 9 -Risk Management (Continued) The Michigan Municipal Risk Management Authority risk pool program operates as a claims servicing pool for amounts up to member retention limits, and operates as a common risk -sharing management program for losses in excess of member retention amounts. Although premiums are paid annually to the Authority that the Authority uses to pay claims up to the retention limits, the ultimate liability for those claims remains with the City. The City estimates the liability for general liability, workers' compensation, and radical claims that have been incurred through the end of the fiscal year, including claims that have been reported as well as those that have not yet been reported. These estimates are recorded in the Self-insurance Internal Service Fund. The estimated liability for property loss, general liability, workers' compensation, and medical daims is recorded within the governmental activities and business -type activities columns of the statement of net assets. Changes in the estimated liability for the past two fiscal years were as follows: General❑abildy WoM1srs' Compensation Medaal Claims 2105 2004 2005 2103 2005 MN Estimaledliability - Beginningdrain $ 5 ,3r1 $ 479,891 $ 1,033,383 $ 950,403 $ 328,398 $ 329,913 Edimateddaims incurred, inducing dunces in estimates 1463,159 1532,170 449,092 469,fi26 6,405,983 6209,25 Claim payments (1,476,162) (1475,000) (435103) (394,646) (5,688625) (6,210,754) Estimated liability - Endofrar $ 523,368 $ 536,371 $ 1,047221 $ 1033,383 $ 1,095,755 $ 328,398 Note 10 - Pension Plans Retirement Svstem Plan Description - The City of Livonia Employees' Retirement System (the "System") is a single -employer defined benefit pension plan that is administered by the City of Livonia Employees' Retirement System; this plan covers the following employees of the City unless they elected to transfer to the City's 401(a) defined contribution pension plan (see Note 11): • General employee members - All members hired prior to March 17, 1997 and their beneficiaries • Police lieutenant and sergeant members - All members hired prior to December 8, 1997 and their beneficiaries 49 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 10 - Pension Plans (Continued) • Police officer merrbers - All members hired prior to November 24, 1998 and their beneficiaries • Fire fighter merrbers - All members hired prior to duly 1, 1998 and their beneficiaries The System provides retirement, disability, and death benefits to plan members and their beneficiaries. At November 30, 2004, the date of the most recent actuarial valuation, membership consisted of 571 retirees and beneficiaries currently receiving benefits and terminated employees entitled to benefits but not yet receiving them, and 281 current active employees. The System does not issue a separate financial report. Contributions - Plan member contributions are recognized in the period in which the contributions are due. Employer contributions to the plan are recognized when due and the employer has made a formal commitment to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan. Please refer to Note 1 for further significant accounting policies. The obligation to contribute to and maintain the System for these employees was established by negotiation with the City's collective bargaining units and requires a contribution from the employees from 2.55 percent to 5.21 percent. The funding policy provides for periodic employer contributions at actuarially determined rates. Administrative costs ofthe plan are financed through investment eamings. Annual Pension Cost - For the year ended November 30, 2705, the City was not required to and did not make a contribution. The annual required contribution was determined as part of an actuarial valuation at November 30, 2003 using the aggregate actuarial cost method. Significant actuarial assumptions used include (a) an 8.25 percent rate of return and (b) projected salary increases of 4.75 percent to 12.67 percent per year. Both (a) and (b) include an inflation component of 4.75 percent. The actuarial value of assets was determined using techniques that smooth the effects of short-term volatility over a five-year period. The unfunded actuarial liability is being amortized as a level percentage of payroll on a closed basis. The remaining amortization period is the expected future working lifetime. 50 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 10 - Pension Plans (Continued) Reserves - As of November 30, 2))05, the plan's reserves have been fully funded as follows: Legally required reserves: Reserve for employees' contributions $ 9,233,540 Reserve for retired benefit payments 73,824,553 Additional reserves- Reserve for employer contributions 119,700,762 Total reserves $ 202,758,855 Fiscal Year Ended November 30 2003 2004 2005 Annual pension cost (APC) $ 392,639 $ - $ - Percent ofAPC contributed 100% 100% 100% Net pension obligation $ - $ - $ - Postemployment Health Care Benefit Plan Plan Description - The City of Livonia Postemployment Health Care Benefit Plan is a single employer defined benefit plan that is administered by the City of Livonia Employees' Retirement System; this plan covers all full-time employees included in the City's Defined Benefit Pension Plan (1) retiring on or after Decerrber 1, 1979, (2) retiring under disability provisions, and (3) retiring before December 1, 1979 if the person has attained age 65. The system provides postemployment health care benefits to plan members and their beneficiaries. On November 4, 1998, the City created a separate plan to cover all postemployment health care benefits of all defined benefit pension plan and defined contribution pension plan members. After this date, all postemployment health care benefit contributions are recorded as revenue in this new plan (see Note 11). However, benefit payments will continue to be paid out of the Postemployment Health Care Benefit Plan as long as reserve balances remain. At November 30, 2004, the date of the most recent actuarial valuation, membership consisted of 571 retirees and beneficiaries currently receiving benefits and terminated employees entitled to benefits tut not yet receiving them, and 281 current active employees. The plan does not issue asepaate fimncial report. Contributions - Employer contributions to the plan are recognized when due and the employer has made a formal commitment to provide the contributions. Benefits are recognized when due and payable in accordance with the team of the plan. Please referto Note 1 forfurther significant accounting policies. 51 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 10 - Pension Plans (Continued) The obligation to contribute to and maintain the system for these employees was established by negotiation with the City's competitive bargaining units and requires no contributions from the employees. The funding policy provides for periodic employer contributions at actuarially determined rates. Administrative costs of the plan are financed through investment earnings. As discussed above, there will be no contributions to the plan subsequent to November 4, 1998. Reserves -As of November 30, 2005, the plan's legally required reserve for employees' postemployment health care benefits has been fully funded in accordance with the actuarial determined contributions in the amount of $3,052,525. Fiscal year Ended November 30 2003 2004 2005 Annual pension cost (APC) $ - $ - $ - Percent ofAPC contributed 100% 100% 100% Net pension obligation $ - $ - $ - Note 11 - Defined Contribution Pension Plan The City established a defined contribution pension plan under Section 401(a) of the Internal Revenue Code for the following employees: • General employee members -AII merrbers hired on or after March 17, 1997 • Police lieutenant and sergeant members - All members hired on or after December 8, 1997 • Police officer members -AII members hired on or after November 24, 1998 • Fire fighter members -AII members hired on orafter duly 1, 1998 In addition, the plan covers all employees electing to transfer from the City's defined benefit pension plan (see Note 10). 52 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 11 - Defined Contribution Pension Plan (Continued) In a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. As established by the City of Livonia through collective bargaining agreements, the City contributes a percentage of employees' earnings as follows: EmployeesTmnsfernng New Employees Hired from the Mine Benefit Aflerthe Elk %Dates Pension Plan Note Above Employer Employee Employer Employee Contribution Contnbuhnn Contnbuhnn C ntnbution General 12% 31%to 366% 7% 3.1%to 3.66% Police lieutenants and sergeants 13% 521% 9% 521% Police 13% 5% 9% 5% Fire 13% 356% 11% 356% The employee contribution percentages noted above represent the minimum required contribution. Employees are permitted to contribute additional amounts up to the maximum allowed by law. The City's contributions for each employee (plus interest allocated to the employee's account) are fully vested after four years of service and are vested immediately for employees transferring from the existing defined benefit pension. In accordance with the above requirements, the City contributed $1,748,492 during the current year, and employees contributed $626,867. Note 12 - Postemployment Benefits Effective November 4, 1998, the City created the City of Livonia Retiree Health and Disability Benefits Plan (the "VEBA"). The plan provides medical and health care benefits, including hospitalization and disability benefits, for the welfare of all retirees and their spouses and eligible dependents. After November 4, 1998, all contributions related to postemployment benefits for all members ofthe Defined Benefit Pension Plan and Defined Contribution Pension Plan and their beneficiaries will be recorded as revenue in the City's Other Employee Benefits Trust Fund. Eligibility - All retirees of the Defined Benefit Pension Plan and the Defined Contribution Pension Plan and their beneficiaries and future retirees who complete 10 years or more of credited service are eligible. 53 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 12 - Postemployment Benefits (Continued) Contributions - Employer contributions to the trust are recognized when due and the employer has made a forrml commitment to provide the contributions. Benefits are recognized when due and payable in accordance with the terms of the plan. Please refer to Note 1 for further significant accounting policies. The obligation to contribute to and maintain the trust for these employees was established by negotiation with the City's collective bargaining units and requires no contributions from the employees. The funding policy provides for periodic employer contributions at actuarially determined rates. Administrative costs of the plan are financed through investment earnings. Annual Cost - For the year ended November 30, 2005, the City's annual post - employment cost of $5,534,608 for the plan was equal to the Citys required and actual contribution. The annual required contribution was determined as part of an actuarial valuation at November 30, 2003, using the entry actual age cost method. Significant actuarial assumptions used include (a) an 8.25 percent investment rate of return and (b) projected 6.00 percent annual rate for medical care inflation. Both (a) and (b) include an inflation component of 4.75 percent. The actuarial value of assets was determined using techniques that smooth the effects of short-term volatility over a five-year period. The unfunded actuarial liability is being amortized as a level percentage of payroll on an open basis. The remaining amortization period is 50 years for health and 30 years for disability. Reserves - As of November 30, 2005, the trust reserves for employees' post - employment benefits have been fully funded as follows: Reserve for health insurance $ 38,114,696 Reserve for disability insurance 1,073,802 Total reserves $ 39,188,498 Fiscal Year Ended November 30 2003 2004 2005 Annual pension cost (APC) $ 4,960,217 $ 5,859,287 $ 5,534,608 Percent of APC contributed 100% 100% 100 Net pension obligation $ - $ - $ - 54 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 12 - Postemployment Benefits (Continued) Upcoming Reporting Change - The Governmental Accounting Standards Board has recently released Statement Number 45, Accounfing and Reporfing by Employers for Postemployment Benefits Other Than Pensions. The new pronouncement provides guidance for local units of government in recognizing the cost of retiree health care, as well as any "other" poster ployment benefits (other than pensions). The new rules will cause the government -wide financial statements to recognize the cost of providing retiree health care coverage over the wonting life of the employee, rather than at the time the health care prerriurts are paid. The new pronouncement is effective for the year ending November 30, 2009. Note 13 - Deferred Revenue Governmental funds report deferred revenue in connection with revenue that is not considered to be available to liquidate liabilities of the current period. Governmental funds and Enterprise Funds also defer revenue recognition in connection with resources that have been received but not yet earned. At the end of the current fiscal year, the various components of deferred revenue are as follows: Governrrental Businesstype Governmental Funtl; Actrvaies Actrvaies Unavailable Unearned Total Uneametl Unearnetl Property tax, special assessrrent sotl other recervall $ 75T,638 $ - $ 75T,638 $ - $ - Conanonay recreation center nual passes - 929,W1 929p01 929,601 - Interest receivable on sewer - - - - 916,745 Assnnections ets M1eN AWayne County - - - - 267180 Grant paynent receivetl pier to raeurn g all eligibildy re4irenents N,813 66813 man Total $$ 7_638 $_414 $ 1,754052 $ 996,414 $ 1183,845 Note 14 -Subsequent Events Subsequent to November 30, 2005, the City approved the issuance of $4,885,000 of Water Supply and Wastewater System Revenue Bonds and issuance of $4,110,000 of Water Supply and Wastewater System Revenue Refunding Bonds. Interest rates range from 3.50 percent to 5.0 percent for each bond. The bonds are payable through the year ending November 30, 2020. The Revenue Bond will be used for water and sewer construction. The Refunding Bond will be used to refund the 2000 Water and Supply and Wastewater System bonds. 55 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 14 - Subsequent Events (Continued) Subsequent to November 30, 2005, Ford Motor Company, the City's largest taxpayer, filed an appeal disputing the 2005 taxable value. Ford Motor Company property is entirely located within the Plymouth Road Development Authority. If Ford's claim is upheld, it would result in a refund of approximately $860,000 to Ford Motor Company of city taxes plus an additional amount for county taxes. The City is vigorously defending its position. RT Required Supplemental Information 57 City of Livonia, Michigan Required Supplemental Information Budgetary Comparison Schedule - General Fund Year Ended November 30, 2005 Variance with Fnal Orignal Bute1 Rai Budget Haul Budget Rewenues Properly Taxes 8 2],65],616 8 27,07,,616 8 27,604,219 $ (53367) Rival and permits Business 133,188 133po8 163,098 30,298 Hondsiness 2,003,200 2223200 2,M,899 156699 Total ovens¢ and pernits 2,141600 2,356,600 2,393,59! 18699] Intergwernnental Real 5lateand local 9,8688 9388,855 9,235,983 (104,8]2) Federal 5.000 5,000 26(.183 262ps3 Total Intergovernmental revenue 9,85,88 9385855 9,503,065 117,611 Charges is services 3,398,685 3398,685 3,3,18,891 (09,]V) Internal 658,008 910,000 1,C)i 122313 Flans and Forfeitures 0,062,800 0,852888 3,637,75] (015,803) Miscellaneous Revenan Rent and rgaAies 1,196,892 1;196892 1,149,618 (0]282) Sale or fixed assets 150,000 150,000 83,481 (66516) Other misellaneos 1.82.915 1582.905 937,211 (645,704) Total miscellaneous revenue 292381 292983] 211 (]59502) Total revenue S 50,216,310 S 50,691310 S 09,810,610 S (850,700) Expenditures (weanralf rnnent Isg¢lative: CAyCouicil $ 38],]20 $ 38],]20 $ 359,116 $ 18,595 CAyClerk 060,058 060,059 057,053 7,005 Eleddrs 280,336 260336 191,09 92,6/] Total legislative 1,135,120 1;136,120 1,817,807 118217 eddal 2,550,170 2581,171 2,59{650 521 E.ecu6ve Mayors once 23520 235200 222,351 12,819 Hdninstratrve hereon 211 211 211,969 855 Tdd executive 108,025 108,025 0N,328 13,705 Hurran resources Hurrah Relations Connision 8,2/] 8,2]] 5,932 ?285 Iabx relations 137,000 137,000 101 3'605 ceasenace 601,778 601,]]8 5]],100 60,31"8 Totzl Tuner resources 71 7`37,055 687,]8] 99,268 58 City of Livonia, Michigan Required Supplemental Information Budgetary Comparison Schedule - General Fund (Continued) Year Ended November 30, 2005 At Variance with Final Original Budget Final Budget Actual Budget Expenditures(Conicuedl General Government (Continued, Francial atlmnaValion_ Accounting $ "9883 $ EM,783 $ 4160,968 $ 8,755 Aseal 5984108 593,4108 081905 113,535 Finance 2]],812 270,612 2]222] 2,365 I coalescent audit 51,200 50566 51,456 56 Board or Revizr, 3,660 3,660 3,148 512 Treasurer 565871 565871 513,476 51,595 Data posing 665.158 665.158 661.820 3331 T dal Donal adnn¢Valion 2,631 2,631;1410 2,4158,99 1881F5 Omeractimgm: Legal 658336 658,336 631,380 18,902 utilig¢ and suppies 597,4129 597,4129 5416,935 56,191 Accustim nn and 9,000 9,000 2,381 6,609 Research and investigation 24,666 24,666 24,666 - Du¢andsutrcriginm 57,666 57,666 51,601 5,399 Titin other donag¢ 1,31],]65 1,33],]65 1256,317 8],111 Total general govarnment 8,8992d] 8,920267 8,420,903 099,381 numb seleq Police Tragic Wreau 818325 854,325 ]50]95 113,530 Adnnistration 3,161,001 2,927,830 2,793,98 131,101 Detective Wreau 2,2X,139 2Yd,139 23634151 668 Adnmdive sanies 413563 4113,563 396,4241 15,679 Comminiation9Recwce bureau 810,123 8229,371 ]]6,]96 413,575 Crooning guard; 63,032 63,032 587M 12,326 OAR E/School Iaison Muss 483,649 086230 019 Reserve poise 32527 021,331 027,135 199 Patrol Wreau 10603,696 18385.810 10258518 135296 Intelligence Wreau 1.399208 1,X8200 1S'Xo 968 Tidal needs 20299237 28299237 19,M3,882 4156235 Fre Acimnistration sell sell 813;181 0,41X Firefighting 9,817,352 9,00],]52 8,852,073 1552]9 Fire prevention 411 022963 022.867 96 Total fire 101 182]8}50 10,118,'Yt 159,829 Protective inspection, Fuildng Co@ Board oiAppeals 1,492 1,092 571 921 Inspection 1.119.053 1;1X,463 1;166,173 26,298 Tidal prolective inspection 1,160,965 1;195955 1;166,7410 29,211 Olherprotedive: Once of emergency 76,5141 76,5141 26,25ZI 58,256 TraRiccommision 6,]X 6,]X 5565 1,219 Total ober prolective 85298 15,298 25,829 59,4164 Tidal Wdol sakly 31843810 31351 31150096 ]01 At City of Livonia, Michigan Required Supplemental Information Budgetary Comparison Schedule - General Fund (Continued) Year Ended November 30, 2005 M Variance with Final Original Budget Fnal Budget Actual Budget Expenditures(CmGnuedt Puck waits Putlicservices- Highwals, streets, and ircintenance Engineering $ 573,858 $ A3,858 $ 571, $ 2,4M Pans naintenance 928E60 928,560 928,761 96 Administration 22372 10872 10613 229 Ecuiaxnent nainlenance 151 225,Of£ 220,116 920 Bunning insinaenaoce 1901 1,701,721 1700911 810 Street lighting 32,711 351 355,131 150 Maintenance Streets 310 112,310 111639 701 Tran¢services 67,163 51163 51,213 250 Forestry 21652 21652 21131 518 Total rydicwwVs 3,961116 3,981116 3971,919 6,16! Recreation and cultural Park and recreation: nmnniatratmn 139wo 535,w) 531jn 963 Recreation battles 39,121 30,031 29,815 186 Selanni "a 182606 159,606 151873 ],]35 Recreatim athletic 151862 12,972 108655 316 Recrealim lacgrzrns 81,914 60,914 60,400 511 Total agree antl recreatim 891 895,065 865,351 9,731 Cultural: Historic Presem4m Canal 5,119 1,119 3,315 SM HistorialConnral 69,182 69,182 6],561 1,618 Chary Commisim 150000 515,000 515,000 AM Corral 21,513 19513 19,506 37 Communityresmrces 966607 909,607 909576 31 Total cultural 1517,151 1517151 1511,961 2,190 Total recreation andcdtural 2p11 2112536 2,400312 12221 eonanunml am Econanc reinstatement Cry Planning Commision 629,T26 629,326 623223 6,10 Zoning Board ofHageak 124,151 121151 105,630 18,521 Total cornea antl economic clam"ent 753,480 753,180 726953 21,627 Enni eerier; Insurance, am Other 2,318,951 2,778951 2,716,55 2366 Total extenMures $ 50209,213 $ 50,709213 $ 19,14,619 $ 1219$31 M City of Livonia, Michigan CommunTyRecrealion Original Final Variance with Budget Budget Actual Final Budget Revenues pmperlytaxes $ 3,564743 $ 3564,143 $ 3,544624 $ (28,119) Chargesforsermoo 3,481155 3,556,155 3,546988 (9,255) Interest 65,000 65,000 163e39 98,839 Miscellaneous revenue 2,4E3 ?463 Total revenues 7,118,898 7,185,898 ],25],826 71928 Expenditures Sanitation - - - - Recreation and culture 4589957 4988,899 4489,471 419,428 Transfers out 2,181545 2,181545 2,172,881 8,744 Total expendmms 6,771502 7,090,444 6,662,212 428,172 Excess of Revenues Over (Under) Expenditures 339396 95,454 595554 580,188 Fund Balance- Beginning of year 5,041 ]66 5,041 ]66 5,041 ]66 Fund Balance - End of year $ 5,381,162 $ 5,13],228 $ 5,637,328 $ 588,188 61 Required Supplemental Information Budgetary Comparison Schedule Major Special Revenue Funds Year Ended November 3O, 2005 OMinal Final Vanance with Budjet Budipt Actual Final Budget $ 11,684,004 $ 11,684,004 $ 11,619,633 $ (64,311) 105,000 105,000 82,173 (22,821) 15,000 15,000 16/,861 W,861 10,000 10,000 12,109 2,109 11814,004 11814,004 11,881n13 7,172 12,511,664 12,651 413 l l 133 516 1511,891 12,511,664 12,651 413 l l 133 516 1511,891 (643,660) pn,409) 148,260 1525,669 4,629,699 4,629,699 4,629,699 $ 3,996,039 $ 3,952,290 $ 5,3]],959 $ 1,525,669 RE City of Livonia, Michigan Required Supplemental Information Pension System Schedule of Funding Progress (000s omitted) 63 Unrunded Actuarial Actuarial Unfunded Funded (Overfunded) Actuarial Value of A ed Liability (Overfunded) Ratio Covered AOL as Valuation Assets (MD Entry Age ML(UAAL) (Percent) Payroll Percentage of Date (a) (b) (t~a) (alb) (c) Covered Payroll 11130198 $ lerero 5 ` $ 1510&5 $ (25,9W) 1172 $ 20,653 (1256) 11 MAN) 184,782 ` 149,052 (35.730) 1240 18,fi84 (1912) 11 mm 192,4H ` 146670 (43,807, 1295 17,132 (2557) 11130101 200937 - 151,438 (49,499) 1327 16,]21 (296.0) 11130102 199,627 - 159272 (40,355) 1253 17285 (2335) 11130103 203,505 - 159,900 (43,0057 1273 17109 (2549) 11130104 190578 ` 164,378 (35,200) 1214 16W0 (2190) Valued usingtbe We -year ^snootned rending market value Schedule of Employer Contributions Annual Year Ended Required Percentage November 30 Contribution Contributed 1999 $ 1,919,594 100 2000 837,116 100 2001 645,335 100 2002 417,464 100 2003 392,639 100 2004 - 100 2005 100 63 City of Livonia, Michigan Required Supplemental Information (Continued) The information presented above was determined as part of the actuarial valuations at the dates indicated. Additional information as of November 30, 2004, the latest actuarial valuation, follows: Actuarial cost method Aggregate Amortization method Remaining amortization period Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases, including inflation at 4.75 64 Level percent, closed Expected future working lifetime Five-year smoothed market 8.25% 4.75%-12.67% City of Livonia, Michigan Required Supplemental Information Postemployment Benefit Plans Schedule of Funding Progress (000s omitted) The following schedules indude both the Postemployment Health Care Benefit Plan and the Retiree Health and Disability Benefits Plan: Actuanal Valuation Date Aau aria Value of Assets (a) Actuarial Accrued! Liability Unfunded (AAL)Entry Age AAL(UAAL) (b) (ba) Funded Ratio (Percent) (alb) Covered Payroll (c) UAAL as Percentage of Covered Payroll 1113958 E 23,250 ` E 51,118 E 2!,868 455 E 28,989 96.1 1113959 24,360 ` 61,357 36,987 397 go375 1218 11130/00 25,331 ` 71,464 vR'lH 355 31523 146.3 1113051 1113052 1113053 30,475 104,386 73911 292 34,084 2168 11/30M 3'6go 110,156 n466 342 33,355 2173 `Valued using the hadyear"simomed Lruin Y market value "Infone8on not available Schedule of Employer Contributions Annual Year Ended Required Percentage November 30 Contribution Contributed 1999 f 3,066,032 100 2000 3,542,404 100 2001 4,318,306 100 2002 4,575,001 100 2003 4,960,217 100 2004 5,859,287 100 2005 5,534,608 100 K� City of Livonia, Michigan Required Supplemental Information (Continued) Postemployment Benefit Plans Actuarial Assumptions (000s omitted) The information presented above was determined as part of the actuarial valuations at the dates indicated. Additional information as of November 30, 2004, the latest actuarial valuation, follows: Actuarial cost method Entry age Amortization method Remaining amortization period: Health Disability Level percent, open 50 years 30 years Asset valuation method Five-year smoothed market Actuarial assumptions: Investment ate of return Projected annual premium increases, induding inflation at 4.75 Ffl 8.25% 10.75 City of Livonia, Michigan Notes to Required Supplemental Information November 30, 2005 Note 1 - Reconciliation of Budgeted Amounts to Basic Financial Statements The budgetary comparison schedules for the General and Major Special Revenue Funds are presented on the same basis of accounting used in preparing the adopted budget. Following is a reconciliation of the budgetary comparison schedule to the governmental funds (statement of revenues, expenditures, and changes in fund balances): Major Sreaal Revenue Fv s CcnerA Fu Comnunl Re<reatw Refile Taal Tout Taal raaI Taal Total Revenue Fa mRures Revenue ExpemRures Revenue Fa mRures ammo ger ogeraing statement $ 49.800,610 $ m,297,314 $ 7.zn.8z6 $ 4,439.471 $ 11.331.n6 $ 11,143516 Operangtramkrs Wa3eteaas reumueandexpentlWres 40003 2,162,365 - 2Ts'2801 ammo per k4el statement $ 49.843613 $ 49,0.59679 $ 725/,826 $ 6,662272 $ 11881,716 $ 11,133,516 Note 2 - Budgetary Information Budgetary Information - Annual budgets are adopted on a basis consistent with accounting prinaples generally accepted in the United States of America for the General Fund and all Special Revenue Funds except that operating transfers and debt proceeds have been included in the "revenue' and "expenditures" categories, rather than as "other financing sources (uses)." All annual appropriations lapse at fiscal year end; encumbrances are not included as expenditures. During the year, the budget was amended in a legally permissible manner. The City follows these procedures in establishing the budgetary data reflected in the financial statements: 1. On or before September 15, the mayor submits to the City Council a proposed operating budget for the fiscal year commencing the following December 1. The operating budget includes proposed expenditures and the means of financing them. 2. Public hearings are conducted to obtain citizen comments. 3. As provided for by the City Charter, not later than November 1, the Council shall adopt the budget through the passage of a budget resolution and transmit the budget to the mayor. Not later than November 15, the mayor shall either approve or disapprove the adopted budget, in whole or in part. 67 City of Livonia, Michigan Notes to Required Supplemental Information November 30, 2005 Note 2 - Budgetary Information (Continued) 4. The legislative budget is adopted at a functional level for the General Fund, and at the fund level for other governmental and proprietary funds. The budget document presents information by fund, function, department, and line items. Management may amend the budget at the detail level within the legislative summary constraints. Appropriations that exceed the summary budget constraints require City Council approval. Excess of Expenditures Over Appropriations in Budgeted Funds - The City did not have significant expenditure budget variances. Other Supplemental Information es City of Livonia, Michigan Special Revenue Fund 70 Grants andS4D Puts Wjor Streets Intel Streets Street Ligning Cade Television Gbary Commmiation Assts Cash and investmmnts S 2,3935M S 1.065631 S 130.101 8 1.127,00! 8 8]9,]6! 8 t991,R! Re sales: Tars - - - - FIVE Specialasesments - - 2,869 - - - Other 6,99E 3,625 352'A Due Rom other find Due Rom other governmental units 651759 269206 934,821 - - - Rstuctedmob Total assets S 3,058,25] S 1,314,835 5 1,11],]91 S 1,127,08E S M,510 S 2,031,081 Liabilities and Fund Balsams LiabiliUs Accounts tortes 8 10,497 8 741 8 829.035 8 1.983 8 113,261 8 Accrued and other liadlitis - - 2580E 9,613 91581 - De%rredrevenue - - 66,813 - 8,913 - Due to other find - Total liadlitis 10,097 7E1 921]32 11,626 216,M - Fund Bamnca Reserved our aptal construction - - - - - - Unreserved Undsigmted 3,04],]60 1,316,09E 196,059 1,115,458 tiOrss 2,031,082 Totafilndllarces 306],]60 1,31E,09E 136,059 1,115,458 6/!,M 2,031,082 Tota lhablloesann Lndmlances $ 3,058,257 $ 1.314AM S 1.117,791 S 1,127,094 S M,510 $ 2031,@ 70 Other Supplemental Information Combining Balance Sheet Nonmajor Governmental Funds November 30, 2005 SWial Revenue Fina; 321,631 8 oeasemce Funds - 8 - 8 - 9,813 3,011 wnktal 331,526 3,011 1087,981 19,824 Bunning A4udated R®d and 19'0 Street swial 2005 MBA Authcrtyand Furra9ura s�cla.alks imau+arrent Assessments Rerunning other S 82,985 8 1,331,821 8 1,195,8% 8 19,892 8 1,626 - V2 3,]U 22,900 131,38] B2%5 S 1,131,@1 $ 1,339587 $ nX5 $ 24,46 $ S 81,985 8 25518 8 321,631 8 - 8 - 8 - 8 - 9,813 3,011 25518 331,526 3,011 1087,981 1685583 1087.981 19,824 3,M 82'A5 1685583 1087,981 19,824 3,M 82%5 S 1,131,021 $ 1}3950] $ T2$35 $ 24,526 $ S 82,985 71 City of Livonia, Michigan 72 Gptal Projects Find Branase cercoise Street Projects 1%09ree1 carom GpUI Irnprovemem cnmtruaten Irnprovemem ImPrnvermnt ImPraemmnt Annals Cash and Investments 8 - 8 1$210 8 - 8 393.017 8 1)3],385 Re<ewbes. Taxes- - - - - Spoolasessments - - - - - Other Due tom other that; - - - - - Dueaomnthersnwmmemalwits - - - - - Restri<@tlassets 110,519 - 1670;108 TolAasets S 110,519 5 116,210 5 ip70,108 S 399,007 51,237,385 HabiliUes and! Fund Balances Hadlites Accounts Mnabe 8 - 8 - 8 - 8 - 8 28,802 Accrued and other loblities - - - - - Berarrearevenue - - - - - Metnnmerruns Total patello¢ - - - - 28,812 Funs B,larcas Reseiwtlrar wpel comtruaten 110,549 - 1,76,108 - - Unreservetl-Bndsignatetl - 116' 10 - %59067 Total Nntl Macs 110,89 116,210 1,470,108 3'13,007 1208,513 Total 1ad1Aies antl runtlbalances 5 110,519 5 116,210 $ 1A70,108 $ 399,07 $ 1,237,385 72 Other Supplemental Information Combining Balance Sheet (Continued) Nonmajor Governmental Funds November 30, 2005 QpW PrMeck Funds Community Taal Nonmaior Special Recreation Court Building G emmental Assessments Construction Imorovemeaa Funds - - - 547488 s 12407,140 27,086 486,197 - - 511,966 46,917 131,387 1,891,781 1,6113,612 $ 75,44 $ $ 547,41% $ 17,080,662 s X04 s - s - s 1.360,645 130118 417806 - - 526.913 1,530,657 3(crg4 - 547488 13081 J088g4 547488 15862996 $ 755,14 $ 5 547,488 5 17,880662 73 City of Livonia, Michigan 74 Special Revenue Fund crams and saBStreet Pudic safety Mardi Local Streets Fighting Cade Television Library Comnuniation Revenue Property taxes 8 - 8 - 8 - 8 - 8 3,650,160 8 Special Movements 911,395 - - Intergovernmental revenue State am local 45810]] 1736,964 495667 - - - Federal - - 1598588 - - - Clargesbrsexeces - - 51,842 - 262,907 642,157 Interest SS,B5 21,619 178 20,822 48018 37,125 Fines and mrfxtules - - - - 0,807 - Rsscelaneaesrevenue - 4,400 99,704 v5T36 - - Tical revenue 4,6397]2 1762,963 3,151 Bibi 4,042,3'Y 6]9262 Expenditures (Renard go+ernirem - - 169,168 Pubic safely 546,617 - - 34,944 PudicwwVs 2,483,674 1693,943 91 - - - Recreation and cu6ure - - 546,486 SsrrZ 3,810451 - Comminilyandsconomcdselopnent - - io33961 - - - CaPleloullay Bed- Principal letneram - - - - - - Bed- ratelestanndher Tical expentlWres 2,413,074 1,691 3:135X0 Sspset 3,821 34.944 Escessol Revenue Orer(Under) Expenditures 2,156,698 69,646 21978 39566 149,895 6xi Other Financing Sources (Uses) Proceed fromthe Issuance of long-termdd - - - - - Rossi escrow agents for thnderunding Therefore in - 1.499,999 - - 515,000 Franchise out theg9.99a (170000m - (ao.00m (493.750J - Toulotherhnanciresources(uses) (160,9.999) (200001) - (4a,o90) 16250 Net change in Fund Balances 456g r (130,969 21976 ("O) 166,145 61 FundBaances-eeinningofyar 2591061 1?ns,oss 174,061 1115e96 511Vr 1,366,]44 FundEbances-Endofyear $ 3,04],]66 $ 1,314,094 $ 196,059 $ 1,115,456 S Ini $ 2,031,062 74 Other Supplemental Information Combining Statement of Revenue, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds Year Ended November 30, 2005 Sgeaial Revenue Funds - oew Sema Funds 160,888 Mjudated I,TI6,12] 1998 Wee1 SFecal 2005 MM MunciRal BuiMng FwkAwes RadandSiRwalks IWovement A¢esmenk ReNndng MhwiiyandUher 1235.325 165255 94.359 3.550,486 743X3 s - s 4,812.00 s 1242555- (94,359) (3,52577) - - - 39,895 - - 46L134 - - - - N,88 ]1,458 M 3,454 - 7,829 613,215 53659 3,529]1 13 2X291 (8].6 6 1,895,248 4,189,76ii 12428f8 42,549 - 7,829 3 1' 6, 95913 - - 1;135008 160,888 I,TI6,12] 100,325 5,256 94359 1814,279 3519e7 6.795913 1235.325 165255 94.359 3.550,486 743X3 (2686,147) 7,515 (122707) (94,359) (3,52577) - - - - 3,738,888 - - - - - (3,6®,30� - - 1980,8W - - 53659 3,529]1 (8].6 6 - 1980,8W - - 94X9 3,875,2]6 743303 ( .147) 7,515 (M707) - (4/7,381) 6622X8 1]94124 tt,3W 125996 550,86 S 1,485583 $ 1,887,981 $ 19,824 $ 3,289 $ $ UM 75 City of Livonia, Michigan Revenue proaM taxes Special atevesirems Intergovernmental revenue: State am local Federal Gorges br servics Interest Fns and brkitures rdscelaneans revenue Total revenue Expenditures General govemnem Pudic sati Pudicworis Re creation and culture comminity and economc deselop�rem Capital outlay Dew- Pnndtel reorenrem Dew-Imerestandmher Taal exgencitures Excess of Revenue Over (Under) Expenditures Omer Financing sours es (uses) Proceed tommeisuarce of long+erns dew Prymene to esrov agents to trnd rerunning Traiskrs in Trmskrs out Taal other financing sources Nss) Net change in Fund Bull FUN Balarces- Beginning ofyear FUN Balarces-End after GPtal Projects Fund Cdfcourse Street Drainage Projects 1990 Street captal improvement construction improvement imaovamew 8 8 8 8 18,611 $2925 z540 27,361 1E3,742 3,113 z540 27361 7,050 3,113 z540 27361 150,792 18,611 $2925 (379B12) z540 27,361 18,611 490361 111 1462,747 267,266 �37991T1 z540 27361 132,161 (379B12) z540 27,361 132,181 490361 111 1462,747 267,266 $ 110,549 $ 116,210 5 1A70,108 $ 391 w Other Supplemental Information Combining Statement of Revenue, Expenditures, and Changes in Fund Balances (Continued) Nonmajor Governmental Funds Year Ended November 30, 2005 CapW Prgeck Funs Cum umry Capul Special Recrekm CouN BuildM TdINw�jw xovemen( A mmenk Ca trulm lm mem n15 Gm rnmenbl Fwd 77 8,900,738 - iM235 - - itM,]25 6817M8 - - - - 2066n4 291,926 1415,574 1170) 23189 1,1% 8,676 M,4n 832,822 30,000 2z7,00 - - 917,215 4170) 410,433 11% 303,692 z22Bo,575 - - - - 109,160 - - - -8, qi's - - - - 49026 ,v,2o1 - - - - 1833,961 406,2tt 6+7296 an5,732 - 1660,]22 - - - - 3011127 zoMz19 4062V Wn M5,7M 25Az4,014 (3Fd E43) (23689) (2M542) 363W2 (3. .439) - - - - 3,738,888 (3,689388) M36M ],9]5,2M (4.82b.395) M36M - - - 3,929,589 4]9181 (2589) (2MM2) 3N692 U,078 Y23,34 A ,]5] A4j4 203886 14616,926 S 1268M3 $ MAM S $ 547,22 $ 15,o "6 77 City of Livonia, Michigan Other Supplemental Information Combining Statement of Net Assets Pension and Other Employee Benefit Trust Funds November 30, 2005 Assets Cash and cash equivalents Invest nents: US gowmment seventies Common stack Corporate bonds Foregn stock Mutualtmds Real estate investment trust Invest rents held by bmker�daaler and banks uncler secunhas bans: US gosemment seventies US corporate fixetl icoome US equities SawrlheS landing shorlterm collateral bank invest hent pool Otherrewisables Total assets Liabilities Accounts payable Accrued and other IiabilRies Amwnts die to broker wider seventies lancing agreement HIRMIIF.ITRM. Net Assets - Reserand Employees' Retirement System Employees' postamployment health care and ch ability tenants Total net assets Employees' Retirement Systan(Note10) VEM(Note12) Total $ 1006,705 $ - $ 1,006,705 35,063,792 8,788,402 43,852,194 99947,413 8,324360 108,271]73 35,794,366 7,093330 42,887,696 2,]40,30] 491,790 3,232,097 10,122,471 13,944,940 24,067,411 10,000,000 - 10,000,000 435,203 - 435,203 367,A3 - 367,773 1086].653 - 10.86].653 12,118,448 - 12,118,448 46]3]5 563896 1831271 218,931506 39,206,718 258,138,224 331]04 18,228 349,924 669,974 - 669974 12,118, 448 12,118, 448 13,120,126 18,228 13,138 346 202,758,855 - 202,758,855 3,052,525 39,188,498 42,241,023 $ 205,811,380 $ 39,188,498 $ 2A4,999,818 City of Livonia, Michigan Other Supplemental Information Combining Statement of Changes in Net Assets Pension and Other Employee Benefit Trust Funds Year Ended November 30, 2005 Additions Imestmentiware: Interest and dsi@ids 5al0emantlncuma Net appreciation in fair value of investments Less inseshnant expenses Netinaestrentinxnma 6 rifles lendinx income: Interest aM fees Less borrower rebates and bank tees Total landing inxnma Contributions: Employer Empkryea Total contributions Total addtions Deductions BereNpayments Medical bereft payrnents Adranislrabw expenses Refunds of cuntnbutians Total dedrdains Net Increase Net Assets Held in Trust for Pemion and ONer Employee Benefits Beginning of year EM of year 79 Employees' Retirement Wem(Notalb WBA(Note12) Total $ 6918,739 $ 896,514 $ 7,815,253 1209,947 - 1209,947 12,864319 2,157,379 15,021698 (501,M) (40,M) (541,727) 11,047,M 15,207 11062, 429 20,491970 3,013,201 23505,171 613,457 - 613,457 (566,237) - (586,237) 27,220 - 27,220 - 5,534,606 5,534,688 529,975 - 529,975 529,975 5,534,608 6,064,583 21,049,165 8,547,8109 z ,596,974 11,047,M 15,207 11062, 429 4,446,697 499,588 4,946,285 131,246 32,863 164,109 330438 - 330.438 iF AIIIlk�4/lw:iIJIIAI f51 5,093,562 8,000,151 13,093,713 200117,818 31,188,347 231,906,165 $ 2(15,911,390 $ 39,198,499 $ 244,999,979 District Court Funds of District No. 16 City of Livonia, Michigan Financial Report with Additional Information November 30, 2005 District Court Funds of District No. 16 City of Livonia, Michigan Contents Report Letter Basic Financial Statements Statement of Net Assets - Fiduciary Funds 2 Notes to Financial Statements 34 Other Supplemental Information Schedules of Cash Receipts and Disbursements Independent Auditor's Report District Judges of the 16th District Court Honorable Kathleen McCann and Honorable Robert Brzezinsla Livonia, Michigan We have audited the financial statements of the District Court Funds of District No. 16, City of Livonia, Michigan as of November 30, 2005. These financial statements are the responsibility of the Court's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable bass for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the District Court Funds of District No. 16, City of Livonia, Michigan at November 30, 2005, in conformity with accounting principles generally accepted in the United States of America The accompanying financial statements do not present a management's discussion and analysis, which would be an analysis of the financial performance for the year. The Governmental Accounting Standards Board has determined that this analysis is necessary to supplement, although not required to be a part of, the basic financial statements. Our audit was conducted for the purpose of forming an opinion on the District Court Funds of District No. 16, City of Livonia's basic financial statements. The accompanying other supplemental information, as identified in the table of contents, is presented for the purpose of additional analysis and is not a required part of the basic financial statements. The other supplemental information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. January 19, 2006 District Court Funds of District No. 16 City of Livonia, Michigan Assets Cash and investments (Note 2) Due from bond account Total assets Statement of Net Assets Fiduciary Funds November 30, 2005 Agency Funds Depository Bond Account Account Total $ 455,340 $ 275,364 $ 730,704 3,675 3,675 $ 459,015 $ 275,364 $ 734,379 Liabilities Due to: Depository account $ - $ 3,675 $ 3,675 City of Livonia 323,770 8,880 332,650 State of Michigan 126,278 - 126,278 Wayne County 8,967 - 8,967 Bond deposits, voluntary work program, and other 262,809 262,809 Total liabilities See Notes to Financial Statements. 2 $ 459,015 $ 275,364 $ 734,379 District Court Funds of District No. 16 City of Livonia, Michigan Notes to Financial Statements November 30,2005 Note 1 - Significant Accounting Policies The accounting policies of the Distinct Court Funds of District No. 16, City of Livonia, Michigan (the "Distinct Court") conform to accounting principles generally accepted in the United States of America (GAAP) as applicable to governmental units. The District Court is governed by two elected judges. There are no component units. The following is a summary of the significant accounting policies used by the District Court Funds of District No. 16: The funds of the District Court are Agency Funds. The financial activities of the funds are limited to collections of amounts that are subsequently returned or paid to third parties. The funds are custodial in nature (assets equal liabilities) and do not involve the measurement of results of operations. The District Court is responsible for traffic and moving violations, certain civil matters, and misdemeanors within the City lirrits. Note 2 - Cash and Cash Equivalents Michigan Compiled Laws, Section 129.91, authorizes local governmental units to make deposits and invest in the accounts of federally insured banks, credit unions, and savings and loan associations that have offices in Michigan. The District Court s allowed to invest in bonds, securities, and other direct obligations of the United States or any agency or instrumentality ofthe United States; repurchase agreements; bankers' acceptance of United States banks; commercial paper rated within the two highest classifications which matures not more than 270 days after the date of purchase; obligations of the State of Michigan or its political subdivisions, which are rated as investment grade; and mutual funds composed of investment vehicles that are legal for direct investment by local units ofgovernment in Michigan. The District Court has designated three banks for the deposit of District Court funds. The investment policy adopted by the City Council in accordance with Public Act 196 of 1997 has authorized investment in bonds and securities of the United States government, bank accounts and CDs, and such obligations, bonds, and securities as permitted by the statutes of the State of Michigan. District Court Funds of District No. 16 City of Livonia, Michigan Notes to Financial Statements November 30, 2005 Note 2 - Cash and Cash Equivalents (Continued) Custodial Credit Risk of Bank Deposits - Custodial credit risk is the risk that in the event of bank failure, the District Court's deposits may not be returned to it. The District Court does not have a deposit policy for custodial credit risk. At year end, the District Court had $690,033 of bank deposits (checking accounts) that were uninsured and mcollateralized. The District Court believes that due to the dollar amounts of cash deposits and the limits of FDIC insurance, it is impractical to insure all deposits. As a result, the District Court evaluates each financial institution with which it deposits funds and assesses the level of risk of each institution; only those imtitutions with an acceptable estimated risk level are used as depositories. Note 3 - Court Operations The costs relating to the operation of the District Court (including risk management) are a budgeted item of the City of Livonia, Michigan General Fund and, accordingly, such costs are paid by the General Fund. The District Court is exposed to various risks of loss related to property loss, torts, errors and omissions, and employee injuries (workers' compensation), as well as medical benefits provided to employees. General Liability - The District Court participates in the Michigan Municipal Risk Management Authority for claims relating to general and auto liability, auto physical damage, and property loss claims. The Michigan Municipal Risk Management Authority (the "Authority") risk pool program operates as a claims servicing pool for amounts up to member retention limits, and operates as a common risk -sharing management program for losses in excess of member retention amounts. Although premiums are paid annually to the Authority that the Authority uses to pay claims up to the retention limits, the ultimate liability for those claims remains with the City of Livonia. In addition to the Imes retained, the City of Livonia is responsible for certain defense costs. Workers' Compensation - The District Court employees are covered under the City of Livonia's self-insured workers' compensation program. However, the workers assigned to the Court Voluntary Work Program in lieu of jail are not covered. The District Court does have a policy that covers up to the first $1,000 per occurrence and the City of Livonia's self-insured plan covers claims in excess of $1,000. Medical Claims -The District Court participates in the City of Livonia's health care coverage plan in the same manner as the City of Livonia employees. District Court Funds of District No. 16 City of Livonia, Michigan Other Supplemental Information Schedules of Cash Receipts and Disbursements Year Ended November 30, 2005 5 Depository Bond Account Account Cash and Cash Equivalents - December 1, 2004 $ 448,969 $ 329,255 Receipts Fines and fees collected 5,563,275 - Bond receipts - 979,726 Wayne County penal fines 121,884 - Work program - 171,585 Garnishments - 1,378 Restitution, judgments, and other 91,312 164,536 Interest income 11,944 7,459 Total receipts 5,788,415 1,324,684 Disbursements Transfers: City of Livonia 3,659,918 - Court Building Fund - City of Livonia 295,322 - State ofMichigan 1,584,197 - Wayne County 119,706 - Bond transfers and refunds - 921,399 Bond forfeitures - 122,393 Work program - 164,704 Garnishments - 1,378 Restitution, judgments, and other 122,901 168,701 Total disbursements 5,782,044 1,378,575 Cash and Cash Equivalents - November 30, 2005 $ 455,340 $ 275,364 5 City of Livonia, Michigan Federal Awards Supplemental Information November 30, 2005 City of Livonia, Michigan Contents Independent Auditors Report Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with GovemmentAuditing Standards 2-3 Report on Compliance with Requirements Applicable to Each Major Program and on Internal Control Over Compliance in Accordance with OMB Circular A-133 45 Schedule of Expenditures of Federal Awards 67 Reconciliation of Basic Financial Statements Federal Revenue with Schedule of Expenditures of Federal Awards Notes to Schedule of Expenditures of Federal Awards Schedule of Findings and Questioned Costs 10-11 Independent Auditors Report To the Honorable Mayor and Members of the City Council City of Livonia, Michigan We have audited the basic financial statements of City of Livonia for the year ended November 30, 2005 and have issued our report thereon dated February 14, 2006. Those basic financial statements are the responsibility of the management of City of Livonia. Our responsibility was to express an opinion on those basic financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the basic financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Our audit was conducted for the purpose of forming an opinion on the basic financial statements of City of Livonia taken as a whole. The accompanying schedule of expenditures of federal awards and reconciliation of basic financial statements federal revenue with schedule of expenditures of federal awards are presented for the purpose of additional analysis and are not required parts of the basic financial statements. The information in these schedules has been subjected tothe auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. February 14,20D6 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Perfommed in Accordance with Government Audifing Standards To the Honorable Mayor and Members of the City Council City of Livonia, Michigan We have audited the financial statements of City of Livonia as of and for the year ended November 30, 2005 and have issued our report thereon dated February 14, 2006. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered City of Livonia's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessanly disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the nsk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. Compliance and Other Matters As part of obtaining reasonable assurance about whether City of Livonia's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. To the Honorable Mayor and Members of the City Council City of Livonia, Michigan This report is intended solely for the information and use of the city council, management, federal awarding agencies, and other pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. February 14,2006 Report on Compliance with Requirements Applicable to Each Major Program and on Internal Control Over Compliance in Accordance with OMB Circular A-133 To the Honorable Mayor and Members of the City Council City of Livonia, Michigan Compliance We have audited the compliance of City of Livonia with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each of its major federal programs for the year ended November 30, 2005. The major federal programs of City of Livonia are identified in the summary of auditors results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of City of Livonia's management. Our responsibility is to express an opinion on City of Livonia's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular /+133, Audits of States, Local Governments, and Non -Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test bass, evidence about City of Livonia's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on City of Livonia's compliance with those requirements. In our opinion, City of Livonia complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended November 30, 2005. To the Honorable Mayor and Members of the City Council City of Livonia, Michigan Internal Control Over Compliance The management of City of Livonia is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered City of Livonia's internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordancewith OMB Circular A-133. Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulations, contracts, and grants caused by error or fraud that would be meterial in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we considerto be material weaknesses. This report is intended solely for the information and use of the city council, management, federal awarding agencies, and other pass-through entities and is not intended to be and should not be used by anyone otherthan these specified parties. AL&? ,PLLt February 14, 2006 City of Livonia, Michigan Schedule of Expenditures of Federal Awards Year Ended November 30, 2005 Passthrough Entity CFDA PmjaWGrant Award Fatleral Feral AgenncyrPassthmugh Agency/Program Title Number Number Amount ExpeiWiWres U 5 Department of Housing aid Urban Dekelapment Community Dewlopment Black Grant Program }ear 2003-B03 MC -264)008 14218 N/A $ 506,000 $ 121897 (1) Program }ear 2004 -But MC -264)008 14218 N/A 487,000 645,125 (1) Program }ear 2005-B05 MC -264)008 14218 N/A 456,290 194,549 (1) Total Community Development Block Grant 961,371 Passed through the Michigan State Housing Dekelopment Au0 of -HOME Imes[ment Partnership - Program War 2003 14239 tvt20025068 271,200 219374 Total US. Department of Housing aid Urban Development 1180,745 U S. Department of Health aid Human Services - Passed through Stale of Michigan Department of Community Heath- 13635 Pmect9/30104 2,218 368 Senior Center Staffing 13635 Pmect9/30105 6,976 5,812 Total US. Department of Health and Human Services 6,180 US Departmenlof Tmnsportation- Passed Mmugh the Michigan Office of Hghway Salary Planning: Challenge Award Grant 20.604 Pf4)FW 5,000 5,000 Drive Michigan Safety Task Force 20.600 13I-0>19 289,751 47,493 Total US. Department ofTransportetion 52,493 US Departmentof HomelaM Sewro-Passedthmughthe Michigan Department of State Police: Emergency Proparconess age Response Grant 97044 N/A 98,042 92537 Assistance to Freighter 97044 FG21956119,684 107,144 2003 SHSGP I Assessment It Strategy 97004 NONE 6],14] 52,166 2003 SHSGP Escram Grant 97004 NONE Auto 42,900 2003 SHSGP Escram Grant 97004 NONE 17,000 16973 2004 Homeland Security Grant 97004 NONE 564,896 385578 Emergency Management Performance Grant 83.552 NONE 5,975 5,975 2002 Pre,13lSash3r Mitigation Grant 83.557 NONE 35800 1,806 Total U S. Department of Homeland Security ]05,0]9 (1) Correct War expenkSWms include use of program income from housing rehabilitation aid Corg lhomes See Notes to Schedule of Expenditures 6 of Federal Awards. City of Livonia, Michigan Schedule of Expenditures of Federal Awards (Continued) Year Ended November 30, 2005 Passturough Entity CFDA PmjeWGrant Award Fealeral Feral AgenePassthmugh Agency/Pregram Tule Number Number Amount ExpeiWiWres US Departuent of Justice: 2004 Loral Law Enforcement Bock Grants Program 16592 N/A $ 15,787 $ 7,641 2003 Loral Law Enforcement Bock Grant Pregram 16592 N/A 34,669 34,359 Total Local Law Enforcement Block Grants Pragram 42,000 Dmg Enforcement Adininistrstion Task Force 16 unknown N/A 29,260 16,324 Feral Equuabla Sharing Program 16 000 N/A 272,868 272,868 Passed through Me Michigan State Pdice- Internet Crimes Against Children 16543 NONE 30,000 15,000 Total U S Departoent of Justice 346,192 US Departuent of Agriculture: Passed Mrargh the State of Michigan Departuent of Natural Resources: ON R Tree Planting Grant 16664 EAB -04-21 20,000 20,000 ArborDay MorGrant 16664 AErM 13 200 200 PassedthreWh the Michigan Departuentof Agnwlture- DepartinentofAgnwlture Ash Borer Tree Removal 16025 791144002274 82,044 2,760 Total US Departmentof Agriculture 22960 US. Department of Labor- Passed through Me State of Mohgan Departuent of Natural Resources - Passed through Library of Michigan- Read Act Library Grant 17207 NONE 13,768 12,724 US Environmental Prateetion Agency- Passed through Wayne County, Mohgan-Maine Riker National Wet Weather Demonstration Project Idyl Wyk Retention Fadlity-U2-09 66606 NONE 180,000 21,316 Idyl Wyk Regional Storm Water Treatinent Facluy(11W26) 66606 X995743-05-0 345850 345850 Ann Arbor Trail Projed 66606 X995743-08-1 132880 131,387 Total US Environmental Protection Agency 498,553 Total kderal awards $ 2,BN,926 See Notes to Schedule d Expenditures 7 of Federal Awards. City of Livonia, Michigan Reconciliation of Basic Financial Statements Federal Revenue with Schedule of Expenditures of Federal Awards Year Ended November 30, 2005 Revenue from federal sources: As reported in the governmental funds $ 2,328,257 Included in capital contributed in Water and Sewer Fund 498,553 Total revenue from federal sources -As reported in the basic financial statements 2,826,810 Add federal revenue reported as other revenue 253,995 Less federal drug forfeiture revenues in excess of expenditures (254,979) Less other grant revenue reported as federal revenue (900) Federal expenditures per the schedule of expenditures offederal wards $2,824,926 City of Livonia, Michigan Notes to Schedule of Expenditures of Federal Awards Year Ended November 30, 2005 Note 1 - Significant Accounting Policies The accompanying schedule of expenditures of federal awards includes the federal grant activity of City of Livonia and is presented on the same basis of accounting as the basic financial statements. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Govemments, and Non -Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. Note 2 - Noncash Assistance Thevalue ofthe noncash assistance received was determined in accordance with the provisions of OMB Circular A-133. Summary of Noncash Assistance - The grantee received the following noncash assistance during the year ended November 30, 2005 that is not included on the schedule of expenditures of federal awards: CFDA Federal Procram Number Descdotion Amount U.S. Department of Agriculture - Passed through the Wayne Metropolitan USDA Food Community Services Agency 10.569 Distribution $ 26,966 Note 3 - Subrecipient Awards Of the federal expenditures presented in the schedule of expenditures of federal awards, federal awards were provided to subrecipients as follows: Amount CFDA Provided to Federal Program Title Number Subrecipients Community Development Block Grant 14.218 $ 13,782 0 City of Livonia, Michigan Schedule of Findings and Questioned Costs Year Ended November 30, 2005 Section I - Summary of Auditor's Results Financial Statements Type ofauditors report issued: Unqualified Internal control over financial reporting: • Material weakness(es) identified? Ya X No • Reportable condition(s) identified that are not considered to be material weaknesses? Ya X None reported Noncompliance material to financial statements noted? Ya X No Federal Awards Internal control over major progmm(s) • Material weakness(es) identified? Yes X No • Reportable condition(s) identified that are not considered to be material weaknesses? Yes X None reported Type of auditors report issued on compliance for major program(s): Unqualified Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of Circular A-133? Yes X No Identification of major program(s): CFDA Numbers) Name of Federal Prooram or Cluster 14218 Community Development Block Grant 97.004 Homeland Security 66.606 Rouge River National Wet Weather Demonstration Project Dollar threshold used to distinguish between type Aand type B programs: $ 300,000 Auditee qualified as low-risk auditee? Ya X No 10 City of Livonia, Michigan Schedule of Findings and Questioned Costs (Continued) Year Ended November 30, 2005 Section II - Financial Statement Audit Findings None Section III - Federal Program Audit Findings None City of Livonia, Michigan Summary Schedule of Prior Audit Findings Year Ended November 30, 2005 Finding CFDA Queshoned Fiscal Year Number Finding Number Costs Comments 20M 20M 208E-1 Community Development Block Grant 14218 None The Cmsolidand Annual Performance artl The City has amended the 200E Evaluation Report (CAPER) should indutle all OPER with HUD to mane the expendRures and p ram income for the alnKonnalecorrec8ons. program }ear in Me hnandal summary section of Me report The Gty did not include the proper program expenddures and program incore in the 200E p ram year in the financial summary section of Me 2W4 CAPER. plate me moran February 14, 2006 The Honorable Mayor and Members arthe City Council City of Livonia 33000 Civic Cerner Drive Livonia, MI 48154-3097 Dear Mayor and Council Members: Planta s Moran, pus 27 a uonh..m Huh y >o �, aw 9�oMi 49031-0907 T9..248.1 200 Fax 248%520019 nnnarno,anmm We recently completed our audit of the basic financial statements of the City of Livonia for the year ended November 30, 2005. As a result of our audit. we have the following comments and recommendations for your review and consideration. STATE SHARED REVENUE The State's fiscal year 2005/2006 provides for both constitutional and statutory revenue sharing at approximately $ 1.1 billion, which is basically the fiscal year 2004/2005 funding level. As with the past several years, revenue sharing payments on an individual community -by -community basis for fiscal year 2005/2006 will be funded a approximately fiscal year 2004/2005 levels. The Governor's proposed 2006/2007 budget did not include any additional funding for local governments. As a result, it is expected that overall revenue sharing payments to communities for fiscal year 2006/2007 will remain stagnant a the 2004/2005 level. Even though there is the expectation that revenue sharing will hold constant at prior year funding levels, continued caution should be exercised when budgeting this line item. While it is good news that revenue sharing may be maintained a current levels, sales tax revenue would support an increase to total state shared revenue payments. However, for fiscal years 2004/2005, 2005/2006, and 2006/2007, the appropriation in the State's budget for revenue sharing payments is over $500 million less annually than amounts provided for in law and based on actual sales tax collections. For those three years, revenue sharing distributions are planned to be approximately $1.6 billion less than amounts provided by statutory formulas. There appears to be no long term solution to the State's structural deficit in its General Fund and as long as this condition exists revenue sharing remains at risk and a return to past funding levels is not likely in the foreseeable future. State shared revenue accounts for approximately 18.596 of the Cit/s total General Fund revenue. The table below details state shared revenue for the City of Livonia from 2000 forward by statutory and constitutional portions. In addition, it details the total decrease in state shared revenue experienced by the City compared to the State's Oscal year 2000. mri The Honorable Mayor and Members Of the City Council February 14, 2006 City of Livonia State Fiscal Year Statuto ConrtitutionalTotal Decrease from 2000 2000 $4,375,886 $6,836,339 $11,212,225 $--- 2001 $4,667,824 $6,524,585 $11,202,409 $9,816 2002 $4,257,760 $6,591,046 $10,848,806 $363,419 2003 $3,665.960 $6,702,630 $10,368,590 $843,635 2004 $2,668,973 $6,629,826 $9,318,799 $1,893,426 2005 $2.429,180 $6,788,044 $9,217,224 $1,995,001 2006 est. $2,201,032 $6,957,407 $9,158,439 $2,053,786 If the State were to eliminate the statutory portion of revenue sharing (as the constitutional portion cannot be modified without a change to the State's constitution), the City has approximately $2,201,032 a risk in its General Fund budget based on 2005 funding levels. We will continue to update the City as developments occur. The statutory formula expires in 2007 and requires action by Michigan Legislature.. TRANSPORTATION MATTERS The State experienced lower than anticipated Act 51 receipts for the State's 2004/2005 fiscal year which ended September 30, 2005. Plante & Moran publishes annually forecasted Act 51 distribution rates which we receive from the State and are based on its forecast of anticipated collections at the State level. If actual collections are less than amounts forecasted by the Michigan Department of Transportation, this could likely result in revenue less than budgeted amounts in the City's Major and Local Street Fund. There is also a concern about the State's forecast for fiscal year 2005/2006. We encourage the City to be conservative in budgeting Major and Local Street Fund revenue. In 2004, the legislature modified Act 51 to allow local governments to transfer monies from their Major Street Fund to their Local Street Fund if a surplus existed. As a condition of the transfer, the amended law requires that certain conditions be met, including the adoption of an asset management process for the Major and Local Street systems. It is important to note that these provisions sunset December 31, 2008. Without an extension of this provision, a transfer from the Major Street Fund to the Local Street Fund can only be done to the extent that local revenues exist in the Major Street Fund. There is currently legislation proposed that would allow for the combination of the Major Street Fund and the Local Street Fund if certain conditions are met. _2_lad ante Moran The Honorable Mayor and Members Of the City Council February 14, 2006 City of Livonia LOCAL GOVERNMENT FINANCE MODEL In 2005, the Governor created a Local Government Fiscal Task Force to study the financial challenges of Michigan local governments. While their report was originally due by November 30, 2005, the Local Government Final Task Force held its first meeting in September 2005. A report from this group is expected in 2006. Unrelated to the Local Government Fiscal Task Force, Citizens Research Council is conducting a study focused on documenting the nature and extent of structural Oscal problems facing IoW governments, and to catalogue local services and activities for local units (with the intention that local governments will use this information to study the possibility of greater collaborative efforts to optimize government resources). TAX MATTERS The Governor and the Legislature spent considerable time in 2005 on business tax reform with specific focus on the Michigan Single Business Tax. The final approved business tax reform plan appears to spare local governments from any direct negative impact of the charges. A key component to this plan is a significant credit on personal property taxes paid by certain businesses. Many questions have arisen from these proposals such as who determines the property that qualifies for credit, how will local governments be reimbursed by the State for the Ion tax revenue as is the stated intention, etc. Currently, the plan as passed provides for a personal property tax credit for certain businesses on their Michigan Single Business Tax mum. The loophole involving the inconsistent treatment of the assessment of commercial property is commonly referred to as the "WPW Case" involving the City of Troy, and was discussed in the Fall 2005 legislative session. The inconsistent treatment occurs when the taxable value of a commercial property is reduced based on a Ions in occupancy and a corresponding increase will not occur when occupancy Increases resulting in a permanent taxable cap on property (subject to annual inflationary increases). This method of assessing commercial property (known as the "occupancy method") has been used by assessors to give commercial property owners a break when occupancy of their property has decreased and then to restore the taxable value of the property consistent with previous levels when occupancy increases. There are two bills in the House currently (House Bills 5096 and 5097) that have received hearings and consideration which would address this matter. TAXING MUNICIPAL RECREATION OPERATIONS During the States Oscal year 2005/2006 budget discussions, a proposal was introduced to put certain municipal operations that are in competition with the private sector on an equal playing field by requiring them to pay certain state taxes paid by the private sector. The main target appears to be municipal golf course operations but other recreation operations (such as ice arenas) could become part of the scope. There have been hearings on the subject and it is not clear which direction this issue will take in the fall. plante -3- Moran The Honorable Mayor and Members Of the City Council February 14, 2006 City of Livonia TELECOMMUNICATIONS ACT CHANGES Changes were made by the Legislature to restrict the ability of local governments to engage in telecommunications activities. Additionally, threats exist at both the Federal and State level to restrict or eliminate the ability of local governments to regulate and franchise cable television, which would impact franchise fees received by local governments. The City of Livonia could be at risk of losing up to $1,070,000. We encourage the City to monitor their developments closely given the impact that a reduction in cable franchise fees could have on the City's budget. POST -EMPLOYMENT BENEFITS Two new accounting pronouncements were recently issued by the Governmental Accounting Standards Board (GASB). GASB 43 and 45 address the accounting and disclosures related to post -employment benefits other than pensions. In short, these pronouncements will require communities to account for and disclose liabilities related to health care promises to retirees, much in the same way that pensions are handled. The City will be required to implement GASB 43 and GASB 45 in fiscal years ending November 30, 2008 and November 30, 2009 respectively. GASB 43 and 45 require a governmental unit to measure its retiree health care liability through actuarial valuations that are to be performed a least biennially. These valuations compute an annual required contribution (ARC). The annual required contribution is the amount the actuary believes is necessary to fund the benefit over a period of 30 years or less. Unlike most cities, Livonia anticipated the significance of these costs and in 1986 began accumulating funds on an actuarial basis for future health care payments. While the City is already having actuarial valuations prepared and making an annual contribution, the VEBA plan is currently using a 50 year amortization period. Using this longer period will likely result in the City's contribution being less than the annual required contribution. A contribution less than the ARC would require the City to record a liability for the difference on the govemment-wide financial statements. We recommend that the City discuss the amortization period with the actuary to prepare for the new pronouncement. The VEBA fund currently has approximately $31 million dollars set aside for these costs. The following table shows the actuarial calculated funding progress: ACWaral Valuation Data Actuarld Value of Assets Actuarial Accrued Uability, Urduule l Actuarial Accrued UsNOO Funded Iatio 11/30/98 $ 23.250,000 $ 51,118.000 $ 27,868,000 45.5% 11/30/99 24,360.000 61,357,000 36,997,000 39.7% 11/30/00 25,337.000 71,469,000 46,127,000 35.5% 11/30/01 11/30/02 11/30/03 30.475,000 104,386.000 73,911.000 29.2% 11/30/04 37,690,000 110,156,000 72.465.000 34.2% • Not provided by actuary plante mor'"an The Honorable Mayor and Members Of the City Council February 14, 2006 City of Livonia POST -EMPLOYMENT BENEFITS (continued) As noted above, the actuarial -calculated liability for retiree health care has more than doubled from $51 million in 1998 to $110 million in 2004. As a result, the City's contribution to fund these costs has almost doubled from $3 million in 1998 to $5.5 million in 2005. During our testing, we noted that the City's health care reserve in the Postemployment Health Care Benefit Plan will be depleted during the 2005-06 fiscal year. After that time, the responsibility to pay for all post employment benefits will fall on the VEBA, which is nes yet fully funded. INTERNAL CONTROL AND FRAUD PREVENTION Statement on Auditing St dards No 99 We performed additional procedures during the audit as required by Statement on Auditing Standards No. 99, Consideration of Fraud in the Financial Statement Audit (SAS 99). While SAS 99 does not change the focus of the financial statement audit to a "fraud audit", the standard incorporates a change in mindset for auditors to search for and identify significant fraud risk factors. SAS 99 requires auditors to perform specific procedures to search for significant fraud risk factors, including inquiries with key members of the administration and other employees throughout the organization; a retrospective review of accounting estimates; a detailed review, of all journal entries; and other related procedures. During our testing it came to our attention that virtually all personnel in the accounting and inane department have the ability w make manual journal entries. We recommend that the department review its current procedures and determine the Individuals that need the ability to make journal envies and restrict access for those who do not. In addition, we performed additional procedures related to time reporting in the Police Department. During our testing, we noted that the TeleStaR report does not accurately track overtime. This report is not used to pay employees for their overtime; however, it is used within the department to review overtime hours. We recommend that the department either work with the software provider to correct the error or use an accurate means to review overtime. In addition, we noted that timesheets for the Chief, Deputy Chief, Public Safety Director, and Captains are nes required to be reviewed by another party. We recommend that procedures be put in place so that these timesheets are approved in a similar manner as the process followed by other department heads in the City. 5- plate me moran The Honorable Mayor and Members Of the City Council February 14, 2006 City of Livonia We would like to thank the Mayor and City Council for the opportunity to serve as auditors for the City. We would also like to express our appreciation for the courtesy and cooperation extended to us by the administration during the audit If there are any questions about your financial report or the above comments and recommendations, we would be happy to discuss them at your convenience. Very truly yours, Plante & Moran, PLLC rank W. Audi, Brian J. Camiller 6 pla,�r co=o — moran