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Home My WebLink About2010 Annual Financial ReportCity of Livonia, Michigan Financial Report with Supplemental Information November 30, 2010 City of Livonia, Michigan Contents Report Letter 1-2 Management's Discussion and Analysis 3-9 Basic Financial Statements Government -wide Financial Statements: 17 Statement of Net Assets 10 Statement of Activities 11-12 Fund Financial Statements: Governmental Funds: 21 Balance Sheet 13 Reconciliation of the Balance Sheet to the Statement of Net Assets 14 Statement of Revenue, Expenditures, and Changes in Fund Balances 15 Reconciliation of the Statement of Revenue, Expenditures, 23 and Changes in Fund Balances of Governmental Funds 24-25 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 Fiduciary Net Assets 21 Statement of Changes in Fiduciary Net Assets - Pension and Other Employee Benefits Trust Funds 22 Component Units: Statement of Net Assets 23 Statement of Activities 24-25 Notes to Financial Statements 26-51 Required Supplemental Information 52 Budgetary Comparison Schedule - General Fund 53-55 Budgetary Comparison Schedule - Major Special Revenue Funds 56-57 Pension System - Schedule of Funding Progress 58-60 Note to Required Supplemental Information 61-62 City of Livonia, Michigan Contents (Continued) Other Supplemental Information Nonmaior Governmental Funds 63 Combining Balance Sheet 64-66 Combining Statement of Revenue, Expenditures, and Changes in Fund Balances (Deficit) 67-69 Fiduciary Funds: Combining Statement of Net Assets 70.71 Combining Statement of Changes in Fiduciary Net Asset 72 plante i*°'M W`"°�° °`1 , CAN Pa EkI,24)7 moran � °" °"�°' 1D: DALAI W18 pEurtErromI Independent Auditor's 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 units, 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, 2010, which collectively comprise the City's basic financial 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 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 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 fairy, in all material respects, the respective financial position of the governmental activities, the business -type activities, the discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Livonia, Michigan as of November 30, 2010 and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended, in conformity with accounting principles generallyaccepted in the United States cf Amenca. 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. Praxitr; 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 Standard's, we have also issued our report dated March 28, 2011 on our consideration of the City of Livonia, Michigan's internal control over financial reporting and on our tats of its compliance with certain provisions of laws, regulations, contracts, and grant agreements. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. 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. /fl t 2%Lt/ l PLL[ March 28, 2011 City of Livonia, Michigan Management's Discussion and Analysis Overview of the Financial Statements The City of Livonia, Michigan's (the "City") 2010 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 nonmajor 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 financial 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 Citys assets and liabilities. All of the current year's revenue 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 changed. Net assets, the difference between the City's assets and liabilities, are one way to measure the Citys 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 three other entities in its report, the Plymouth Road Development Authority, the Economic Development Corporation, and the Livonia Brownfield Redevelopment Authority. 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 him cash and other financial assets that can be converted to cash, flan 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 program. • 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, 2010 to the prior year. Net Assets (in millions of dollars) Summary ConilenseE Statement of Net Assets Govemniental Activities BusinesstypeActivates Total 2010 2009 2010 2009 2010 2009 Assets Current and other assets $ 588 $ 58.2 $ 29.5 $ 32.5 $ 883 $ 987 Capital asset 1817 1763 783 780 2680 2543 Total asset 232.5 234.5 1078 1185 M03 345.0 Liadlities Current liabilities 58 82 31 32 89 114 Longterm liabilities 545 55.8 118 135 663 693 Total liabilities 683 64.0 149 167 752 887 Net Assets Invested in capital asset - Net ofrelated debt 139.2 133.9 61.3 65.9 2065 1998 Restrided 216 249 25 31 241 280 Unrestrided 114 iV 231 248 34.5 365 Total net asset $ 1722 $ 176.5 $ 92.9 $ 93.8 $ 265.1 $ 264.3 City of Livonia - Net Assets The City's assets exceed its liabilities at the end of the fiscal year by $265.1 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's governmental activities decreased from $11.7 million at November 30, 2009 to $11.4 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 City 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) summary Condensed Income Stazement Governmental Activities In reviewing the above table, it can be noted that revenue remains constant and expenses decreased by $2.6 million. The significant factors impacting expenses were reductions to wage and benefit costs as a result of reduced staffing. (y Governmental Actirdies Bunnesstype Activities Total 2016 2609 2810 Must 2010 2DW Revenue Program revenue: Charges for services $ 153 $ 152 $ 282 $ 254 $ 43.5 $ 4D6 Operating grant and contributions 84 87 - - 84 87 Capital grant and contributions 22 03 07 - 29 03 General revenue: - - - - Property issues 55.6 569 - - 55.6 58.9 Statnshared revenue 75 77 - - 75 77 Rental income and fees 22 18 - - 22 18 Interest 04 13 01 04 05 17 Transfer and miscellaneous D3 03 03 03 Total revenue 919 919 9.D 28.1 1209 1186 Rrogmm Experrses General govern ment 103 100 - - 103 100 Public safety 371 372 - - 371 372 Public work 254 258 - - 254 258 Comamn0 and economic development is 11 - - is 11 Recreation and cu in re 143 162 - - 143 162 Interest on Ion gterm debt 16 19 - - 16 19 Water and sewer - - 9.1 243 21.1 243 Golfcourse - - 18 18 18 18 Housing 18 18 18 18 Total expenses 9D2 928 9.9 21.1 1201 1199 charge In Net Asx[s 17 (09) (D.9) (19) 08 (19) Net Assets - Beginning ofyear 1765 1714 93.8 94.8 264.3 2662 Net Assets - End of year S 1723 S 170.5 $ 92.9 $ 93.0 $ 265.1 S 261.3 Governmental Activities In reviewing the above table, it can be noted that revenue remains constant and expenses decreased by $2.6 million. The significant factors impacting expenses were reductions to wage and benefit costs as a result of reduced staffing. (y City of Livonia, Michigan Management's Discussion and Analysis (Continued) Business -type Activities The City has three business -type activities. These include the water and sewer system, the operating fund for the Fox Creek, Idyl Wy1d, and Whispering Willows golf courses, and non- federal senior housing at Silver Village and Newburgh Village. The following table shows the operating (loss) income before contributions, transfers, and interest for each of these activities in the current and prior year: (In ttrou canis a dollars) Water aM Server WfCourses (busing 2010 2009 2010 2009 2010 2009 Operating Revenue $ 25,190 $ 22,762 $ 16W $ 1593 $ 1333 $ 1336 Operating Expenses (26,16) (22.932) (1836) (1812) (908) (893) Operating (Loss) Income $ (1,526) s 11]0) $ (201) $ (219) $ 425 $ 40.1 Capital Assets and Debt Distribution At the end of fiscal year 2010, the City has $427.6 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 $42.5 million 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 $9.3 million and debt related to the housing and activities of $2.2 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 senior housing rental facilities. Significant additions to capital assets during fiscal year 2010 include $8.1 million invested in the construction of infrastructure and improvements to roads, $1.4 million invested in equipment and vehicles, and $3.6 million invested in the construction of a new court house and golf course club house. Significant disposals of capital assets during fiscal year 2010 included the disposal of library books and other vehicles and equipment with a total cost of $1.7 million. 7 City of Livonia, Michigan Management's Discussion and Analysis (Continued) The City's Funds The fund financial statements begin on page 13 and provide detailed information 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 Citys major governmental funds for 2010 include the Geneml Fund, Community Recreation Fund, and Refuse Disposal Fund. The City's govemmental funds reported a combined fund balance of $31.8 million. This is a decrease of appronmr tely $5.9 million for the year. The decrease was caused primarily by the use of fund balance to construct a new golf course club house, district court building, and road improvements. General Fund Budgetary Highlights Over the course of the year, the City administmton 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 nearly the same total revenue and expenditures as the original adopted budget. Actual General Fund revenue was approximately $1.6 milion below the final budget. The deep economic slowdown resulted in nearly all categories of revenue being below budget estimates. Specifically, the biggest shortfalls were seen in licenses and permits ($288,000), interest income ($632,000), court fines ($352,000), and miscellaneous revenue ($472,000). Actual Geneml Fund expenditures were approximately $1.5 million below the final budget Nearly all departments held expenditures below the final budget. Current Economic Conditions The City continues to maintain positive fund balances in each of its funds. However, concerns arse when considering the revenue and expenses thatthe City is facing in upcoming years. The majority of the City's revenue base is contained by factors outside the City's control. Property taxes, state -shared revenue, and interest income total 77 percent of the City's total governmental activities revenue. Property tax revenue will significantly decrease incoming years as a result of decreased property values. The State of Michigan has experienced budget deficits and has significantly reduced revenue-sharing payments to local govemments to help reduce its deficit Interest rotes are at historic lows as a result of ate cuts from the fedeml reserve. On the expense side, certain expenses continue to rise at a rate far in excess of inflation. In particular, heatthcare expenses have continued their trend of double-digit increases. Hiring and capital outlay freezes, among other measures, have been implemented in previous years to reduce expenses to the level of available revenue. We are committed to living within our means, although the result rmy be diminished programs and service response capabilities. City of Livonia, Michigan Management's Discussion and Analysis (Continued) 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, 2010 The Notes to Financial Statements are an Integral Part of this Statement. 10 PrannaryGoverninent Governmental Bisnest}pe A<tiviti¢ A<tiviti¢ TdA Conninoned Units Assets Cash andash e4iwlents (Noted a 38p4903 a Ti a 51517,001 a 4,511 Accounts reconvene: Tares 257361 257311 30,938 Custwners 11,43828 11,43828 - Workareconrenatiw 48,816 - 48,816 - Duetwnsthergovemmentalunik 5,034006 - 5,03400E - Otheraccomterccenctee 2,412280 566511 2,9113,791 7,315 SPe<al assessments 567153 567,153 - Ii Wanes 33290 (33290) - Inventory, aekeiaeryenatures,add @Peck 3303,402 1,158,962 6462366 - aatrdeaaaekmole ]) - 2,891 2..894206 - rental assets Note a): NsnRlxeciade capital assets 35,061 ],534,2] 42.622076 676468 Oeyeciade aptalaaets-Net iM,6il902 ]11,764,]62 21]428666 8.02]056 Total assets 232,A7,83o 1W,rai 340366432 13059671 Hai Accounts aerates 3,165542 1647,393 4,812935 53,4,23 Due to other governmental units Sa6605 Sa6605 Accrued add other loathes 2,013,135 111 2,128825 3,325239 Deterred revenue IN de 13) 640264 228,]63 869,0,17 - BmdantlRp<s8s V35M 13359,1 - NetOPEBsteigatim l'is 6 42,763 11151549 - Noncurrent heretics (Note 6): Due wthin one year 4,611 2,ffi4,733 6,691 410,000 Due in mare than one year: comPemateea5aen<esadd insurance 7,602,720 110,159 7712879 - u�ellleeurehategry 511 511 Born and al>nallaaa aerates 40,739,756 9,6473,t5 50,387,101 3510,000 Total heretics 63,333,730 14,927065 75,266795 7298,662 Net Assts Invested in center assets -N at of related RN 11 67,224,670 207,432981 4,81502 Restricted to Commonly, recreation 3,446,407 - 3,446,407 - Mun<iayretse 6,407,101 - 6,407,101 - dreet,rad,atlsiRwalas 2,173,703 - 2,173,703 - Libary 1076236 - 107623,1 - Putei<akly<ommuiialon 4,221 58 - 4,221 58 - Giants 1,W3220 - 1,W3220 - Pdme 1,400,425 - 1,400,425 - communedytramit 5rs'em - 579655 - Cartteeangirriarownrents 1,148,196 1148,191 Ordinance requirements 1366al 2,49587E 2,630,859 - Wderatlsewer 23,091 D,(97,698 - rentalinten emenls 307,182 307,182 Unrestricted 11? ,429 61,191 11n5,6zo 1,179507 Total net assets $ 1722,14,100 $ Wtui!53] $ 265,10.07 $ 5161,109 The Notes to Financial Statements are an Integral Part of this Statement. 10 City of Livonia, Michigan FunctiaWProgmms Pdmarygovernment Governmental actiHties: General government Public safety Publicworks Community and economic development Recreation and culture Interest on longterm debt Totalgovernmental actistes euaness4y activities: wateraidsewer Goff course Housing Program Revenue Operating Capital Grants Charges for Grants and and Expenses Sertices Contributions Contributions $ 18,325,127 $ 3,588,818 $ 6/,284 $ - 3],094,584 5,346,622 1445,219 181,814 25,405685 1934869 5,861,911 1522,593 1443,173 198,635 856,499 514,119 14,333,168 4,190,081 219,384 Economic Development Corporation 1,623,747 - - - 1525,346 - - - 90,225,484 15,251625 8,456,363 2,198,386 2],179,1]6 25,198,462 - 102,682 1838,435 1636,984 - - 1 802,453 1332,119 Property taxes Total buanessAy acbmtes 30,020,064 28,168,225 - 102,682 Total primary government $120,245,5x8 $ <,419,250 $ BA56,363 $ 2,901,068 Componentunffs: Economic Development Corporation $ 112 $ - $ - $ - PlymouthRoadDeNalopmentAuOmnty 1525,346 - - - Totalconponentunffs $ 1,525,518 $ $ $ General revenue: Property taxes Statesharedrevenue Interest Unrestricted tees and other Miscellaneous Total general revenue Transfers Change in Net Assets Net Assets- Beginning of }ear Net Assets- 6d of year The Notes to Financial Statements are an Integral Part of this Statement. 11 Statement of Activities Year Ended November 30, 2010 Net(Expense) Rewnm an Changes in Net Assets Pnmary Govemment Gowmmentel Busimss{ Compmenl AdivIns AdivIns Total Unb $ (6,6/,025) $ - $ (6,6/,025) $ (30,201129) - (30,201129) (16,019,646) - (16,019,646) 186,140 - 186,140 - (9,924,303) - (9,924,303) - (1623,141) - (1623,141) - (64,319,110) - (64,319,110) - (1218,832) (1218,832) - - (201,51) (201,51) - 330,326 330,326 - (1149,151) (1149,151) - (64,319,110) (1149,151) (65,466,867) - (112) - - - (1525,346) - - - (1525,518) 55,567,192 - 55,56],192 205,661 1,524,615 - 1,524,615 - 406,344 128,861 535,205 2,006 2,262,859 - 2,262,859 - 352,146 - 352,146 1,114 66,113,156 128,861 66,242, 611 206,841 (35,000) 35,000 1159,046 (9&5,296) 773,150 (1316,677) 110,485,0.54 93,844,833 264,329,861 1,011,666 $112,244,100 $ 92,959,531 $265,103,637 $ 5,761,009 12 City of Livonia, Michigan Liabilities ! counts pa}able $ 806,26/ $ 125,244 Governmental Funds $ 1158,145 $ 3,165,542 Due to other funds - Balance Sheet 1,188,40.5 1,188,445 !¢trued and other liabilities 1552,296 November 30, 2010 212,153 1860,767 Major Special Revenue Funds 650,943 41,271 1628,884 3,346,5119 Total liabilities 3,385,974 Other 1159,626 4,187,627 9,561263 Fund Balances Refuse Non -major Total Community Disposal Governmental Governmental Assets General Fund Recreation System Fumes Fumes Cash and investments $ 2,218,689 $ 4,243,631 $ 7,954,982 $ 15,261979 $ 29,679,281 Receivables: 307,182 Unreserved, reported in: Taxes 136,665 17,664 55,164 47,848 257,341 Special assessments - - - 56],153 567,153 Werier5 compensation 48,816 - - - 48,816 Due from other gowmmental 4,580, 723 Totalfund units 2,824,385 - - 2,260,019 5,084,404 VEM 1,104,x32 - - - 1,104,232 Other 644,347 - 34,178 421,517 1,188,842 Due from other Lends 2,373,015 - - - 2,373,015 Inventory, prepaid expenses, and deposits 154,945 - - 971,221 1126,166 Total assets $ 9,505,154 $ 4,261,295 $ 8,044,3N $19,529,737 $ 41,340,510 LiabilitiesaM Fund Balances Liabilities ! counts pa}able $ 806,26/ $ 125,244 $ 1873,886 $ 1158,145 $ 3,165,542 Due to other funds - - - 1,188,40.5 1,188,445 !¢trued and other liabilities 1552,296 51,849 44,469 212,153 1860,767 Deferred rownue(Note 13) 1825,411 650,943 41,271 1628,884 3,346,5119 Total liabilities 3,385,974 828,836 1159,626 4,187,627 9,561263 Fund Balances Reserved for Propaids and inventory 154,M - - 971,221 1126,166 Capital improwments - - - 307,182 307,182 Unreserved, reported in: General Fund 5,964, 235 - - - 5,964, 235 Special Revenue Funds - 3,433,259 6,884,698 9,482,984 19,800,941 Capital Pmjects Funds - - - 4,580, 723 4,580, 723 Totalfund balazes 6,119,180 3,433,259 6,884,698 15342,110 31779,247 Total liadlities and Fund balances $ 9,58.5,154 $ 4,261,295 $ 8,044,321 $19,529,737 $ 41,349,519 The Notes to Financial Statements are an Integral Part of this Statement. 13 City of Livonia, Michigan Governmental Funds Reconciliation of the Balance Sheet to the Statement of Net Assets November 30, 2010 Total Fund Balances of Governmental Funds $ 31,779,247 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 181,751,949 Certain receivables are expected to be collected over several years relating to special assessments and delinquent personal property taxes 2,706,245 A portion of fines and fees is not available to pay for current year expenditures 1,312,238 The liability for compensated absences is recorded when incurred in the statement of activities (7,641,515) Landfill closure and postclosure liability is not due and payable in the current period and is not reported in the funds (518,868) Long-term liabilities are not due and payable in the current period and are not reported in the funds (42,543,638) Net OPEB obligation is not due and payable in the current period and is not reported in the funds (1,008,786) Accrued interest is not due and payable in the current period and is not reported in the funds (152,365) The Internal Service Fund (self-insurance) is included as part of governmental activities 6,559,593 Net Assets of Governmental Activities $ 172,244,100 The Notes to Financial Statements are an Integral Part of this Statement. 14 City of Livonia, Michigan The Notes to Financial Statements are an Integral Part of this Statement. 15 Governmental Funds Statement of Revenue, Expenditures, and Changes in Fund Balances Year Ended November 30, 2010 Major Special Revenue Funds Other Non rejor Total c rnm y Rdin de eidposat Governmental Governmental Gene al Fu nit Recreation system Funds Funds Revenue Property taxes $ 29,604 toi $ 3,808884 $ 11,511,930 $ 10658,349 $ 55,583,632 Licenses and lemons 1631865 - - - 1,631,865 Federalrevenue 173,145 - - 2,072246 2,245,391 Stateandlocalrevenue 7,546134 6,132,706 13678840 Charges forservices 3,839,354 3,593,351 95607 526462 8444.847 Fines andforleitures 3,315233 - - 8!13371 4,118,604 Interest 167547 26,867 45,621 121833 361,868 Otherrevenue: Special assessment 1179,385 1179,385 Miscellaneous revenue 2,805,107 58,120 22,095 925036 3,810,308 Total revenue 49,082,854 7JHT 22 1164`5276 22419,388 90654,740 Expen3tures Current General government 8,]!2,]00 - - 85,338 8,858838 Publosalety 33,01 - - 3,564345 36641117 Puhloworl¢ 2,]9539] - 118!6,000 13,896396 28,567793 Conmi and econom development 547242 - - 899676 1,W,918 Recreation andculwre 1,453,789 s,3ns19 - Seel 13,799710 Employed tenants, insurance, and other 2,429814 - - 2,429814 Capital outlay - - - 1phy6fitR 1phy6fitR Belot service 3,130,622 3,130,622 Total expendW res 49,035705 6,W,619 118I6,GG0 29,191251 96,480575 Excess of Revenue Over( Under) Expen3tures 47,149 1839603 ("g724) (6,]!1863) (5@5,835) Otter Financing Sources used) Trendless in (Note 5) 40000 - - 9,891299 9,931299 Thrusts out (Note 5) (211,088) [{425063) (!,310,148) RS66299) Net change in Fund Balances (113939) (1325,460) (210724) (4,220,712) (5860835) Fund Balances - Be ginning ofyear 6,233,119 4,]58,]19 7085,422 19,562822 37,640882 Fund Balances -End ofyear It 6,119,160 $ 3,433,259 $ 6,664,696 $15,342,110 $31,779,247 The Notes to Financial Statements are an Integral Part of this Statement. 15 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, 2010 Net Change in Fund Balances - Total Governmental Funds $ (5,860,835) Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures; however, in the statement of activities, these costs are allocated over their estimated useful lives as depreciation: Capital outlay 12,414,582 Capital contribution 1,037,265 Depreciation expense (7,595,412) Loss on disposal of fixed assets (434,586) Certain revenue reported in the statement of activities is recorded in the governmental funds as deferred revenue 803,174 Repayment of bond principal is an expenditure in the governmental funds, but not in the statement of activities (where it reduces long-term debt) 1,500,802 Interest expense is recorded when incurred in the statement of activities 5,974 Net decrease in accumulated employee sick and vacation pay is recorded when incurred in the statement of activities 585,634 Decrease in landfill liability is recorded when incurred in the statement of activities 230,040 Environmental remediation liability is recorded when incurred in the statement of activities 123,285 Increase in net OPEB obligation is recorded when incurred in the statement of activities (514,234) Internal service funds are included as part of governmental activities (536,643) Change in Net Assets of Governmental Activities $ 1,759,046 The Notes to Financial Statements are an Integral Part of this Statement. 16 City of Livonia, Michigan Proprietary Funds Statement of Net Assets November 30, 2010 The Notes to Financial Statements are an Integral Part of this Statement. 17 Nmirejw 6ainc Enteraise Fund Enterprise Fmd Taal Enterase Internal Service Water andSewer Homi Golfcourse Fuld Fund Assets Current assets: Cash andimintments s 13.11 s 345,789 s - s 3,502,098 s eddscso nccmnts locaisatee: Customers 11,D9,328 - 11,D9,328 - Other 551,109 - 2,402 556511 - nvantmy,prefnideatchal es, anddpnc3s 158,902 - - 158,902 2,m23s Taalcurrentasets 26,228,788 395,789 2,402 Ni,R6899 10512,855 Noncurrent assets: restricted mob IN de 7) 2,891 - - 2,891 Coal assets: Nondlareciade wall assets 2,369591 1$41918 3,542688 ],531,82] Not 65,2&1,743 65,211,]43 1,828698 1539,321 ]11,761,762 Tdd noncurrent assets ]8.16a538 5,61 5,121889 81,192,993 Total assets 96,697216 5,%38,435 5,121211 160,819,892 18,512,855 Hai Current 0awmea: Hccmnts inmates 1,608817 31,419 ],15] 1,647,393 - Duetodhergwemmentalunits Sa6685 - Sa6685 Due to other Linda 33290 33290 1,151280 nccruedadd deer lawaiea 98290 15,130 2270 111 - Deterred revenue (Nde13) 229,7a3 - 229,7a3 - Bodanddpnc3s 62161 130,730 - V35M - compematedamences-Due within we Year 199,122 22955 7,655 229,733 - Current porton or low term oNgat,ms 1,400,000 425,000 - 1325000 - Tdalcurrentliamioes 1,131,481 ass23n 50373 5,160,oea 1151280 Noncurrent routines compematedamences-Due in we than we year 3766 9219£ 13927 118,159 - NetOPEBoteigatim 42,763 - - 42,]63 - Lmg4erm deb- Net ofcurred portion (Note 6) ],8/]}45 1,778,888 - 9,607315 2,811982 Total noncurrent hatihties 7.923,871 I,P52 Nee 13,927 9,@1826] 2,311962 Total Ill y,ssD 5 2,48],]88 Fd300 b,96o355 3,963262 Net Assts Invested In wil assets- Net of related db M'sa 15 3,407,646 5,121889 67,221,678 - restricted fwordnance implement; 2,495978 2,495978 Unrestricted 23,tl7,698 183,889 (61898) D,138889 6,59593 Total net assets $ 81288,891 $ 3510,85 $ 5,055,911 $ 923:5,53] $ 6555,553 The Notes to Financial Statements are an Integral Part of this Statement. 17 City of Livonia, Michigan The Notes to Financial Statements are an Integral Part of this Statement. 18 Proprietary Funds Statement of Revenue, Expenses, and Changes in Net Assets Year Ended November 30, 2010 Nomajor Enteriume vigor Enteryise Fund Fund Tmd waterand Enteriume Internal Service Sewer Housng GoffCourse Fund Fund Operating Rourne Customer dings $ 23,996,035 a - a - a 23,996,035 a - FinesantlMkiWres 1018,625 - - 1018,625 Service connections 30285 - 30285 Groom am - - I,650EE6 I,650EE6 - Gilove - - M520 M520 City <mViMom - 36,8!5936 Rental lmmnm 1,328910 4,000 1,M,910 Other revenue 153517 3,869 78,010 M,400 Total operatic revenue 25,28,052 1312.]!9 16K98! 2d,158225 36,8!5936 Operating Expense Cost ofwmer 3,42],]61 - - 3,42],]61 - Costofsewagecisp®I 9,832,309 - - 9,832,309 - systemmsintenanceandoperaton 4662,968 - - 4662,968 - Generalandadmnistrative 1066638 - - 1066638 Reinsurance charge and daunt - 15,427,301 S larimandwages - 048,020 150,930 et'am - supt ies - 10,711 196586 20]29] - Other normal andmarges 28gas0 13216+4 1602.124 - DePeciamn 2,M,073 168584 seam 3w2?02 Total operating expenses 26.]20,]55 90],]69 Tm38?35 D.010?59 15,427,301 opereing(real l regard (1,56293) 425,010 (2Dlas1) (1302,734) pit ) Noropereting Revenue (Expense) Interest incare do 611 3250 - T28E61 W,]22 Interest expense (054021) (941684) (549,105) Total nonoperating horsemen) revenue (328810) (91434) (420244) 44m (Las)Income-BeMecmViWtimsantl Vanskrs (1855.103) 313576 (2D1051) (1]129]8) (536643) retail eamNhauan. than Developers and Game X2682 - - X2682 - 3ranHeaingr ) - - 35.000 35,000 - Change inNet Assets (1,,152421) M3576 (56E51) ('95296) (4361613) Netltssets-Beenningofyear 85.401312 3,M,159 5,226,362 93,844833 7,036236 NeUtssets-Endofyear 580288,891 $ 3510,85 $ 5,059,911 592,859,53] $ 6559,593 The Notes to Financial Statements are an Integral Part of this Statement. 18 City of Livonia, Michigan Proprietary Funds Statement of Cash Flows Year Ended November 30, 2010 The Notes to Financial Statements are an Integral Part of this Statement. 19 Nmmajor saran Enterprise Fund Enteriese Fund Taal EnkraM1e Internal Sefhce Water andSewer Hmsng Goffcourse Fund Fund C6M1 Flow from Operating Activilig Receipts from cotoners 8 24,7711 8 1.38,]]9 8 1.610,981 8 27.752,Q59 8 1,937216 Payments to suppliers (21),90,759) (316258) (1,59,030) (22,819,W) (41,216027) Payments to employees (4,111 (3]4,]13) (16951) (4,626 Q30) Other recaptsfirmerents (84,071) 1,849 (82222) Net dean (wed In) proadtl[y opzrztilg activities (403,897) 613657 (35,000) ]LQ]60 (1,219211) Cash Flaws from NonsapNl Nnani Activitks- Nottransfershonotherfund - - 35,000 35,000 - C6M1 Flows from Cati and Release] Ramada Activities CmViWtims hon<ustoners 50,482 - - 50,482 - NetWrchasesofaptalasets (2,668,46er - - (2,668,46er - Principrlandinterstleitlmlmg- term dam (1,782296) (w6.050) (2,238,346) ea421B Netaah lesson) poidtltyapkl andrelated firmang activities (4,400280) (506050) - (4,9(6330) 464210 C6M1 Flow from Investing Actfvitim Interest reconand on investments TL5611 3250 - tt8E61 44,]22 Net sles(ryrchasm) of investment activities 991,485 (38,031) (2,863) 950571 16,376 Net ash poiRtl by mestin9 acteates 1,117,096 (34]81) (2,863) 1,0N,E32 231,098 Net mecrmi Ircreme in Cash and Cash Equivalents P'w'081) 102,826 (2,863) (3,87,138) (503903) Cash and Cash Equivalents - Beginning ofyear 16,149,033 186,151 2,863 1,318,070 6,88906 CmandCasM1 Equivaknis - End of r y $ 12p61,952 $ 288,980 S - $ 12]50,932 $ 6,085,003 Oalance SM1cet CImBicetion of Cash and Cash Equfraknts Cash and Investments $ 13,106,309 $ 91 $ - $ 13,82,M a 8,335620 Rmtrcted mob IN de 7) 2,891 - 2,891 Lm investments [3,88561) (106809) (3,615,370) (2250617) an Tdalashsuccess ents8980 ry $ 12p(ii $ 28 $ $ 12]50,932 $ 6,085,003 The Notes to Financial Statements are an Integral Part of this Statement. 19 City of Livonia, Michigan Proprietary Funds (Continued) Statement of Cash Flows Year Ended November 30, 2010 Nonropo larch Entertains Fund Enterpise Fund Total Enterturse Internal Service Water andSewer Hoisng GoffCourse Fund Fund Reconciliation of Operating (Los) Income to Net Ca ah Van Operating Activation Operzting(Iow)Inorre 8 (?4bTJ3) 8 N5,010 8 (2D?351) 8 (?302,]3!) 8 ('81,355) PijusMents to reconcile operate g (Iow)Inc oto net was horn operating adiviies DePeciation 2,735,073 hai 159235 3,Uni - Changeslnasetsand histories: Recenr✓abes (1,141 - 3,936 (1,136355) Inventory, prepaid, andidi (42B.On - - (42B.On retardant! deer assets (1,71 126) Accounts terns n4512 1,931 (26,n3) a5,57o Due to deers - - - - 1'1512so Accrued and deer liabli0es (53,061) geram 13961 7203 Deterred revenue (303,67"y - (303,67"y - Bondanddro0s 1619 1619 Net was (wed in)prodd operating tyina e$ (1038.9]) $ 633,6.5] $ (35,000) S Mired $ (1219,211) During the year ended November 30, 2010, the City received $52200 in donated water and sewer lines reported as capital assets In the WderandSev Fund The Notes to Financial Statements are an Integral Part of this Statement. 20 City of Livonia, Michigan The Notes to Financial Statements are an Integral Part of this Statement. 21 Fiduciary Funds Statement of Fiduciary Net Assets November 30, 2010 Pension and Other Employee Benefits Agency Funds Assets Cash and cash equivalents (Note 3) $ 1,025,348 $ 9,303,654 Investments (Note 3): U.S. government securities 22,106,536 - Collateralized mortgage obligations 14,666,855 - Commonstock 113,785,036 - Corporate bonds 42,111,591 - Realestateinvestmenttrust 8,843,369 - Foreign bonds 5,800,224 - Mutual funds 38,903,014 - Securities lending collateral pool 3,806,572 - Accounts receivable 523,548 - Due from agency funds 689,858 Total assets 252,261,951 $ 9,303,654 Liabilities Accounts payable 1,066,506 $ 276,603 Due to other governmental units - 5,644,832 Due to primary government 1,104,292 - Duetootherfunds - 689,858 Accrued and other liabilities - 2,692,361 Amounts due to broker under securities lending agreement 3,999,990 Total liabilities 6,170,788 $ 9,303,654 Net Assets Held in Trust for Pension and Other Employee Benefits $246,091,163 The Notes to Financial Statements are an Integral Part of this Statement. 21 City of Livonia, Michigan The Notes to Financial Statements are an Integral Part of this Statement. 22 Fiduciary Funds Statement of Changes in Fiduciary Net Assets - Pension and Other Employee Benefits Trust Funds Year Ended November 30, 2010 Pension and Other Employee Benefits Additions Investment income: Interest and dividends $ 6,943,790 Net charge in fair value of investments 18,158,830 Less investment expenses (544,451) Net investment income 24,558,169 Contributions: Employer 5,633,055 Employee 1,196,550 Total contributions 6,829,605 Total additions 31,387774 Deductions Pension benefit payments 12,459,933 Medical benefit payments 6,622,837 Refunds of contributors 649,024 Administrative expenses 202,350 Total deductions 19,934,144 Net Increase 11,453,630 Net Assets Held in Tmst for Pension and Other Employee Benefits - Beginning of year 234,637,533 Net Assets Held in Tmst for Pension and Other Employee Benefits - End of year $ 246,091,163 The Notes to Financial Statements are an Integral Part of this Statement. 22 City of Livonia, Michigan Component Units Statement of Net Assets November 30, 2010 Assets Cash and cash equivalents Accounts receivable Capital assets (Note 4): Nontlepreciable capital assets Depreciable capital assets- N at Total assets Liabilities Accounts payable Accrued and other liabilities Noncurrent liabilities: Due within one year Due in more than one year Total liabilities Net Assets Invested in capital assets- Net of related debt Unrestricted Total net assets Economic Plymouth Road Development Development Corporation Authority Total $ 23,341 $ 4,496,515 $ 4,519,856 - 38,313 38,313 - 474,448 474,448 _ 8,027,054 8,027,054 23,341 13,036,330 13,059,671 53,423 53,423 3,325,239 3,325,239 - 410,880 410,880 3,510,880 3,510,880 - 7,298,662 7,298,662 - 4,581,502 4,581,502 23,341 1,156,166 1,179,507 $ 23,341 $ 5,737,668 $ 5,761,009 The Notes to Financial Statements are an Integral Part of this Statement. 23 City of Livonia, Michigan Funct omVProgmms Eoononrc DevelopmentCorporation- General government Plymouth Road Development Au0ionty Community and econonrc development Interest on longterm @lot Total Plymouth Road Development Authonty Totalgovernmental acbmtes Program Revenue Operating Capital Grants Charges for Grants and and Expenses Seraws Contnbuhnns Contnbuhnns $ 172 $ - $ - $ 1346,046 - - - 179,300 - - - 1525,346 - - - $ 1,525,518 $ $ $ General revenue: Taxes Interest Miscellaneous Total general revenue Change in Net Assets Net Assets-Beginningmyear Net Assets - E d of year The Notes to Financial Statements are an Integral Part of this Statement. 24 Net (Expense) Rewnm and Changes in Net Assets Emmmic Plymo Road DewlWment DewlWment Co rahm Mftro Total (172) $ - $ (172) (1346,846) (1346,846) (179,388) (179,388) (1525,346) (1525,346) (112) (1525,346) (1525,518) - 285,661 285,661 115 1891 2,006 1,000 174 1,174 1,115 207,126 288,841 943 (1317,628) (1316,68) zz,398 7,M,280 7,M,666 $ 23,3!1 $ 5,]3],668 $ 5,761,069 25 Component Units Statement of Activities Year Ended November 30, 2010 City of Livonia, Michigan Notes to Financial Statements November 30, 2010 Note 1 -Nature of Business and 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 is governed by an elected seven -member council. The Citys 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 Citys operations. The discretely presented component units are aggregated and reported in a separate column in the government -wide financial statements to emphasize that they are 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 Municipal Building Authority are reported as a nonmijor Debt Service Fund. Discretely Presented Component Units - The Economic Development Corporation (EDC) 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 EDC's governing body, which consists of eight individuals, is selected by the mayor and approved by the City Council. Internally prepared financial statements for the EDC can be obtained from the City of Livonia finance department at 33000 Civic Center Drive, Livonia, MI 48154. The Plymouth Road Development Authority was created to encourage additional economic activity and growth in the Plymouth Road business district. The Plymouth Road Development 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. 26 City of Livonia, Michigan Notes to Financial Statements November 30, 2010 Note 1 -Nature of Business and Significant Accounting Policies (Continued) The Brownfield Redevelopment Authority was created, pursuant to Public Act 381 of 1996, to promote revitalization of environmentally distressed areas within the 36 -square mile boundary of the City. The Brownfield Redevelopment Authority is funded Primarily by property tax revenue captures. The Brownfield Redevelopment Authority is governed by a nine -member board that is designated by the mayor and appointed by the City Council. The Brownfield Redevelopment Authority had no activity during the year. The City has exduded 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 nonfduciary activities of the City (the primary government, which includes the blended component unit) and its discretely presented component units. The effect of interfund activity has been removed from these statements. Governmental activities, nomnally supported by taxes and intergovernmental revenue, 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 revenue. Direct expenses are those that are dearly identifiable with a specific function or segment Program revenue includes (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, 2010 Note 1 -Nature of Business and 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 of the 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 accrual basis 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 reirrbursements 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 daims andjudgments are recorded only when payment is due. The City reports the following major governmental funds: The General Fund - The General Fund is the City's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. Refuse Disposal Fund - The Refuse Disposal Fund amounts for the operations of the refuse disposal activities of the City. Funding is provided primarily 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, 2010 Note 1 -Nature of Business and 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 internal service and fiduciary activities: Internal Service Fund - The Internal Service Fund is used to fund general, workers' compensation, and employee healthcare 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 Fund - The Pension and Other Employee Benefits Trust Fund accounts for the activities of employee beneFd plans that accumulate resources for pension and other postemployment beneFd payments to qualified employees. The City of Livonia Employees' Retirement System and the City of Livonia Health and Disability Plan have been blended into the Citys financial statements. These systems are governed by a five -member pension board that includes three individuals chosen by the City Council andlor 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. 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. 29 City of Livonia, Michigan Notes to Financial Statements November 30, 2010 Note 1 -Nature of Business and Significant Accounting Policies (Continued) 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 revenue reported for the various functions concemed. 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 includes all taxes. When an expense is incurred for the purposes for which both restricted and unrestricted net assets are available, the Citys policy is to first apply restricted resources. Proprietary funds distinguish operating revenue and expenses from nonoperating 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 City's 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 nonoperating revenue. Operating expenses for proprietary funds include the cost of sales and services, administrative expenses, and depredation 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 July 1 and December 1 of the following year, and are due on September 14 and February 14, respectively. After the final collection on the last day of February, real property taxes are added to the county tax rolls. The 2009 taxable valuation of the City totaled $4.999 billion (a portion of which is abated and captured by the PRDA). The millages levied by the City and the resulting revenue are as follows: 30 City of Livonia, Michigan Notes to Financial Statements November 30, 2010 Note 1 -Nature of Business and Significant Accounting Policies (Continued) Purpose of Millage Millage Rate Approximate Revenue (in millions) Operating purposes 4.0447$ 19.70 Police and fire 0.8088 3.94 Police and fire and snow 1.2134 5.91 Library 0.8088 3.92 Refuse and recycling 2.3746 11.51 Industrial development 0.0102 0.05 Roads, sidewalks, and trees 0.8893 4.31 Recreation 0.7855 3.81 Transit and capital improvement 0.5000 2.42 These amounts are recognized in the respective General, Special Revenue, and Debt Service Funds financial statements as tax revenue. The delinquent real property taxes of the City are purchased by Wayne County (the "County'). The County sells tax notes, the proceeds of which are used to pay the City for these property taxes. Wayne County remitted its purchased delinquent real property taxes in October and December 2010. 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 balance for the principal 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 financial 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 ofgovemmental 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 fimncial statements. City of Livonia, Michigan Notes to Financial Statements November 30, 2010 Note 1 -Nature of Business and Significant Accounting Policies (Continued) 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 classified as restricted assets. 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 Citys 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 of year end. Long-term 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, 2010 Note 1 -Nature of Business and Significant Accounting Policies (Continued) Pension and Other Postemployment Benefit Costs - The City offers both pension and retiree healthcare benefits to retirees. The City receives an actuarial valuation to compute the annual required contribution (ARC) necessary to fund the obligation over the remaining amortization period. In the governmental funds, pension and other postemployment benefit costs are recognized as contributions are made. For the government -wide statements and proprietary funds, the City reports the full accrual cost equal to the current year required contribution, adjusted for interest and "adjustment to the ARC" on the beginning of year underpaid amount, if any. 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. Unreserved fund balances have been designated for subsequent year expenditures in the following amounts: $624,279 in the Community Recreation Fund, $1,498,055 in the Refuse Fund, and $4,091,173 in other nonmajor governmental funds. 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 during the period. Actual results could differfrom those estimates. Upcoming Accounting Pronouncement - In March 2009, the Governmental Accounting Standards Board (GASB) issued Statement No. 54, Fund Balance Reporting and Governmental Fund -type Definitions. The objective of this statement is to enhance the usefulness of fund balance information by providing clearer fund balance classifications that can be more consistently applied and by clarifying the existing governmental fund -type definitions. This statement establishes fund balance classifications that comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds. Under this standard, the fund balance classifications of reserved, designated, and unreserved will be replaced with five new classifications: nonspendable, restricted, committed, assigned, and unassigned. The City is currently evaluating the impact this standard will have on the financial statements when adopted. The City will implement GASB Statement No. 54 beginning with the fiscal year ending November 30, 2011. 33 City of Livonia, Michigan Notes to Financial Statements November 30, 2010 Note 2 - Stewardship, Compliance, and Accountability Construction Code Fees - The City oversees building construction, in accordance with the State's Construction Code Act, including 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, including an allocation of estimated overhead costs. A summary of the current year activity and the cumulative surplus or shortfall generated sincedanuary 1, 2000 is as follows: Cumulative shortfall at December 1, 2009 $ (1,056,219) Current year building permit revenue 1,448,458 Related expenses: Direct costs $ 1,388,134 Estimated indirect costs 452,418 1,840,552 Current year net expenses (392,094) Cumulative shortfall at November 30, 2010 $ (1,448,313) Fund Deficits - The Golf Course Fund had a deficit of $61,898 in unrestricted net assets at November 30, 2010. The SAD Street Lighting Fund had a deficit of $78,822 in unreserved fund balance. The deficit in the Golf Course Fund will be eliminated by cost management over several years. The deficit in the SAD Street Lighting Fund will be eliminated by adjusting assessments as necessary. 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 offedeally insured banks, credit unions, and savings and loan associations that have offices in Michigan. A 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 for direct investment by local units of government 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. 34 City of Livonia, Michigan Notes to Financial Statements November 30, 2010 Note 3 - Deposits and Investments (Continued) The City has designated four banks for the deposit of its funds. The investment policy adopted by the 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 Citys deposits and investment policies are in accordance with statutory authority. As permitted by state statutes and under the provisions of a securities lending authorization agreement, the City of Livonia Employees' Retirement System (the "System") (see Note 9) lends securities to broker-dealers and banks for collateral that will be returned for the same securities in the future. The System's custodial bank manages the securities lending program and receives cash as collateral. Borrowers are required to deliver collateral for each loan equal to not less than 100 percent of the market value of the loaned securities. During the year ended November 30, 2010, only United States currency was received as collateral. The City then converts that cash received as collateral into other investments. The System imposes a limit of $7.6 million during the fiscal year on the amount of loans made on its behalf by the custodial bank. There were no failures by any borrowers to return loaned securities or pay distributions thereon during the fiscal year. Moreover, there were no losses during the fiscal year resulting from a default of the borrowers or custodial bank. The City of Livonia Employees' Retirement System and the borrower maintain the right to terminate all securities lending transactions on demand. The cash collateral received on each loan was invested, together with the cash collateral of other lenders, in an investment pool. The average duration of such investment pools as of November 30, 2010 was one day because the loans are terminable on demand; their duration did not generally match the duration of the investments made with cash collateral. On November 30, 2010, the System had no credit risk exposure to borrowers. The collateral held and the fair market value of the underlying securities on loan for the System as of November 30, 2010 was $3,999,990 and $3,821,559, respectively. 35 City of Livonia, Michigan Notes to Financial Statements November 30, 2010 Note 3 - Deposits and Investments (Continued) 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 bankfailure, 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 had $33,184,181 of bank deposits (certificates of deposit, checking, and savings accounts) that were uninsured and uncollateralized. The City 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 evaluates each financial institution with which it deposits funds and assesses the level of nsk of each institution; only those institutions with an acceptable estimated risk level are used as depositories. 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 Citys 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: Primary Government Fair Value om5yeas 6m to years over 10 Years U . agencysecurtles $ 24,a36435 $ 24,439,435 $ - $ - US.3reasurysecurmea 2,om579 2ow,s Taal $ 26,a33,e34 $ 26,439,m4 s $ City of t3mnla FmpHees Retirement System Fair Value om5yeas 6m 30 years over 30 years corp ate W cs $ 32,965zo $ 9,1B.173 $ 33,763,056 $ 9,126,821 Foreign 11 4004837 2212,628 1j49616 842593 OS agengsecurAies 12075,388 50,214 2)51,63] 10.173459 O S. Treasurysecurites 3,162905 3,042425 - 128480 Colateralbedmortgage odigatms 11214615 385911 10,828 7X Total $ 63322907 $ 14,483,430 5 17,748)20 $ 33,091,25] City of t3mnla Retiree Health and disability Beni plan Fair Value om5y®rs 6m 10 years over 10 years corp ate bonds $ 10,046}41 $ 3289.84 s 4,493849 $ 226518 Foreign ii 1j95,388 743,112 11 211,048 II S. agengsecurAies 4299,924 6,025 ]85214 3508,685 B S. Treasurysecurites 2,10,407 2oA,W3 - ri Collatera1¢edmoltgage odigatms 3,452240 125160 3327,050 Total $ 21,352,300 $ 6,118,390 5 5,812591 $ 9,401,319 'M City of Livonia, Michigan Notes to Financial Statements November 30, 2010 Note 3 - Deposits and Investments (Continued) Credit Risk State law limits 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 (other than the U.S. government) are as follms: nvestment Primary Government Bank investment pools Bank investment pools Corporate bond Corporate bond Corporate bond Corporate bond Corporate bond Corporate bond Corporate bond Foreign bonds Foreign bonds Foreign bonds U.S. agencies securities U.S. agencies securities U.S. Treasury securities U.S. Treasury securities Collaterialized mortgage obl'gatiom Collateralized mortgage obligations Collateralized mortgage obligations Collateralized mortgage obligations Collateralized mortgage obligations Total Component Units- Bank imestment pools 37 Fair Value Rating Rating Organization $ 2,557,632 Aaa Moody's 894,510 Al 3&P 4,894,293 AAA 3&P 3,390,423 AA 3&P 10,423,158 A 3&P 19,404,989 BBB 3&P 318,225 BB 3&P 324,150 B 3&P 3,356,353 NR 3&P 1,778,669 AA 3&P 2,566,763 A 3&P 1,454,792 BBB 3&P 24,875,029 A 3&P 16,330,630 NR 3&P 6,868,166 AAA 3&P 465,725 NR 3&P 1,402,040 AAA 3&P 3,361,139 AA 3&P 7,396,570 A S&P 1,236,828 BBB S&P 1,270,278 NR S&P $ 114,570,362 $ 4,496,515 Aaa Moody's City of Livonia, Michigan Notes to Financial Statements November 30, 2010 Note 4 - Capital Assets Capital asset activity of the City's governmental and business -type activities was as follays: 38 Balance Balance oeemeer 1, November 36, f omental Aanilla 2069 Reclasilaoms Accli tell 2010 Capital risk na bang Rpeciated lam! 8 1.914,669 8 8 8 (63270) 8 M.851019 Cmstructim in armless 8,46001 (6,5t9,635) 305,859 Z 626 suddal 43,395,093 (8,5t9,635) 305,859 (63270) 35,088,11 Capital mi Wing Rtarmated Inhsiruciwe Sf,6£,554 - 7,914614 - 92,611;168 Ratlrights 17,313292 182974 17,'176266 tailings antlinnarwenrents 93,TL3239 6,495590 3,650614 (400,196) 1N,869247 E4iprentantlwhi 31,4]4610 54,445 1,36]]E6 (1,269900) 31,R6j41 suddal 226,W7,695 8,Sf9,ms V,W5988 (1,610,095) 245,613222 Accumilated Rpecialim: Inhstructure M,953607 - 2,511 - 3],410,691 R®tlrights 6,251593 - ' ]85 6,M,ln Buildings antlinnarwenrents 31,082}45 - 2,31815 (tt2,368) 35011,TR E4iprentantlwhi N,385 2,500,]28 (1,176012) 211,]15,659 suaaal 93,6n688 7,595,412 O.M.]So) 'N,b932o Net aphi sets bung di'Preciatan 1]2905,00] S,Sf9,ms 5,50576 (311,316) 1M,6il902 Net aPta assets 8 13,310,100 8 - 8 5,41 8 (434586) 8 18431,949 38 City of Livonia, Michigan Notes to Financial Statements November 30, 2010 Note 4 - Capital Assets (Continued) 39 Balame Balance Deemeer 1, Noeemeer 30, BusInas7Peaanilla 200 Reclasilagims Amgims tell 2010 CapIal assets not bens deaeciated Land $ dirt E35 8 8 8 - 8 dirt E35 Construction In progress MIM (i W9,EE3) 2,65890 2,369591 Suddal 6,013580 (1,169,EE3) 265890 - ],53!82] CapUl assets ming tlzpeciated Water and sewer dsiriWiim 1211,228602 1'%9,EE3 02203 - 12200248 Buildrgs and Wildig Imywemei 9,$2531 - 15,800 - 9,del Machinery and e4ipnenl 2,T 629 - 12,]]9 - 2,211008 Vehicle 1,]65539 1,]65539 Land impwerrenis 2,916,044 2,916,044 SUWdal 136491845 1;%9,40.3 839]62 - 1383215]0 Accumilated depreciation Water and sewer dsiriWiim 55'snr AS - 2,406,073 - A,9H868 Buldrgs and Wildig imywemei 4,W4,338 - 18l - 4,M,000 Michnen and egiipnenl 1,388243 - 207585 - ', 5,s2B ends 1,00581 - deo]rs - 1,311,35] Land imaueerrents 2,326949 110]96 2,43],]45 subi 64.483906 3,M902 a'w'sm Net deal assets being deaeciated 72,W7,439 1,149,443 (2,392,120) - 711,764,762 Net deal mob 8 B31019 8 - 8 247,]]0 8 - 8 7d.2SB.789 Balance Balance December 1, November30, Canponent Units- Development Authority 28119 A6BRions 2010 Capfel assets not being deprerAafed - Land $ 474,4M $ - $ 474,448 Capfel assets being @preciatetl- Land improvements 15,617,146 86,081 15,]03,22] A rnullclepreviation- Lan improvements 6,895,136 ]81,03] 7,676,173 Net mpdal assets being deprestafed 8,722,010 (694,956) 8,027,054 Net mpdal assets $ 9,196,456 $ (694,956) $ 8,501502 39 City of Livonia, Michigan Notes to Financial Statements November 30, 2010 Note 4 - Capital Assets (Continued) Payable Fund Depreciation expense was charged to programs ofthe primarygovernment as follows: Governmental activities: General government $ 478,113 Public safety 1,349,358 Public works 3,746,525 Recreation and culture 2,021,416 Total governmental activities $ 7,595,412 Business -Type activities: Total General Fund Water and sewer $ 2,735,073 Housing 168,584 Golf course 169,245 Total business -type activities $ 3,072,902 Total $ Construction Commitments - The City has active construction projects at year end. At year end, the City's commitments with contractors are as follows: Remaining Spentto Date Commitment Street and sidewalk projects $ 15,954,939 $ 2,496,461 Water and sewer projects 2,404,570 218,460 Total $ 18,359,509 $ 2,714,921 Note 5 - Interfund Receivables, Payables, and Transfers Receivable Fund Payable Fund Amount Due to/from Other Funds General Fund Golf Course Fund $ 33,290 Internal Service Fund 1,151,280 Nonmajor governmental funds 1,188,445 Total General Fund 2,373,015 VERA Fund Investment Administration Agency Fund 689,858 Total $ 3.062.873 40 City of Livonia, Michigan Notes to Financial Statements November 30, 2010 Note 5 - Interfund Receivables, Payables, and Transfers (Continued) 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 follming: Transfer Out Transfer In Amount General Fund Nonmijorgovemmental funds $ 166,088 ` Golf Course Fund 35,000 ` Community Recreation Fund Nonmajorgovemmental funds 2,425,063 " Nonmajorgovemmental funds General Fund 40,000 Nonmajorgovemmental funds 7,300,148 Total $ 9,966,299 ` Transfer of unrestricted resources to fimnce capital projects and general obligation debt service in accordance with budgetary authorizations " Transfer from the Community Recreation Fund fordebt service Transfer from Cable Television Fund to General Fund for building rent The majority of transfers are for gas and weight tax revenues from the Major Streets Fund to the Local Streets Fund and from these funds to the Road and Sidewalk Fund in accordance with Act 51. Most of the remaining transfers relate to the City's community transit program. Note 6 - Long-term 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 cover the deficiency until other resources (such as tax sale proceeds or a reassessment of the City) are received. Revenue bonds involve a pledge of specific income derived from the acquired or constructed assets to pay debt service. City of Livonia, Michigan Notes to Financial Statements November 30, 2010 Note 6 - Long-term Debt (Continued) Long-term debt activity can be summarized as follows: interest Principal Rate unwary Beginning Ending Due when Rang= Rage= Balance /accurate Reductions Balance One Year Gawnenmental Activities Bunning /Lthoriry Batds: 2000 Recreation Bonds: Amount ofi„ue -$3,000,000 Maturing through 210 - - s 100,000 s - s (101 s - s - 2001 Recreation Bonds: Amount of isue -133,500,000 Maturing through 218 - - 758,80 - (758,80) - - 2805 MBA Refunding Bonds Amoumi-$3,730,000 350%- s245)00 - Maturing through 2n15 425% MOW 3/(35.00) - (ns,)00) 3,350,00) 245)W 2887 MBA Refunding Bond:: Amouncofssue-$31,825000 400%- 510oo,000- Maturing through 2o30 475% 51705,000 30,790,000 - (125,000) 30,665,00) 1000,000 2888 MBA Court Construl Bond Amountofisue-$8588,00) 325%- $2)5,00) Maturing through 2833 525% $580)0) 85)0)0 - 095,00) 8,3)5,)0 205,M Capel lease obligations: Fire truck Wmre[ Annountofisue-$485,888 Wturingterouge2811 339% W690 133131 - low) thi thi Transportation Wses: /mmntofisue-$]2b 912 Wturiig through Dll 30% $155946 30,386 - (15038) 155,948 155,948 Total gouemmennl activity Rd Uh g44D - (1500802) 42,'.s13,68 1,673,68 Other lonrl odigatims: General radliry chin's, wor ere nmgensatiat, and real care (Note s3 2,311 464,210 - 2,801,912- Landfillcmure and "holders haagry 748,9% (230m)) 511 - oaFBreday 49458 514,214 1y)a,]efi Co�zmatetlah:e¢es 829,149 2613,882 (3,198,7166) 7,641,515 2971,821 Roger ac(3„tiesmmennl $55,832821 $ 361?52b 8 (4,923,58) 854514,]89 $ 4,644,68 42 City of Livonia, Michigan Notes to Financial Statements November 30, 2010 Note 6 - Long-term Debt (Continued) 43 Interest running Rate Maturity Beginning Endrg Due Wthin Ranged Ranges Balance Idea s Reductions Balance One Year Business typeActirRies Building Authority Bonds: 2007 MBA Refunding Bond; Amountofaesue-$3380,000 5425,000 - Maturing through mt5 400% Sas5p00 $ 265.000 $ - $ (410,000) $ 2195.000 $ 4Z,000 Wmer Supoy andwaste.ater System Bond: 2002WderSuppyand Wastmater Srstem Revenue Refunding Bond: Amount of $9,300,00(r 315%- $915,000 - Maturing through M12 400% $930000 2753,030 - (93,WD) 1,841 91,000 Le„ eeferiedamoam o, reNndng (243,664) - 31,009 (24,655) - 2005Water Supplyand Wasteavater Srstem Revenue Bond: Pmountofrare - $4,885,000 350%- 595,000 - Maturing through 2020 500% $400000 3,820,000 - BRi 3,540,000 295,000 20% Water Sunny and Wastmater Seri Revenue Refunding Bond: Rol ofrare - $4110,000 350%- $1]0000 - Running through 2020 500% &55,000 4,0=000 (1 00D)3,_000 1 00o Taal bsinestyine actl debt 129]63K - (1,11,991) 11,2¢,315 1,85,000 Coantycomractual of igatiens: Slone Revolving Fund Lol N. Huron Valey/Rorge Valey Wastmater Control System: Amount of $14,42d,]I13 $2g000 - Running through 2021 225% $ D00 23D,00D - (20,00D) 210,000 20,000 Other Iorl odigatims: (BRED liablty 20,55 22A8 - 42,763 Corrinematedabiences 0_5]4 56,318 339g_892 x_m Tonal bsinestyine activates 1351171B526(1,733,991) 11,_000 ZDMBM Tonal governmental and bisinestype actirties $ 693,13,286 8 3,6W,f62 8 (6,66,519) $ 65.369.7649 8 6,699,392 cempnnem unit nclNnies 2000 E mdo,n Development Refunding Bond: Announ isue-$4p10,W0 400%- M10,0W- Running through 2998 500% ss70,0W $$ 43!6DDD $� $ (390,000) $ 3920,000 $ 410,000 43 City of Livonia, Michigan Notes to Financial Statements November 30, 2010 Note 6 - Long-term Debt (Continued) Annual debt service requirements to maturity for the above bonds and note obligations are as follows: .+anuM 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. The aggregate original issue amount was $81,422,000. Note 7 - Restricted Assets The balances ofthe restricted asset accounts areas follows: Business -type Activities - Water and Sewer Fund Cash and cash equivalents: Revenue bond reserves $ 2,495,978 Bond proceeds 398,226 Total restricted assets $ 2,894,204 Business -type Activities - In accordance with the provisions of the Water Supply and Wastewater System Revenue bonds, the City is required to set aside monies in a bond reserve account. At November 30, 2010, the City set aside $2,495,978 to comply with these requirements. 44 City of Livonia, Michigan Notes to Financial Statements November 30, 2010 Note 7 - Restricted Assets (Continued) Bond proceeds held in the amount of $398,226 in the Water and Sewer Fund relate to excess funds from the 2005 Water Supply and Wastewater System Revenue bonds to be used for future water and sewer obligations. Note 8 - 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 workers' compensation and participates in the Michigan Municipal Risk Management Authority (the "Authority'). 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 medical claims that have been incurred through the end of the fiscal year, including c aims 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 claims is recorded within the governmental activities column in the statement of net assets. Changes in the estimated liability for the past two fiscal years were as follows: Genera'Gad4ry worlievicamsemarim Medal Chime 2010 2869 2818 2869 2010 2009 Estimated halshl Bunning of War 8 48,7r] $ 1.813E51 8 841,191 8 987.513 8 %7.8N 8 Sfd088 Estimated claims incurred inaudrg chases n estii¢ rel1,575097 1,258907 ral 359,049 13,063y7 12,896812 Claimre}ments (1,713598) (414251) (505,361) (19,W5097) (1$813,116) Estinm@dliadily-End ofrar 8 660,931 8 48.7r] 8 1.135507 $ 811.191 $ 1.035.514 $ 97,804 45 City of Livonia, Michigan Notes to Financial Statements November 30, 2010 Note 9 - Defined Benefit Pension Plan 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 employee of the City unless they elected to transfer to the Citys 401(a) defined contribution pension plan (see Note 10): • 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 • Police officer members - All members hired prior to November 24, 1998 and their beneficiaries • Firefighter members - All members hired prior to July 1, 1998 and their beneficiaries The System provides retirement, disability, and death benefits to plan members and their beneficiaries. At November 30, 2009, the date of the most recent actuarial valuation, membership consisted of 569 retirees and beneficiaries currently receiving benefits and terminated employees entitled to benefits but not yet receiving them, and 226 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 Citys collective bargaining units and requires a contribution from the employees from 2.55 percent to 6.25 percent The funding policy provides for periodic employer contributions at actuarially determined rates. Administrative costs of the plan are financed through investment earnings. City of Livonia, Michigan Notes to Financial Statements November 30, 2010 Note 9 - Defined Benefit Pension Plan (Continued) Annual Pension Cost - For the year ended November 30, 2010, 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, 2008 using the aggregate 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 tediniques 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. The pension cost for the three most recent years is as follows: Fiscal Year Ended November 30 2010 2009 2008 Annual pension cost (APC) $ - $ - $ - PercentageofAPCcontributed 100.0 % 100.0 % 100.0 Net pension obligation - - - Reserves - As of November 30, 2010, the plan's legally required reserves have been fully funded as follows: Legally required reserves: Reserve for employees' contributions $ 9,633,068 Reserve for retired benefit payments 51,447,690 Additional reserves- Reserve for employer contributions 127,398,257 Total reserves $ 188,479,015 Note 10 - 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 - All members hired on or after March 17, 1997 • Police lieutenant and sergeant members - All members hired on or after December 8, 1997 • Police officer members - All members hired on or after November 24, 1998 • Firefighter members - All members hired on or after July 1, 1998 In addition, the plan covers all employees electing to transfer from the Citys defined benefit pension plan (see Note 9). 47 City of Livonia, Michigan Notes to Financial Statements November 30, 2010 Note 10 - 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 through collective bargaining agreements, the City contributes a percentage of employees' earnings as follows: Employees Transfernngfroinft New Employees HirA After the Detned Benefit Pension Plan Effective Dates NoW Above Employer Employee Employer Employee Contribution Contribution Contnbuhnn Contnbuhnn General 13% 3.1%to366% 8% 3.1%to366% Police lieutenants and sergeants 13% 521% 11% 521% Police 13% 5% 11% 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 employees account) are fully vested after four years of service. In accordance with the above requirements, the City contributed $2,230,811 during the current year and employees contributed $779,197. Note 11 - Other Postemployment Benefits The City of Livonia Retiree Health and Disability Benefits Plan Plan Description - Effective November 4, 1998, the City created the City of Livonia Retiree Health and Disability Benefits Plan (the "VERA"). The plan provides medical and healthcare benefits, including hospitalization and disability benefits, for the welfare of all retirees and their spouses and eligible dependents. At November 30, 2009, the date of the most recent actuarial valuation, merrbership consisted of 641 active participants, 638 retired participants, and 34 inactive vested participants. After November 4, 1998, all contributions related to postemployment benefits for all members of the 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 - Most 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. Effective December 1, 2009, newly hired employees receive a health reimbursement account instead of being eligible for the VEBA. m City of Livonia, Michigan Notes to Financial Statements November 30, 2010 Note 11 - Other Postemployment Benefits (Continued) Contributions - Employer contributions to the trust 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 terms of the plan. The obligation to contribute to and maintain the System for these employees was established by negotiation with certain bargaining units, including general and administrative employees. These employees are required to make a contribution of 2 percent beginning December 1, 2006. The funding policy provides for periodic employer contributions at actuarially determined rates. Administrative costs of the plan are financed through investment earnings. Funding Progress - For the year ended November 30, 2010, the City has estimated the cost of providing retiree healthcare benefits through an actuarial valuation as of November 30, 2008. The valuation computes an annual required contribution which represents a level of funding that, if paid on an ongoing basis, is projected to cover normal costs each year and amortize any unfunded actuarial liabilities over a period not to exceed 30 years. This valuation's computed contribution and actual funding are summarized as follows: Annual required contribution (recommended) $ 6,155,752 Interest on the prior years net OPEB obligation 41,209 Less adjustment to the annual required contribution (27,464) Annual OPEB cost 6,169,497 Contributions to VEBA (5,633,055) Increase in net OPEB obligation 536,442 OPEB obligation - Beginning ofyear 515,107 OPEB obligation - End of year $ 1,051,549 The annual OPEB costs, the percentage contributed to the plan, and the net OPEB obligation for the current and two preceding years were as follows: Percentage Fiscal Year Annual OPEB OPEB Costs Net OPEB Ended Costs Contributed Obligation 11/30/08 $ 6,218,636 100.0 % $ - 11/30/09 6,197,363 92.0% 515,107 11/30/10 6,169,497 91.3% 1,051,549 49 City of Livonia, Michigan Notes to Financial Statements November 30, 2010 Note 11 - Other Postemployment Benefits (Continued) The funding progress of the plan as of the most recent valuation date is as follows (in 000s): - Valued using (he tv�year"smoothetl fuming' market value Actuarial Methods and Assumptions - Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplemental information following the notes to financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing overtime relative to the actuarial accrued liabilities for benefits. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the November 30, 2009 actuarial valuation, the entry age actuarial cost method was used. The actuarial assunptions included an 8 percent investment ate of return (net of administrative expenses), which is a blended ate of the expected long-term investment returns on plan assets and on the employer's own investments calculated based on the funded level of the plan at the valuation date, and an annual healthcare cost rate of 6 percent for fiscal year 2010, 5.5 percent for the following year, and 4.75 percent thereafter. Both rates included a 4 percent inflation assunption. The actuarial value of assets was determined using techniques that spread the effects of short-term volatility in the market value of investments over a five-year period. The UAAL is being amortized as a level percentage of projected payroll on an open basis, over 30 years. 50 Actuarial Actuarial UML as Actuarial Value of P nxl Unfundetl Fun@tl Ratio Coveretl Percentage Valuation Assets' Liability AAL(UML) (Percent) Payroll of Coierecl Date (a) (MIL) (b) (ba) (alb) (c) Payroll 11/30/07 $ 52,802 $ 115,685 $ 62,863 456 $ 35,354 1779 11/30/06 55,361 122,117 66,756 453 37,403 1785 11/30/09 57,845 137,822 79,97 420 36,981 2163 - Valued using (he tv�year"smoothetl fuming' market value Actuarial Methods and Assumptions - Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplemental information following the notes to financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing overtime relative to the actuarial accrued liabilities for benefits. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the November 30, 2009 actuarial valuation, the entry age actuarial cost method was used. The actuarial assunptions included an 8 percent investment ate of return (net of administrative expenses), which is a blended ate of the expected long-term investment returns on plan assets and on the employer's own investments calculated based on the funded level of the plan at the valuation date, and an annual healthcare cost rate of 6 percent for fiscal year 2010, 5.5 percent for the following year, and 4.75 percent thereafter. Both rates included a 4 percent inflation assunption. The actuarial value of assets was determined using techniques that spread the effects of short-term volatility in the market value of investments over a five-year period. The UAAL is being amortized as a level percentage of projected payroll on an open basis, over 30 years. 50 City of Livonia, Michigan Notes to Financial Statements November 30, 2010 Note 12 - Pension and Other Employee Benefit Trust Funds The following are condensed financial statements for the City's defined benefit plan (see Note 9) and the postemployment healthcare plan (see Note 11). The plans do not issue separate financial statements. Statement of Net Assets Cash and investments Other assets Liabilities Net assets Statement of Changes in Net Assets Investment income Contributions Benefit payments Other decreases Change in Net Assets Note 13 - Deferred Revenue Employees' Retirement System VEBA $192,833,985 $ 58,214,560 426,832 786,574 4,781,802 1,388,986 $188,479,015 $ 57,612,148 $ 18,697,135 $ 5,861,034 533,276 6,296,329 (12,459,933) (6,622,837) (834,586) (16,788) $ 5,935,892 $ 5,517,738 Governmental funds report deferred revenue in connection with receivable for revenue that is not considered to be available to liquidate liabilities of the current period. Governmental 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: Governmental Business type Govemmental Funds mtmhes �bhbss Unavailable Urearred Total Urearred Unsarnetl Property tax, spaial assessment, andotherresavables $ Ganmunity recreation center annual passes Interest receivable on sewer connections 911 surcharge revenue not received within 60 days Grant revenue received in advance Grant revenue not received! within 60 dan 713,371 - 713,371 - - $ 2,786,245 $ 648,264 $ 3,346,589 $ 640,264 $ 228,783 1,638,104 $ - $ 1,638,164 $ - $ 637,793 637,793 637,793 354,nD - 354,nD - - 2,471 2,471 2,471 228,783 rr n 51 Required Supplemental Information 52 City of Livonia, Michigan 53 Required Supplemental Information Budgetary Comparison Schedule - General Fund Year Ended November 30, 2010 Variance with Chanel Budget Final Budget Actual Final Budget Revenue Property Taores S 29,836,963 S 29,836,963 S 29,684,469 S (232494) Licenses and Permits Business 155,500 155,500 136]46 (16,754) Nonbusiness 1]6Q401) 1]6Q400 1493,119 (2]1 281) Total licenses and pemits 1919,988 1919,988 1 631665 (288,835) Intergovernmental Revenue State and Ideal ],566,]65 ],566,]65 7,546,134 (26631) Federal 1815]2 1815]2 173145 (8,427) Total intemavemmmtal revenue 7,]46337 7,]46337 7,719,279 (29,856) Charges for Services 3,116061 3,116061 3,839,354 69,293 Interest 888,888 888,888 16/,541 (632453) Fines and Forfeitures 3,661,888 3,661,888 3,315,233 (Ml 767) Miscellaneous Revenue Rent and royalties 1446,858 1446,858 1811695 3K845 Sale df Fixed assets 96008 9g888 34965 (55,935) Other miscellaneous 1411381 1411381 999341 (471 95,H Total miscellaneous revenue 3886151 3886151 2845181 (163844) Total revenue S 60,761DA12 S 60,76DA12 S 49,122,854 S (1,627,558) Expenditures General Government Legislative City Council $ 363,899 $ 363899 S 313.834 S 10,865 City Clark 523,655 523,655 511450 12,205 Elections 354,961 354,961 283,052 11915 Total legislative 1262,521 1262,521 1161,536 94,985 ludanal 3,031 ]54 3,031 ]54 3,021,935 3819 Executive - Mayors office 436962 436962 412,136 18,224 Human resources: Human Relations Commission 2,542 2,542 1330 1 212 Labor relations 114,000 114,000 15,102 38,896 Civil served 689,316 629,316 566141 41169 Total human resources 805,856 145856 664,519 81219 53 City of Livonia, Michigan s4i Required Supplemental Information Budgetary Comparison Schedule - General Fund (Continued) Year Ended November 30, 2010 Variance with Original budget Final budget Actual Final Budgast Expenditures (Con inued) Generale emment(Continued) Financial adninistratbn: Accounting S 329,482 S 318,310 S 219018 S 99,292 Assessing 51],0]4 526,206 526,206 - Finance 248,641 258684 250,684 - Incependentaudl 45,T/1 45,768 35,832 %W6 Board of Review 5,683 5,683 4,838 845 Treasurer 553,465 553,465 536,899 16,566 Inicrmation systems 642,373 642,373 555,334 87,039 Total financial adninistratbn 2,342,489 2,342,489 2,128,811 213,618 Other adrvities_ Legal 665,149 683,614 683,614 - Utililiesandsupples 598524 658525 649,573 952 Acquisition of land 4,000 3,474 1250 2,224 Research and iwestigation 18000 - - - Dues and sulascri nations 37,000 37,000 36,604 396 Total other actrviles 1314,613 1374,613 1371101 35]2 Total general government 9,188257 9,188257 8,712,700 415,55] Pudic Safety Pence: Trafic Wreau 1125,540 1134,560 1134,560 - Adninistration 2,455,566 2,518,748 2,448,602 78146 BeteclNe bureau 2,795,966 2,795,966 2,]63,619 32,34] Aotomdive service 586,750 559,150 546,4]2 12,618 ComminicatbnslRecord Wreau 746,613 ]415]3 ]23,360 18,213 Pressing guards 5A525 5A525 54,230 2% School liaison 452,907 44890] 362921 85,986 Reserve Mire 287,97/ 323,831 323,831 - Patrol Wreau 11309298 18936,905 18545,442 391463 Intelligence Wreau 1528,303 1593,340 1593,340 Total pollee 21343,505 211 W,505 28496,37/ 611128 Fire: AAninistration 842,016 842,016 ]88]83 53,233 Firefighting 18028,942 18028,942 9,968,025 48917 Fre prevention 496531 496531 481 096 15435 Total fire 11361,489 11361,489 11257,904 109565 Protective inspection funding Cod 6oartl of Appeals 1580 1580 485 11195 Inspection 1284,161 1298094 1298,902 (8,808) Total RotedNe inspection 1285,]4] 1291 614 1299,387 (1,]13) Other Rotedrve Office otemergency preparedness 156,064 156,064 147,394 Wo Traficcornmission 2,530 2,530 1]98 732 Total other protective 158,594 158,594 149192 9,402 Total Wblic safety 34,,155,335 33,925,262 33,202,860 722,402 s4i City of Livonia, Michigan 55 Required Supplemental Information Budgetary Comparison Schedule - General Fund (Continued) Year Ended November 30, 2010 Vanance with Original Budget Final Budget Actual Final Budget Expenditures(Continued) Pudic Works Public services - Highways, street, and maintenance Engineering S 307,502 S 282,582 S 252,54] S 29,955 Parks maintenance 1 123,642 975,005 895959 79,046 Administration 411145 66,045 58,943 7,102 EQngpment maintenance (237,523) (237,524) (295471) 5],94] Building maintenance 1328664 1364666 1364,666 - Street lighting 307,000 411,616 411,616 - Maintenance Street 18226 18226 1187 18039 Trafficservicei 127,829 127,829 104,207 23,622 Forestry 3,319 3,319 1]23 1 596 Trial pudic works 3,012,]04 3,012,]04 2,]95,39] 217,307 Parks and Recreation and Cultural Parts and recreation Administration 406,365 436,962 436,962 - Recreatbn hernias 42,554 28,971 28,971 - Recreationathletics 122)66 105m 105633 139 Trial parks and recreation 5]1 ]05 5]1 ]05 571566 139 Cultural: Historic Preseryatbn Comnissim 3,593 3,593 1238 2,355 Historical Commission 85162 84949 ]8,31] 6,632 Art Conmssbn 22,860 23,073 23,073 - Comminityrescurces 825,026 825,026 8101987 23,039 Youth Commssion 13,362 13,362 6,T10 6592 Commssion or Aging ],02] ],02] 5,829 Mild Trial cultural 957,030 957,030 917,214 39,816 Trial parks and recreation and cultural 1528,]35 1528,]35 1488,]80 39,955 Community and Economic Development City Manning Commssbn 575,539 575,539 471,194 104345 Zoning Beard of Appeals 84,312 84,312 76,048 8264 Trial community and ecoromc deaeloment 659,851 659,851 54],242 112,609 Employee Benefits, Insurance, and Other 2,205,130 2,441130 2,429,814 11,316 Trial expenditures S 60,760,012 $ 50,755,939 $ 49,236,793 $ 1,519,146 55 City of Livonia, Michigan 56 Required Supplemental Information Budgetary Comparison Schedule - Major Special Revenue Funds Community Recreation Year Ended November 30, 2010 Variancew4h Annennen Amended Onginal Budget Bunged ACWal Butlget Revenue Property taxes $ 3,836,564 $ 3,836,564 $ 3,808,884 $ (27,680) Charges is services 3,456,558 3,456,558 3,583,351 126,793 Interest 200,000 200,000 26,867 (173,133) Miscellaneous rownue 40,000 40,000 58,120 18,120 Total revenue 7,533,122 7,533,122 1,417,222 (ss,900) Expenditures Recreation and wlWre 5,902,032 7,381224 6,317,619 1003,605 Tanskrs ad 2,404,226 2,425,113 2,425,063 50 Tote) expeidRures 8,306,258 9,806,337 8,802,682 1003,655 Net Change in Fund Balance V73,136) (2,273,215) (1325,460) 94],]55 Fund Balance- Beginning of year 4,158,119 4,758,719 4,758,719 Fund Balance -End of year $ 3.885,583 $ 2,485,584 $ 3433259 8 94],]55 56 City of Livonia, Michigan 57 Required Supplemental Information Budgetary Comparison Schedule - Major Special Revenue Funds Refuse Disposal System Year Ended November 30, 2010 Vanancew4h Amended Amended Onginal Budget Budget ACWal Budget Revenue Property taxes $ 11,598,996 $ 11,598,996 $ 11,511,930 $ (86,166) Charges to services 137,000 137,000 95,660 (41,320) Interest 250,000 250,000 45,621 (204,379) Miscellanwus revenue 25,000 25,000 22,045 (2,955) Total revenue 12,010,096 12,010,096 11675,276 (334,820) EVenditures- SanOahon 12,836,410 13,044,107 11876,000 1166,107 Net Change in Fund Balance (828,314) (1834,011) (200,724) 633,287 Fund Balance- Beginning of year 7,085,422 7,085,422 7,085,422 - Fund Balance -End of year $ 6,257,109 $ 6,051,411 $ 6,9&1,699 $ 933,297 57 City of Livonia, Michigan Required Supplemental Information Pension System Schedule of Funding Progress Year Ended November 30, 2010 The schedule of funding progress is as follows (000s omitted): Actuanal Actuanal Amnued UAAL as Value of Liadlity(AAD Unfunded Fundnd Ratio Covered Percentage of Actuanal Assets' Entry Age AAL(UAAD (Percent) Payroll Covered Valuation Date (a) (b) (ba) (alb) (c) Paymll 11/30/04 $ 199,578 $ 164,378 $ (35,200) 1214 $ 16,070 (2190) 11/30/05 200,005 167,226 (32,7]9) 1196 15,805 (2064) 11/30/06 205,101 169,506 (35,595) 1210 16,135 (2206) 11/30/07 215,675 173,486 (42,189) 1243 15,657 (2695) 11/30/08 210,519 179,096 (31,423) 1175 16,055 (1957) 11/30/09 207,959 190,134 (17,825) 1094 15,8% (1124) Valued using the tv�yaar"smoothing funding' market value Schedule of Employer Contributions Annual Required Percentage Fiscal Year Ended Actuarial Valuation Date Contribution Contributed 11/30/03 11/30/01 $ 392,639 100 11/30/04 11/30/02 - 100 11/30/05 11/30/03 - 100 11/30/06 11/30/04 - 100 11/30/07 11/30/05 - 100 11/30/08 11/30/06 - 100 11/30/09 11/30/07 - 100 11/30/10 11/30/08 - 100 The schedule of funding progress presented above was determined as part of the actuarial valuations at the dates indicated. Additional information as of November 30, 2009, the latest actuarial valuation, is as follows: Actuarial cost method Aggregate (employer contribution) Entry age normal (schedule of funding progress) Amortiution method Level percent, closed Remaining amortiution period Expected future working lifetime Asset valuation method Five-year smoothed market Actuarial assumptions: Investment rate of return 8.00% Projected salary increases, including inflation at 4.75% 4.00%-11.92% 58 City of Livonia, Michigan Required Supplemental Information Retiree Health and Disability Benefits Plan Schedule of Funding Progress Year Ended November 30, 2010 The schedule of funding progress is as follows (000s omitted): Actuanal Actuanal A nuxl UML as Value of Liatlity(ML) Unfundetl Fun@tl Ratio Ceseretl Percentage of Actuanal Assets' Entry Age AAL(UMD (Percent) Paymll Ceveretl Valuation Date (a) (b) (ba) (alb) (c) Paymll 11/38/84 $ 37,698 $ 118,156 $ 72,466 342 $ 33,355 2173 11/38/85 41,987 122,819 88,832 344 33,312 2482 11/38/86 47,673 122,267 74,594 398 34,373 2170 11/38/87 52,882 115,685 62,883 456 35,354 1779 11/38/86 55,361 122,117 66,756 453 37,483 1785 11/38/89 57,845 137,822 79,97] 428 36,981 2163 Valuetl using the tvc year"smoothing fmWiny' market value Schedule of Employer Contributions Annual Required Percentage Fiscal Year Ended Actuarial Valuation Date Contribution' Contributed** 11/38/05 11/30/03 $ 5,534,608 180 11/30/06 11/30/04 7,755,379 100 11/30/07 11/30/05 6,455,607 100 11/30/08 11/30/06 6,218,636 100 11/30/09 11/30/07 6,197,363 92 11/30/10 11/30/08 6,155,752 92 The required contribution is expresse l to the City as a percentage of payroll. " The fiscal year ended November 30, 2009 was the first year of implementation of GASB Statement N o. 45. As such, it was the first year the annual required contribution was calculated using the GASB N o. 45 required 30 -year amortization. Previously, the City used 40 or 50 years. 59 City of Livonia, Michigan Required Supplemental Information (Continued) Retiree Health and Disability Benefits Plan Schedule of Funding Progress Year Ended November 30, 2010 The information presented on the previous page was determined as part of the actuarial valuations at the dates indicated. Additional information as of November 30, 2009, the latest actuarial valuation, is as follows: Amortintion method Level percent, open Remaining amortintion period 30 years Asset valuation method Five-year smoothed market Actuarial assumption: Investment rate of return B.00% Projected annual premium increases 6% for this year, 5.5% for next year, and 4.75% thereafter 60 City of Livonia, Michigan Note to Required Supplemental Information Year Ended November 30, 2010 Reconciliation of Budgeted Amounts to Basic Financial Statements - The budgetary conpanson schedules for the General and Major Special Revenue Funds are presented on the same basis of accounting used in preparing the adopted budget. The following is a reconciliation of the budgetary comparison schedule to the governmental funds (statement of revenue, expenditures, and changes in fund balances): Total Total Revenue Expenditures General Fund Amounts per operating statement $ 49,082,854 $ 49,035,705 Operating transfers budgeted as revenue and expenditures 40,000 201,088 Amounts per budget statement $ 49,122,854 $ 49,236,793 Total Expenditures Community Recreation Fund Amounts per operating statement $ 6,377,619 Operating transfers budgeted as revenue and expenditures 2,425,063 Amounts per budget statement $ 8,802,682 Budgetary Information - Annual budgets are adopted on a basis consistent with accounting principles 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 offinancing them. 2. Public hearings are conducted to obtain citizen comments. 3. As provided for by the City Charter, not later than November 1, the City Council shall adopt the budget through the passage ofa 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. City of Livonia, Michigan Note to Required Supplemental Information (Continued) Year Ended November 30, 2010 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. 62 Other Supplemental Information 63 City of Livonia, Michigan Revenue Fund 64 wjou SPD Street Cane Streets Local Streets Gants L9hting Televison Uri Assts Cash and Investments $ - $ 161,989 $ 18242 $ - $ 1,4136903 $ 1,290,056 Re penes Tares 18,188 Specal assessment; - - - Duetonothergovemmentalunits 853;124 244009 Ip18,019 - - - Other 6,934 1954 Inventdy, pretend ofiemes, and other 5F2,012 Total assets S 8Wpll8 S 401 $2A28,n3 $_ $1 Ai $11,303,244 Liabilities and FUN E a dances (Dedicip Hai Hccounth te}abe 8 153,828 8 36J91 $ 81906 8 8 4]]3 $ 42,371 Due to other Linda 248909 - 860,714 ]8822 Hccrued and other ladlities - 9,962 - 7,636 TN 639 Dekrted revenue 76,]59 65274 13i35 Total 4N,305 36,]91 1,'81,855 ]8822 12,Q59 Z15,]416 Fund Bahamas (Der n7 Reseed bar: Invemdyandpretad - - 5F2012 - - - CaptaFimproveme0n - - - - - - Unreaeriand, reported In Specal Revenue Fund 380,813 3]0,961 (` 595) (]3,822) 1,414,41414 1'iri CapUl Projects Fund Total and bslances (deficit) 380$13 310961 43454117 D13s22) 1.474.W 1,382698 TotaDbd00es and rand balanced (drop $ efigtte $ 401 $2A28,n3 $_ $11fili $1,303244 64 Other Supplemental Information Combining Balance Sheet Nonmajor Governmental Funds November 30, 2010 Capel Projects Funa; Dell Senece Funs Funs 8 3.M2 8 1014,371 8 66,113 $ 1,716512 8 3275 8 - 8 - 8 - 8 13!881 22,826 6,832 114,8457 3v,no - 53299 - - - - - 9209 $ 6237,336 $1,016,371 $ 590,189 51,792,639 $ 10,107 $ S S S 13,881 8 2,976 8 3,9Efi 8 105 8 637,147 8 - 8 - $ - $ - $ - Tramp ane - - 9,307 Burning Drainage Puna Gkly Ajudated Corn ily R®dand CapUl 2005 MM 2007 MA HNMrty Projects Commmiation ForkiWres Transit Sidwals Imprweimnt Rehnndng ReDntlng and0ther Construction 8 3.M2 8 1014,371 8 66,113 $ 1,716512 8 3275 8 - 8 - 8 - 8 13!881 22,826 6,832 114,8457 3v,no - 53299 - - - - - 9209 $ 6237,336 $1,016,371 $ 590,189 51,792,639 $ 10,107 $ S S S 13,881 8 2,976 8 3,9Efi 8 105 8 637,147 8 - 8 - $ - $ - $ - - - 9,307 5559 3v,no 136,881 1i 6,v8 357,166 39a6 10i Y1613 10,107 - - - - 9209 3,Mi 1,010025 S78p66 1, 328826 136,881 3,Mi 1,010025 A9,655 1,328826 136,881 $ 6237,336 $1,016,371 $ 590,189 $1,192,639 $ 10,107 $ $ $ $ 13,881 65 City of Livonia, Michigan Other Supplemental Information Combining Balance Sheet (Continued) Nonmajor Governmental Funds November 30, 2010 �� Tad CalfCwrse Nonni Caput Caput Spsial Cmtl Burning Courthouse Governmental Imaovenent Imaovenent Fasesmenk IinfinTovementa Construction Fund Assts CohandinvsMems 8 318.888 8 2,721696 8 757.129 8 1.M519 8 41} 815.2519]9 ReciewHes Tarns - - - - 47,818 Specal assessments - - 56],153 - - 56],153 Due tom other governmental unite - - - - 2,250,819 Omer - 4500 - - - V1517 Inaemny, transit ofian es, and other WiDrai Tidal assets $ 338,080 $ 2,7M,106 $1,321,282 $ 1232,519 $ 41,339 $1952g737 Liabilitien and Fund Balance (Deficit Hai frcounts parabe 8 - 8 143992 8 113,]93 8 84,325 8 41} 8 1.158,145 Doe to deer Linda - - - - - 'mfi 0.5 eecaoed and deer 11 - - - - 212,19 Deterred revenue srarw 'eat;' 4 Tidal bdhtis - hudi 636,646 84,325 41} 4,181 Fund Balance (Deficit) Reserved Jar: Invemdyandaefad - - - - WiDrai Captalimaovemems - 301 - - - Mi Unreserved reported In Specal Revenue Fund - 9,462,964 Captal Projects Fund 338,080 2,2]4932 644,636 1148,194 4,80,123 Tidal and bslances (deficit) 338,080 282114 W,636 1,1calm 15,312110 Total bdkled and rand balanced (dict) $ 338000 $ 2,1M,106 $1}21,282 $ 1232519 $ 41,339 $19,52g731 �� City of Livonia, Michigan Spinal Revenue Fund 67 Kill SPD Street Calve Streets Local Streets Grants Lighting Teemson Libary Reenu property taxes 8 8 - 8 8 - 8 - 8 3,921837 Father revenue B0503 1 138526 - - Stateatllocalrevenue 4248590 1610,969 49,763 - - 120,893 Charges brservices - - - - - 45618 Finesand Mkilures - - 80,127 Interest 5155 - 113 - 6, 10)28 Other revenue: Si lasesments - - Yr0,J18 Miscellaneous revenue ],0]6 813,150 2,075 Total revenue 4391324 1614,969 1848602 '%0,778 M9517 4184718 Expenditures Current General govemirenl - - 85,336 - - - pudicskly 410,031 - - pudtlwwVs 3,001 2,364,064 - fire 4 - - Com uiilyande< m< 3636 dvelopnent 8996]6 - Recreatanandcubre - - - - 612,860 4,427541 Cabal outlay - - - - - - BeRse Punster retterrent - - - - - Interest and Total shenaWrs 3.009]62 2,364,064 1395,045 Peril 612,860 4,427541 Excess of Revenue Over(Under) Expenditures 1390542 (749,695) 453}5] (126076) 236657 042,]63) Other Financing Souu:es (Uses) Transhers In 2,M,148 - - - Transhersout (2652148) (1829000) (49000) Total other financing sources Tses) (2,452,148) 442,148 - - (49000) Net Change in Fund Balances tt0l (306947) 453}5] (126p]g)i 196,657 042,]63) Fund Balances(De RI -Beginning nfyear 1452,419 617,908 (16,940) 47,654 1217,787 1315,461 Fund Balances(1xlwR)-Endofyear $ 380,813 $ 370,961 $ 436,417 $ pa,W $IA74,a44 S1,0n,698 67 Other Supplemental Information Combining Statement of Revenue, Expenditures, and Changes in Fund Balances (Deficit) Nonmajor Governmental Funds Year Ended November 30, 2010 62296 890147 - - 97,910 - - - - - 115,000 v5,000 1'w5'000 - U6,014 1,M 75 420133 82290 X0,147 927,910 7,asa29s M,014 1,412,375 1,a ,133 183248 po'6 ) (]45,]65) (3,ma209) 2424,642 (D3,014) (1412575) (1? ,133) 666 - - 1,007526 2,W0,000 D3,014 1412,375 1465,133 - (2.re4,642) 007526 2,W0,000 (2.Q4,642) M,014 1412,375 1465,133 163248 (W0,662) X1761 (1,M269) 666 3,&6,340 1511,107 W,894 2,3Y2235 134215 $ 3,8]9,568 $1,010,425 $ 5]9,E55 51,328,06 $ $ $ $ $ 134,861 68 Qpul Prgeck SWial Revenue Fug Den SeMce Funs Fina; MunciiMl Tramit and Bulcim Dranage PudK Gkly Ajud ted Cmmmily Rmdand Capbl 2005 MM 2007 MM AdMrly Prgeck Cmnimtion PorMures Transl Sid alb ImPr "nt ReNndng ReNming aMOther Cmstrudim s4,n1a70 $ 2,424,642- - w 217 - - - - - - 9M491 2E],Nil 63206 D6l 18,W5 6,831 4,119 D515 666 8,750 209 M,7W D5536 M6 162,145 4,Me,27 2,424,642 666 62296 890147 - - 97,910 - - - - - 115,000 v5,000 1'w5'000 - U6,014 1,M 75 420133 82290 X0,147 927,910 7,asa29s M,014 1,412,375 1,a ,133 183248 po'6 ) (]45,]65) (3,ma209) 2424,642 (D3,014) (1412575) (1? ,133) 666 - - 1,007526 2,W0,000 D3,014 1412,375 1465,133 - (2.re4,642) 007526 2,W0,000 (2.Q4,642) M,014 1412,375 1465,133 163248 (W0,662) X1761 (1,M269) 666 3,&6,340 1511,107 W,894 2,3Y2235 134215 $ 3,8]9,568 $1,010,425 $ 5]9,E55 51,328,06 $ $ $ $ $ 134,861 68 City of Livonia, Michigan Other Supplemental Information Combining Statement of Revenue, Expenditures, and Changes in Fund Balances (Deficit) (Continued) Nonmajor Governmental Funds Year Ended November 30, 2010 69 Carder Projects Fund Twa Godcourse Nourrejor Carol Carol Spsial Cmtl Building Courthouse Gwemmental Impwermnt Impwermnt Assessments Iinturovements Construction Find genera Property taxes 8 - 8 - 8 - 8 - 8 - 8 10,658349 Federal revenue 2.072266 Slate atlloal revenue - - - - 6,132]06 Charges brservices 150,095 - - - 526662 Fnesand Mkgures dg25]] 073,371 Interest 1J 1 16220 11 6917 3,964 121,833 Other revenue: Specal asesmen6 - 226607 - - 1P9J85 Miscellaneous revenue 9,031 925036 Total revenue 151436 25254 246,909 49909E 3,981 12,619,388 Expenditures Current General govemimnl - - - 65336 Pudmsarety - - - 647769 15f1,106 3.604345 Pubic wwe; - - - - - 13,896396 Com uiityande< m< ww veloment dep 81 Recreation andculWre - 5,gri Carol outay 2225,730 1,109931 X6670 E0,325 - i'th 3 Dense Pdnatual retnermm - - - - - 1'MB00 Interest and other 1815522 Total espentltures 205,730 1109931 246671 692,031 1A1,106 D'higi Excess of Revenue Over(Unal Expenditures (51291) (1064680) DS (132600) (1A0,121) (6,]!1863) Other Financing Soun:es (Uses) Transhers In 20,867 1150216 - - 9,221233 Transhers out (593}58) (7,310,118) Total other financing sources Tses) 20,867 1150216 - (593}58) - 2,51,151 Net Change in Fund Balances (33007) Bri DS 015958) (1A0,121) (1,220,712) Fund Balances (Del - Beginning ofyear 3]108] 2,2165]8 831001 1931.152 1A0,121 N,562822 Fund Belances(DelwR)-Endofyear $ 336,060 52582,111 $ 681,636 $ 1,11$191 $ - 515,3@,110 69 City of Livonia, Michigan Trust Funds Oil Pension andOther Enployee Beneft Plms Agents Funds Engloyees' Investment Retirement Admndration Special Trust System VERA Total Fund Fund Assets Cash andeah ecurdlent $ 813,146 $ 212,202 $ 1025,348 $ 900305 $ 1908 fi18 Investments: US. government securities 15,638205 6,468,331 22106,536 - - Wideral¢edmor[gage obligations 11214,615 3,452,240 14,666855 - - Comrmon stock 91,636112 16,148,924 113,185,036 - - Corporatebonds 32,065250 10016341 42,111,591 - - Realestateinvestrenttrust 8,843369 - 8,843,369 - - Forelglbonds 4404836 1,395388 5,800224 - - MutlalNncis 18,411,850 21,491,134 38,903014 - - Securdieslendingcolideral pool 3,806512 - 3806572 - - Account resemble 426,832 96,116 523,548 - - DuehomagencyNnds fi89,85r fi89,858 Total assets 193,250,811 Seta 134 252,261,951 $ 900,305 $1,900,610 Liabilities Account payable 751,812 284694 1066506 $ 171,213 $ - DuetooMergovernmentalunRs - - - - - Duetoprinerygovernment - 1,104292 1,104292 - - Due intrust Ends - - - 699,asa Accrued and other liabilities - - - 39234 1,908,618 Mount die to broker under securities lending agreement 3,999990 3,999,990 Total liabilities 4181802 1380950 6,110,188 $ 900,305 $1,900,610 Ned Assets Neld in Trust for Pension and Other Employee Benefits $i00A16015 $51,612,140 $206091,163 Oil Other Supplemental Information Combining Statement of Net Assets Fiduciary Funds November 30, 2010 Agency Funds Hdoncal Art Comncsion LibaryTrust Comas ion Comncsion on Aging Unddnbuted Fund Fund Fund Fund Tax Fund Total $ 15265 $ ]26,411 $ 105,390 $ 2,T/3 3 5,614,832 $ 9,W3,fi54 $ 15,265 $ 726411 $ 10.5,390 $ 2,713 $ 5,644832 $ 9,303,651 $ - $ - $ 105390 $ - $ - $ 96,fiO3 - - - - 5,644,832 5,614832 - - - - 689,858 15265 n6,411 - 2n3 - 2,e32 as1 $ 15,265 $ 726A11 $ 195,399 $ 2,713 $ 5,6",532 $ 9,393,651 71 City of Livonia, Michigan Other Supplemental Information Combining Statement of Changes in Fiduciary Net Asset Fiduciary Funds Year Ended November 30, 2010 Additions Inveshnentineane: Interest and divid ends Net change in fair value of investments Less investment expenses Net inveshnentineane Contributions: Empbyer Empbyee Toblcontributions Total saddens - Net Deductions Pension benefit payments Wdiml benefit payments Refunds of contributions Administrative expenses Totaldeductions Net Increase Net Assets Held in Trust for Pension and Other Employee Benefits- Beginning of year Net Assets Held in Trust for Pension and Other Employee Benefits- End of year 72 Empbyee5 Retirement System WBA Total $ 5,568,666 $ 1375,124 $ 6,943,798 13,585,265 4573,565 18,158,830 (456,796) (87,655) (544,451) 18,697,135 5,861,034 24,558,169 - 5,633,055 5,633,055 533,276 663,274 1196,550 533,276 6,296,329 6,829,605 19,230,411 12,157,363 31387,]]4 12,459,933 - 12,459,933 - 6,622,83] 6,622,83] 649,024 - 649,024 1&5,562 16,786 202,350 13,294,519 6,639,625 19,934,144 5,936,892 5,51],]36 11453,630 182,543,123 52,694,416 234,637,533 $199,4]9,015 $ 57,612,149 $246,091,10 City of Livonia, Michigan Federal Awards Supplemental Information November 30, 2010 City of Livonia, Michigan Contents Independent Auditors Report 1 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standard's 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 4S Schedule of Expenditures of Federal Awards 67 Reconciliation of Basic Financial Statements Federal Revenue with Schedule of Expenditures of Federal Awards 8 Notes to Schedule of Expenditures of Federal Awards 9-10 Schedule of Findings and Questioned Costs 11-13 Independent Auditor's Report To the Honorable Mayor and Members of City Council City of Livonia, Michigan We have audited the financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, 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, 2010, which collectively comprise the Citys basic financial statements, and have issued our report thereon dated March 28, 2011. These basic financial statements are the responsibility of the City's management. Our responsibility is to express opinions on these 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 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. 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 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 a required part of the basic financial statements. The information in these schedules 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. ix V& l &"�v 'a" it March 28, 2011 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standard's To the Honorable Mayor and Members of City Council City of Livonia, Michigan We have audited the financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, 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, 2010, which collectively comprise the Citys basic financial statements, and have issued our report thereon dated March 28, 2011. We have 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 Govemni Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City of Livonia, Michigan's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Citys internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Citys internal control over financial reporting. Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses; therefore, there can be no assurance that all deficiencies, significant deficiencies, or material weaknesses have been identified. However, as described in the accompanying schedule of findings and questioned costs, we identified certain deficiencies in internal control over financial reporting that we consider to be material weaknesses. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely bass. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entitys financial statements will not be prevented or detected and corrected on a timely bass. We consider the deficiencies described in the accompanying schedule of findings and questioned costs as Findings 2010-1 and 2010-2 to be material weaknesses. To the Honorable Mayor and Members of City Council City of Livonia, Michigan Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of Livonia, Michigan'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. The City of Livonia, Michigan's response to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs. We did not audit the City of Livonia, Michigan's response and, accordingly, we express no opinion on it. This report is intended solely for the information and use of management, the Honorable Mayor, members of City Council, others within the City, federal awarding agencies, and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. ix V& l &�v PLCG March 28, 2011 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 City Council City of Livonia, Michigan Compliance We have audited the compliance of the City of Livonia, Michigan (the "City') with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major federal prograrts for the year ended November 30, 2010. The major federal prograrts of the City of Livonia, Michigan 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 the City of Livonia, Michigan's management. Our responsibility is to express an opinion on the City of Livonia, Michigan'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 A-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 basis, evidence about the City of Livonia, Michigan'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 the City of Livonia, Michigan's compliance with those requirements. In our opinion, the City of Livonia, Michigan complied, in all anterial respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended November 30, 2010. To the Honorable Mayor and Members of City Council City of Livonia, Michigan Internal Control Over Compliance The management of the City of Livonia, Michigan is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contacts, and grants applicable to federal programs. In planning and performing our audit, we considered the City of Livonia, Michigan'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 accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Citys internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented or detected and corrected on a timely basis. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of management, the Honorable Mayor, members of City Council, others within the City, federal awarding agencies, and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. March 28, 2011 City of Livonia, Michigan Schedule of Expenditures of Federal Awards Year Ended November 30, 2010 (i) Current year eapenMures include the use of program Immre from housirg rehatiliUtiou mucky, owned Mmes See Notes to Schedule of Expenditures of Federal Awards. 6 Pasihro gh Entily, CFDA Priced/Grant Award Federal Federal FgenNPasthrough MenNProgram TAle Number Number Amount Expenditures NS. DeMnmentof Hosingand UrWnDmbp d COBG Enlitlemenl Gans Cluster Communy Development BI¢k Gant: Prcgramyear2D69-B69M 26DDN Pi2m N/A 9 JN?U S ull (t) Prcgramyeal-B1DMO26DD08 0218 N/A 061211 220600 (1) Tota' Community Development Btsd at '49251 ARRA- Prcgramyour2009,COBGR 16253 B69MY-260088 183,762 181,010 Pasedthrwgh the Michigan State Housing Development Psthwiy-Neighb>thmtlStaNi}atim Programs U218 N&P 2006T5068 1,650,000 I,DM'(g66 Tota' Cll Entitlement Grats Cluster 1'arad31 Passed through the Michigan Stale Horsing Development ANM1wity- HOME Investment Partnership-Prcgramyear2003 I'l W20025(ge Zrr200 SSD Pasedthrogh Wayne Cony- Hmre Cosodium Fund I'l N/A 226,000 63897 Tola' U S. Department of Housing add Urban Development I,742,778 US. DepadmenlofTrampatalion: HghwaySafetyClus@ry Pasedthmugh the Michgan Ofice of HighwrySafey-0rive Michigan Sal Task Force 20WO PT 06,05 25087 25087 Newsy Planning and Construction Cluster Pasedthroughthe Michigan Department ofTrampatalion: ARRA- Highway Planning andCoustm<tiou gridon) M205 (ELM505 100,000 99,338 Highway Planning andCoustm<tiou(S<Mnkrafl) M205 045hA 80,955 rd,b8 Highway Planning andCoustm<tion Novernight M205 ivaeu 109216 PECUA Total Highway Planning andCoustm<tiou Cluster M7,071 Total J . Department of transportation 2Rj58 US. Department of Commerce- Pasedthroughthe Michigan Department ofoale Pdi<e-mol Puui<Safey lnleroperatee Commmiwenn Gam PISC 11.s5s 2om-G:H14o43 12,015 35,a9a uS. Department of Homelandsecny- Passedmrougb the Mimigan Departmentoftllale Prime 2010 Emergen<yuamgemenl Perbmarce Grant 97 M2 NONE U07 0.3601 (i) Current year eapenMures include the use of program Immre from housirg rehatiliUtiou mucky, owned Mmes See Notes to Schedule of Expenditures of Federal Awards. 6 City of Livonia, Michigan Schedule of Expenditures of Federal Awards (Continued) Year Ended November 30, 2010 See Notes to Schedule of Expenditures of Federal Awl 7 Pawrtnroyn Entity CFDA Prgee/Grant Award Federal Federal FgenNPasthrw9M1 MencrProgram TAle Number Number Amount Expenditures US. recommend ofbstce: Federal Ecil Sharing Program 16000 N/A $276,858 a 276,858 Ory Enbrsmeni Pilninstraos Task Force 16 unknown N/A 28,025 28,025 0 GO£T£Task Fors 16 unknown GL -MI -0631 12,193 11 US. Wasali Smace- Detrot Fugi4ve PFyehenson 16 unknown N/A 13,70 13,70 US. Wasall Serace-'dice Range Gant 16 unknown N/A 3582 3582 2009Se<ure Our S<Mnk 16710 2009CKWX4)699 01,072 119931 Paesedmrogh Wayne County 2007 Edrard BNne Memorial Justis Assistance Grant Program 5.738 N/A 11 4,418 ARRA- 2009 Edward Byrne Moral listi<e Assistance Grant Program 5806 N/A 66$70 9,160 Total ressedthrough Wayne County 13578 Toa US. Dep,rtmeo oN stke 45a2B3 US. recommend ofAgriculture -ComnnmryForestrycranni 10664 N/A 4,000 4,000 US. Department of EnergyARRAEnergy ER¢ien<yand conservation BlockGrand 81128 BESCOW15N 971,000 85,336 US. Department of Agriculture Passedthroyhthe Wayne Metropolitan Commmiry mince Fgenq- WDAFmd Distribution 10569 n/a 80,605 80,605 Tota' %deral award $ 2693,013 See Notes to Schedule of Expenditures of Federal Awl 7 City of Livonia, Michigan Reconciliation of Basic Financial Statements Federal Revenue with Schedule of Expenditures of Federal Awards Year Ended November 30, 2010 Revenue from federal sources- As reported on financial statements (includes all funds) $ 2,245,391 Less other nonfederal reimbursements recorded as grants (176,727) Add change in deferred revenue Add value of noncash assistance 406,122 Expenditures of revenue earned in previous years 143,622 Federal expenditures per the schedule of expenditures of federal awards $ 2,693,013 City of Livonia, Michigan Notes to Schedule of Expenditures of Federal Awards Year Ended November 30, 2010 Note 1 - Basis of Presentation and Significant Accounting Policies The accompanying schedule of expenditures of federal awards (the "Schedule") includes the federal grant activity of the City of Livonia, Michigan (the "City") under programs of the federal government for the year ended November 30, 2010. Expenditures reported on the Schedule are reported on the same basis of accounting as the basic financial statements, although the basis for determining when federal awards are expended is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Govemments, and Non -Profit Organizations. In addition, expenditures reported on the Schedule are recognized following the cost principles contained in OMB Circular A-87, wherein certain types of expenditures are not allowable or are limited as to reimbursement Therefore, some amounts presented in this Schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. Because the Schedule presents only a selected portion of the operations of the City of Livonia, Michigan, it is not intended to and does not present the financial position, changes in net assets, or cash flows, if applicable, of the City of Livonia, Michigan. Pass-through entity identifying numbers are presented where available. Note 2 - Noncash Assistance The value 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, 2010 that is included on the schedule of expenditures of federal awards: CFDA Federal Program Number Description Amount U.S. Department of Agriculture - Passed through the Wayne Metropolitan USDA Food Community Services Agency 10.569 Distribution $ 80,605 City of Livonia, Michigan Notes to Schedule of Expenditures of Federal Awards Year Ended November 3O, 2010 Note 3 - Subrecipient Awards Of the federal expenditures presented in the Schedule, federal awards were provided to subrecipients as follows: Amount CFDA Provided to Federal Program Title Number Subrecipients Community Development Block Grant 14.218 $ 12,032 10 City of Livonia, Michigan Schedule of Findings and Questioned Costs Year Ended November 30, 2010 Section I - Summary of Auditor's Results Financial Statements Type of auditors report issued: Unqualified Internal control over financial reporting: • Material weaknesses identified? X Ya No • Significant deficiency identified that are not considered to be material weaknesses? Yes X None reported Noncompliance material to financial statements noted? Yes X No Federal Awards Internal control over major program: • Material weakness identified? Yes X No • Significant deficiency identified that are not considered to be material weaknesses? Yes X None reported Type of auditors report issued on compliance for major programs: 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 programs: CFDA Number Name of Federal Program or Cluster CDBG Entitlement Grants Cluster 14.218 Community Development Block Grant 14.218 Neighborhood Stabilization Program -1 14.253 Community Development Block Grant -R Dollar thresh old used to distinguish between type A and type B programs: $300,000 Auditee qualified as low-risk auditee? Yes X No 11 City of Livonia, Michigan Schedule of Findings and Questioned Costs (Continued) Year Ended November 3O, 2010 Section II -Financial Statement Audit Findings Reference Number Findings 2010-01 Adjustments related to fund level and government -wide statements Finding Type - Material weakness Criteria - Management's goal was to accurately remrd all adjustments for the fund level and government -wide statements. Condition - Journal entries were necessary to adjust various account balances in order to properly state them as of November 30, 2010. Context - Three entries were made to various funds to reflect current year activity. The adjustments affected capital assets, prepaid assets, receivables, and deferred revenue. Cause - For certain financial statement accounts, the City did not have a system in place to ensure that year-end balances agree to detail and are properly stated. Effect - As a result of these three transactions not being completely recorded, several account balances required adjustments as of November 30, 2010. Recommendation - The City should develop controls to ensure that all appropriate journal entries are made so that ending balances are mmect. Views of Responsible Officials and Planned Corrective Actions - The City concurs with the recommendation and will put a process in place to address the issue. 12 City of Livonia, Michigan Schedule of Findings and Questioned Costs (Continued) Year Ended November 3O, 2010 Section II - Financial Statement Audit Findings (Continued) Reference Number Findings 2010-02 Identification offederal expendituresffnancial reporting Finding Type - Material weakness Criteria - A complete and accurate schedule of expenditures of federal awards (SEFA) is necessary to record all program expenditures as required by federal regulations. Condition - Management's goal is to prepare a complete and accurate SEFA to record all program expenditures in order to comply with the above criteria. Context - The original SEFA provided by the City of Livonia, Michigan as part of the audit did not include Highway Planning and Construction grant expenditures. Cause and Effect - The City did not have appropriate procedures in place to ensure the completeness of the SEFA. Effect - The SEFA required changes during the course of the audit in order to ensure amounts on the SEFA reflected the appropriate activity per the Citys general ledger. Recommendation - We recommend that the City develop a procedure to ensure the completeness of the SEFA. Views of Responsible Officials and Planned Corrective Actions - The City concurs with the recommendation and will develop a procedure to ensure the completeness of the SEFA. Section III - Federal Program Audit Findings None 13 City of Livonia Report to the City Council November 30, 2010 City of Livonia Report to the City Council November 30, 2010 Introduction Page 1-2 Section 1 - Communications Required Under SAS 114 3-5 Section II - Other Recommendations 6-8 Section III - Legislative and Informational Items 9-11 EIhF plante "°� ""° „�� CBEF -FAIF PC moran -�' TEA March 28, 2011 To the Mayor and Members of the City Council City of Livonia, Michigan We have audited the financial statements of the City of Livonia, Michigan (the "City") for the year ended November 30, 2010 and have issued our report thereon dated March 28, 2011. Professional standards require that we provide you with the following information related to our audit which is divided into the following sections: Section 1 - Communications Required Under SAS 114 Section II - Other Recommendations Section III - Legislative and Informational Items Section I includes information that current auditing standards require independent auditors to communicate to those individuals charged with governance. We will report this information annually to the mayor and members of the City Council of the City of Livonia, Michigan. Section II presents recommendations related to internal control and procedures noted during our current year audit. These comments are offered in the interest of helping the City in its efforts toward continuous improvement, not just in the areas of internal control and accounting procedures, but also in operational or administrative effdency and effectiveness. Section III contains updated legislative and informational items that we believe will be of interest toyou. In addition to the comments and recommendations in this letter, our observations and comments regarding the City's internal control, including any significant deficiencies or material weaknesses that we identified, have been reported to you in the report on internal control over financial reporting and on compliance and other matters based on an audit of financial statements performed in accordance with Government Auditing Standards. This report is included in the supplemental schedule of federal awards (single audit report), and we recommend that the matters we have noted there receive your careful consideration. Praxitr To the Mayor and Members of the City Council City of Livonia, Michigan March 28, 2011 We would like to take this opportunity to thank the City's staff for the cooperation and courtesy extended to us during our audit. Their assistance and professionalism are invaluable. This report is intended solely for the use of the mayor and members of the City Council and management of the City and is not intended to be and should not be used by anyone other than these specified parties. We welcome any questions you may have regarding the following communications and we would be willing to discuss any of these or other questions that you might have at your convenience. Very truly yours, Plante & Moran, PLLC 2*zw .c . Frank W. Audia K 114A Brian.. Camiller To the Mayor and Members of March 28, 2011 the City Council City of Livonia, Michigan Section I - Communications Required Under SAS 114 Our Responsibility Under U.S. Generally Accepted Auditing Standards As stated in our engagement letter dated January 3, 2011, our responsibility, as described by professional standards, is to express an opinion about whether the financial statements prepared by management with your oversight are fairy presented, in all material respects, in conformity with U.S. generally accepted accounting principles. Our audit of the financial statements does not relieve you or management of your responsibilities. Our responsibility is to plan and perform the audit to obtain reasonable, but not absolute, assurance that the financial statements are free of material misstatement As part of our audit, we considered the internal control of the City. Such considerations were solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. We are responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process. However, we are not required to design procedures specifically to identify such matters. Our audit of the City's financial statements has also been conducted in accordance with Government Auditing Standards, issued by the Comptroller General of the United States. Under Government Auditing Standards, we have made some assessments of the Citys compliance with certain provisions of laws, regulations, contracts, and grant agreements. While those assessments are not sufficient to identify all noncompliance with applicable laws, regulations, and contract provisions, we are required to communicate all noncompliance conditions that come to our attention. We have communicated those conditions in a separate letter dated March 28, 2011 regarding our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contacts, and grant agreements. We are also obligated to communicate certain matters related to our audit to those responsible for the governance of the City, including certain instances of error or fraud and significant deficiencies in internal control that we identify during our audit. In certain situations, Government Auditing Standard's require disclosure of illegal acts to applicable government agencies. If such illegal acts were detected during our audit, we would be required to make disclosures regarding these acts to applicable government agencies. No such disclosures were required. Planned Scope and Timing of the Audit We performed the audit according to the planned scope and timing previously communicated to you in our letter about planning matters on December 23, 2010. To the Mayor and Members of March 28, 2011 the City Council City of Livonia, Michigan Siqnificant Audit Findings Quafitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. In accordance with the terms of our engagement letter, we will advise management about the appropriateness of accounting policies and their application. The significant accounting policies used by the City are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during 2010. We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. There are no significant transactions that have been recognized in the financial statements in a different period than when the transaction occurred. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements are as follows: • Incurred but not reported amounts related to the City's self-insured medical claims, workers' compensation, and general liability • Unbilled water and sewer receivables • In the employees' retirement system, the value of the SAS equity real estate investment trust managed by The Serrinole Companies • The landfill closure and postclosure liability • The liability related to pending property tax appeals Management's estimate of the various incurred but not reported amounts and unbilled water and sewer receivables is based on historical information. The value of the real estate investment trust was provided by The Seminole Companies and supported by third -party appraisals of the value of the underlying real estate. The landfill liability is calculated by the City's engineering department. The property tax appeals liability is calculated by the Citys legal department. We evaluated the key factors and assumptions used to develop the estimates in determining that they are reasonable in relation to the financial statements taken as a whole. The disclosures in the financial statements are neutral, consistent, and clear To the Mayor and Members of March 28, 2011 the City Council City of Livonia, Michigan Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. Disagreements with Management For the purpose of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated March 28, 2011. Management Comultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the City's financial statements ora determination of the type of auditors opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. To the Mayor and Members of March 28, 2011 the City Council City of Livonia, Michigan Section II - Other Recommendations During our audit, we noted areas where we believe there are opportunities for the City to further strengthen internal control or to increase operating efficiencies. Our observations on those areas are presented for your consideration below. Pension Contributions As noted in past years, the City's actuary has not recommended that the City make any contribution to its defined benefit pension plan since 2003. There are a variety of factors that impact the calculation and estimates made by the actuary, including investment performance, life expectancy, etc Over the past few years, the City has made some minor modifications to the actuarial assumptions used to calculate the required contributions, if any, in response to fluctuations in the investment markets. In the most recent valuation dated November 30, 2009, there was a notable increase in the actuarial accrued liability. The liability increased from approximately $179,000,000 in the 2008 valuation to $190,000,000. According to the actuary, the system is still funded in excess of 100 percent. In the future, a contribution may be required and would need to be incorporated into the City budgets. Street Funding and Millage Expiration Date As a reminder, the City's road improvement rrillage will expire after the upcoming 2011 taxyear levy. This millage provided approximately $4,300,000 in tax revenue during fiscal year 2010. With declining Act 51 monies from the State, this millage provides an important funding source for continuing to maintain the City's roads. The following table shows the combined fund balance of the Major Streets, Local Streets, and Roads and Sidewalks Funds over the past five years. The declining total fund balance further emphasizes the importance of this millage for the City's continued investment in its infrastructure, as Act 51 monies from the State have declined. Year Ended November 30 2006 2007 2008 2009 2010 Major Streets Fund $2,964,042 $2,343,099 $2,496,337 $1,452,419 $ 380,813 Local Streets Fund 1,001,906 1,000,284 883,450 677,908 370,961 Roads and Sidewalks Fund 1,559,761 1,539,196 2,146,971 2372,235 1,328,026 Total fund balance $5,525,709 $4,882,579 $5,526,758 $4,502,562 $2,079,800 To the Mayor and Members of March 28, 2011 the City Council City of Livonia, Michigan Retiree Health Care The City has demonstrated foresight and responsibility over the years by the creation and funding of the City's VEBA plan. Unlike the majority of municipalities in Michigan, the City has been actuarially funding the growing liability associated with postenployment health care for many years, ahead of the accounting standards. New accounting standards, GASB Statements Nos. 43 and 45, require a governmental unit to now measure its retiree healthcare liability. We continue to compliment the City for the actions taken in this regard. While the City has been completing these actuarial valuations and making an annual contribution for many years, the VEBA plan has used an amortization period (40 years) that is somewhat longer than what is allowed under the new standards (30 years). Using this longer period has resulted in the City's contributions being less than the actuarially calculated annual required contribution (ARC) under the new standards. As a result, since the adoption of GASB Statement No. 45 last year, the City is required to record a liability forthe difference between the ARC and what the City actually contributes to the VEBA. As of November 30, 2010, that liability is $42,763 in the Water and Sewer Fund and $1,008,786 in the government -wide financial statements. At November 30, 2010, the VEBA fund has approximately $58 million set aside for these costs. As of the date of the most recent actuarial valuation (November 30, 2009), the liability for retiree health care was approximately $138 million. These costs continue to be a very significant part of the City's budget, approximately $5.6 million for the year ended November 30, 2010. In fact, the most recent actuarial valuation also noted that the City's computed contribution rates are likely to increase in the future as the effects of changes to certain actuarial techniques are realized. Plymouth Road Development Authority (PRDA) Over the past several years, there have been significant property tax -related events and changes, including declining taxable values, increased volume of tax appeals, and changes to the personal property multiplier tables for certain assets, that have dramatically reduced the PRDA's ability to capture tax revenue. The PRDA's tax revenue for the last five years is as follow: 2006 2007 2008 2009 2010 PRDA tax revenue $ 2,363,182 $ 1,713,379 $ 1,534,235 $ 1,668,616 $ 265,661 In addition to the reasons noted above, a recent Senate Bill threatens to eliminate personal property tax entirely which would further reduce the PRDA's tax revenue. As of November 30, 2010, the PRDA has $3,920,000 of bonds payable remaining from the 2006 Downtown Development Refunding Bond issue. The decreased tax revenue available to the PRDAwill likely jeopardize its ability to pay off these bonds as they come due. To the Mayor and Members of March 28, 2011 the City Council City of Livonia, Michigan Fund Deficits The State may require a deficit elimination plan forthe following funds: • Street Lighting Fund - This year, the Street Lighting Fund incurred a deficit of $78,822. • Golf Course Fund - The City has submitted a deficit elimination plan in the past for the Golf Course Fund. The City continues to reduce its deficit in its unrestricted net assets. This year, the deficit was reduced by approximately $3,000, to $61,898. Upcoming Reporting Change - GASB Statement No. 54 GASB Statement No. 54, Fund Balance Reporting and Governmental Fund -type Definitions, is effective for the City's 2010-2011 fiscal year. The new standard eliminates the current use of the terms 'reserved" and "designated" in the reporting offund balance and replaces those terms with five new categories for segregating fund balance: nonspendable, restricted, committed, assigned, and unassigned, determined based on the availability for future appropriation (depending on the extent of externally and internally imposed constraints on their use). GASB Statement No. 54 also modifies the definition of existing governmental fund types. The changes to the General Fund, Debt Service Fund, and Capital Project Fund definitions are not likely to result in any significant changes to the fund types currently used. However, changes to the Special Revenue Fund definition could result in some existing special revenue funds no longer meeting the criteria, resulting in fund reclassifications. Specifically, any fund that does not have a particular external revenue source as its foundation will likely no longer meet the definition of a special revenue fund and may need to be reported as a different fund type or reported within the General Fund (although consideration could be given to continuing to budget separately, if the governing body finds that useful). GASB Statement No. 54 is required to be implemented for financial statements for periods beginning after June 15, 2010. Retroactive restatement is required for all periods presented. At a minimum, governments will need to apply this change at the beginning of the year of implementation so that the MD&A disclosures are comparative. The standard also requires disclosure in the financial statements of any rrinimum fund balance policies and the purposes for restrictions, commitments, and assignments of fund balance. We encourage the City to become familiar with the new terms and definitions and work with the users of the financial statements to ensure a dear presentation and understanding of the new requirements. You will likely want to consider what formal "commitments" you wish to create and adopt formal policies or approvals to document these decisions. Commitments or assignments of fund balance should be made prior to November 30, 2011. To the Mayor and Members of March 28, 2011 the City Council City of Livonia, Michigan Section III - Legislative and Informational Items State of Michigan - Governor's Proposed Budget On February 17, 2011, Governor Snyder released his proposed budget for the State's fiscal year beginning October 1, 2011. While there are several items that will dramatically change the finances of Michigan, one Rem in particular has a significant effect on local municipalities. The amount of statutory revenue sharing available to be distributed to local units is proposed to be reduced from approximately $300 million to $200 million. On March 21, 2011, the governor announced his new economic vitality incentive program and provided additional details for how the remaining $200 pillion of statutory revenue sharing would be distributed amongst the local units. According to this announcement, the formula for statutory revenue sharing is expected to remain the same; however, communities that would receive less than $6,000 under the existing formula will be removed from consideration. For the remaining communities, there are three criteria that local units will need to attest they are in compliance with. The State will assume that local units are in compliance unless othenvise notified. If noncompliance comes to light, then a local unit could have their share reduced by one-third for each criteria in violation. The three criteria include the following: 1. Accountability and transparency- Required to be implemented by October 1, 2011 • Useofa"dashboard"ofkeymetrics • Use ofa "transparency tool" or Citizens Guide 2. Service sharing and consolidation - Required to be implemented by January 1, 2012 • The local unit must submit a plan or identify what they are already doing in terms of service sharing/consolidation. A "good faith" effort is to be shown by January 1, 2012. • The State will set aside $5 million to assist communities with one-time implementation costs related to launching the service-sharing initiatives. 3. Employee compensation best practices • Make changes similar to what the State has done already in regard to new or reopened contracts. Changes would not be required for existing contracts. • Pension - Change to a defined contribution or hybrid plan which includes a capped employer contribution of 10 percent of wages, a capped multiplier of 1.5 if in Social Security and 2.0 if not in Social Security, and a limit on overtime and banked time included in the calculation of final average compensation • Medical premiums- 80/20 cost sharing with employees • Many of these changes may only be applicable to new hires As it pertains to Livonia, the City has already implemented defined contribution retirement programs for many employees, and has a long-standing commitment to funding retiree healthcare through the VEBA among other items. The City has also already taken steps to share certain services with other communities. To the Mayor and Members of March 28, 2011 the City Council City of Livonia, Michigan However, until the State's budget is finalized and additional details behind this statutory revenue sharing distribution plan are announced, we will continue to recommend that local units of government be extremely cautious when forecasting this revenue source for future years. Other Legislative Developments Senate Bill 34 - Elimination of the Personal Property Tax On January 19, 2011, SB 34 was introduced. Very simply, this bill, if it becomes law, will amend PA 206 of 1893 and exempt all personal property from the collection of taxes. Altogether, this would reduce revenue for communities across the state by approximately $770 million. Including the school districts, the lost revenue would be over $1 billion. This bill does not provide any source of revenue to replace that which is lost. Obviously, this would be devastating to many communities as personal property tax can be a significant component of a local unit's tax structure. For the City of Livonia, the lost annual revenue would be approximately $7.8 million. As mentioned previously, this would further erode the PRDA's ability tocapture tax revenue and make its bond payments. We understand that the City is monitoring this legislation. Emergency Financial Managers - Public Act 4 of 21111 On March 16, 2011, PA 4, Local Government and School District Fiscal Accountability Act, was signed into law. This Act repeals Public Act 72 of 1990, the previous Local Government Fiscal Responsibility Act. Under the new Act, the state treasurer can conduct a preliminary review to determine the existence of a local government financial problem if one or more of 18 different "triggering events" occur. Some of these events are truly a sign of financial stress, such as incurring payless paydays or defaulting on a bond or note payment. Others are more subjective, including a blanket statement that the existence of "other facts or circumstances ... as determined by the state treasurer' is sufficient to start the process. If a finding of probable financial stress is made, the governor shall appoint a review team. The team would conduct its review and report back to the governor and state treasurer within 60 days of its appointment. Depending on the severity of the findings during the review, the actions then taken could range from none to a declaration of a financial emergency, the local unit would be placed in receivership, and an emergency financial manager (EFM) appointed in place of the existing governing body and chief administrative officer. Also, there is a potential intermediate step whereby a consent agreement may be entered into in situations where a community is in financial stress, but not enough yet to call for an appointed EFM. Effectively, this means that a community under consent agreement could have many of the same powers as an EFM under the proposed law (with limitations on the ability to modify collective bargaining agreements). 10 To the Mayor and Members of March 28, 2011 the City Council City of Livonia, Michigan In addition to the above changes, there are many other new provisions in this Act, but the most significant change from the previous Act is the provision that grants an appointed emergency financial manager the authority to potentially modify or abrogate existing labor contacts (much broader than the powers given to an EFM under the previous law). To date, seven Michigan communities and one public school district have had EFMs appointed under the previous PA 72. The State has recently conducted a session to train new potential EFMs as the state treasurer has stated he is anticipating a need for more. Budget Matters in General As we have discussed with the City, the situation with declining property values will continue to play out over a number of years based on the structure of the State's property tax system. Even when property values begin to rice, it will likely take many years for }enable value to return to historical levels as growth on existing property is limited by the State's Constitution to the lesser of inflation, or 5 percent. Combined with the State's budget situation and changes occurring as a result of State policy changes, all of these developments are putting extreme pressure on local governments across Michigan to maintain their fiscal solvency. Unfortunately, we do not see any short-term relief to the current situation. We continue to encourage all of our governmental clients, including the City of Livonia, to consider the long-term impact of these developments as part of its budget process. We are willing to share our experiences in wonting with other communities facing similar challenges as requested by the City. 11