HomeMy WebLinkAbout2012 Annual Financial ReportCity of Livonia, Michigan
Financial Report
with Supplemental Information
November 30, 2012
City of Livonia, Michigan
Contents
Report Letter
1-2
Management's Discussion and Analysis 3-9
Basic Financial Statements
Government -wide Financial Statements
Statement of Net Assets
10
Statement of Activities
11-12
Fund Financial Statements:
18
Governmental Funds:
19-20
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,
22
and Changes in Fund Balances of Governmental Funds
to the Statement of Activities
16
Proprietary Funds:
Statement of Net Assets
17
Statement of Revenue, Expenses, and Changes in Net Assets
18
Statement of Cash Flows
19-20
Fiduciary Funds:
Statement of 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
26-53
City of Livonia, Michigan
Contents (Continued)
Required Supplemental Information
em
Budgetary Comparison Schedule - General Fund
55-57
Budgetary Comparison Schedule - Major Special Revenue Funds - Community
Recreation
58
Budgetary Comparison Schedule - Refuse Disposal System
59
Pension System - Schedule of Funding Progress
60
Retiree Health and Disability Benefits Plan - Schedule of Funding Progress
61
Note to Required Supplemental Information
62-63
Other Supplemental Information
Nonmajor Governmental Funds
61!
Combining Balance Sheet
65-66
Combining Statement of Revenue, Expenditures, and Changes in Fund
Balances (Deficit)
67-68
Fiduciary Funds:
Combining Statement of Net Assets
69-70
Combining Statement of Changes in Fiduciary Net Assets
71
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, 2012, 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 an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America 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 fairly, 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, 2012 and the respective
changes in financial position and cash flows, where applicable, thereof for the year then ended, in
conformity with accounting principles generally accepted in the United States of America.
To the Honorable Mayor and
Members of the City Council
City of Livonia, Michigan
Accounting principles generally accepted in the United States of America require that
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, be presented tosupplement the basic financial statements. Such information, although
not a part of the basic financial statements, is required by the Govemmental Accounting
Standards Board, which considers it to be an essential part of financial reporting for placing the
basic financial statements in an appropriate operational, economic, or historical context. We
have applied certain limited procedures to the required supplemental information in accordance
with auditing standards generally accepted in the United States of America, which consisted of
inquiries of management about the methods of preparing the information and comparing the
information for consistency with management's responses to our inquiries, the basic financial
statements, and other knowledge we obtained during our audit of the basic financial statements.
We do not express an opinion or provide any assurance on the information because the limited
procedures do not provide us with sufficient evidence to express an opinion or provide any
assurance.
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 financial statements. Such
information is the responsibility of management and was derived from and relates directly to the
underlying accounting and other records used to prepare the financial statements. The
information has been subjected to the auditing procedures applied in the audit of the financial
statements and certain additional procedures, including comparing and reconciling such
information directly to the underlying accounting and other records used to prepare the financial
statements or to the financial statements themselves, and other additional procedures in
accordance with auditing standards generally accepted in the United States of America. In our
opinion, the information is fairly stated in all material respects in relation to the financial
statements as a whole.
In accordance with Government Auditing Standards, we have also issued our report dated April
11, 2013 on our consideration of the City of Livonia, Michigan's internal control over financial
reporting and on our tests of its compliance with certain provisions of laws, regulations,
contracts, grant agreements, and other matters. 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 opinions 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.
4L& 12&It�r PLLG
April 11, 2013
City of Livonia, Michigan
Management's Discussion and Analysis
Overview of the Financial Statements
The City of Livonia, Michigan's (the "City") 2012 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 cortpanies. The statement of net
assets includes all of the City's assets and liabilities. All of the current yeaf'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 Citys assets and liabilities, are one way to measure the
City's financial health or position.
The government -wide financial statements of the City are divided into three categories:
• Government Activities - Most of the City's basic services are included here, such as the
police, fire, public works, parks departments, and general administration. Property taxes,
state -shared revenue, and charges for services provide most of the funding for these
activities.
• Business -type Activities - The City charges fees to customers to cover the costs of certain
services it provides. The City's water and sewer system, golf course operations, and
nonfederal 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 how cash and other financial assets that can be converted to cash, flow
in and out, and the balance left at year end that is available for spending. The governmental
fund statements provide a detailed short-term view that helps you determine if there are
more or fewer financial resources available to spend in the near future to finance the Gty's
programs.
• Proprietary Funds - Services that are intended to be entirely self-supporting by customer
fees are generally reported in proprietary funds. Proprietary fund statements, like
government -wide statements, provide both short- and long-term financial information.
• Fiduciary Funds - The City is responsible for ensuring that the assets in these funds are
used for their intended purposes. We exclude these activities from the government -wide
financial statements because the City cannot use these assets to finance its operations.
City of Livonia, Michigan
Management's Discussion and Analysis (Continued)
The City as a Whole
In a condensed format, the table below
shows a
comparison of
the net assets as of November
30, 2012 to the prior year.
Net Assets (in millions of
dollars)
Summary Condensed Statement of Net Assets
Governmental Activities
BusinesstypeActivities
Total
2012
2011
2012
2011
2012
2011
Assets
Current and other assets
$ 519 $
479
$ 296 $
296 $
81.5 $
77.5
Capital assets
1849
184.4
750
765
2599
2699
Total assets
2368
2323
1046
106.1
3414
3384
liabilities
Current liabilities
12.5
7.1
50
32
17.5
193
Long-term liabilities
493
53.6
70
161
56.3
637
Total liabilities
618
60.7
120
133
738
740
Net Assets
Invested incapital assets -
Netofrelated debt
1456
143.5
672
669
2128
2194
Restricted
189
263
15
25
264
228
Unrestricted
10.5
7 8
23 9
234
34 4
31 2
Total net assets
$ 175.0 $
171.6
$ 92.6 $
92.9 $
267.6 $
264.4
City of Livonia - Net Assets
The City's assets exceed its liabilities at the end of the fiscal year by $267.6 million (net assets).
Havever, a major portion (79 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 increased from $7.8 million at
November 30, 2011 to $10.5 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 awhole, 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 Conclensed Income Statement
Governmental Acbvlties Business
typeActivities
Total
2012
2011
2012
2011
2012
2011
Revenue
Program revenue
Changes for services
$ 173
$ 167 $
348 $
316 $
52.1 $
483
Operating grants and
contributions
87
90
-
-
87
90
Capital grants atl
contributions
09
13
1.1
92
20
15
General revenue
Property taus
544
496
-
-
544
496
State -shared revenue
] 8
] 6
-
-
] 8
] 6
Rental income aid fens
25
23
-
-
25
23
Interest
93
94
0.1
0.1
94
95
Transfer aid miscellaerfus
92
94
0.1
93
94
Total revenue
92.1
873
36.1
319
1282
1192
Program Expenses
General government
197
195
-
-
197
195
Public safety
3] 5
3] 4
-
-
3] 5
3] 4
Public works
247
239
-
-
247
239
Community and economic
development
16
16
-
-
16
16
Recreation and culture
125
130
-
-
125
130
Interest on long-term debt
1 ]
15
-
-
1 ]
15
Water and sewer
-
-
334
292
334
292
Golf cow se
-
-
19
19
19
19
Housing
-
-
19
99
19
99
Total expenses
887
879
363
320
1259
1199
Change in Net Assets
34
in 6)
in 2)
(0.1)
32
in 7)
Net Assets -Beginning of year
171
1722
928
929
2644
265.1
Net Assets - End of yea
$ 175.0
$ 171.6 $
92.6 $
92.8 $
267.6 $
264.4
Fl
City of Livonia, Michigan
Management's Discussion and Analysis (Continued)
Governmental Activities
In reviewing governmental activities in the above table, it can be noted that revenue increased
by $4.8 million and expenses increased by $800,000. The increase in revenue was caused by the
levy of additional property tax rrillage for public safety, senior services, and cultural activities as a
result of a voter approved ballot proposal in August 2011. The significant factors impacting
expenses were increases to pension and retiree healthcare costs, which were offset somewhat
by reduced staffing and implementation of unpaid furlough days.
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 Wyld, and Whispering Willows golf courses, and
nonfederal 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:
(m thousands of dollars)
Wada and Sever Golf Courses Housing
2012 2011 2012 2011 2012 2011
Operating Revenue $ 31675 $ 28,631 $ 1,764 $ 1,583 $ 1,345 $ 1,341
Operating Expenses (33,022) (28848) (1941) (1873) (968) (891)
Operating (Loss) Income $ (11.34]) $ (217) $ (1T1) $ (290) $ 3T $ 450
The operating revenue, expenses, and loss for the Water and Sewer Fund all increased
substantially from 2011 to 2012. The City's wholesale supplier of water, the Detroit Water and
Sewerage Department (DWSD), continued recent trends of substantial increases to the cost of
water supplied to the City. In response, the City revised its methodology in rates charged to
customers by adopting a much larger fixed fee component to its charges to better match the
way DWSD charges for the wholesale cost of water. Because this rate methodology change was
implemented for only the last six months of the fiscal year, the Water and Sewer Fund revenue
did not reflect the impact that would be anticipated over a full 12 -month period. Our analysis
shays the operating loss would have been eliminated if the new rate structure was in place for
the full year.
Capital Assets and Debt Distribution
At the end of fiscal year 2012, the City has $445.3 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.
City of Livonia, Michigan
Management's Discussion and Analysis (Continued)
Debt of $39.3 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 $6.3 million and debt related to housing
activities of $1.3 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 2012 include $5.5 million invested in the
construction of infrastructure and improvements to roads, $3.1 pillion invested in public safety
communication equipment, $270,000 invested in parking lots, and $1.6 million invested in
equipment and vehicles. Significant disposals of capital assets during fiscal year 2012 included the
disposal of radio equipment and other vehicles and equipment with a total cost of $3.2 million.
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 City's major governmental funds for 2012 indude the General
Fund, Community Recreation Fund, and Refuse Disposal Fund.
The City's governmental funds reported a combined fund balance of $29.9 million. This is an
increase of approximately $2.4 million for the year. The increase was caused primarily by the
two new millages levied - public safety (1.7 hills) and senior and cultural services (25 mills).
General Fund Budgetary Highlights
Over the course of the year, the City administration and City Council monitor and amend the
budget, primarily to prevent expenditures in excess of budget, as required by the State of
Michigan Budget Act The final amended budget included nearly the same total revenue and
expenditures as the original adopted budget.
Actual General Fund revenue was approximately $296,000 above the final budget. Shortfalls
were experienced as a result of tax appeals ($468,000) and lower fines collected by the District
Court ($124,000) and reduced transfers of 911 fees to the General Fund ($500,000). These
shortfalls were offset by better than anticipated revenue for licenses and permits ($388,000),
state -shared revenue ($850,000), and cable franchise fees ($80,000).
Actual General Fund expenditures were approximately $2.8 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 that the City is facing in upcoming years.
City of Livonia, Michigan
Management's Discussion and Analysis (Continued)
The majority of the City's revenue base is constrained by factors outside the City's control.
Property taxes, state -shared revenue, and interest income total 76 percent of the City's total
governmental activities revenue. In August 2011, voters approved millage increases of 1.7 mills
for public safety and 0.25 mills for senior and cultural services. These millages will help maintain
these activities at current levels, but continued declines in property values will erode the impact
of these new millages. It appears that the revenue reductions are slowing. Residential property
assessments are projected to increase in fiscal 2014, although business assessments continue to
decline. State -shared revenue is projected to increase slightly in fiscal 2013 and 2014.
On the expense side, certain expenses continue to rise at a rate in excess of inflation. In
particular, retiree healthcare and pension contributions are experiencing significant increases.
Staff reductions, unpaid furlough days, and increased employee cost-sharing for medical
expenses, 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 may be dirrinished programs and service response capabilities.
Contacting the City's Financial Management
The financial report is designed to provide our citizens, taxpayers, customers, investors, and
creditors with a general overview of the City's finances and to show the City's accountability for
the money it receives. If you have questions about this report or need additional financial
information, contact the director of fimnce at the City of Livonia, 33000 Civic Center Drive,
Livonia, Michigan 48154.
City of Livonia, Michigan
Statement of Net Assets
November
30, 2012
Primary Governionent
Governmental
Businesstype
Component
Activities
Activities
Total
Unit
Assets
Cash and invednent
$ 38,880608
$ 12,930074 $
51810,682
$ 393,118
Account rereivable:
Taxes
289,920
-
289,920
-
astral
-
13,199939
13,199939
-
WoderSmrryensation
20,558
-
20,558
-
DuefromothergovernnentalunRs
5,331645
-
5,331645
-
VEDA
551 fi35
-
551 fi35
-
Oroerarcountrecerciale
2,950,717
698441
3,6/09,158
47457
Special assessment
343957
115,343
459,300
111,039
Inventory, prepaid expenditures, anddeposits
3,492248
1119,667
4,611915
-
Restricted asset (Note 7)
-
1550,389
1550,389
-
Capital asset (Note 4):
Nondepreciable capital asset
35,641 E07
8,023,060
41,664,867
474,448
Depreciable trial asset - Net
149,260663
68,998660
218265323
6,455,732
Total asset
236,785,768
104,595573
341371341
7,482,794
LiaNlities
Account payable
3,921274
1,612,144
5,533,418
73,372
Due to other governmental units
1,369,479
1,369,479
Accrued liabilities and other
3,095,771
149220
3,244991
11583
Deterred revenue (Note 13)
718,797
149,452
858249
-
BondsanddeposRs
-
212264
212264
-
Noncurrent liabilities (Note 6)
Du within one year
Payable from restricted asset
-
7ssaao
755aa0
-
Curl absences -<1 yr
3,038510
220939
3,255449
-
Currentportionoflongtermdebt
1,740000
485,000
2,225,000
455,000
Due in more than one year:
Compensated absences and insurance claim
8,842478
333,714
9,176,192
-
LandGlldosureliability
592,140
-
:92140
-
NetOPEBobligation
2274,767
99110
2,373877
-
BondandcapRalleasespayable
37,545800
6,:93,359
44,138359
2,625,000
Total liabilities
61j68,737
11975,681
73,744,418
3,164955
NN Assets
Invested in capital asset- Net of related debt
145,623,470
67,188361
212,811,831
3,851180
Restricted for:
Cormi overall
3,675,941
-
3,675,941
Municipal refuse
2,812975
-
2,812975
-
Streef,road,andsol lk
3,235,805
-
3,M685
-
Library
972,520
-
972520
-
Publcsafetymnmuncation
2,759,109
-
2,759,109
-
Gant
237,819
-
237,819
Street lighting
0,774
-
0,774
-
Cdjud ted forfeitures
925,382
-
925,382
Cormi transit
583s02
-
583s02
-
Ordnancere4uirenent
39289
1550,389
1,589,678
Capital improvements
3,969952
-
3,969952
-
Unrestricted
10,517513
23,871142
34388655
466659
Total net asset
$175,017,031
$ 92,609,592 $26],620,923
$ 4,3110539
The Notes to Financial Statements are an
Integral Part of this Statement.
10
City of Livonia, Michigan
Functions4Progmms
Pr inarygawminent
Governmental actiHties:
General government
Public safety
Publicwor
Community and economic
development
Recreation and culture
Interest on longterm debt
Totalgovernmentsl
actlNtles
Buawsslype activities:
wateraidsewer
Golf course
Housing
Program Revenue
Operating Capital Grants
Charges for Grants and and
Expanses Sertices Contributions Contributions
$ 18,]08,24] $ 3,788,268 $ - $ 398,381
37,486,692 6,751518 1665,626 40,070
246%93] 1995.32] 611]52] 364.1%
1636,971 250,138 498,769 67,126
12,505,390 4,474,693 388,264 -
v22.220 - - -
68,147,451 17,259,936 8,610,186 669,772
33,380,0.58
31,614,167 - 1,133,310
1941,066
1163,865 -
1,028,487
1344,904
Total buawsslype
acbmtes
36,349,695 34,183,556 - 1,133,310
Totalpnmarygovernmenl
$125,097,062 $ 52,043,492 $ 8,670,186 $ 2,003,082
Component unit -PRDA
$ 1,219,192 $ - $ 96,216 $ -
General revenue:
Property taxes
Stateshared!revenue
Inveshmenl income
Unrestricted tees and other
Miscellaneous
Total general revenue
Transfers
Change in Net Assets
Net Assets- Beginning of }ear
Net Assets- End of year
The Notes to Financial Statements are an
Integral Part of this Statement. 11
Statement of Activities
Year Ended November 30, 2012
Net(Expense) Rewnm an Changes in Net Assets
Pnmary Govemment
Gowmmentel Busimss{ Compmenl
AdivIns AdivIns Total Units
$ (6,513,606) $ - $ (6,513,606) $
(26,029,478) - (26,029,478)
(16,218,888) - (16,218,888)
(820,938)
- (820,938) -
(7,642,433)
- (7,642,433) -
(1M,220)
- (1M,220) -
(61947,563) - (61947,563)
- (5]19]3) (5]19]3) -
- (111,183) (111,183) -
316,417 316,417
- (432,739) (432,739) -
(61,947,563) (432,739) (62,380,382) -
- - -
(1,122,946)
54,406,366
-
54,406,366
106,133
7,801,736
-
7,801,736
-
356,691
119,163
415,854
826
2,500,836
-
2,500,836
-
392,115
392,115
65,459,828
119,163
65,518,991
107559
(147,M)
147,M
-
-
3,364,400
(165111)
3,196,669
(415,361)
111,652,631
92,115,60
264,428,234
4,133,226
$115,011,031 $
92,609,892
$261,626,923 $
4,317,839
12
City of Livonia, Michigan
Governmental Funds
Balance Sheet
November 30, 2012
kabemes and Fund Balances;
Major glans I Revenue Ford
uabmn
Community
Rause DisP®I
Non -odor
General Fund
Recreation
System
Fund
Tac'
Assets
Due to other Nnd
T36216
Cash andlnv¢Menls
S 1901
8 4.459.819
8 4933,869 8
13,590154 8
33.916586
Real
Deterred revenue (IN de 13)
977821
agi
56,138
]ATR
Tares
i61,E61
19976
60,367
47,696
2b9920
glacial asesnents
Fund Boll
-
-
313977
313977
workelrcomPeneauon
20,568
-
-
20,568
Due tom other governmental units
3286,922
-
-
2,30,723
5,331645
WBA
51,635
51,635
Other
59],]89
T36861
55,825
565,732
1011
Due torn other Linda IN de S)
776216
-
-
776216
inventory, prelaideaPemes, and dpa4s
deal
-
-
163510
Sr9596
Total assets
$ 13,713,8113
$ 4,6766/6
$ 5,110,101 $
16,781 $
40262,352
kabemes and Fund Balances;
uabmn
Accounts leyade
s 961 s
2(gi s
1.53530 s
1.173592 s
3921274
Due to other Nnd
T36216
T36216
Accrued and other retain
2,463571
g9662
ui4w
219505
2,954p94
Deterred revenue (IN de 13)
977821
agi
56,138
]ATR
2,]115281
Total routines
4,4505]0
1216366
1,761124
2,919205
10,317265
Fund Boll
BomPencal mvedoryandirrengd
snob
Pal
-
-
-
deal
Reduced:
Streets, r®d, adsidwallis
3,181
3,181
PdludWed kukAures
g25,362
g25,362
Grants
-
-
-
227208
227208
(Aptalimaovemems
-
-
328458
3,266532
Community recreation
-
3460310
-
3466310
Municipal refile
-
-
3,3189]]
3348 W]
Street lighting
-
-
-
63,]]4
63774
53598
953,399
Pubic early cornminiapon
-
-
-
2,453204
2,463204
Cornminilytramit
-
-
-
Srl,]62
Srl,]62
Drainage projects
-
-
-
77289
77289
Comnined- Cabeacoestelesison
-
-
-
ra1]26
ra1]26
Assigned
Gdfcourse apitaliinnTosemenle
-
-
-
drew
drew
Court ladngiinnrovemenle
-
-
916,716
916,716
Unassigned
8,HF114]
8,ral
Total Lnd idarces
9253277
3,450310
3,3189]]
13,%1256]
29,905,087
Total routines add and
idImces
$ 13213,816 $
4,6]6,6]6 $
5,110,101 $
16281 $
40282,352
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, 2012
Total Fund Balances of Governmental Funds $ 29,905,087
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
184,908,470
Certain receivables are expected to be collected over several
years, including special assessments, delinquent personal
property taxes, and grants
1,986,484
A portion of fines and fees is not available to pay for current
year expenditures
1,544,493
The liability for compensated absences is recorded when
incurred in the statement of activities
(9,116,442)
Landfill closure and postclosure liability is not due and payable
in the current period and is not reported in the funds
(592,140)
Long-term liabilities are not due and payable in the current
period and are not reported in the funds
(39,285,000)
Net OPEB obligation is not due and payable in the current
period and is not reported in the funds
(2,274,767)
Accrued interest is not due and payable in the current period
and is not reported in the funds
(141,277)
The Internal Service Fund (self-insurance) is included as part of
governmental activities 8,082,123
Net Assets of Governmental Activities $ 175,017,031
The Notes to Financial Statements are an
Integral Part of this Statement. 14
City of Livonia, Michigan
Governmental Funds
Statement of Revenue, Expenditures, and Changes in Fund Balances
Year Ended November 30, 2012
The Notes to Financial Statements are an
Integral Part of this Statement. 15
Major Special Revenue Funds
Other Nourmjor
Tda'
Community
Rebse oisp®I
Gwemmatal
Gwemmatal
General Fund
Recreation
System
Finds
Finds
Russell
Property taxes
8 32.620955 8
3,188y3
8 9,627262
8 6,969871
$ 51,R2,321
Licenses antl permits
1,9]6353
-
-
1,978353
Federal revenue
110,925
-
2,,163,708
2.5986]3
Slide atllocal revenue
7,861,855
151,874
6,358,466
14372139
Charges brservices
3,955922
3,898346
tt32w
9/]368
8,956]]8
Finesand Mkitures
3,613317
sul
6,56],]65
Interest
141l
2728,1
3,163o
99529
367,926
Other revenue:
Special assensua
1497,9,11
1,497,961
Other nadelanewsincome
3,16339,1
86112
15336
assi
3,932,682
Total revenue
53,511124
7,bi869
9,316,42,1
21836521
92,483918
Expenditures
Current
General govemrrent
6,9U695
-
-
39,19565
9,W855o
Pudicsakly
31,]61596
-
1,257,]]6
35,62535o
such work
2,938,768
-
11
1862],13]
2,393,417
Coarrealunity and ecww me
develonent
ta
,1986,19
-
]53236
'm'sha5
recreation and culture
I,4M,963
4,531228
-
5,097,]]6
11,W3,961
Erni demons, Insurance, and
other
2,]11895]
-
-
2,]11895]
Capital outlay
2,031282
2,031282
Oelf service
3,311
3,311
Total drencitures
50 093662
4,531228
11
2,524,756
111
Excess of Revenue Over(Unden
Expenditures
3,417,152
2,818621
(1,951,148)
(1,®,1229)
2,55,796
Other Financing Sources (Ines)
Transfars in de 5)
39,996
-
5,661j26
5,161716
Transfars out(N de 5)
(463,475)
({518,451)
({2],655)
(5,269581)
Net Fill in Fund Balances
2,933,963
28,176
(1951.148)
1159,835
2,618,811
Fund Baknces-Begimingai
6,2b9256
3,228,146
5,316,12
22,622,731
21,186266
Fund Bolorm Endai
$ 9263,233 $
3A60,310
$ 3348,9]]
$ Usti
$ 29965,687
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, 2012
Net Change in Fund Balances - Total Governmental Funds $
2,418,841
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
8,601,011
Depreciation expense
(8,025,697)
Loss on disposal of fixed assets
(108,057)
Certain revenue reported in the statement of activities is
recorded in the governmental funds as deferred revenue
(466,101)
Repayment of bond principal is an expenditure in the
governmental funds, but not in the statement of activities
(where it reduces long-term debt)
1,585,000
Interest expense is recorded when incurred in the statement of
activities
5,464
Net increase in accumulated employee sick and vacation pay is
recorded when incurred in the statement of activities
(2,105,204)
Increase in landfill liability is recorded when incurred in the
statement of activities
(44,304)
Increase in net OPEB obligation is recorded when incurred in
the statement of activities
(711,995)
Internal service funds are included as part of governmental
activities
2,215,442
Change in Net Assets of Governmental Activities $
3,364,400
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, 2012
The Notes to Financial Statements are an
Integral Part of this Statement. 17
Noisjor
X4jor Enteryise Fund
Enterpise Fund
Total Enterarse
Internal Serves
Water ancDower
Housns
Gall
Fund
Fund
Assets
Current assets:
Cash and;n.gtments
s 12,274527 s
591.4]8
s 61.069
s 12.930,074
s 2934,me
ncccunte local
Customers
V,TA939
-
V,TA939
-
Other
612}58
-
6,883
6f8,441
-
nvemwy,areameatchal e.
and looms
1.119,F5]
-
-
1,111
2,912,652
Total current assets
27,236.491
591.478
70,152
27,898,121
10'816,612
Noncurrent snots:
ReArded mob IN do 7)
I,S0,389
-
-
I,S0,389
-
Sta l assessment recession
115}13
-
-
115}13
Deal snob (Note 4)_
Nontlzaeciade wall assets
828624
yx 1,948
3,x2688
6,023,868
-
Oeaeciadeaptalasets-Net
6f,W8285
3,814,393
120.3976
B3,%R F58
Tota noncurrent
assets
4+.934641
5,256}4]
4,821
3,837,452
Total assets
93,831;132
5,857,825
4,896,616
181,5&5573
10,8166]2
Hai
Current 0ablmn:
Accounts ral
i gs918
48,o23
38203
1,611
-
Duemmhersovernmentalumis
1,369.4]9
1,369.4]9
-
Acauedandotherladlmn
110503
15.422
3,295
119220
-
Deterred revenue (Ndo13)
149,452
-
149,452
-
BodanddaosAs
70,198
32,874
-
D2264
-
Cunpematedaaences-Due
within one y®r
ani 621
205]8
4,740
226939
-
Current action of low term
cb;samns
20,000
465,000
-
485,000
-
Tmalcurreml;aN;Bes
3,65],163
831,697
16238
4,191
Noncurrent routines
Pal from restr;aedanete
3s,eee
-
-
3s,eee
-
Cunpematedaaences-Due in
e than e y®r
on
2()9,705
96889
22120
333,714
-
Netw
OPEecN;saecn
99,110
-
-
99,110
-
Lens -term deb- Net ercurrem
portion (Note 6)
5,]13}59
8]0,888
-
6,x3}59
2,34519
Total noncurrent
haNlmes
trial
966189
27,120
7,31;183
2,761519
TotaHadl;Bn
10,254337
1,617,986
73358
11,9]5,681
2,76IM9
Net Assts
Invested In:aotal assets Not of
related had
54,430550
3,911347
4,821
61,1ss361
-
restricted Ordnance
regtremenis
1,x0389
Tedo3
Unrestricted
D,x5,856
218,492
(3285)
21,811;42
8,x2123
Total net assets
$ 825]6,]95 $
4209839
$ 4tri
$ 92,689892
$ 8,882,123
The Notes to Financial Statements are an
Integral Part of this Statement. 17
City of Livonia, Michigan
Proprietary Funds
Statement of Revenue, Expenses, and Changes in Net Assets
Year Ended November 30, 2012
The Notes to Financial Statements are an
Integral Part of this Statement. 18
Noarejor
Enteriume
kit Enteryise Fund
Fund
Tata
waterana
Enteriume
Internal Service
Sewer
Housng
Golfcourse
Fund
Fund
Operating Rene
Customer tilings
8 29.756596 8
-
8 -
8 29.756596
8 -
FinesantlMkiWres
1,758988
-
-
1,758988
Serves connections
37,632
-
37,632
Groom goes
-
-
1,552523
1,552523
-
Gdfaftkes
-
-
995520
995520
CitycmViWom
-
15,125,387
Rental inane
1'341535
4,000
1'3+5535
Other revenue
111'629
3,369
112,836
227,836
Total opermn9 revenue
31,674,]6]
1W904
1']63685
3t'rgrr56
15.125,387
Operating External
Cost ofwater
10,436620
-
-
10,436620
-
Costofsewage cisp®I
13,816,062
-
-
13,816,062
-
Systemmsintenanceandcreraton
4,752,374
-
-
4,752,374
-
Generalandadmnistrative
1'243.748
-
-
1'243.748
Reinsurance charges add daunt
-
12,955,324
S lane andwages
-
0.33691
151,933
5&5824
-
Supplies
-
10,014
213,962
223976
-
Otherservi<esandcharges
356,168
19544,340
1recri
-
retroaction
2,713,451
16],]14
130,833
3,011996
Total operating expenses
31.022275
96s]]87
1'911' 068
35,931130
12,965,324
Opemting(read Income
(1,317503)
3/],11]
(111,183)
(1,14]5]4)
2,110,063
Noroperating Revenue (Expenses)
Investment Income
112978
6,169
16
119,163
45,3]9
Interest wronse
(357,]]5)
(60,700)
-
(418,475)
-
Tmaln9 (expemes)
revenue
(244,797)
(� 1)
16
(299,312)
45,3]9
(Los)Income- BefweconViWtimsanctranskrs
O'Na2,305)
322586
(1/],167)
(19546886)
2,215,442
Capital Contributions nom Developers and
Game
Gaal grants
924,021
-
-
924,021
-
Specalasesmenk
153,]91
-
-
153,791
-
CaPtal<mViWtims
556%
-
-
55,498
-
Total aptal mmritutiohs hour
drelorchandgrants
1'133,310
-
-
1,133,310
-
Tmnskrsln(NmeS)
62.9565
-
85.000
967,9565
-
ChangeinNetAssets
(396,130)
322586
(92.167)
(55,711)
2,211
Netloxts- Beginning ofyear
83.972925
3,661
4,915,425
92,775603
5,8796661
Netloxis-Endofyear
$ 83576,795 $
4209
$ 4623,258
$ 92,609,892
$ 8,882,123
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, 2012
The Notes to Financial Statements are an
Integral Part of this Statement. 19
Nonnnjw
X4jor Enterprise Fund Entertains Fund
Taal
Enkrnme Internal
Serves
Water andSmer
Housng
CalfCwr
Fund
Fund
C6M1 Flow iron Operating Activilig
Receipts hon cotoners
8
3226859] 8
1314,901 8
1.762450 8
35,3fi1,951 8
16,330,8W
Payments to suppliers
(26,817577)
(383,1
(11640,841)
(28,841,614)
(14224,634)
Payments to employees
(4,144,83))
(414,835)
(142555)
(4592272)
Other receipts(toenents)
24,7¢
(46)
24,716
Net can pwidtl by (used in)
operating activitio
1622902
55682%
(20,947)
1958,]81
106,1]0
Cash Fbas Iran Nonsagtal Financing
Activitks- Net Vamkrstomdher Nnd
628'L
-
850W
14],8'L
-
C6M1 Fbws Iran restated and Relatetl
Rrencirg rlctivitks
Receipt o(aprkl grants
924,021
-
-
924,021
-
Simi asesnantcdledinm
3B,44B
-
-
3B,44B
-
NetWrchassofaptalasets
(1528,320)
(1528,320)
Principrl mtllnterst leitlm Iom4erm
dN
017 075)
(497,151)
(2269.226)
Net can mourn espial end
rehtedfimncing adiMis
(2337,926)
(497,151)
-
(2,831
C6M1 Rays fran Investing Actfvilia
Interest received on nvestirants
112979
side
15
119,10
45379
Net purchases of investment activitis
(2910,683)
(153,]]5)
(32035)
(3,096,493)
(I,E65,743)
Net men mod In Investing
activities
(2.797,73)
(147,606)
(32019)
(29]],330)
(11820,361)
Net mecread) Increase in Cash and Cash
Equivalents
(3,649,851)
(8],931)
32031
(3,]05,]61)
(1714,191)
Ca ah and Cash Equivalents -
Beginning ofyear
1133],]661
dri
-
11]21535
5681,2W
Cash andasM1 Equivalents -
End of yer
$
],68],9@ S
235,839 S
32 ,034 $
8,015,]]5 $
3,96),010
Balance SM1cet Classification of C6M1 add
C6M1 Equivalents
rush andlnvesMents
$
11 $
591479 a
64,0(B a
12930,074 $
7,934,020
Restrotedasetsmokn
1550389
1558389
Less investments
(6,137,0%)
(65,63))
(32031)
(61E61,613)
(3,96/,010)
Taal can success ecrualents
$
],6e],9U2 $
295s39 $
s,034 $
8,011 $
3,961,010
The Notes to Financial Statements are an
Integral Part of this Statement. 19
City of Livonia, Michigan
Proprietary Funds
Statement of Cash Flows (Continued)
Year Ended November 30, 2012
Reconciliation of Operling (Loss) Income
to Net Cort from Operating Milvi ics
Operating (al Immne
PQustments to reconale operating (al
mse to net can tom operating
activiti¢
DePeastion
Changes In assets and Iiadlities:
RKenessUes
Inventory, lxefeid, tlzpaits,
and other assets
Accounts MrUe
Accrued and other Itlrntmea
retired revenue
Bond ands is
Net can Ixwidtl by
(used in) operating
acbwtes
N omrejor
X4jor Enteryise Fund Enterpise Fund
Total Enterase Internal serves
Water antlsewer Housng Galfcomse Fund Fund
(1,347,506) s 377127 s 077183) $ (1,147,,574) s 2,11oC61
2,111
16777
11
3011,99
-
(5]9]91)
-
(1,436)
(581,217)
(]94581)
131,106
131,106
(1269,310)
etw ile1
9,587
1i
2b,1e3
-
276,235
2454
9323
atil
-
(37714)
-
(37714)
-
(46)
s)
$ 1pII,902 $ steal $ (28,947) $ 1,958,781 $ 106,178
During the year endtl Nouenber30, 201$ the Cily rKeenal$55698 of dna@tl lines renal aptal assets In the Wa@rantlsewer Fund
The Notes to Financial Statements are an
Integral Part of this Statement. 20
City of Livonia, Michigan
Fiduciary Funds
Statement of Fiduciary Net Assets
November 30, 2012
The Notes to Financial Statements are an
Integral Part of this Statement. 21
Pension and
Other
Employee
Benefits
Agency Funds
Assets
Cash and cash equivalents (Note 3)
$ 846,114
$ 9,682,524
Investments (Note 3):
U.S. government securities
21,644,368
-
Collateralized mor[gate obligations
14,223,668
-
Commonstock
164,936,381
-
Common bonds
35,659,922
-
Realestateinvestmenttrust
10,270,643
-
Foreign bonds
5,562,664
-
Mutual funds
71,559,494
-
Securitieslendingcollateralpcol- Mutual funds
3,621,947
-
Accounts receivable
711,161
-
Due from agency funds
871,432
Total assets
268,635,674
$ 9,682,524
Liabilities
Accounts payable
361,326
$ 162,396
Due to other governmental units
-
5,799,543
Due to primary government
551,635
-
Duetootherfuntls
-
871,432
Accrued and other liabilities
-
2,849,159
Amounts due to broker under securities lending agreement
3,815,366
Total liabilities
4,668,327
$ 9,682,524
Net Assets Held in Trust for Pension and Other Employee
Benefits
$263,967,347
The Notes to Financial Statements are an
Integral Part of this Statement. 21
City of Livonia, Michigan
Fiduciary Funds
Statement of Changes in Fiduciary Net Assets - Pension and Other
Employee Benefits Trust Funds
Year Ended November 30, 2012
The Notes to Financial Statements are an
Integral Part of this Statement. 22
Pension and
Other
Employee
Benefts
Additions
Investment income:
Interest and dividends
$ 6,487,166
Net charge in fair value of investments
27,668,655
Less investment expenses
(614,599)
Net investment income
33,546,556
Contributions:
Employer
7,323,315
Employee
1,675,157
Total contributions
8,398,472
Total additions
41,939,628
Deductions
Pension benefit payments
14,461,326
Medical benefit payments
7,241,113
Refunds of contributions
769,725
Administrative expenses
239,315
Total deductions
22,651,473
Net Increase in Net Assets Held in Trust
19,287,555
Net Assets Held in Trust for Pension and Other Employee Benefits -
Beginning of year
244,679,792
Net Assets Held in Trust for Pension and Other Employee Benefits -
End of year
$ 263,967,347
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, 2012
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
- 3,164,955
Development
Development
Corporation
Authority
Total
$ 23,594
$ 389,524 $
393,118
-
158,496
158,496
-
474,448
474,448
6,456,732
6,456,732
23,594
7,459,289
7,482,794
73,372 73,372
11,583 11,583
- 455,989
2,625,989
455,989
2,625,989
- 3,164,955
3,164,955
- 3,851,180 3,851,180
23,594 443,065 466,659
$ 23,594 $ 4,294,245 $ 4,317,839
The Notes to Financial Statements are an
Integral Part of this Statement. 23
City of Livonia, Michigan
Function Programs
Eoononrc Development
General
n-
General government
Plymouth Road Development Augnonty
Community and econonrc
development
Interest on longterm @bt
Total Plymouth Road
Devebpment Authonty
Totalgovemmental
actiHties
Program Revenue
Operating Capital Grants
Charges for Grants and and
Expenses Sertices Contnbuhnns Contnbuhnns
The Notes to Financial Statements are an
Integral Part of this Statement. 24
1,072,825 -
96,246 -
146,36
1,219,192 -
96,246 -
$ 1,219,192 $ 5
96 246 5
General revenue:
Property taxes
Interest
Total general revenue
Charge in Net Assets
Net Assets- Beginning of }ear
Net Assets- End 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 rwmoro Total
(9]6,5]9) (9]6,5]9)
(146,367) (146,367)
(1,122,946) (1,122,946)
(1,122,946) (1,122,946)
- 706,733 706,733
134 692 826
134 707,425 707,559
134 (415,521) (415,38])
23,469 4,]69,]66 4,733,226
$ 23,594 $ 4,294,M $ 4,317,939
25
Component Units
Statement of Activities
Year Ended November 30, 2012
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2012
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, 2012
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 capture. The Brownfield Redevelopment Authority is
governed by a nine -member board that is designated by the mayor and appointed by the
City Council.
The City has excluded the Housing Commission from this report. Even though the City
appoints the Housing Commission's directors, it does not have the ability to impose its
will.
The City has excluded the 16th District Court from this report based on a legal opinion
stating that the court is a part of the Michigan statewide court system, not the City of
Livonia, even though the City has the responsibility to provide fimncing for the court's
operations. The court has a separately issued audited financial statement which can be
obtained from the 16th District Court at 32765 Five Mile Road, Livonia, MI 48154.
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, normally 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, 2012
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 revenue to be
available if it is 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:
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.
Community Recreation Fund - The Community Recreation Fund amounts for the
activities of the Livonia Community Recreation Center, ice rinks, and certain other
recreation activities. Funding is provided primarily by a local dedicated property tax levy
and user charges.
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
dedicated property tax levy.
28
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2012
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, 2012
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 or fund balances are available, the City's policy is to first apply
restricted resources, except for the Community Recreation Fund and Capital
Improvement Fund, which apply unrestricted fund balance first. When an expense is
incurred for purposes for which amounts in any of the unrestricted fund balance
classifications could be used, it is the City's policy to spend funds in this order:
committed, assigned, and unassigned. This is true for all funds except the Community
Recreation Fund and Capital Improvement Fund. As noted above, the policy for these
funds is to use unrestricted funds first; therefore, the order of spending is: unassigned,
restricted, committed, and assigned.
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.
30
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2012
Note 1 -Nature of Business and Significant Accounting Policies
(Continued)
Prooertv 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
2011 taxable valuation of the City totaled $4.209 billion. The millages levied by the City
and the resulting revenue are as follows:
Approximate
Millage Revenue
Purpose of Millage Rate in millions
Operating purposes 4.0447 $ 16.44
Police and fire 0.8088 3.29
Police and fire and snow 1.2134 4.93
Library 0.8088 3.28
Refuse and recycling 2.3746 9.63
Industrial development 0.0121 0.05
Roads, sidewalks, and trees 0.8893 3.60
Recreation 0.7855 3.18
Public safety 1.7000 6.91
Culture and senior services 0.2500 1.02
Transit and capital improvement 0.5000 2.03
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 June 2012. Wayne County delinquent real property taxa 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.
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2012
Note 1 -Nature of Business and Significant Accounting Policies
(Continued)
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 ofgovernmental 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 govemment-wide and fund
financial statements. In inventory where real estate is induded, the inventory is valued
at the lower of cost or market
Restricted Assets - The revenue bonds ofthe Enterprise Funds require amounts to be
set aside for construction, debt service principal and interest, operations and
maintenance, and a bond reserve. These amounts have been classified as restricted
assets.
Capital Assets - Capital assets, whidi 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.
32
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2012
Note 1 -Nature of Business and Significant Accounting Policies
(Continued)
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.
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 the following
components of fund balance:
• Nonspendable: Amounts that are not in spendable form or are legally or contractually
required to be maintained intact.
• Restricted: Amounts that are legally restricted by outside parties, constitutional
provisions, orenabling legislation for use for a specific purpose
• Committed: Amounts that have been formally set aside by the City Council for use
for specific purposes. Commitments are made and can be rescinded only via
resolution of the City Council.
• Assigned: Intent to spend resources on specific purposes expressed by the City
Council orthe finance director, who is authorized by resolution approved by the City
Council to make assignments
33
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2012
Note 1 -Nature of Business and Significant Accounting Policies
(Continued)
• Unassigned: Amounts that do not fall into any other category above. This is the
residual dassification for amounts in the General Fund and represents fund balance
that has not been assigned to other funds and has not been restricted, committed, or
assigned to specific purposes in the General Fund. In other governmental funds, only
negative unassigned amounts are reported, if any, and represent expenditures
incurred for specific purposes exceeding the amounts previously restricted,
committed, or assigned to those purposes.
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 differ from those estimates.
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, 2011 $ (1,621,465)
Current year building permit revenue 1,798,471
Related expenses:
Direct costs $ 1,287,900
Estimated indirect costs 412,459 1,700,359
Current year net revenue
98,112
Cumulative shortfall at November 30, 2012
$ (1,523,353)
34
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2012
Note 3 - Deposits and Investments
Michigan Compiled Laws Section 129.91 (Public Act20 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.
The City has designated six 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. The City's 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, 2012, 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.
35
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2012
Note 3 - Deposits and Investments (Continued)
The City of Livonia Employees' Retirement System and the borrower maintain the night
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,
2012 was one day because the loans are terninable on demand; their duration did not
generally match the duration of the investments made with cash collateral. On
November 30, 2012, the System had no credit risk exposure to borrowers. The
collateral held (cost basis) and the fair market value of the underlying securities on loan
forthe System as of November 30, 2012 were $3,815,365 and $3,662,265, respectively.
The City's cash and investments are subject to several types of risk, which are examined
in more detail below:
Custodial Credit Risk of Bank Deposits
Custodial credit risk is the risk that in the event of a bank failure, the City's deposits may
not be returned to it. The City does not have a deposit policy for custodial credit risk.
At year end, the City had $32,594,925 of bankdeposits (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 risk 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 w a result of a
rise in interest rates. The Citys investment policy does not restrict investment
maturities, other than commercial paper will can only be purchased with a 270 -day
maturity. At year end, the average maturities of investments are as follows:
Prim y(3 rml Fair Value om5y®rs 6m 10Years over 10Years
O S. agenry securities $ 24j9,766 $ 20,5H,7E0 $ - $ -
Commerciallaper 3,188,691 3,189,691
Total $ 2].]38.a3s $ 2].]33.635 $
G7 of tmonia Fmpbrees Retirement
Fair Value om5r®Ie 6m 10 Years over 10 Years
Corp ate comas
8 26218803 $
9,81 $
),432,146 8
6,923485
Foregn band
4,032296
1,851 tag
2,015,635
154,762
IIS. agengsecurAies
10,9 ,res
13C1,156
W,705
10,9],98]
IIS. Treasurysecurities
3}5],188
79,926
-
25]],262
Colateral¢eamMgage odigatims
104F596o
1883243
85837P
Total
$ 51,998,95 $
12685,153 $
139]5,]23 $
28,U7,2V
'M
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2012
Note 3 - Deposits and Investments (Continued)
a7 of (mania Retiree Health and ol.:abeny
Parents Pian Fair wue
omsv®rs 6m 10 Yang
osar 10 Yang
Crrpxale Wnds 8 8,811119
8 3,682159 S
3,676,855
8 1082895
Foreign Wnds 101
75,019
]82,]81
51,583
IIS. agencysecurAies 3,643E54
10,793
252,126
3380535
PS. Treasun,securitin 3,128818
1,2]83n]
13],]02
1712693
ColaternizedmMgage rdigaiims 3755648
Sai
2834130
Total 8 20832087
8 5,679,018 S
5591692
$ 9 Sil'a ]
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)
areas follows:
Rating
Investiainl
Fair Value
Rating
Organization
Primary Government
Bankinvestmentpods
$ 167],269
Asa
Midi
US. agencies securides
24,549,744
A
S&P
Commercial paper
3,188,691
N/A
n1a
Total
$ 29,415,704
is
Fidmiary Finals
Corporate bond
$ 3,016,072
AM
S&P
Corporate bontl
3,353622
M
S&P
Corporate bond
7,802,260
A
S&P
Corporate bond
17,102,164
BBB
S&P
Corporate bond
127],7]5
BB
S&P
Corporate bond
262,650
B
S&P
Corporate bmtl
2,245,979
NR
S&P
Forego bonds
689,337
M
S&P
Foreign bonds
1,634,950
A
S&P
Foreign bonds
2,534,594
BBB
S&P
Foreign bolds
443,783
BB
S&P
US agencies securities
476,554
M
S&P
US. agencies securities
610,482
A
S&P
US. agencies securities
13,479,266
NR
S&P
US. Treasury secunties
6,478,006
NR
S&P
Cdlatemlizei mortgage obligations
97],836
AM
S&P
Cdlatemlized mortgage obligations
1666,441
M
S&P
Cdlateralized mortgage obligations
4,382,736
A
S&P
Cdlateralized mortgage obligations
2,354,173
BBB
S&P
Cdlateralized mortgage odgabons
4,842,422
NR
n1a
Total
$ 75,830,502
Component Unib - Bank investment pools
$ 369,524
Asa
Midi
37
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2012
Note 4 - Capital Assets
Capital asset activity of the City's governmental and business -type activities and
component unit was as follows:
38
Balance
Balance
oece niaer 1,
November 36,
2011
Retlasilatims
Accil
tell
2012
f nmenNU¢ririlia
CapUl mets nd Wing
deprecated
laic
8 M.851.419
8 8
8
-
8 34851A19
Cmstruclim in pcgres
3,157,936
(2,835505)
511
no3
Suddal
390]9603
(2,885505)
511
-
35,611807
Capital mi Wing Rpecialed
InhsVmWre
9],706]34
-
5',sts 6o
-
ID3159074
Ratlrights
18,197220
T36,381
8,393601
Sailings antl innarwenrenta
105,896,634
M'M
258213
(26,700)
106413,9,15
E4iprenlantlwhi
31535,026
2,519,]0]
2,173,178
(3,80251)
M'W'FSo
Suddal
2 ,M,614
2,85505
6,83112
(3,296,951)
M'M5280
frcumilatea Rpecialim:
Inhslruclure
46218,385
-
2,901,
-
,13119,752
Ratlrights
7,309,124
51670
7,860803
Sailings antl innarwenrenta
31,252932
229]}51
2,297266
(26,700)
5.]39319
E4iprenlantlwhi
22,121373
(29]}51)
2,2]5385
(3,0Y2,196)
21,11728
Suddal
1W,901814
8,025697
(3,tl38896)
111,828,617
Net aPla sets bung dsPreciaten
146631800
2,835505
57,415
(106,057)
iM'agg' il
Net aPta'asob
8 181,441213
8 - 8
M,314 8
(106,057)
8 1i
38
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2012
Note 4 - Capital Assets (Continued)
daze dance
December 1, Noeember 30,
2011 Reclassifiatims Aditims tell 2012
Bi sly:bpenal.me
8 474,448 8
- 8
4]4,448
Gptalasetsbeing RpeciateJ-Wndimpwerents
Qptal assets not being
-
1,703227
AccumJateJRpeciatim-Wndimpwerents
8,461,334
Rpeciated
9,246695
Net deal assets being dlarmiated
7,241893
(395161)
Land 8
5,14"136 8
8
8
- 8 5,14"136
Construction in progress
ffi3152
(1,M,m)
1,83911
158,6z4
submtal
6,116288
(i M,m)
1,83911
- 6,m3,ofio
GpUI assets ming depecialed
Water and sewer dstriial
124,612,850
1,6!],839
-
- 3Ni,319,889
BJldrgs and Wilding
imywemei
9,321,832
82,05(1
-
- 9,483,866
Manners and e4ipnent
2,211088
(82056)
-
- 2,19}2
Vehicle
1,]65539
1,]65539
Land impwmrenk
2,916,844
2,916,844
Suddal
148,ffi],613
1,6!],839
-
- 142,534,]12
Accu
detr:
ratlRper
WatertlstriWtim
Waleranand
W,312658
-
2,494255
- R,EFb 985
to
Buildrgsantl Wiltlig
im
4,311245
50,430
18690.5
- 4,616,628
andek
Vehicles antle4ipnenl
1,]61583
(58,438)
123$00
- 1,818,853
Vehicle
1,4595]2
-
133,889
- 1,W3,461
land impwenrents
2,5348M
73609
2,W8213
Suddal
70,824051
3,011938
73,53(3,052
Net aptal assets being tlzpeciated
n313619
1,6!],039
(3,011,938)
- %att'e5o
Net aptal mets 8
$449907 8
- 8
(1,428,187) $
- $ ]5,W1,]2o
dance dame
December 1, November 30,
2011 Adel 2012
CanporeM Dnils- OerelagneM slutM1aily
Gptal assets not bens esVeaateJ-land
8 474,448 8
- 8
4]4,448
Gptalasetsbeing RpeciateJ-Wndimpwerents
15,703227
-
1,703227
AccumJateJRpeciatim-Wndimpwerents
8,461,334
X5,161
9,246695
Net deal assets being dlarmiated
7,241893
(395161)
6,0.56,732
Net deal assets
8 ],]16,341 8
05161) s
6,931180
39
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2012
Note 4 - Capital Assets (Continued)
2,713,451
Depreciation expense was charged to programs ofthe primarygovernment as follows:
Governmental activities:
Newburgh and Silver Village
General government
$ 676,222
Public safety
1,319,700
Public works
4,067,447
Recreation and culture
1,962,328
Total governmental activities
$ 8,025,697
Business -type activities
Water and sewer $
2,713,451
Golf course
130,833
Newburgh and Silver Village
167,714
Total business-typeactimbes $
3,011,998
Construction Commitments - The City has active construction projects at year end.
At year end, the City's commitments with contractors are as follows:
Remaining
Spent to Date
Commitment
Street and sidewalk projects $ 6,979,927
$ 1,510,246
Detention basin 200,909
160,627
Streanbank stabilization project 57,187
192,216
Equipment -
228,029
Note 5 - Interfund Receivables, Payables, and Transfers
Receivable Fund Payable Fund Amount
Due to/from Other Funds
General Fund Nonmajor governmental funds $ 796,216
VEBA Fund Investment Administration Agency
Fund 813,514
Total $ 1,609,730
These balances result from the time lag between the dates that goods and services are
provided or reinbursable expenditures occur, transactions are recorded in the
accounting system, and payments between funds are made.
40
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2012
Note 5 - Interfund Receivables, Payables, and Transfers (Continued)
Interfund transfers reported in
the fund financial statements
are comprised of the
following:
Transfer Out
Transfer In
Amount
General Fund
Nonmijorgovemmental funds
$ 378,475 `
Golf Course Fund
85,066 `
Community Recreation Fund
Nonmijorgovemmental funds
2,578,451 "
Nonmajorgovemmental funds
General Fund
39,996
Nonmajorgovemmental funds
2,104,794
Water and Sewer Fund
62,865 '
Total
$ 5,249,581
` Transfer of unrestricted resources tofnance capital projects and general obligation
debt service in accordance with budgetary authorizations
" Transfer from the Community Recreation Fund for debt service
Transfer from Cable Television Fund to General Fund to move unrestricted fund
balance
The majority of transfers are for gas and weight tax revenue 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 debt service.
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.
41
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2012
Note 6 - Long-term Debt (Continued)
Long-term debt activity can be summarized as follows
42
interest
Prenatal
Ra@
Maturity
Beginning
Ending
Due whin
Rage=
Rage=
Balance
Acitims
Reductions
Balance
One Year
Govenmental Activities
Building Authority Bonds:
2005 MBA Refunding Brendle<
Amoumi-53,]36Wo
ag(%-
$155,0W -
Maturing through 2o25
425%
52650W
5 3105,000 5
-
5 (2560W)$
2,85,0W
5 21
2007 MBA Refunding Bores
Am000torinoe-531,025,000
aW%-
$12E6000 -
Maturing through 2s30
as%
51,705,000
29,65,000
-
(1?20,000)
285a5,0W
12460W
2008 MBA Court Cms[mdim
Bonds:
Amonntofisue-58500,W0
350%-
5225,0W -
Maturing through 2933
525%
5580,OW
8,100,000
-
(ill
7,8850W
2250W
Trial gouemmental
activity Ra
m,810o00
-
(1585,0M)
39285,0W
I,]ao,oW
Other Iomi obigations:
General hadlily carries, wor ere
nmPensation, and heath
insurance a�(Notesg
3,559,132
-
p91,583)
2y6e5t9
-
untlhllamureand madames
hadlily
517,836
M,3D1
-
5921E0
-
OPEBreally
1,552onr2
711,995
22]0,]67
Conryematedah:ences
7,W1238
1,E02050
(2,336.845)
9,111
3,038,510
Tudor
acar„tiesmmental
553.50978 $5,19835
$ (41.716429) $54.032893
$0,]]8,510
42
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2012
Note 6 - Long-term Debt (Continued)
Interest Pnnatal
Rate Maturity Beginning Ending Due Withn
Ramses Ranges Balance Arcades Reductions Balance One Year
Busires.ctype Activates
Buddha Mhwity Board;:
209 WA Returning Board;:
Amwmofiesue-0,38Do9D $435000 -
Maturing through XlS 4W% $t6,GW$1.]]0,000$
Water Sutpy adwastev ater
- (28000)
System Bmd:
20,000
2O02WaterSUPpyand
38392
Wastmater system Revenue
Returning Board;:
444,368 (MIM)
Pmwntofisue-0300,W0
335% -
Maturing through Xl2
4W%
2005 Water SuWyand
Wasteavater System Revenue
Border:
Pmwntofisue-$?SBSWD
375%- $335,0W -
Maturing through WOO
5W% $400,OW
2506 Water SuWyand
Wsteavater System Revenue
Refundrg Bond:
Amountofisue-$1,110,WD
375%- $ ,DW -
Maturing through Z20
5W% $Wtgw
Less deferred amount m
reuncing
Total brineestyge
activaly dN
Cwntyconvawal ndigatims:
State Revdving EundLwn-
N. Hurm Valley/Rwge Valley
WstmaterCmtrd System:
Pmmntofmane -
$10,0X,]I13
K0,000
Maturing through M1
225% M5,000
OtherImg4erm odigatims:
OPEB liabfty
Corrpematedatsemes
Total bsinestyye
activities
Total goremmental and
Wsinessty actirties
930,000
3,X5000
$ (a3s,DDD)$ i3u,000 $ a6s,DDD
(mD 000)
(300000) 2,90,000 315,000
3,M,000 - (190000) 3,535000 410,000
(ffi?WS) 30,004 (ziw)
9'La8,355 - (1 @4,996) 7,633,359 1, 220,000
190,000
- (28000)
P8000
20,000
68,718
38392
NIND
3151195
444,368 (MIM)
568653
226,939
10,832268 4]6,]4D (2,013,885) 8,493,122 1,466939
$63,613246 $ 5,613,089 $(6,790,315)$8,46,020 $6,XSE49
comporem Una Actirnles
20%Darnlavn Develnpnent
Refuncing Board;:
Amwntnfisue-U.470ODD 4.00%- $ ,00D-
MatoringthrwghXlB 5O0% 478000 $ 3018000 $ - $ (0.30000)$ 3088000 $ 33 ,000
43
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2012
Note 6 - Long-term Debt (Continued)
Annual debt service requirements to maturity for the above bonds and note obligations
are as follows:
Revenue Bonds - The City has pledged substantially all revenue of the Water and
Sewer Fund, net of operating expenses, to repay the above water and sewer revenue
bonds. Proceeds from the bonds provided financing for improvements to the water and
sewer system The bonds are payable solely from the net revenues of the water and
sewer system. The remaining principal and interest to be paid on the bonds total
approximately $7.7 million. During the current year, net revenue of the system was
approximately $1.5 million compared to the annual debt requirements of approximately
$1.8 million.
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 amountwas $81,422,000.
Note 7 - Restricted Assets
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, 2012, the City set aside $1,550,389 of cash and cash
equivalents to comply with these requirements.
44
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2012
Note S - 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 daims 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:
GenerALadity WoIXelscmryer®tion Medalcarins
2012 2011 2012 2011 2012 eon
Edirreted hadgty
Beginning of par $
912914 $
630.931 $
1,912927 $
1,135587 $
393291 $
I,W5j
Edinoteddairds
incurred indudM
chases in estinretes
511
1M138855
(4895}5)
1,311,908
12,838,596
12,96]]27
claimte}ments
(719}37)
(1218,872)
(W858F)i
(481688)
(8421,984)
(13,399988)
aNily-Entl
Estinfrar
a 8
fyeal
44
798,8 $
'992914 $
961 $
1,'992927 $
938383 $
Sr3291
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 employees 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
45
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2012
Note 9 - Defined Benefit Pension Plan (Continued)
• 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, 2011, the date of the most recent actuarial
valuation, membership consisted of 574 retirees and beneficiaries currently receiving
benefits and terminated employees entitled to benefits but not yet receiving them, and
171 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 7.30 percent The funding policy
provides for periodic employer contributions at actuarially determined rates.
Administrative costs of the plan are financed through investment earnings.
Annual Pension Cost - For the year ended November 30, 2012, the City's annual
pension cost of $747,119 for the plan was equal to the City's required and actual
contribution. The annual required contribution was determined as part of an actuarial
valuation at November 30, 2010 using the aggregate cost method. Significant actuarial
assumptions used include (a) an 8 percent rate of return and (b) projected salary
increases of 4 percent to 11.92 percent per year. Both (a) and (b) include an inflation
component of percent. The actuarial value of assets was determined using techniques
that smooth the effects of short-term volatility over a five-year period. The unfunded
actuarial liability is being amortized as a level percentage of payroll on a closed basis.
The remaining amortization period is the expected future working lifetime. The
pension cost for the three most recent years is as follows:
Fiscal Year Ended November 30
2012 2011 2010
Annual pension cost (APC) $ 747,119 $ - $ -
Percentage ofAPC contributed 100.0% 100.0 % 100.0
Net pension obligation - - -
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2012
Note 9 - Defined Benefit Pension Plan (Continued)
Reserves - As of November 30, 2012, the plan's legally required reserves have been
fully funded as follows:
Legally required reserves:
Reserve for employees contributions $ 8,855,523
Reserve for retired benefit payments 53,334,913
Additional reserves- Reserve for employer contributions 132,417,830
Total reserves $ 194,608,266
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 orafter March 17, 1997
• Police lieutenant and sergeant members - All members hired on or after
December 8, 1997
• Police officer members - All members hired on orafter November24, 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).
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 Transfennngtmmlhe New Employees Hir Afferthe
Detned Benefit Pension Plan Effective Dates NoW Above
Employer Employee Employer Employee
Contribution Contribution Contribution Contribution
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 $2,143,517 during the
cumentyear and employees contributed $767,611.
47
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2012
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, 2011, the date of
the most recent actuarial valuation, membership consisted of 550 active participants,
676 retired participants, and 34 inactive vested participants.
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, certain
newly hired employees receive a health reimbursement account instead of being eligible
for the VEBA- As of November 30, 2012, the plan will provide Health Reimbursement
Savings Accounts (H RSA) to all new hires in lieu of the VEBA medical benefits.
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, 2012, the City has estimated
the cost of providing retiree healthcare benefits through an actuarial valuation as of
November 30, 2010. 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:
48
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2012
Note 11 - Other Postemployment Benefits (Continued)
Annual required contribution (recommended) $
7,259,781
Interest on the prior years net OPEB obligation
130,519
Less adjustment to the annual required contribution
(71,717)
Annual OPEB cost
7,318,583
Contributions to VEBA
(6,576,196)
Increase in net OPEB obligation
742,387
OPEB obligation - Beginning ofyear
1,631,490
OPEB obligation - End of year $
2,373,877
The annual OPEB costs, the percentage contributed to the plan, and the net OPEB
obligation for the current and three preceding years were as follov s:
Percentage
Fiscal Year Annual OPEB OPEB Costs
Net OPEB
Ended Costs Contributed
Obligation
11/30/10 $ 6,169,497 91.3%$
1,051,549
11/30/11 6,685,510 91.3
1,631,490
11/30/12 7,318,583 89.9
2,373,877
The funding progress of the plan as of the most recent valuation date is as follows (in
000s):
Actuarial Actuarial
UML as
Actuarial Value of P need Unfunclatl Funded Ratio Ceieretl
Percentage
Valuation Assets' Liability AAL(UML) (Percent) Payroll
of Wretl
Date (a) (W) (b) (ba) (alb) (c)
Payroll
11/38/89 $ 57,80.5 $ 137,822 $ 79,97] 42896 $ 36,981
2163%
11/38/18 68,361 153,223 92,862 394 34,862
2726
11/38/11 62,491 156,268 93,769 409 32,871
2853
Valuetl using the tvs year"smoothetl tuning' market value
49
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2012
Note 11 - Other Postemployment Benefits (Continued)
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, 2011 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 employers 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 2012, 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 t1AAL 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, 2012
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
$198,037,186 $ 69,015,895
663,071 919,522
4,091,991 576,336
$194,608,266 $ 69,359,081
$ 24,728,614 $
8,811,942
1,197,947
7,200,525
(14,401,320)
(7,241,113)
(990,611)
(18,429)
$ 10,534,630 $
8,752,925
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 BusinasstWe
Gocemmental Funds &hvities Mivilies
Unavailable UreameO Total unaon tl Uneametl
Property tax, sl a al assessment,
andotherreceivables $ 1424,470 $ - $ 1424,478 $ - $ -
G nnunity recreation center
annual passes - 693,899 693,899 693,899 -
Interest receivable on sewer
connections - - - - 149,452
911 surcharge revenue not
received within 60 daw 295,985 - 295,985 - -
Grant revenue received in
advance - 24,M 24,M 24,M -
Grant rownue not received
within 60&n 266,109 - 266,109 - -
Total $ 1,986,484 $ 718,797 $ 2,705,281 $ 718,797 $ 149,452
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2012
Note 14 - Upcoming Accounting Pronouncements
In November 2010, the GASB issued Statement No. 60, Accounting and Financial
Reporting for Service Concession Arrangements. This statement addresses financial
reporting related to service concession arrangements which are a type of publio-private
or public -public partnership. An SCA is an arrangement between a transferor (a
government) and an operator (whether a government or nongovernment) in which the
transferor conveys to an operator the right and relation obligation to provide services
through the use of infrastructure or another public asset in exchange for significant
consideration and the operator collects and is compensated by fees from third parties.
The City is currently evaluating the impact this standard will have on the financial
statements when adopted during the City's 2012-2013 fiscal year.
In November 2010, the GASB issued Statement No. 61, The Financial Reporting Entity
Omnibus. This pronouncement, which is an amendment to Statement No. 14 and
Statement No. 34, modifies certain requirements for inclusion of component units in the
financial reporting entity. This statement also amends the criteria for reporting
component units as if they were part of the primary government (that is, blending) in
certain circumstances. Lastly, the statement also clarifies the reporting of equity
interests in legally separate organizations. The City is currently evaluating the impact
this standard will have on the financial statements when adopted during the Citys 2012-
2013 fiscal year.
In December 2010, the GASB issued Statement No. 62, Codification of Accounting and
Financial Reporting Guidance Contained in Pre -November 30, 1989 FASB and AICPA
Pronouncements. This statement incorporates into GASB literature certain accounting
and financial reporting guidance issued on or before November 30, 1989 that is included
in FASB statements and interpretations, APB opinions, and accounting research bulletins
ofthe AICPA Committee on Accounting Procedure. The City is currently evaluating the
impact this standard will have on the financial statements when adopted during the
City's 2012-2013 fiscal year.
In June 2011, the GASB issued Statement No. 63, Financial Reporting of Deferred Outflows
of Resources, Deferred Inflows of Resources, and Net Position. The statement will be
effective for the Citys 2012-2013 fiscal year. The statement incorporates deferred
outflms of resources and deferred inflows of resources, as defined by GASB Concepts
Statement No. 4, into the definitions of the required components of the residual
measure of net position, formerly net assets. This statement also provides a new
statement of net position format to report all assets, deferred outflows of resources,
liabilities, deferred inflms of resources, and net position. Once implemented, this
statement will impact the format and reporting of the balance sheet at the government -
wide level and also at the fund level.
52
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2012
Note 14 - Upcoming Accounting Pronouncements (Continued)
In March 2012, the GASB issued GASB Statement No. 65, Items Previously Reported as
Assets and Liabilities, which is required to be implemented for financial statements for
periods beginning after December 15, 2012. Statement No. 65 establishes accounting
and financial reporting standards that reclassify, as deferred outflow and inflows of
resources, certain items that were previously reported as assets and liabilities. This
statement also provides other financial reporting guidance related to the impact of the
financial statement elements deferred outflow of resources and deferred inflows of
resources. Statement No. 65 will be implemented for the City during the 2013-2014
fiscal year.
In June 2012, the GASB issued two new pension standards, GASB Statement No. 67,
Financial Reporting for Pension Plans, and No. 68, Accounting and Financial Reporting for
Pensions. These new standards significantly revise the current accounting and reporting
for pensions, both from an employer perspective as well as from a plan perspective.
Employers providing defined benefit pensions to its employees must now, under these
new standards, recognize their unfunded pension benefit obligation as a liability for the
first time, and to more comprehensively and comparably measure the annual costs of
pension benefits. This net pension liability that will be recorded on the government -
wide, proprietary and discretely presented component units statements will be
computed differently than the current unfunded actuarial accrued liability, using specific
parameters set forth by the GASB. The statement also enhances accountability and
transparency through revised and expanded note disclosures and required supplemental
information (RSI). Statement No. 67 is required to be adopted for the year ending
November 30, 2014 and Statement No. 68 one year later.
Note 15 - Contingent Liabilities
Sanitation System Overflow- In the spring of 2011, the City experienced a 100 -year
rain event. In connection with this event, certain properties in Livonia experienced
flooding and approximately 1,000 residents fled claims against the City for flood
damage. The City has been served with a class action lawsuit for those claims. The City
believes it has governmental immunity from such claims as there was no sewer system
defect that would eliminate this immunity. As such, no estimated liability has been
recorded related to this event.
53
Required Supplemental Information
54
City of Livonia, Michigan
Required Supplemental Information
Budgetary Comparison Schedule - General Fund
Year Ended November 30, 2012
Expenditures
vanancewnh
General Government
Original Budget
Final Budget
Actual
Final Budjet
Revenue
Property Taxes
$ 33,093352
$ 33,093,352 $
32,624955
$ (466397)
Licenses and Permits
515,565
528,065
525,308
2,151
Business
128,100
128,100
140,420
12,320
Nonbusiness
1,454,300
10.54,300
1829,933
375,633
Tolal licenses and permits
1582,400
1582,400
1,970,353
367,953
Intergovernmental Revenue
366,931
366,931
314,151
(1,228)
Stale and local
1,034,118
6969,]]8
7,861865
892,087
Federal
155,166
155,166
114,925
(40841)
Total intemmernmental revenue
1,190544
1,125,544
1,916,190
851,246
Charges for Services
3,901512
3,901,512
3,955,922
54,410
Interest
150,000
150,000
146,483
(3511)
R nes and Forfeitures
3,191,000
3,191,000
3,673,311
(123,683)
Miscellaneous Revenue
Rent and royalties
2,131,679
2,131,619
2,251395
113,116
Sale affixed assets
50,000
50,000
13,930
23,930
Othermecellanwus
1417,200
1417,200
817,915
(539,225)
Total miscellaneous revenue
3,604819
3,604,819
3,203,300
(401519)
Total revenue
$ 63,]19,69]
$ 63,264,69] $
63,661,129
$ 2961133
Expenditures
General Government
Legislative:
City Counal
$ 344,679 $
333,064 $
306,450 $
26,614
City Clerk
515,565
528,065
525,308
2,151
Elections
269,144
W4,744
298,90.5
43839
Total legislative
1129,988
1195,813
1122,663
13,210
Judiaal
3,251684
3,251684
3,228,382
23,382
Execetive-Mayers offrz
366,931
366,931
314,151
(1,228)
Human resources:
LaInorrelatums
99500
12,500
48,958
23,542
Caml service
596353
625,353
622,119
2,514
Total human resources 691,853 691,853 671,737 26,116
55
City of Livonia, Michigan
Required Supplemental Information
Budgetary Comparison Schedule - General Fund (Continued)
Year Ended November 30, 2012
vanancewifh
Onginal BLKINt Final Bucbet Actual Final Budget
apenditures (Continued)
General Govemmerit (Continued)
Finanaal a8 inistmbon:
A unling
$ 214,758 $
201,758 $
111943 $
29,815
Assessing
443,679
4]3,1]9
589,859
(36,668)
Finance
255,943
259,443
258,421
1822
IWependenl aWit
41865
41885
34843
7,842
Board of Review
503
5,683
-
503
Treasurer
513,301
513,381
49],]21
15,588
Information systems
572,888
572,888
536,922
35078
Total finawal administration
2,847,249
2,867,249
2,889,789
57,548
Other activities:
Legal
785998
785,998
678,336
27,662
Utilities aW supplies
612,392
612,392
563,528
48872
AcquisibonoflaW
3,500
3,588
966
2,534
Dues aW subscnphons
35000
39,888
38,889
111
Totalotheraclvmbes
1365890
1,360,890
1281]11
]9,1]9
Total general gaaemment
8,854595
8940,480
8,668,273
252,287
Public Safety
Police:
Tmitebureau
1,391,901
1391901
1851259
340,642
Administration
2,953369
3,493,232
3,175,485
317,747
Detechw bureau
2,608,012
2,611512
2,516,125
95381
Automobie service
525,000
581,000
519,013
1921
CommunimtnnYRecords bureau
885254
868,254
851,682
30,572
Crussingguards
660,984
60,984
58,053
2,931
School liaison
369832
368,832
326,851
41,975
Reserw police
316,006
313,506
292,520
20,986
Patrd bureau
11,820,812
11222,949
9948,81]
1,274,072
Intellgence bureau
2,041981
2,043,981
16/4,441
369546
Total police
22,916,151
22,916,151
20,480,372
2,495185
Fire:
Administration
871,462
861,062
860,594
468
FiretghbM
11111 980
11,155,2K
11013,028
142,254
Fire preienbm
528,070
555,168
551,857
3,311
Total fire
12,511 512
12,511512
12,425,419
146,033
Pmtec&e inspection:
Building Code Board of Appeals
1066
1,080
340
140
Inspection
1,218,973
1218,913
1,160,238
58,135
Total pmtecbw inspection 1225053 1225053 1,160,578 59,415
City of Livonia, Michigan
AA
Required Supplemental Information
Budgetary Comparison Schedule
- General
Fund (Continued)
Year Ended
November
30, 2012
vanancewith
Original Buciget
Final Bud3et
Actual
Final Budget
Eapendituras (Continued)
Public Safety (Continued)
Otherpmtaubw
Once otemergecey preparedness
$ 175,558
$ 175,558
$ 73,382
$ 102,176
Tafficcommission
2,195
2,195
1676
519
Totalotherpmtaubw
17],]53
177,753
75,058
10205
Total public scanty
36,945,475
36945,475
34,141407
2,803968
Public Works
Public scrams - Hghways, streets, and
maintenance:
Engineenng
284,834
316,834
316,214
620
Parks maintenance
1416,7]5
1308,775
1307,507
1,268
Administation
56,845
22,545
19,696
2,847
Equipment maintenance
(294,942)
(252,942)
(253,974)
1832
building maintenance
1848,674
1869,974
1198,588
(128,614)
Street lighting
305,100
386,100
385,333
767
Maintenance:
Streets
7,272
1,524
971
553
TalOc services
20,356
2,356
978
1,378
Forestry
35,664
25,412
23,393
2,019
Total public works
2,880578
2,880,578
2,998,708
(118,130)
Parks and Recreation and Cultural
Parks and recreation:
Administration
351,184
378,975
373,821
5,154
Recreahonfaalitres
35,267
23,267
22,806
461
Recreahon athlobcs
101,076
84,076
83,189
887
Total parks and mcmahon
487,527
486,318
479,816
6,502
Cultual:
Senior Services
457,449
446,449
301,319
55,130
Grnenmead and Cultural
68],35]
698,357
657,928
40,429
Totalcultal
1,144,806
1144,806
1849,247
95559
Total parks and mcmahon and cult al
1,632,W3
1 631124
1,529,063
102,061
Community and Economic Development
City Planning Commission
46],]28
467,728
449,416
18,312
Zoning Baud of Appeals
51,172
51,172
41233
9,939
Total community and economic
davebpmenl
518,900
518,900
490,649
28,251
Employee Benefits, Insurance, and other
2,448504
2,449,713
2,708,957
(259,244)
TotaleapeidRures
$ 53,280,385
$ 53,366,270
$ 50,55],13]
$ 2,809,133
AA
City of Livonia, Michigan
Required Supplemental Information
Budgetary Comparison Schedule - Major Special Revenue Funds
Community Recreation
Year Ended November 30, 2012
Revenue
Property taxes
State -shared nown re and grants
Charges far services
Interest
Miscellanrous rein re
Total revenue
Expenditures
Recreation and wlWre
Tanskrsoul
Tolalexpeud4ures
Net Change in Fund Balance
Fund Balance - Beginning of }ear
Fund Balance- End of year
Varianww4h
Ameudetl Annencied
Onginal Budjel Budget Achral BuMat
$ 3,230,9,4 $
3,230,9,4 $
3,188,233 $
(58,744)
-
-
151874
151874
3,870,945
3,870,945
3,898,346
27,481
20,000
20,000
27,284
7,284
15,200
15,200
84,112
8,912
1,191,122 1,191,122 7,341,849 144,727
4,808,612
5,112,042
4,531,M
580,814
2,578,45l
2,578,45l
2,578,45l
$ 3,938,199
1,381,063
1,690,493
1,109,679
580,814
(189,941) (493,311) 232,110 125,541
3,228,140
3,228,140
3,228,140
$ 3,938,199
$
2,134,169
$
3,469,319
$
M5,541
City of Livonia, Michigan
Required Supplemental Information
Budgetary Comparison Schedule - Major Special Revenue Funds
Refuse Disposal System
Year Ended November 30, 2012
59
Vanancew6h
Amende
Anna W
Onginal Budjel
BWWt
&Mal
Budget
Revenue
PmNrty taxes
$ 9,765,866 $
9765888 $
9,627,262
$ (136,626)
Charges far services
125,500
125,500
123,202
(2,296)
Interest
$5,001)
aSool)
34,630
(10,370)
Mis iiannus revenue
25,000
25,000
15,330
(9,6D)
Total revenue
9,961366
9,961366
9,800,$2$
(160,964)
Expenditures - Sandabon
12,137,918
12,199596
11]67,572
431,026
Net Change in Fund Balance
(2,176,536)
(2,237,210)
(196],1$8)
270,062
Fund Balance- Beginning of year
5,316,125
5,316,125
5,316,125
Fund Balance -End of year
$ ],1]9,595 $
3,W8,915 $
3'w' A
$ 2]9,962
59
City of Livonia, Michigan
Required Supplemental Information
Pension System
Schedule of Funding Progress
Year Ended November 30, 2012
The schedule of fundi rig progress is as follows (000s omitted):
Valuetl using the fitiss}ear"smoothing fmWiny' market value
Schedule of Employer Contributions
&Marial Valuation
Actuanal
Percentage
Fiscal Year Eotleetl
Date
Contribution
Conhitautxl
Aduanal
A rxxl
$ 392,639
100 %
11/30104
UML as
-
Value of
Duality(AAD
UnluMetl
Fun@tl Ratio
Ceseretl
Percentage of
Actuanal
Assets'
Entry Age
AAL(UAAD
(Percent)
Payroll
Ceveretl
Valuation Date
(a)
(b)
Mrs)
(alta)
(c)
Payroll
11/30/06
$ 285,101
$ 169,506
$ (35,595)
12109'0 $
16,135
(228.6)96
11130107
215,675
173,486
(42,189)
1243
15,657
(2695)
11/30/08
210,519
179,096
(31,423)
1175
16,855
(1957)
11/30/09
207,959
190,134
(17,825)
1094
15,855
(1124)
11/30/10
283,934
195,105
(8,829)
1045
13,800
(640)
11/30/11
194,515
196,420
1,906
990
12,455
153
Valuetl using the fitiss}ear"smoothing fmWiny' market value
Schedule of Employer Contributions
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, 2011, the latest
actuarial valuation, is as follows:
Actuarial cost method
&Marial Valuation
Annual Requiretl
Percentage
Fiscal Year Eotleetl
Date
Contribution
Conhitautxl
11/30103
11/30/01
$ 392,639
100 %
11/30104
11/30/02
-
100
11/30105
11/30/83
-
100
11/30106
11/30/04
-
100
11/3010]
11/30/85
-
100
11130108
11W06
-
100
11/30109
11WO7
-
100
11/30/10
11/30/118
-
100
11/30/11
11W119
-
100
11/30/12
11W18
]4],119
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, 2011, the latest
actuarial valuation, is as follows:
Actuarial cost method
Aggregate (employer contribution) Entry
age normal (schedule of funding progress)
Amortization method
Level percent - Closed
Remaining amortization period
Expected future working lifetime
Asset valuation method
Five-year smoothed market
Actuarial assumptions:
Investment ate of return
8.00
Projected salary increases - Including inflation at
4.00 percent
4.000/ka-11.92%
60
City of Livonia, Michigan
Required Supplemental Information
Retiree Health and Disability Benefits Plan
Schedule of Funding Progress
Year Ended November 30, 2012
The schedule of funding progress is as follows (000s omitted):
Valued using the tw-year"smoothing fmWi q'market value
Schedule of Employer Contributions
A uanal Valuation Annual Required Percentage
Fiscal Year Ended Date Cmhibuton- Contributed"
11130N7 11130N5 $ 6,455,607 100 q
11130N8 11130N6 6,218,636 100
11130N9 11130N7 6,197,363 92
11/30/10 11130N8 6,155,752 92
11/30/11 11130N9 6,639,053 92
11/30/12 11/30/10 7,259,781 91
The required contribution is expmssedto time aty as a percentage of payroll.
" The laical }ear encled November 30, 2009 was the first year of implementation of GASB Statement No. 45. As
such, it was the first }ear the annual required contribution was calculated using the GASB No. 45 regiirecl
30-yearamortization. Previousty,[he Gtyumd40or50years.
The information presented above was determined as part of the actuarial valuations at the dates
indicated. Additional information as of November 30, 2011, the latest actuarial valuation, is as
follows:
Amortization method Level percent, open
Remaining amortization period 30 years
Asset valuation method Five-year smoothed market
Actuarial assumptions:
Investment rate of return 8.00
Projected annual premium increase 6% for this year, 5.5% for next year,
and 4.75% thereafter
Actuanal
Actuanal
Acme!
UML as
Value of
Liadlity(AAD
Unfunded
Funded Ratio
Covered
Percentage of
Actuanal
Assets'
Entry Age
AAL(UAAD
(Percent)
Paymll
Covered
Valuation Date
(a)
(b)
Mrs)
(alta)
(c)
Paymll
11/30/06
$ 47,6/3
$ 122,267
$ 74,594
390% $
34,373
2170%
11/30/07
52,882
115,685
62,863
456
35,354
1779
11/38/88
55,361
122,117
66,756
453
37,483
1785
11/38/89
57,845
137,822
79,97
428
36,981
2163
11/30/18
60,361
153,223
92,862
394
34,862
2726
11/30/11
62,491
156,268
93,769
400
32,871
2853
Valued using the tw-year"smoothing fmWi q'market value
Schedule of Employer Contributions
A uanal Valuation Annual Required Percentage
Fiscal Year Ended Date Cmhibuton- Contributed"
11130N7 11130N5 $ 6,455,607 100 q
11130N8 11130N6 6,218,636 100
11130N9 11130N7 6,197,363 92
11/30/10 11130N8 6,155,752 92
11/30/11 11130N9 6,639,053 92
11/30/12 11/30/10 7,259,781 91
The required contribution is expmssedto time aty as a percentage of payroll.
" The laical }ear encled November 30, 2009 was the first year of implementation of GASB Statement No. 45. As
such, it was the first }ear the annual required contribution was calculated using the GASB No. 45 regiirecl
30-yearamortization. Previousty,[he Gtyumd40or50years.
The information presented above was determined as part of the actuarial valuations at the dates
indicated. Additional information as of November 30, 2011, the latest actuarial valuation, is as
follows:
Amortization method Level percent, open
Remaining amortization period 30 years
Asset valuation method Five-year smoothed market
Actuarial assumptions:
Investment rate of return 8.00
Projected annual premium increase 6% for this year, 5.5% for next year,
and 4.75% thereafter
City of Livonia, Michigan
Note to Required Supplemental Information
Year Ended November 30, 2012
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):
General Fund
Amounts per operating statement
Operating transfers budgeted as revenue and expenditures
Amounts per budget statement
Community Recreation Fund
Amounts per operating statement
Operating transfers budgeted as revenue and expenditures
Amounts per budget statement
62
Total
Total Revenue Expenditures
$ 53,511,124 $ 50,093,662
39,996 463,475
$ 53,551,120 $ 50,557,137
Total
Expenditures
$ 4,531,228
2,578,451
$ 7,109,679
City of Livonia, Michigan
Note to Required Supplemental Information (Continued)
Year Ended November 30, 2012
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 of financing them.
2. Public hearings are conducted to obtain citizen comments.
3. As provided for by the City Charter, not later than November 1, the City Council shall adopt
the budget through the passage of 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.
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 - During the year, the
General Fund incurred expenditures that were in excess of the amounts budgeted, as follows:
Budget PCWal Variance
General goiemment-Execute-Mayors of
$ 366,931 $
374,151 $
V,22D)
Gemralgaremment-Assessing
4]3,1]9
509,859
(36,680)
Public works- Buidix inontenoxe
1069,974
1198,588
(128,614)
Employee benefits, insurance, andother
2,449,713
2,]08,95]
(259,244)
63
Other Supplemental Information
64
City of Livonia, Michigan
vrosreat Quo wbucsfey Adp9mRd
maysrem Lorelfirtms Grans Lym1y Tdmmoi Dnaiy commmrenon sormnarm
a ea
Cash and lmeGnnerad
$ 131 G1 $
925,93 $
N4V $
03 4 $
"4Us $
1 1 $
2W227 $
98,W
Bemrvablm
Tam
NSB
speoalammmurend
Due RamQBa gmemrterihl unl5
M443
mm
919M
-
-
-
-
G[na
69N
4M 112
-
Imertmyprepaldapaem,andrtner
18{510
Total assets
$ 1.115.081 $
1183¢16 $
1.181.9W $
63)]4 $
860.408 $
1211.118 S
1. 309 S
93 3W
Dannmmand sem Balaze
Dannmes
nmonm payable
s 2n,a1 $
991 $
1®ms $
- $
1m1 $
1a6,su $
14243 $
sere
Duelootnemrdd
-
-
M216
-
-
-
nxnumandotnellabmom
-
194Ue
-
ns11
133,0;.
-
D4erredramve
3295
355)d
19121
M
Trial ladllnm
290[@
991
M
-
1268
25],]19
mim
69Z
Fund Balance
Bmtr6ed
srmla, r®ds, andsdeaallm
d24W
1174M
-
-
-
-
-
ndiudmmlortenured
-
-
-
-
-
-
ms,3e2
Grand
-
-
II72q
-
-
-
-
-
GplhurNrwertend
-
-
-
-
-
-
-
xremlgnlm
-
-
-
M3 4
-
-
-
Dbrary
-
-
-
-
-
am,M
-
Bnblicsmmymmmmnaw
-
-
-
-
-
-
24MM
-
Gormmnytamn
-
-
-
-
-
-
-
-
Dralmgeproie:m
-
-
-
-
-
-
-
-
Gomrndm-r:bleamem
laasmn
-
-
-
-
N7M
-
-
-
Adwned
Gdfm rm¢pnal
improvement
-
-
-
-
-
-
-
-
coartmlldl.Dlrnprmerern
-
-
-
-
-
-
-
-
Total Md balances
924614
1174M
II12q
03 4
81186
99,M
29,2W
P5,3B2
Total llaminmand Md
baste
$IX5X3 S1.InAX
S1.18].966
S
63.174 $
950.404 Six
1.118 S
1.811.319 S
93 3W
65
Other Supplemental Information
Combining Balance Sheet
Nonmajor Governmental Funds
November 30, 2012
spe lRmmerid: Gml Sewu oda ouol npemwim
rmnclwl Taal
MUM Dmi ye G fl m Nwna
Gm W R®6aM ABS MBP 4N7M80 MR * Prqe QPb11 QPb11 Spwal CwR Buildim Gpea nrt ll
Tarsi Sg lh P4undim Rau ig and Gl r Cacti w InP "l InP "l ftaw Imprwerte Fws
$ 5g,fizfi $ imA $ - $ - $ - $ MM $ 21M $ 2dti M $ 93906) $ 916716 $135A1w
12715 14413 - - - - - - - 47M
2
w9m
- 12 m - - - - 163A ze 125
$ 639.57 slxcl% $ $ $ 5 MM $ 569,98 $ u 1,6 $ +a33.6z. 5 M6,716 $1CM+n2
$ R,52fi $
163]16 $ - $ - $ - $
- $ 18131 $
10710 $ 1MM $ - $
1in3
A6216
910
1839
2A,A5
11M
13�
26013
Il5,dA
T M
9,515
225,49
198174
10710 116 -
290.9285
- 12U,TY 31w]11
9253Bz
22]208
29]AB MW - 3MN
63]/4
163204m
n1
A2AM
MM
5T ]82 imU 5,25 MM 29]AB M 916716 13=W
$ 6Y1.57 si}16159 $ $ $ $ AM $ 5%W8 S l 1,616 S I}W. S 916.716 $1CM1,n2
66
City of Livonia, Michigan
sp®m Revere da
Soo sren ode NWN«feF] Mydla@d
Lm Stiai1s Garb L m Tani LIMry CmnumMlm FOReilur¢
Rete
Propemfadd $
s
- s
$
- $
- $
3273,iP6 $
- s
Fedaal revenue
175910
22270x1
-
-
-
888
5 eand local revenue
1,410,011
1 W24
21 075
-
-
12445
-
Clargedfu'sei
m
fi£,821
Fina' and WelWra'
-
67m
E2, 025
Interest
2W
488
90
-
4013
895
1288
6 054
Other
Syeam®'eavren6
1231i95
_
Mlssllanais Fmre
SBiW
1m
103
Tonal releve
4018191
li3fl2m
2219,010
123108
95,15
3MM
08,785
PJ,5U
ExperpRura
L rre[
Genaalgwamerl
-
-
P4,8S
-
-
-
anm¢afm
m28m
-
-
59176
254]18
Ni
3321M
1630,03
40,31
1221 ]31
-
-
-
-
ComraiiecororrK
derdoprrem
-
-
M236
-
-
-
Rm®[ImandNNe
195015
313464
Qpl4l onlay
owf.e
Prop@( rWlrerrem
-
-
-
-
-
-
-
-
Imaafandrcher
Tonal apendlWra
3321218
1 831�2M
1211 ]31
X05
3 68�1R
2718
Ev¢d a1 Re+enueOver(11nM)
ExpeMRures
1290913
13M
518
1095
93,441
(low)
M614
M]F5
Man Financing saurcii
Transfers In-
Tramion
85R,mR)
------—
(4flO
Tonal dherfire¢Ig
(used)¢ar®'
�OB)�M3
Ne[ Change In FUM Rahn
310913
413M
518
1095
Sd 415
(low)
M614
M76
h10
Fund(0e-B9ImIry
ayaar
Ymr
S mi
7918
(12484
)mw (124)
545@
M2111
1658750 ,
20035M
M616
Fund Mbnm End Ryear S
924A M S 1.1]4}5 S
4]218 S
03.]]4 S
M],]26 S
95313% S
l, M S
9$302
67
Other Supplemental Information
Combining Statement of Revenue, Expenditures, and Changes in
Fund Balances (Deficit)
Nonmajor Governmental Funds
Year Ended November 30, 2012
spe lRmmeDM Sme Fwl
4M
opal ngmwmr
910
Municipal
198]13]
T=11
B9a1m
Dral�e
c fl me
Nonrjor
Cnm W R®6 aM 2LL5 M19A
ID M61
AUrTy
Profen
(Sp101 (Sp101 spwal
Cou[BUII411g
DoverneMll
Trars Mg lh P4unft
Rer ig
and a[ r
CaNru6lm
Irrp "l Irrp "l 0.ea *
Inrwer
FunLL
W4,6II
$ ]II 310 S 3�2 S -
S -
$ -
S -
S $ 1Z$W1 $ -
S -
$ BM91
11N,03
215013
MM
2403]40
$342
121201
1MV5
W4,0B
535943]
M{
1W413 - -
96!40.5
97]3)0
-
-
-
910
354,6II
514514
GVXs
5203 135
9524350
AY
2361 13M 13320
5295
WT9
MW5
-
1 49911
A3,]26 3639 AY 22$]50 13"@1w 2n 295 519" 218W,T1
IN
-
4M
910
198]13]
]9 6
96!,40.5
507715
W4,6II
1661422
®ew
2]30
2m1 m2
2'➢,Dl]
11N,03
215013
150503
121201
1MV5
W4,0B
1876
96!40.5
4i'B
3]1201
23424)5
x,08
910
354,6II
1661422
040
2338
9524350
(11719)
(]383®)
CTM!)
83422435)
(`39,D]H1
I4a)
(125 2)
(324235)
210,835
517W1
(1690.99)
-
Sw,Bm
3T 281
2342n5
'99,08
1553Y5
2u259
-
5851M
(322®)
(146u3)
(9908)
R297�)
YA,OL
3]1281
2342n5
9P,0B
(12218)
im,
ww
(9908)
2850.05
(11719)
(M8 )
(%L 04)
2W4
(227428)
2138
(8107)
11' M
50591
12nW
1119®
3@918
205295
W629
MM
12612]31
S 571.R2 $1W7M S
S
S
S
39j S
Xr9� SZMAS $
80f4 $
M.716 $13¢3},567
68
City of Livonia, Michigan
Trust Funds
M
Pension andOther Enployee Bereft Plms
Agents Funds
Engloyees'
Investment
Retirenent
Admndation
Special Trust
System
VERA
Total
Fund
Fund
Assets
Cash andeah ecuidlenis
$ 612592
$ 167522 $
840,114
$ 1127542
$ 2,080014
Investment:
US. government securities
14,280,036
6,]64,2]2
21044308
-
-
C011ateral¢edmortgage
obligations
10,466960
3,]56648
14223,608
-
-
Commn stock
90,111,115
14810206
104930381
-
-
Corpoatebonds
5,216803
6841,119
36050942
-
-
Real estate investment trust
10,059,947
210,696
10210,643
-
-
Foreigibonds
4032296
1410,368
5,502664
-
-
MutualNncis
38;573,430
32,986,064
11,550494
-
-
Securdieslendingcollatealpool-
MutualEnds
3,621941
-
3621,941
-
-
Account resemble
605,153
106008
711,161
-
-
Duehomagenc Encis
57,918
813,514
811,432
Total asset
196,1Bo251
63,935,417
263636614
E 1,1 V N2
$ 2,000.014
Liabilities
Account payable
216625
24,101
301,35
$ 162390
$ -
DuetooMergovernnentalunRs
-
-
-
-
-
Duetoprineygovernment
-
551,fi35
551,fi35
-
-
Duetmtrustrunds
-
-
-
811432
Accrued and other liabilities
-
-
-
93,120
2,080014
Mount due to broker under
securities lending agreement
3815,366
3,816366
Total liabilities
4091991
576,336
4,6fi8,321
$ 1,121,542
$2,000,014
Net Assets Held in Trust Por
Pension and Other Emplge s
geneRts
$194,600,266
$ 69,359,001 $
263,96],34]
M
Other Supplemental Information
Combining Statement of Net Assets
Fiduciary Funds
November 30, 2012
Agency Funds
Hdoncal Art Conmssion
LibaryTrust Conmssion Conmcsion on Aging Unci Mbited
Fund Fund Fund Fund Tax Fund Total
$ 15,401 $ Y1192 3 96030 $ 2,802 $ 5,799593 $ 9,602524
$ 15,401 $ 561,192 $ 96,030 $ 2,002 $ 5,799,543 $ 9,682,521
$ - $ - $ - $ - $ - $ 162,390
- - - - 5,799543 5,799543
871 32
15,401 Y1192 %,ow 2,&12 - 2,849,159
$ 15,401 $ 561,192 $ 96,030 $ 2,002 $ 5,799,543 $ 9,682,52A
70
City of Livonia, Michigan
Other Supplemental Information
Combining Statement of Changes in Fiduciary Net Asset
Fiduciary Funds
Year Ended November 30, 2012
Additions
Inveshnent imam:
Interest and dividends
Net change in fair valm of investments
Less investment related expenses
Net inveshnent imam
Contnbdons:
Empbyer
Employee
Toblconhibutrons
Total additions - Net
Deductions
pension benefit payments
Medrol bereft payments
Refunds of contnbu0ons
Administrative expenses
Tmal dedudi ins
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
71
Employees'
Retirement
System WBA Total
$ 5,180,354 $
1306,746 $
6,48],101)
20,046,586
621,469
27,6168,0%
(498,326)
(116,273)
(614599)
24728,614
8,811,942
33540,556
747,119
6576,196
7,323,315
450,828
624,329
1,075,157
1197,947
7,200,525
8,398,472
25,926,561
16,012,467
41939,028
14,401320
-
14,401320
-
7,241113
7,241113
769,725
-
769,725
220,886
18,429
239,315
15,391931
7,259,542
22,651473
10,534,63/)
8,752,925
19,287,555
184,073,636 60,606,156 244,679,792
$ 194,609,266 $ 69,359,091 $ 263,967,347
City of Livonia, Michigan
Federal Awards
Supplemental Information
November 30, 2012
City of Livonia, Michigan
Contents
Independent Auditors Report
Report on Internal Control Over Financial Reporting and on Compliance and
Other Matters Based on an Audit of Financial Statements Performed in
Accordance with Govemment/luditfng Standards
2-3
Report on Compliance with Requirements That Could Have a Direct and
Material Effect on Each Major Program and on Internal Control Over
Compliance in Accordance with OMB Circular A-133
4-5
Schedule of Expenditures of Federal Awards
6-7
Reconciliation of Basic Financial Statements Federal Revenue with Schedule of
Expenditures of Federal Awards
8
Notes to Schedule of Expenditures of Federal Awards
9
Schedule of Findings and Questioned Costs
10-11
Summary Schedule of Prior Audit Findings
12
Independent Auditor's Report
To the Honorable Mayor and
Members of City Council
City of Livonia, Michigan
We have audited the basic 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, 2012, which collectively comprise the City's basic financial
statements, and have issued our report thereon dated April 11, 2013, which contained
unqualified opinions on those basic financial statements. Those basic financial statements are the
responsibility of the Citys management Our responsibility is to express opinions on those basic
financial statements based on our audit. We have not performed any procedures with respect
to the audited basic financial statements subsequent to April 11, 2013.
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
Audifing Standards, issued by the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
basic financial statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the basic financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
Our audit was conducted for the purpose of forrring 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 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.
Such information is the responsibility of management and was derived from and relates directly
to the underlying accounting and other records used to prepare the basic financial statements.
The information has been subjected to the auditing procedures applied in the audit of the
financial statements and certain additional procedures, including comparing and reconciling such
information directly to the underlying accounting and other records used to prepare the basic
financial statements or to the basic financial statements themselves, and other additional
procedures in accordance with auditing standards generally accepted in the United States of
America. In our opinion, the information is fairly stated in all material respects in relation to the
basic financial statements as a whole.
April 11, 2013
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
Independent Auditor's Report
To the Honorable Mayor and
Members of City Council
City of Livonia, Michigan
We have audited the basic 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, 2012, which collectively comprise the City's basic financial
statements and have issued our report thereon dated April 11, 2013. 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 Government Auditing Standards, issued
by the Comptroller General ofthe United States.
Internal Control Over Financial Reporting
The management of the City of Livonia, Michigan is responsible for establishing and maintaining
an effective 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 City's
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 a certain deficiency in internal control over financial
reporting that we considerto be a material weakness.
To the Honorable Mayor and
Members of City Council
City of Livonia, Michigan
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal mum 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 City's financial statements will not be prevented or
detected and corrected on a timely basis. We consider the deficiency described in the
accompanying schedule of findings and questioned costs as Finding 2012-01 to be a material
weakness.
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 determinatim of financial statement amounts.
However, providing an opinion on compliancewith 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 Audifing Standards.
We also noted certain matters that we have reported to management of the City of Livonia,
Michigan in a separate letter dated April 11, 2013.
The City of Livonia, Michigan's response to the finding 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 m 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.
A�L I �I A14t
April 11, 2013
Report on Compliance with Requirements That Could Have a
Direct and Matenal Effect on Each Major Program and on
Internal Control Over Compliance in Accordance with OMB Circular A-133
Independent Auditors Report
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 programs for the year ended November 30, 2012. The majorfedeal programs
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 Standard's, 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 material 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, 2012.
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 a 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.
AV& t ?t*�, 001.4 It
April 11, 2013
City of Livonia, Michigan
Schedule of Expenditures of Federal Awards
Year Ended November 31. 2012
Taal US. Departed of Justice 161)56
(1) current year expendWrs Imlude the we of program Imorre tom M1uing rehadltatim and: Qtyo ned Mmes
See Notes to Schedule of Expenditures
of Federal Awards. 6
CFOA
Pase-through E city
Asad
Federal
Federal Agencymass-thra,gh Agencymryramrdle
Number
Prgecucran Number
Arrount
Expenditures
U S Department ofAfriculmre-Emergenq Food Avidance Clreter-
Pasedthrmgh the Wayne Metropolitan Community Ormic¢fgeny-
Emergency FoodAs¢tance Program(Food Commodtis)
1D539
N/A
$ 36,966
$ 36,966
NS. Oepartirea offlosiig and Nrimn Oevebpnenl:
COBG En1Alerrent Grank Cluder
CommnAy Oevelopnenl BI¢kGranl:
Program year 2012-B05 W N -D012
16218
N/A
281558
239,182 (1)
Programy®r201b B05MC264Xp11
16218
N/A
329252
231 (1)
Total Community Oereloprenl Bln*Grad
639$T3
Pasedthrogh the MkM1gan Stale Hosing OzieloprentAutM1uity-
NegM1bxM1mtlSlatiliretimProgram!
16218
NSP-MW50'8
1A58Wp
301557 (1)
Taal COBG Entreatment Gradeareter
n1H3o
Passed through the Morgan State Housing GzieloprentAutMity-
HOME Irradiated Partnership Program -Program year 2pW
16239
111150%
mOBRD
22p
Pasedthrough Wryne County - HOME ImsLrenl Partnership
Program- Horre Consortium FunW
14239
N/A
M6,Wp
11190
Taal US. oelartirea of Hosing and
Urmn oaelo„nent
M253
US. oep,rtnrea o Jidet m
AD Program Clre@r-Pasedthrough Vi County -ARM -
2W9EdrardByrne MermrialJustine FsistansGrad
168M
N/A
(ai
18184
Federal Egaitade Sharing Program
16922
N/A
1d,166
106,166
Ory Enforcement Admnishation Took Force
16 unkmxn
N/A
219168
N'sca
US. X4rdiak Sereice Detroit Fyitiee PFyehenim Task Force
16 mkmxn
N/A
18,62p
18,62p
BWetpoofVst Partnership Program
1660
N/A
9%
938
Taal US. Departed of Justice 161)56
(1) current year expendWrs Imlude the we of program Imorre tom M1uing rehadltatim and: Qtyo ned 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, 2012
See Notes to Schedule of Expenditures
of Federal Awards. 7
CFDA
Pa�mrough Emily
raard
Federal
Federal Agem Pas through AgenwRrogramnlle
Number
Prgecucran Number
Ahmhhm
Expenditures
J s. Deprtmem ofTramportmim:
Highway Phoning& CmsWctim Cluster-Passedthrough the Mid dad
Departmentofnanslartation-ARRA- HighaayPlsnningand
Cm9mction- Rve Mileto Uurel Park North
M20
Fffi l3
$i1B18
$ 2U.796
lighwaySafety Cluster-Passedthmughthe Mchigsn OHce of
righwaySakty.
Slate and Community HighwaySUflity Belt EnMcemenl
MEN)
PIP 1317
11216
11216
Acdol lindeed Grihng Counlenreaswes Incentive Grants
mart
N/A
6513
6513
Total ll S. GelaNnenl of Transportation
225513
US Emiromrental Protection Agi
Pasedthrmgh Wayne County-Cmgressionally Nan&ted Project
River Rouge National Wet Weather Project-Wripend Wims
65202
RO 15
211D'W0
18,181
River Rouge National Wet Weather Project-Remdd Ravne
65202
RXB-id
55,E81
55681
Total U s. Emirmhmn[d Protect , Agency
ai,66a
us. Dep3rtmem of Energy
ARRA- EnergyErcaienayandcmsenaom Blodcrmt
81118
DESC0W1527
Wlpoo
396381
PasedTnrougn Milligan Ecomhdc Da elophmmcorg-
ARRA- Enew ER¢iencyandCmsretim Blw*Grat
81118
MKrGCST
818M16
81866
Total us. Departhmm of Energy
680221
US . Dep3rthmm ofuorreandsea,rgy
Assistance to FueeghtersGrad
m.oaa
Fell Wi
360,000
360,000
Pasedturmgh the Michigan Dep it"I ofsate Polce-
2wlEnrergamyMamgememPerfuhmmGrant
m.o62
N/A
29eo
29,62o
Pasedturmgh OauandCo,nty HmrelandsecuntycramPrcgram-
HazMalResponseTeamPan
91.061
N/A
16,ID816838
Total Department of HormlandSecurity
681,0.58
Total kRral award
$ 2X3"
See Notes to Schedule of Expenditures
of Federal Awards. 7
City of Livonia, Michigan
Reconciliation of Basic Financial Statements Federal Revenue
with Schedule of Expenditures of Federal Awards
Year Ended November 30, 2012
Revenue from federal sources - As reported on financial statements
(includes all funds)
$ 2,596,673
Less other nonfetleral reimbursements recorded as grants
(114,925)
Plus program income not included with federal revenue
232,923
Less charge in deferred revenue
(539,421)
Add value of noncash assistance
34,964
Revenues earned in excess of expenditures
63,391
Other differences
(19,666)
Federal expenditures per the schedule of expenditures of federal awards
$ 2,273,849
City of Livonia, Michigan
Notes to Schedule of Expenditures of Federal Awards
Year Ended November 30, 2012
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 under programs of the federal
government for the year ended November 30, 2012. 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
Governments, 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, ifapplicable, of the City of Livonia, Michigan. Pass-
through entity identifying numbers are presented where available.
Note 2 - Noncash Assistance
The value of the 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, 2012 that is included on the schedule of
expenditures of federal awards:
CFDA
Federal Program Number Description Amount
U.S. Department of
Agriculture - Passed
through Wayne
Metropolitan Community
Services Agency 10.509 USDA Food Distribution $ 34,904
Note 3 - Subrecipient Awards
Of the federal expenditures presented in the Schedule, federal awards were provided to
subrecipients as follows:
Amount
Provided to
Federal Program Title CFDA Number Subrecipients
Community Development Block Grant 14.218 $ 14,540
City of Livonia, Michigan
Schedule of Findings and Questioned Costs
Year Ended November 30, 2012
Section I - Summary of Auditor's Results
Financial Statements
Type ofauditors report issued: Unqualified
Internal control over financial reporting:
• Material weakness(es) identified? X Yes No
• Significant deficiency(ies) 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 programs
• Material weakness(es) identified? Ya X No
• Significant deficiency(ies) identified that are
not considered to be material weaknesses? Ya X None reported
Type ofauditors 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 Numbers
Name of Federal Program or Cluster
CDBG Entitlement Grants Cluster.
14.218
Community Development Block Grant
14.218
Neighborhood Stabilization Program -1
81.128
ARRA- Energy Efficiency and Conservation Block Grant
97.044
Assistance to Firefighters
Dollar threshold used to distinguish between type A and type B programs: $300,000
Auditee qualified as Iow-risk auditee? Yes X No
10
City of Livonia, Michigan
Schedule of Findings and Questioned Costs (Continued)
Year Ended November 30, 2012
Section II -Financial Statement Audit Findings
Reference
Number
2012-01 Finding Type- Material weakness
Criteria - Management's goal was to accurately record 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, 2012.
Context - Five entries were made to various funds to reflect current year
activity. The adjustments affected investments, liabilities, receivables, revenue,
and deferred revenue and included: a reduction to the Neighborhood
Stabilization Program grant receivable and deferred revenue related to property
sales; a reduction to receivable and revenue related to the Citys calculation of
unbilled water and sewer sales; an increase in vacation accrual for time earned
but not posted to employee banks until the subsequent year; a reduction to
investment asset and unrealized gain for the SAS REIT to eliminate a duplicate
posting; and a reduction to investment asset and unrealized gain related to
securities lending liability.
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 five transactions not being completely recorded,
several account balances required adjustments as of November 30, 2012. The
financial statements were misstated prior to the auditor proposing the entries.
Recommendation - The City should develop controls to ensure that all
appropriate journal entries are made so that ending balances are correct.
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.
Section III - Federal Program Audit Findings
None
City of Livonia, Michigan
Summary Schedule of Prior Audit Findings
Year Ended November 30, 2012
Prior Year
Planned
Finding
Federal
Original Finding
Corrective
Number
Program
Description
Status Action
2011-02 Neighborhood Expenditures reported Fully corrected Na
Stabilization Program -1, on the NSP quarterly
CFDA#14.218 reports did not agree to
the accounting records.
12
City of Livonia, Michigan
Report to the City Council
November 30, 2012
City of Livonia, Michigan
Contents
Introduction
1-2
Section 1 - Communications Required Under SAS 114 3-6
Section II - Other Recommendations 7-10
Section III - Legislative and Informational Items 11-15
Attachment 1 16
Apra 11, 2013
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") as of and
for the year ended November 30, 2012 and have issued our report thereon dated April 11,
2013. 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 City Council of Livonia.
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 efficiency 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, and we recommend that the matters we have
noted there receive your careful consideration.
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 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.
To the Mayor and Members of
the City Council
City of Livonia, Michigan
April 11, 2013
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
c=*AZC.t ad - Cir.
Frank W. Audiiaa�
Brian J. Camiller
To the Mayor and Members of Apnl 11, 2013
the City Council
City of Livonia, Michigan
Section I - Communications Required Under SAS 114
Our Resoonsibilitv Under U.S. Generally Accented Auditina Standards
As stated in our engagement letter dated January 16, 2013, our responsibility, as described by
professional standards, is to express an opinion aboutwhether 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 April 11, 2013
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, contracts, 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 dated October 19, 2012.
To the Mayor and Members of Apnl 11, 2013
the City Council
City of Livonia, Michigan
Significant Audit Findings
Qualitative 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 ofexisting policies was not changed during 2012.
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 claim,
workers' compensation, and general liability
• Unbilled water and sewer receivables
• The collectibility of any delinquent receivables, including property taxes and utility billing
• The landfill closure and post -closure liability
• The liability related to pending property tax appeals
• In the Employees' Retirement System, the value of the SAS equity real estate investment
trust (the "REIT") managed by the Seminole Companies
• The estimate of chargebacks from Wayne County for delinquent real property taxes
previously purchased from the City
• Reporting of flood damaged claims
Management's estimate of the various incurred but not reported amounts and unbilled water
and sewer receivables is based on historical information. The property tax appeals liability is
calculated by the City's legal department. All delinquent receivables are considered collectible by
the City finance department based on past history. As such, no allowances for uncollectible
amounts have been recorded. The landfill liability is calculated by the City's engineering
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.
To the Mayor and Members of April 11, 2013
the City Council
City of Livonia, Michigan
Management has reported the SAS equity real estate investment trust at an amount provided by
the Seminole Companies. We obtained audited financial statements for the investment fund
itself as of December 31, 2011 and performed various procedures to evaluate the calculations
and assumptions used by REIT management for the unaudited quarterly reports and member
equity statements received since the date of the audit. We also performed limited analytical
procedures on the revenue and expenses reported by REIT from January 1, 2012 to November
30, 2012. We performed these procedures on the data used by management to develop the
estimate to determine that it is reasonable in relation to the financial statements taken as a
whole.
Management has not recorded an estimated liability related to any potential property tax
chargebacks for delinquent real property taxes purchased from the City by Wayne County,
Michigan as the City estimates any potential liability to be inconsequential. We reviewed the
City's recent chargeback history from Wayne County and reviewed the history with
management personnel to determine that management's estimate is reasonable: in relation to the
financial statements taken as a whole.
Management has not recorded an estimated liability related to the class action lawsuit for flood
damages related to the spring 2011 min event. Management believes that it has governmental
immunity from such claims as there was no sewer system defect that would eliminate this
immunity. We have reviewed this matter with management and the City attorney to determine
that management's estimate is reasonable in relation to the financial statements taken as a
whole.
The disclosures in the financial statements are neutral, consistent, and clear.
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.
The attached schedule (Attachment 1) summarizes uncorrected misstatements of the financial
statements. Management has determined that their effects are immaterial, both individually and
in the aggregate, to the financial statements taken as a whole. In addition, none of the
misstatements detected as a result of audit procedures and corrected by management were
material, either individually or in the aggregate, to the financial statements taken as a whole.
Management has corrected all other such misstatements.
To the Mayor and Members of April 11, 2013
the City Council
City of Livonia, Michigan
The following significant adjustments were identified during the audit and subsequently recorded
by management:
• Grants Fund - Reduction to the Neighborhood Stabilization Program grant receivable and
deferred revenue related to property sales
• Water and Sewer Fund - Reduction to receivable and revenue related to the City's
calculation of unbilled water and sewer sales.
• Government -wide - Increase in vacation accrual for time earned but not posted to employee
banks until the subsequent year.
• EmployeesRetirement System Trust Fund:
o Reduction to investment asset and unrealized gain for the SAS REIT, to elirrinate a
duplicate posting
o Reduction to investment asset and unrealized gain related to securities lending liability
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 April 11, 2013.
Management Consultations 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 auditor's opinion that my 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 April 11, 2013
the City Council
City of Livonia, Michigan
Section II - Other Recommendations
During our audit, we noted areas where we believe there may be opportunities for the City to
further strengthen internal control or to increase operating efficiencies. Our observations on
those areas and financetopics are presented foryour consideration below.
General Fund
Like other Metro Detroit local governments, the City experienced General Fund revenue
declines from 2008 to 2011 as a result of significant property tax -related events and changes.
The City reacted by reducing the City's General Fund expenditures during that time period. As
a result, the City was able to maintain its General Fund fund balance at a consistent level
compared to the annual General Fund budget.
As you know, the voters of the City approved two new millages in 2011, 1.7 mills for public
safety and 0.25 mills for cultural and senior services. The combined effect resulted in additional
General Fund tax revenue for the year ended November 30, 2012 which helped offset the City's
continued decline in taxable value and prevent any further significant erosion of City -provided
services. Combined with the City's budgetary discipline, General Fund revenue exceeded
General Fund expenditures by almost $3 million as actual spending in the General Fund was over
$2.8 million less than budget.
Looking forward, even when property values begin to rise, it will likely take many years for
taxable value to return to its historical peak as growth on existing property is limited by the
States Constitution to the lesser of inflation or 5 percent As we discuss later in our letter,
other State policy changes (EVIP criteria, elimination or reduction of personal property tax, etc.)
could put further pressure on the City's budget. 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.
Plymouth Road Development Authority
The Plymouth Road Development Authority (PRDA) has also experienced a reduction of its
revenue due to declining property values, tax appeals, etc. In previous years, the PRDA accrued
significant liabilities related to possible Michigan Tax Tribunal judgments and settlements. In
2012, following the settlement of the outstanding Michigan Tax Tribunal appeals for less than the
accrued amounts, the PRDA recognized approximately $707,000 of property tax revenue,
without actually capturing any taxes, due to the reversal of the remaining estimated accrued
liabilities.
Because ofthe remaining $3.5 million of debt service, principal and interest, related to the 2006
Downtown Development Refunding Bond issue and presently no taxable value from which to
capture tax revenue, the PRDA remains financially challenged. It is our understanding that the
PRDA will levy two new mills on the duly 1, 2013 tax levy for the parcels within the PRDA
district. This new millage may prevent the General Fund from becoming responsible for these
debt service payments in the short temp.
To the Mayor and Members of Apnl 11, 2013
the City Council
City of Livonia, Michigan
Street Funding
The City's road improvement rrillage was successfully renewed in August 2012. This millage
provided approximately $3,600,000 in tax revenue during fiscal year 2012. The City accounts
for road maintenance and construction activity in the Major Streets, Local Streets, and Roads and
Sidewalks Funds. Since 2006, the combined fund balance of the three funds has dedined from
approximately $5.5 million to $3.2 million (while annual spending in 2006 was $10.4 million
versus $9.4 million in 2012). With declining Act 51 monies from the State, this millage provides
an important funding source for continuing to maintain the road infrastructure ofthe City.
Refuse Disposal System Fund
This year, the Refuse Fund incurred an anticipated revenue shortfall of nearly $2 million,
lowering fund balance to approximately $3.3 million. This is the third consecutive year the
Refuse Disposal System Fund has incurred an operating deficit. We are aware that the City's
2012-2013 budget raised the dedicated refuse and recycling millages from 2.3746 mills in 2012
to 2.8746 mills for 2013, leaving only 0.15 mills left before reaching the maximum allowable
millage levy of 3.0246. It is possible that the interaction of the Headlee Amendment and
Proposal A could reduce the maximum allowable millage even further in the future. We
encourage the City to continue to monitor the financial condition of this fund.
Pension Funding
In fiscal year 2012, the City was required to make its first contribution to the defined benefit
pension plan since 2003. The Employees' Retirement System recognized contributions from the
City totaling $747,119. During fiscal year 2013, the required contribution will be approximately
$2.3 million. There are a variety of factors that impact the calculation and estimates made by
the City's actuary, including investment performance, life expectancy, number of retirees, etc.
In the most recent valuation dated November 30, 2011, according to the actuary, the system's
funding dropped below 100 percent for the first time since at least 1992. As a result, it is likely
that the amount of this required contribution may increase further for fiscal year 2014 and
beyond.
Water and Sewer Fund
Based on our testing of the City's utility billing system data for the year ended November 30,
2012, the trend of declining consumption which many Metro Detroit communities have
experienced has reversed itself, if only temporarily, for Livonia. Units of water sold in fiscal year
2012 are up approximately 12 percent from 2011, nearly reaching 2007 levels. The City's
Water and Sewer Fund reported an operating loss and a loss before capital contributed from
developers and grants for the fourth consecutive year in 2012, although the system continues to
maintain a healthy level of unrestricted net assets. In a previous year, a rating agency
downgraded the City's Water and Sewer Fund bond rating related to the operating losses.
To the Mayor and Members of Apnl 11, 2013
the City Council
City of Livonia, Michigan
The Water and Sewer Fund revenue bonds include %veml covenants, including a requirement
to maintain a debt service coverage ratio of at least 100 percent on a prospective basis. This
means that the City crust set its customer rates such that the City plans to generate sufficient
revenue to pay for the required debt service in addition to the normal operating costs of the
system, such as purchases of service from DWSD and Wayne County, employee compensation,
and other operational costs. Using realistic assumptions of future activity, the Citys budget for
the Water and Sewer Fund does, in fact, plan to cover all necessary costs. For 2012, the actual
results of the Water and Sewer Fund yielded net revenue that was 83 percent of debt service.
These results have been partially impacted by the timing of the City's rate change in 2012.
As part of this year's audit, we tested certain practices and policies concerning water and sewer
billing, including the waiving of interest and penalties. In addition to adjustments made by the
City's water and sewer board, the water billing department does have a practice of waiving
interest and penalty if the customer has been current for the past 24 months and the amounts
are insignificant (subject to review and approval by the chief accountant). We recommend
documenting and formalizing this policy (including any dollar or time limits for possible waivers).
Retiree Health Care
The City has been actuarially funding the growing liability associated with postemploymemt
health care for many years, ahead of the accounting standards and, as a result, has been able to
accumulate as of November 30, 2012 approximately $70 million for these costs. According to
the most recent actuarial valuation (November 30, 2011), the plan is approximately 40 percent
funded.
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 in 2009, the City is required to record a liability for the difference between the ARC and
what the City actually contributes to the VEBA. As of November 30, 2012, that liability is now
over $99,000 in the Water and Sewer Fund and approximately $2.3 million in the government -
wide financial statements.
Risk Management
Altogether, including all governmental and business -type activities, the City of Livonia incurred
expenses of approximately $125 million in fiscal year 2012. Quite often, entities of this financial
size -public or private - utilize some form of internal audit function to regularly test aspects of
their environment. As you know, the operating policies, procedures, and processes are the
backbone of an organization's risk management system. While it may not be cost effective for
Livonia to add personnel dedicated to this purpose, it may be a worthwhile exercise to
periodically review and test certain departments or activities that are deemed by management
to inherently have more risk, such as remote location cash receipting, police department
property room, etc
To the Mayor and Members of Apnl 11, 2013
the City Council
City of Livonia, Michigan
New Accounting and Auditing Standards
The Governmental Accounting Standards Board has released a number of additional statements
that will become effective for the City over the next several fiscal years. A brief explanation for
each of these new statements has been included in Note 14 of the City's financial statements.
As we have in the past, we will provide the City the support necessary to implement these new
standards. Also, the Auditing Standards Board of the American Institute of Certified Public
Accountants undertook its Clarity Project to converge, to the extent possible, U.S. generally
accepted auditing standards with International Standards on Auditing issued by the International
Auditing and Assurance Standards Board. In total, almost 50 sections of the new auditing
standards have been issued. The new standards will be effective for the City's next financial
statement audit.
10
To the Mayor and Members of Apnl 11, 2013
the City Council
City of Livonia, Michigan
Section III - Legislative and Informational Items
Revenue-sharina
The City has completed the first two steps related to the Economic Vitality Incentive Program
(EVIP) for the State of Michigan's 2012-2013 fiscal year which included the creation ofa citizen's
guide, a performance dashboard, publishing a projected budget report including future debt
service and the assumptions used, and a consolidation or sharing of services plan including a
proposed new initiative. As a result of this activity to date, the City has been receiving its share
ofthe EVIP funding provided by the State of Michigan.
The third and final required step to obtain EVIP funding for the State's 2013 fiscal year is due to
be completed by May 1, 2013. This step, related toemployee compensation, has been modified
since last year's program. This year, eligible local units of government have three different
options in order to earn this third component of EVIP funding. In summary, the City has the
option of raking modifications to its compensation plan to comply with the requirements of the
act, certify compliance with Public Act 152 of 2011 (which requires hard caps, or alternately
80 percent/20 percent cost-sharing or lastly an opt -out provision), or certify that no medical
benefits are offered.
If the City is already in compliance with Public Act 152, the City will just need to complete the
certification form and remit it to the Department of Treasury by May 1, 2013 in order to earn
the final third of the EVIP funding.
Governor Snyder recently announced his budget plan for the States 2013-2014 fiscal year. For
cities, townships, and villages, the plan calls for maintaining the funding for the EVIP program at
the same level as for the 2012-2013 fiscal year. No further instruction has been given yet
regarding the requirements for the local units' participation.
Personal Property Tax Changes
The personal property tax was repealed by the passage of Public Act 397 of 2012 in Decerrber
2012. Key provisions of the act phase out the industrial portion of the tax over a nine-year
period beginning in 2016. Also, businesses with less than $40,000 taxable value in industrial and
commercial personal property in any jurisdiction would no longer pay the tax beginning in 2014.
As for the impact on local communities, in short, those local governments that would lose at
least 2.3 percent of their property tax base as a result of the changes would be eligible to be
reirrbursed at 80 percent of the revenue the personal property tax currently provides. In
addition, local governments would have the option to assess a special assessment on industrial
property (referred to as Essential Services Assessments). This assessment would not require
local voter approval and would reimburse police, fire, ambulance services, and jail operations to
ensure they receive 100 percent of the funding that they now get from the personal property
tax for these specific services.
To the Mayor and Members of Apnl 11, 2013
the City Council
City of Livonia, Michigan
When working through upcoming budgets and longer-term projections, please keep these items
in mind. The final act has not yet been published by the State.
Michigan Municipal League has developed a tool to aid communities in calculating the potential
impact of the personal property tax cuts: http://www.mml.oro/advocacy/inside208/post/PPT-
calmlationsoreadsheet-wailable.asox
Retro-oav Prohibition
Public Act 54 of 2011 prohibits retroactive pay on an expired contract and calls for employees
working under an expired agreement to bear the cost of any increased healthcare costs until a
new contract is in effect. During that period, the public employer is authorized to make payroll
deductions necessary to pay the increased cost of maintaining those benefits.
During 2012, a new bill was introduced that would amend PA 54 of 2011 to exempt police
officers and firefighters. This proposed legislation did not pass during the lame duck session in
December and will most likely be reintroduced in 2013.
Emergency Manager
Public Act 4 of 2011 which is known as the "emergency manager bill' was repealed by voters in
the November 2012 election. In response to the repeal, the Legislature passed a replacement
to this bill, PA 436 "the Local Financial Stability and Choice Act" This new legislation gives
distressed communities the following four options:
1. Enter into a consent agreement
2. Mediation with the State
3. Emergencymanager
4. Chapter 9 bankruptcy
Another key change is that under this new act, the State will be responsible to pay the salary and
other related costs of the emergency manager and not the distressed community. The act took
effect in March 2013.
Riaht-to-work for Public Emolovees
The governor signed PA 349 in December 2012 which creates a "right-to-work" for public
employees. The act will take effect nrid-March 2013. The act, which exempts police and
firefighters that are PA 312 eligible, makes it illegal to require as a condition of employment for
public and private sector workers that they financially support a union (this includes dues, fees,
assessments, and any other charges). Requirement to make payment to a third party or a
charitable organization in lieu of financial support is also prohibited. In addition, impacted
workers are no longer required to become or remain a member of a union.
12
To the Mayor and Members of Apnl 11, 2013
the City Council
City of Livonia, Michigan
Deficit Elimination Plans
The Michigan Department of Treasury issued numbered letter 2012-1 in February 2012 which
clarifies when a deficit elimination plan is required and how to quantify the deficit requiring
elimination. In addition, it also charges local units with the responsibility to file deficit elimination
plans concurrent with the submission of the audit report to the Department of Treasury. Local
units should no longer be waiting for a letter from the State to file their plans. The plans are
now due on or before the filing of your financial statement. Failure to file a plan can result in
withholding of25 percent ofthe EVIP revenue-sharing payments.
The plans should typically result in elimination of the deficit within one year but should never
exceed five years. These plans should also have acceptable evidence to support the plan. The
letter defines "acceptable evidence" as certified board/council resolutions approving the funding
and the journal entry showing that the transfer was made in the general ledger. Additionally, if
there is a projected multi-year budget, this too must be approved by the council/board and
submitted. Plans and support can be emailed to Tress Municipal Financeamichigan.gov or
mailed to the Michigan Department of Treasury.
The letter defines a fund deficit, since the law lacks any reference to generally accepted
accounting terminology. It states that for governmental funds (not proprietary funds, fiduciary
funds, or discretely presented component units) "a plan is necessary to eliminate any
"unrestricted fund balance" deficits. Unrestricted fund balance is the sum of the committed,
assigned, and unassigned balances." Determining whether a deficit exists is more challenging for
proprietary funds, fiduciary funds, and discretely presented component units and local units will
be expected to apply the test that is explained in the letter. We highly recommend that local
units review the letter at the following link to ensure that they comply with the requirements:
httD:/Awww.michinan.covftreasury/0.1607.7-121-1751 2194 2196---.00.html#2012.
Pension Obliaation Bonds and Other Postemolovment Benefits Obligation Bonds
Michigan Public Act 329 of 2012 was passed on October 17, 2012 and takes immediate effect.
The act allows communities who meet certain criteria to issue bonds to fund all or a portion of
their unfunded pension and Other Postemployment Benefits (OPEB) liabilities. The bonds are
called Pension Obligation Bonds or Other Postemployment Benefits Obligation Bonds and are
collectively referred to as "Benefit Bonds."
These bonds are subject to federal taxation but are tax exempt by the State of Michigan and
must be issued prior to December 31, 2014. The bonds are issued by ordinance or resolution
and do not require a vote of the people.
Municipalities must meet all of the following key requirements (the act also states additional
requirements) in order to be eligible to issue benefit bonds:
• Prior to issuance, the municipality must obtain approval from the State Department of
Treasury. In addition, the municipality must publish a notice of intent to issue the security.
13
To the Mayor and Members of Apel 11, 2013
the City Council
City of Livonia, Michigan
• Be assigned a credit rating of AA rating or higher by one of the nationally recognized rating
agencies (Standards & Poor's, Moody's, or Fitch)
• The issued security shall be rated investment grade by a nationally recognized rating agency.
• The property taxes necessary to meet the debt service obligation may not exceed the limit
authorized by law.
• Have a legal capacity to issue the obligation as these bonds are not exempt from legal debt
limitations
• Relative to the pension plan, have partial or complete cessation of accruals to a defined
benefit plan or closed the defined benefit plan to new or certain existing employee groups
and implemented a defined contribution plan (this requirement does not apply to the retiree
health care, or OPEB plan)
• The municipality shall covenant with bond holders and the State that it will not, after the
issuance of Benefit Bonds and while the bonds are outstanding, rescind any action taken for
the cessation of accruals to a defined benefit plan or complete closure of defined benefit
plans for new and existing employees.
In addition, the local unit must prepare a comprehensive financial plan which is to be made
available to the public. Each of the following elements must be completed to meet this
requirement:
1. An analysis of the current and future obligations of the pension or OPEB plan
2. Evidence that the issuance of the municipal bonds, together with other available revenue,
will be sufficient to eliminate the unfunded liability
3. Debt service amortization schedules and a description of the actions required by the
municipality to satisfy the debt service payments
4. Certification by the person preparing the plan that it is complete and accurate
5. If the bond proceeds are to be placed in a health care trust fund, the municipality must also
put in place a plan to mitigate increases in health care costs, such as the implementation of a
wellness program
PA 314 Pension Changes
Public Act 347 of 2012 was signed into law December 5, 2012. This act makes some significant
changes to Public Act 314 (known as the Pension Investment Act), as follows:
• The legislation utilizes existing asset classes but expands some categories such as foreign
equities (from 20 percent to 70 percent), real estate (5-10 percentage points higher) and the
"basket clause" (10 percentage points higher than existing limits for all plan sizes)
14
To the Mayor and Members of April 11, 2013
the City Council
City of Livonia, Michigan
• Requires fee disclosures by investment service providers
• Establishes uniform transparency standards to allow for benchmarking
• Expands prohibition against payments to providers that make contributions to plan sponsor
officials
• Permits local pension boards to self -police which means they can remove a member who is
legally incapacitated, convicted of certain violations, or has committed material breaches of
policies
• Imposes limits on dollars spent on training to the lesser of $12,000 per board trustee or
$150,000. No one trustee can spend more than $30,000.
• Requires the retention of records for six years
15
To the Mayor and Members of
the City Council
City of Livonia, Michigan
Attachment
April 11, 2013
cissi City & Livonia
Opimii Governmental Activities
YIE: 1113012012
SOMMABY OF ON REFORM] MEE I BLE MUST TS
me aoaammuteress and ciii eras nentiead wmlln bemlarea(asr�el
sherepand artamelnNenra[ alehRrre9[atgona nenticd Wm
amrM1 Lanni aunrl LagA m
W# Emnom aMlsUime6
Aerie uEb Labile Labile Out 1@taue
oni
IMMN MISSTATEMENTS:
Al Torea[emplolmelsnrranoandsb is
cm4nawee nounlecw nd
S (101
S 103479
M Torsan mplol mels b polm 9Mbn
IrrgorerteAS NMwee notcaplUl¢en
2060M
906030)
ESTIMATE ADJUS TMEN TS:
B1 We
IMPLIEDADJUSTMENTS:
C1 We
a a a a a
Taal
s s smss s $ s s-
s 0 51)
PASSED DISCLOSURES:
01 Tnearrenp wonlablone iaawnlnne:mrneracerwmnmrOloan aa�malneparernrren mmssarons
16
District Court Funds of District No. 16
City of Livonia, Michigan
Financial Report
with Supplemental Information
November 30, 2012
District Court Funds of District No- 16
City of Livonia, Michigan
Contents
Report Letter
1-2
Management's Discussion and Analysis 3-4
Basic Financial Statement
Statement of Net Assets - Fiduciary Funds
5
Notes to Financial Statement
6-8
Other Supplemental Information
9
Schedule of Cash Receipts and Cash Disbursements 10
Independent Auditor's Report
To the District Court Judges of the
16th Distinct Court
Honorable Kathleen McCann and
Honorable Sean Kavanagh
Livonia, Michigan
We have audited the statement of net assets for the fiduciary funds of the District Court Funds
of District No. 16, City of Livonia, Michigan (the "District Court"), as of November 30, 2012.
This financial statement is the responsibility of the District Court's management. Our
responsibility is to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material misstatement An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statement. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in all material respects,
the financial position of the District Court Funds of District No. 16, City of Livonia, Michigan as
of November 30, 2012 in conformity with accounting principles generally accepted in the United
States of America-
Amounting
merica
Accounting principles generally accepted in the United States of America require that
management's discussion and analysis, as identified in the table of contents, be presented to
supplement the basic financial statement. Such information, although not a part of the basic
financial statement, is required by the Governmental Accounting Standards Board (GASB), which
considers it to be an essential part of financial reporting for placing the basic financial statement
in an appropriate operational, economic, or historical context. We have applied certain limited
procedures to the required supplemental information in accordance with auditing standards
generally accepted in the United States of America, which consisted of inquiries of management
about the methods of preparing the information and comparing the information for consistency
with management's responses to our inquiries, the basic financial statement, and other
knowledge we obtained during our audit of the basic financial statement. We do not express an
opinion or provide any assurance on the information because the limited procedures do not
provide us with sufficient evidence to express an opinion or provide any assurance.
To the District Court Judges of the
16th District Court
Honorable Kathleen McCann and
Honorable Sean Kavanagh
Our audit was conducted for the purpose of forming an opinion on the financial statement 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 financial statement. Such
information is the responsibility of management and was derived from and relates directly to the
underlying accounting and other records used to prepare the financial statement. The
information has been subjected to the auditing procedures applied in the audit of the financial
statement and certain additional procedures, including comparing and reconciling such
information directly to the underlying accounting and other records used to prepare the financial
statement or to the financial statement itself, and other additional procedures in accordance
with auditing standards generally accepted in the United States of America. In our opinion, the
information is fairly stated in all material respects in relation to the financial statement as a
whole.
A& t P4LC
April 11, 2013
District Court Funds of District No. 16
City of Livonia, Michigan
Management's Discussion and Analysis
Our discussion and analysis of the District Court Funds of District No. 16, City of Livonia,
Michigan's (the `District Court") financial performance provides an overview of the District
Court's financial activities for the fiscal year ended November 30, 2012. Please read it in
conjunction with the District Court's financial statement.
Using this Financial Report
This financial report represents the activities of the funds of the District Court during the year.
The funds of the District Court are agency funds. Therefore, the activities are lirrited to
collection of amounts that are subsequently returned or paid to third parties. The funds are
custodial in nature (assets equal liabilities) and do not involve the measurement of results of
operations. A detailed schedule of cash receipts and disbursements is shown in the
supplemental information portion of the financial report.
The District Court as a Whole
The foliming table shows, in a condensed format, the assets and liabilities as of November 30,
2012 and compared to the prior year:
Assets
Cash and investments (Note 2)
Due from bond account
Total assets
Liabilities
Due to City of Livonia
Due to State of Michigan
Bond deposits, Volunteer Work Program,
and Civil Drug Fund
Other liabilities
Total liabilities
3
2012 2011
$ 2,322,574 $ 1,173,269
60,324 41,974
$ 2,382,898 $ 1,215,243
$ 1,362,248 $ 338,072
111,192 118,678
68,372 710,963
841,086 47,530
$ 2,382,898 $ 1,215,243
District Court Funds of District No. 16
City of Livonia, Michigan
Management's Discussion and Analysis (Continued)
The Distract Court's combined receipts increased approximately 4.5 percent from a year ago -
increasing from $7.3 million to $7.6 million. This increase can be attributed to several factors, all
of which are related directly to ticket counts. The number of misdemeanor (non -traffic)
violations was up by 348 cases, which relates to a 20.4 percent increase in case load, which then
corresponds to increased fines and costs assessed by the Distract Court. Generally,
misdemeanor cases generate higher fines and costs than civil infractions. Misdemeanor traffic
cases were also up by 9.8 percent and OUILs were up by 14.8 percent. Again, these cases
generate more revenue to the City of Livonia (the "City"). It could be argued that some of this
increase can be attributed to the continued use of the S.T.A.R. program by the Livonia police
department, which has been generating additional tickets. Collection has always been an
ongoing problem and we continue to address this issue through stepped-up collection methods.
The future also will include the startup of income tax gamshments in which several courts have
had good results. The voluntary work program (V W P) has again operated in the black, with the
number of hours of service work to the City going from 6,145 to 6,773 hours, or an increase of
10 percent. The V WP continues to be a viable part of the District Court and continues to save
the City monies that would have been spent for incarceration. Finally, the District Court
continues to recoup the majority of the money (almost 90 percent) that is spent for court-
appointed attorneys.
Contacting the District Court's Management
This financial report is intended to provide our citizens and customers with a general overview
of the Distract Court's activities and to show the District Court's accountability for the money it
receives. If you have questions about this report or need additional information, we welcome
you to contact the Distract Court directly at 734-466-2500.
District Court Funds of District No. 16
City of Livonia, Michigan
Statement of Net Assets - Fiduciary Funds
November 30, 2012
Assets
Cash and cash equivalents (Note 2)
Due from bond account
Total assets
Liabilities
Due to:
CO of Liwnia
Stateof Mkhigan
Wayne County
Depository account
Volunteer vrork program
Coal Drug Fund
Bond @posts and other
Total liabildies
See Notes to Financial Statement.
$ 1,441,989
$
Volunteer
$
Depository
Bond
Work
Coal Drug
l oounl
Pccounl
Program
Fund Total
$ 1,441,989
$
258,826
$
429,719
$
1W,049
$ 2,322,574
39,499
-
17,616
3,209
60,324
$1,191,499
$
259,926
$
447,326
$
195,256
$2,362,896
$ 1362,248 $ - $ - $ - $ 1362,248
111,192 - - - 111,192
- 39,499 - - 39,499
- 17,616 - - 17,616
- 3,209 - - 3,209
198,502 447,326 195,258 841,986
$1,191,499 $ 259,926 $ 447,326 $ 195,259 $2,392,999
District Court Funds of District No. 16
City of Livonia, Michigan
Notes to Financial Statement
November 30, 2012
Note 1 - Summary of Significant Accounting Policies
The accounting policies of the District Court Funds of District No. 16, City of Livonia,
Michigan (the "District Court") conform to accounting principles generally accepted in
the United States of America (GAAP) as applicable to governmental units. The District
Court is governed by two elected judges. There are no component units.
The following is a summary of the significant accounting policies used by the District
Court Funds of District No. 16, City of Livonia, Michigan:
The funds of the District Court are agency funds. The financial activities of the funds are
limited to collections of amounts that are subsequently returned or paid to third parties.
The funds are custodial in nature (assets equal liabilities) and do not involve the
measurement of results of operations. The District Court is responsible for traffic and
moving violations, certain civil matters, and misdemeanors within the city limits.
Note 2 - Cash and Cash Equivalents
Michigan Compiled Laws Section 129.91 (Public Act 20 of 1943, as amended) authorizes
local governmental units to make deposits and invest in the accounts of federally insured
banks, credit unions, and savings and loan associations that have offices in Michigan. The
law also allows investments outside the state of Michigan when fully insured. The
District Court 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 District Court has designated four banks for the deposit of its funds. The
investment policy adopted by the City Council in accordance with Public Act 196 of
1997 has authorized investment in bonds and securities of the United States
government, bank accounts and CDs, and such obligations, bonds, and securities as
permitted by statutes of the State of Michigan. The District Court's deposits and
investment policies are in accordance with statutory authority.
Custodial Credit Risk of Bank Deposits - Custodial credit risk is the risk that in the
event of a bank failure, the District Court's deposits may not be returned to it. The
District Court does not have a deposit policy for custodial credit risk. At year end, the
District Court had no bank deposits (checking and savings accounts, certificates of
deposit) that were uninsured and uncollateralized. The District Court evaluates each
financial institution with which it deposits funds and assesses the level of risk of each
institution; only those institutions with an acceptable estimated risk level are used as
depositories.
District Court Funds of District No. 16
City of Livonia, Michigan
Notes to Financial Statement
November 30, 2012
Note 3 - District Court Operations
The costs relating tothe operation ofthe District Court (including risk management) are
a budgeted item of the City of Livonia's General Fund and, accordingly, such costs are
paid by the General Fund.
The District Court is exposed to various risks of loss related to property loss, torts,
errors and omissions, and employee injuries (workers' compensation), as well as
medical benefits provided to employees.
General Liability - The District Court participates in the Michigan Municipal Risk
Management Authority for claims relating to general and auto liability, auto physical
damage, and property loss claims.
The Michigan Municipal Risk Management Authority (the "Authority") risk pool program
operates as a claims servicing pool for amounts up to member retention limits and
operates as a common risk -sharing management program for losses in excess of
member retention amounts. Although premiums are paid annually to the Authority that
the Authority uses to pay claims up to the retention limits, the ultimate liability for those
claims remains with the City of Livonia. In addition to the losses retained, the City of
Livonia is responsible for certain defense costs.
Workers' Compensation - The District Court employees are covered under the City
of Livonia's self-insured workers' compensation program. However, the workers
assigned to the District Court's voluntary work program in lieu of jail are not covered.
The District Court does have a policy that covers up to the first $1,000 per occurrence
and the City of Livonia's self-insured plan covers claims in excess of $1,000.
Medical Claims - The District Court participates in the City of Livonia's healthcare
coverage plan in the same manner as the City of Livonia employees.
Note 4 - Upcoming Accounting Pronouncements
In November 2010, the GASB issued Statement No. 61, The Financial Reporting Enfity
Omnibus. This pronouncement, which is an amendment to Statement No. 14 and
Statement No. 34, modifies certain requirements for inclusion of component units in the
financial reporting entity. This statement also amends the criteria for reporting
component units as if they were part of the primary government (that is, blending) in
certain circumstances. Lastly, the statement also clarifies the reporting of equity
interests in legally separate organizations. The District Court is currently evaluating the
impact this standard will have on the financial statements when adopted during the
District Court's 2013 fiscal year.
District Court Funds of District No. 16
City of Livonia, Michigan
Notes to Financial Statement
November 30, 2012
Note 4 - Upcoming Accounting Pronouncements (Continued)
In December 2010, the GASB issued Statement No. 62, Codification of Accounting and
Financial Reporting Guidance Contained in Pre -November 30, 1989 FASB and AICPA
Pronouncements. This statement incorporates into GASB literature certain amounting
and financial reporting guidance issued on or before November 30, 1989 that is included
in FASB statements and interpretations, APB opinions, and accounting research bulletins
of the AICPA Committee on Amounting Procedure. The District Court is currently
evaluating the impact this standard will have on the financial statements when adopted
during the District Court's 2013 fiscal year.
In June 2011, the GASB issued Statement No. 63, Financial Reporting of Deferred Outflows
of Resources, Deferred Inflows of Resources, and Net Position. The statement will be
effective for the District Court's 2013 fiscal year. The statement incorporates deferred
outflows of resources and deferred inflows of resources, as defined by GASB Concepts
Statement No. 4, into the definitions of the required components of the residual
measure of net position, formerly net position. This statement also provides a new
statement of net position format to report all assets, deferred outflows of resources,
liabilities, deferred inflows of resources, and net position. Once implemented, this
statement will impact the format and reporting of the balance sheet at the government -
wide level and also at the fund level.
Other Supplemental Information
District Court Funds of District No. 16
City of Livonia, Michigan
Other Supplemental Information
Schedule of Cash Receipts and Cash Disbursements
Year Ended November 30, 2012
10
Volunteer
Depository
Work
GHI Drug
Pccount
Bond Pccount
Program
Fund
Cash and Cash Equivalents- Beginning of }ear
$ 441235
$ 234,838
$ 317,332
$ 179,864
Receipts
Fires and lees cullected
5,593,26]
-
-
-
Bond mompts
-
1129,321
-
-
Wa}neCountypenalfires
100,854
-
-
-
Volunteervrorkpragram
-
262,325
-
-
CoalDrugFund
-
48,625
-
-
ReshUien,judgment,andother
15,610
132,815
-
19,87
Transkrs from bond account
-
-
279,460
48,353
Interest income
1,3H
57
271
Total receipts
5,711896
1573,086
280,017
66,521
Disburcemerks
Transkrsto:
Co of Livonia
2,568,115
-
-
-
CourtBuildingFund -Co of Livonia
514,514
-
-
-
StateolMkhigan
1,472,1W
-
-
-
Wayne County
91,838
-
-
-
Volunteermark program
-
279,460
-
-
Coal Drug Fund
-
48,353
-
-
Bmdtranskrs and refutes
-
1,034,M
-
-
Baodforfeibres
-
]5,052
-
-
Volunteervark program and Civil Drug Fund
-
-
17,639
56,336
ReshUien, judgments, and other
63,684
111,842
-
-
Tobldisburcements
4,710,344
1549,098
17,639
56,336
Cashandinveatmenb Balance-EiWodyear
$ 1,441,989
$ 258,826
$ 429,719
$ 192,949
10