Loading...
HomeMy WebLinkAbout2013 Annual Financial ReportCity of Livonia, Michigan Financial Report with Supplemental Information November 30, 2013 City of Livonia, Michigan Contents Report Letter 1-2 Management's Discussion and Analysis 3-9 Basic Financial Statements 18 Government -wide Financial Statements: 19-20 Statement of Net Position 10 Statement of Activities 11-12 Fund Financial Statements: Governmental Funds: 22 Balance Sheet 13 Reconciliation of the Balance Sheet to the Statement 23 of Net Position 14 Statement of Revenue, Expenditures, and Changes in Fund Balances 15 Reconciliation of the Statement of Revenue, Expenditures, 53 and Changes in Fund Balances of Governmental Funds 54-56 to the Statement of Activities 16 Proprietary Funds: Statement of Net Position 17 Statement of Revenue, Expenses, and Changes in Net Position 18 Statement of Cash Flows 19-20 Fiduciary Funds: Statement of Fiduciary Net Position 21 Statement of Changes in Fiduciary Net Position - Pension and Other Employee Benefits Trust Funds 22 Component Units: Statement of Net Position 23 Statement of Activities 24-25 Notes to Financial Statements 26-52 Required Supplemental Information 53 Budgetary Comparison Schedule - General Fund 54-56 Budgetary Comparison Schedule - Major Special Revenue Funds - Community Recreation 57 Budgetary Comparison Schedule - Refuse Disposal System 58 Pension System - Schedule of Funding Progress 59 Retiree Health and Disability Benefits Plan - Schedule of Funding Progress 60 Note to Required Supplemental Information 61-62 City of Livonia, Michigan Contents (Continued) Other Supplemental Information Nonmaior Governmental Funds 63 Combining Balance Sheet 64-65 Combining Statement of Revenue, Expenditures, and Changes in Fund Balances 66-67 Fiduciary Funds: Combining Statement of Net Position 68-69 Combining Statement of Changes in Fiduciary Net Position 70 Independent Auditor§ Report To the Honorable Mayor and Members of the City Council City of Livonia, Michigan Report on the Financial Statements 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, 2013 and the related notes to the financial statements, which collectively comprise the City of Livonia, Michigan's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements basetl 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 Goremment 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 from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of sgnificant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 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, 2013 and the respective changes in its financial position and cash flows, where applicable, for the year then ended, in accordance with accounting principles generally accepted in the Unitetl States of America. To the Honorable Mayor and Members of the City Council City of Livonia, Michigan Other Matters Required Supplemental Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, pension system schedule of funding progress and employer contributions, postemployment benefit plans schedule of funding progress and employer contributions, and the budgetary comparison schedules, as identified in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental 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. Other Information 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 other supplemental information, as identified in the table of contents, is presented for the purpose of additional analysis and is not a required part of the basic financial statements. The other supplemental information 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. Such information has been subjected to the auditing procedures applied in the audit of the basic 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 other supplemental information is fairly stated in all material respects in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated April 3, 2014 on 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, 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 an opinion on the internal control over financial reporting or on compliance. That report's an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Livonia, Michigan's internal control over financial reporting and compliance. April 3, 2014 City of Livonia, Michigan Management's Discussion and Analysis Overview of the Financial Statements The City of Livonia, Michigan's (the "City") 2013 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, propnetary funds, and fiduciary funds. The basic financial statements include two kinds of statements that present different views of the City. The first two statements are government -wide financial statements that are intended to provide longer- term information about the City's overall financial status. The remaining statements are fund financial statements that focus on individual parts of the City's government, reporting the City's operations in more detail than the government -wide financial statements. Government -wide Financial Statements The government -wide financial statements report information about the City as a whole using accounting methods similar to those used by private sector companies. The statement of net position includes all of the City's assets and liabilities. All of the current year's revenue and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The two government -wide statements report the City's net position and how they have changed. Net position, the difference between the City's assets and liabilities, is 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 Authonty. Although legally separate, these 'component units" are important because the City is financially accountable for them, including debt, which is issued on behalf of the authorities by the City. City of Livonia, Michigan Management's Discussion and Analysis (Continued) Fund Financial Statements The fund financial statements provide more detailed information about the City's most significant funds - not the City as a whole. Funds are accounting tools that the City uses to keep track of specific sources of funding and spending for particular purposes. Some funds are required by state law and bond covenants. Other funds are established to control and manage money for particular purposes. The City has three kinds of funds: • Governmental Funds - Most of the City's basic services are included in governmental funds, which focus on how cash and other financial assets that can be converted to cash, flow in and out, and the balance left at year end that is available for spending. The governmental fund statements provide a detailed short-term view that helps you determine if there are more or fewer financial resources available to spend in the near future to finance the City's program. • Proprietary Funds - Services that are intended to be entirely self-supporting by customer fees are generally reported in proprietary funds. Proprietary fund statements, like government -wide statements, provide both short- and long-term financial information. • Fiduciary Funds - The City is responsible for ensuring that the assets in these funds are used for their intended purposes. We exclude these activities from the government -wide financial statements because the City cannot use these assets to finance its operations. City of Livonia, Michigan Management's Discussion and Analysis (Continued) The City as a Whole In a condensed format, the table below shows a comparison of the net position as of November 30, 2013 to the prior year. Net Position (in millions of dollars) GDserrsnertal ActiHties Business type Activities Total 2813 2012 21113 2012 21113 2012 Assets Gyred arsl other assets $ 56.5 $ 519 $ 313 $ 29.6 $ 878 $ 815 Capital assets 184.0 1849 73_fi 750 25]6 259.9 Total assets 240.5 2368 1649 104.6 3954 3414 Ui i[ies Current liadlilies 113 125 49 50 162 175 Longterm liabilities 471 493 59 70 530 563 Total liadlitks 58.4 618 198 120 692 T18 Net Position Net investment in capital assets 146.4 1456 669 67.2 2133 2128 Restnded 218 189 16 15 234 20.4 Umestricted 139 195 256 23.9 395 34.4 Total net position 8 182.1 5 175.0 8 94.1 $ 92.6 8 276.2 $ 267.6 City of Livonia - Net Position The City's assets exceed its liabilities at the end ofthe fiscal year by $276.2 million (net position). Hmever, a major portion (77 percent) of the City's net position represents its investments in capital assets (i.e., 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 forfuture spending. Unrestricted net position of the City's governmental activities increased from $10.5 million at November 30, 2012 to $13.9 million at the end of this year. The amount represents the part of net position that can be used to finance day-to-day operations without constraints established by debt covenants, enabling legislation, or other legal requirements. Furthermore, the City is able to report positive balances in all three categories of net position, both for the City as a whole, as well as for its separate governmental and business -type activities. 5 City of Livonia, Michigan Management's Discussion and Analysis (Continued) The following table shows the changes in net position during the current year and as compared to the prior year: Changes in Net Position (in millions of dollars) 6 Governmental Activities Business -type Activities Total 21113 21112 21113 21112 21113 21112 Revenue Program reserve: Clergev for sewres $ 179 $ 173 $ 353 $ 348 $ 532 $ 52.1 Operating grants and contributions 91 87 - - 91 87 Capital gan4 aM contributions 10 99 94 1.1 14 29 General revenue: Pmpertytaxes 532 544 - - 532 544 State -shared reveme 81 78 - - 81 78 Rental income and fees 26 2.5 - - 26 2.5 Interest 91 93 - 91 91 94 Tar¢kr and miscellaneous 93 92 0.1 91 94 93 Total reveme 923 92.1 358 361 1281 1282 Program Expenses General gosemment 192 197 - - 192 197 Publicsafety 358 375 - - 358 375 PuttlCwores 241 247 - - 241 247 Comminityandeconemlo development 12 16 - - 12 16 Recreation aM mature 123 125 - - 123 125 Interest on long-term bbl 16 17 - - 16 17 Water aM sewer - - 314 334 314 334 Gen coarse - - 18 19 18 19 Horsing - - 1.1 10 1.1 10 Total expemes 852 887 343 363 1195 1250 Change in Net Position 71 34 1.5 (02) 86 32 Net Position- Beginning of year 1750 1716 926 928 2676 2644 Net Pmition - End of year $ 182.1 $ 176.0 $ 94.1 $ 92.6 $ 2]6.2 $ 267.6 6 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 $200,000 and expenses decreased by $3.5 million. The change in revenue is primarily attributable to a decrease in property tax revenues resulting from lower property values, which was offset by increases to state shared revenue, court fines, and ambulance transport charges. The significant factors impacting expenses were increases to pension costs, offset by reductions to healthcare expenses and reduced staffing. 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 shoes the operating income (loss) before contributions, transfers, and interest for each of these activities in the current and prior year: (In thousands of dollars) Water and Sewer Golf Courses Housing 2013 2012 9113 9112 9113 2012 Operating Revenue $ 31,975 $ 31615 $ 1,710 $ 176E $ 1,355 $ 1,345 Operating Expenses (30,969) (33,022) (1325) (1911) (1.096) (966) Operating Income (Loss) $ 1,006 $ (1,347) $ (115) $ (177) $ 259 $ 3A The operating results of the Water and Sewer Fund improved substantially from 2012 to 2013. 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. Capital Assets and Debt Distribution At the end of fiscal year 2013, the City has $452.2 million invested, before depreciation, in a wide range of capital assets, including land, buildings, infrastructure, public safety equipment, computer equipment, and water and sewer lines. Debt of $37.6 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 position. City of Livonia, Michigan Management's Discussion and Analysis (Continued) Debt related to the water and sewer system totaling $5.8 million and debt related to housing activities of $0.9 million is recorded as a liability in the business -type activities in the statement of net position. 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 2013 include $6.7 million invested in the construction of infrastructure and improvements to roads and $2.4 million invested in equipment and vehicles. Significant disposals of capital assets during fiscal year 2013 included the disposal ofvehides and equipment with a total cost of $2.2 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 Citys major governmental funds for 2013 include the General Fund, Community Recreation Fund, and Refuse Disposal Fund. The City's governmental funds reported a combined fund balance of $34.4 million. This is an increase of approximately $4.5 million for the year. The increase was caused primarily by spending constraint in the General Fund and capital improvement projects which began in 2013 but will not be completed until 2014. 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 $444,000 above the final budget. Shortfalls were experienced as a result of tax appeals ($453,000) 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 ($363,000), ambulance transports ($277,000), and court fines ($678,000). Actual General Fund expenditures were approximately $1.1 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 arise 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. It appears that the revenue reductions are slowing. Residential property assessments are projected to increase in fiscal 2014, although business assessments continue to dedine. State -shared revenue is projected to increase slightly in fiscal 2014 and 2015. 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 finance at the City of Livonia, 33000 Civic Center Drive, Livonia, Michigan 48154. City of Livonia, Michigan NN Position Statement of Net Position November 30, 2013 66,909,178 Primary Governionent 3521,019 Restricted for: Governmental Businesstype Component 3,994,441 Activities Activities Total Unit Assets Cash and invednent $ 44,994559 $ 14,700,058 $ 59,691 $ 488,041 Account rereivable: - 4:94931 - Library Taxes 321501 - 327501 76,031 Customers - 13,220375 13,220375 - WoderSmrryensation 18,823 - 18,823 - Duefmmothergovernnentalunits 3,339896 - 3,339896 - VEDA 552,984 - 552,984 - Oroeramountrecerciale 3,111769 904,739 3,722,508 8,305 Special assessment 358457 118227 476,684 10,345 Inventory, prepaid expenditures, ruddeposits 3,830983 1123,413 4,954396 - Restricted asset (Note ]) - 1550,724 1550,724 - Capital asset (Note 4): $ 94,104,695 $216,11Dn,846 $ 4,025,837 The Notes to Financial Statements are an Nondepreciable capital asset 35,116156 5,]4732] 40,8fi3483 474,448 Depreciable trial asset - Net 148.842344 67,862153 216,]0449] 5,671571 Total asset 2404984]2 104,927,016 345,426488 6]28041 LiaGlities Account payable 3,406,418 401206 3,&11624 61992 Due to other governmental units 2,593617 2,593617 Accrued liabilities and other 2,961 147,414 2,]13,]68 9972 neared revenue (Note 13) 611 fi35 114,375 ]26010 - Bondsanddeposits - 217,016 217,016 - Noncurrent liabilities (Note 6) Du within one year Payable from restricted asset - Ho" HnoBB - Oompensded absences 2,874,910 213,345 3,098255 - CurrentportionoflongtenndeN 1,886000 460,000 2325,000 475,000 Due in more than one year: Compensated absences and insurance claim 1985407 W5,bol e,170,805 - LmdGlldosureobligation 592,394 - :92394 - NetOPEBobligation 2,964203 129,645 3,033,848 - Bondandcapdalleasespayable 35,,680000 5,470,302 41104302 2150000 Total liabilities 58,426,321 10,822,321 69,248fi42 2,702964 NN Position Net investment in capital asset 146413,500 66,909,178 213,322678 3521,019 Restricted for: Cormi overall 3,994,441 - 3,994441 Municipal refuse 2,325,130 - 2,325,130 - Streef,road,andsol lk 4,594,931 - 4:94931 - Library 881,188 - 881,188 - Publcsafetymnnencation 2,983500 - 2,983500 - Gant 81]86 - 81]86 Street lighting 137,074 - 137,074 - Cdjud ted forfeitures 1231551 - 1231551 Cormi transit 632,442 - 632,442 - OrdnancereWirenent - 1550,724 1550,724 Capital improvements 4,]99011 - 4,]99011 - Unrestricted 13,938597 25,m4,793 29,583,390 904,818 Total net position $182,073,151 $ 94,104,695 $216,11Dn,846 $ 4,025,837 The Notes to Financial Statements are an Integral Part of this Statement. 10 City of Livonia, Michigan Functom/Progrzms Pnmarygmernment Gown -mental aclim es: General government Public safety Publicwor Community aid economic clawlopment Recreation aid culture Interest on longterm cleat Totalgowmmental actMbes Buawss4We aaivibes: wateraidsewer Golf course Housing Program Rownue Operating Capital Grants Charges for Grants aid aid Expenses Sertices Contributions Contributions $ 18,194,988 $ 3,942,528 $ - $ - 35,808,240 6,894,628 1945,768 - 24,063,6/9 2,158,089 6,239,003 278,386 1217,853 237,909 551,730 11,215 12,284,336 4,628,751 3A,625 690,810 1,656,578 - - - 85,217,6/4 17,861891 9,114,127 980,411 31,353,332 31,915,495 - 351,987 1825,032 1]09,556 - - 1138,290 1,623,964 Total businessAWe ac5H5es 34,316,654 35,309,005 - 351,081 Tofalpnmarygmernment $119,534,328 $ 83.170,902 $ 9,114,127 $ 1,332,398 Component unit -PRDA $ 1,191,678 $ - $ - $ - General revenue: Property faxes State-sharetl revenue Inveshnent income Unresbictecifees annolher Miscellaneous Gain on sale of fxetl assets Total general revenue Transfers Change in Net Position Net Position - Beginning of fear Net Position - 6d of year The Notes to Financial Statements are an Integral Part of this Statement. 11 Statement of Activities Year Ended November 30, 2013 Not (Expense) Rownue an Changes in Net Posdion Pnmary Govemment Gowmmental Business{ Component AdivIns AdivIns Tdal Unb $ (6252,460) $ - $ (6252,460) $ - (26959,B60) - (26,959,860) - (15,386201) - (15,386201) - (416,999) - (416,999) - (6,587,150) - (6,587,150) - (1656,518) - (1656,518) - (57,261239) - (57,261239) - 914,150 914,150 - - (115,416) (115,416) - M,664 486664 - 1344,336 1344,336 - (51,261239) 1344,336 (55,916,901) - - 53,169,111 - 53,169,111 699,518 8,141,205 - 8,141,205 - 56,554 56,431 112,991 96 2,643,6B5 - 2,643,6B5 - 336,144 - 336,144 - - 56028 56028 - 64,356359 112,465 64,467,824 899,676 (36000) 36999 - - 7,056,120 1,494,893 8,559,923 (292,992) 115,011,931 92,609,892 261,626,923 4,311,839 $182,W3,151 $ 94.104.695 $276111.846 $ 4,025,8]] 12 City of Livonia, Michigan Governmental Funds Balance Sheet November 30, 2013 Plabililies and Fund Balances Major glans I Revenue Ford Dealings Community Rause Disl>®I Non -odor General Fund Recreation System Fund TdA Assets Due to other Mnd 158,814 Cash andlnv¢Menls a 187E0y9 a 4729,169 a 3,889,765 a 17,138876 a 36,561998 Real Deterred revenue (IN de 13) 12x3546 ss,]s3 62,s5 dial Tares 179,121 21}33 bsj i 60,496 327561 glacial asesnents Fund Balances - - 358,Q57 358,Q57 Workerecwnpznston 18,823 - - 18,823 Due torn other governmental units 2,fW719 - - 1ars'sa] 3,35896 WBA 52,98! 52,98! Other 816561 1532bo a8y3 419,901 1671835 Due torn other Linda IN de S) 158,814 - - - 158,814 Inventory, prepaid erpemes, add dposts 385610 545616 Total assets $ MiOl,325 $ 490.3,612 $ 4,044,50 $ 19,323,397 $ 43,175,914 Plabililies and Fund Balances Dealings Accounts te}ade $ 8f3]rr 8 215599 8 1661939 8 1259,103 8 3,496018 Due to other Mnd 158,814 158,814 Accrued and other retain 2,038,071 619W 59,087 2116s8 2,438783 Deterred revenue (IN de 13) 12x3546 ss,]s3 62,s5 dial 2,M.384 Total outies 4,45,394 156J49 11698]9 2,381]r] 3,773,399 Fund Balances BomPencal mvedwyandirrepod snob Pal - - - Pal R¢Vded Streets, r®d, aidsidwallis 40.0090 40.0090 PrlludWed kukAures 12s15s1 12s15s1 Grants 81]86 81]86 Captal imPmvemeds - - 4,477222 4,477222 Community recreation - 3,811 - 3,811 Municipal refile - - 2,854,611 2,854,611 Street lighting 13],0]4 13],0]4 868443 868443 Pubic early cornminiaton 2,671098 2,671098 cornmmilyVamit - - - 619,617 619,617 comnined- Cabeacoestelevason - - - sal 882,641 Assigned Gdhwrse:aptallinnTosements - - - V56504 456504 Court bwldnglinnTovemenle - - @]2,934 892994 Dmnigned 11 - - - 103]331] Total Lndndlmces 10,758931 3,811 2,854,611 16,911620 34402,515 Total routines and and ndlaces $ Mistral $ 4903,612 $ 4,044,50 $ 19}23,39] $ 43,175,914 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 Position November 30, 2013 Total Fund Balances of Governmental Funds $ 34,402,515 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and are not reported in the funds 183,958,500 Certain receivables are expected to be collected over several years, including special assessments, delinquent personal property taxes, and grants 2,165,749 A portion of fines and fees is not available to pay for current year expenditures 1,645,937 The liability for compensated absences is recorded when incurred in the statement of activities (8,625,593) Landfill closure and postclosure liability is not due and payable in the current period and is not reported in the funds (592,394) Long-term liabilities are not due and payable in the current period and are not reported in the funds (37,545,000) Net OPEB obligation is not due and payable in the current period and is not reported in the funds (2,964,203) Accrued interest is not due and payable in the current period and is not reported in the funds (135,572) The Internal Service Fund (self-insurance) is included as part of governmental activities 9,763,212 Net Position of Governmental Activities $ 182,073,151 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, 2013 The Notes to Financial Statements are an Integral Part of this Statement. 15 Major Special Revenue Fund: Tad Community Rebse oisp®I IN wall Gwemmatal General Fund Recreation System Find Find Russell Property taxes 8 D.]06j96 8 3,606519 8 18913,86! 8 6,,182,768 8 53.12956] Licenses antl permits 1,!63859 - - 1,!63859 Federal revenue 225,697 - 1,,1/1,193 I,]1y2298 Slate atlloal revenue ajosu92 53,1525 6,452,3]] 1,18359,1 Charges brservices 416,372 4182,718 28819 Msas9 9,207,688 Finesand Mkitures 41694, - 1,142,753 5,Zi9,]2o Interest 23,],16 42.53 - 20.296 481 Other revenue: Special assensua 1'81,926 1'81,926 Other nadelanewsincwne 3,1625,1 84,425 185]2 889,161 4,181;112 Total revenue 52,595,423 ],]32'32 11 211,65,1873 92,18,883 Expenditures Current General gwemrrenl 6,188821 - - 6,188821 Pubicsakly 31,538336 - 1,18369 34,698,785 such work 2,]3],861 - 11649581 9,647,859 24,04521 Coarrealunity and ecww me develonent ta 525,71 - 6719,12 1,2114,659 Recreation and culture 1,,153687 4,615,498 - 4,8]5,821 11,0.04,126 Erni demons, Insurance, and other 2,1]23] - - 2,1]23] Capital outlay - - - 3,4, 1,822 3,4, 1,822 Oelf service 3,,182264 3,,18228,1 Total drentltures 48492,199 4,615698 11649581 22,714697 81,602575 Excess of Revenue Over(Unden Expenditures 4,182624 3,06934 (151,3866) (2,12arl 4,5 ,4128 Other Financing Sources (Ines) Transkrs In IN do 5) 40,001 - 7,518,832 7,58,832 Transkrs out IN do 5) (2,616.926) (2.669951) - (2,ZN,95) (1,596832) Total other inancing (uses)sources (2,606.926) (2.669951) Net Fill in Fund Balances 1495,696 3,16983 (491,1866) 3,169,1153 4,497,428 Fund Bakncn-Beenningofyear 9.263233 3,4511,3111 3,3489]1 1,8325,14] 29,965,1187 Fund Baknces-Endai $ 18,758,931 $ 38,1],293 $ 28',4,1 $ 16941,Q0 $ 34A82515 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, 2013 Net Change in Fund Balances - Total Governmental Funds $ 4,497,428 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 7,584,996 Depreciation expense (8,329,750) Loss on disposal of fixed assets (205,216) Certain revenue reported in the statement of activities is recorded in the governmental funds as deferred revenue 280,709 Repayment of bond principal is an expenditure in the governmental funds, but not in the statement of activities (where it reduces long-term debt) 1,740,000 Interest expense is recorded when incurred in the statement of activities 5,705 Net decrease in accumulated employee sick and vacation pay is recorded when incurred in the statement of activities 490,849 Increase in landfill liability is recorded when incurred in the statement of activities (254) Increase in net OPEB obligation is recorded when incurred in the statement of activities (689,436) Internal service funds are included as part of governmental activities 1,681,089 Change in Net Position of Governmental Activities $ 7,056,120 The Notes to Financial Statements are an Integral Part of this Statement. 16 City of Livonia, Michigan Proprietary Funds Statement of Net Position November 30, 2013 The Notes to Financial Statements are an Integral Part of this Statement. 17 Nonmajor X4jor Enteryise Fund Enterpise Fund Taal Enterturse internal Series Water anaSewer Homi Goffcomse Fund Fund Awards Current aceta: Cash and n.atments s 13.31 s 753513 s 74,847 s 14.7W.058 s B.d32w9 Accounts reconvene: S9e<al assessments 7,690 - - 7,690 - Customers 13,220,375 - 13,220,375 - Other 55 'sss - 59,071 606739 - n.amory,uete;ae.9enawree, pra andmdc 1,123p13 - - 1,123,4133 3665,369 Total current assets 23,768816 753513 133918 29,61 11877938 Noncurrent snots: Restricted mob IN de 7) 1,550,726 - - 1,550,726 - Spe<alanenmentrecanetln 110,537 - - 110,537 - captalassets (Note d): Nondirreciatle aPtal assets ' 'sad 1,81,968 3,542688 5,761 - Oeyeciatle aptal assets- Net 63,298,781 3,87,852 1,116688 61,862,18 Tda noncurrent assets 65652,853 5,119,000 4,698e88 75,270,761 Total assets 91,221,F5] 5,8]2513 6,832896 101,927,016 11877,938 Hai Current hatelt es Accounts teretes 301?os 50,010 69288 W1206 - Duemdhergoernmentamnits 2,533c17 2,83617 - Accrued add other ladht;n 127,65(3 15933 3,825 147,616 - Deterred revenue (Nde13) 116,375 - 116,375 - Boudanadi So971 136839 - 27,016 - coapendeaaaences-Due within one year 195802 22287 52s6 aad3 - Current Corton of low term ote;gaeons 25,000 635,000 - 160,000 - Total current liaN;t;es 3,89,335 659269 55369 6141 - Nomurrentladl;t;n: series nom restricteaasses 770,000 - - 770,000 - coapendeaaaences-Due;n we than one year 196656 91,171 28,171 305,401 - NetOPEBoteigat;m 1296!5 - - 1296!5 - Lmg4erm dN- Net of<urred portion (Note 6) 5,035302 635,000 - 5,8o,302 2,116,726 Tda noncurrent liateltes 6,131803 516,171 28,171 6,615}48 2,116,726 Total ladl;t;n 9'565338 1,175,110 86563 10,822,321 2,116,726 Net Position Not investment in capital assets 57961290 6249,000 6®8866 W909,178 - restricted- ordnance reylrenents 1,550,724 1,550,724 Unrestricted 25.149,315 448,103 4],3]5 25,61 9,]63212 Total net portion $ 84,661,329 $ 4,697,103 $ 4,716,263 $ 96104,695 $ 9,763212 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 Position Year Ended November 30, 2013 The Notes to Financial Statements are an Integral Part of this Statement. 18 Nmmmjor Enterl+ae Raton Enteryise Fund Fund Tata waterand Enternme Internal Series Sewer Housng GoffCourse Fund Fund (tPenging R emc Customer things 8 29.856699 8 - 8 - 8 29.856699 8 - FinesantlMkiWres 1,937,620 - - 1,937,620 - Seracecmnecoms 33,035 - 33,035 - Greemk¢ - - 1,494,]63 1,494,]63 - Gi fids - - 94520 94520 City <mViWom - V,A8369 Rental lnmmre 1,3511,117 3,000 1,357,11 Other revenue 8813] 325 11269 205,731 Total operatn9 revenue 31,975095 1,351402 I,]G9,r.56 35,039093 V,A8369 Operating Expen.sg Cost ofwmer 9,88,160 - - 9,88,160 - Costofsewagecisp®I Y2,P58}!9 - - Y2,P58j19 - Srstemmsintenanceandcreraton 1,56I,]]6 - - 1,56I,]]6 - Generalandatlmnistrative 1,216,042 - - 1,216,042 Reinsurance charges add dairm - 11,905,826 41are andwages - 405,754 1"038 Sf9,TR - suirties - N,E3! 209353 286,]8] - Otherservicesandcharges 46gi 13M'064 1,31]221 - retroaction 2,674,681 141 127,577 2,919606 Total operating expenses 0.969013 1,tl35,690 I,8l 31,81 11,905,826 Operating lrcune grew) 1,006082 258,752 (115676) 1149,758 1,6Y2511 Nonoperating Revenue (Expenses) Investment Income 51,356 1,600 481 56,437 6518 Interest wronse (04319) (42600) - (426919) Gan on sale of assets 56,026 - 56,026 - Otherroroleratingrevenue - 269512 - 269512 - TmIrorolerating(wromes) revenue (213935) 228512 681 (44942) rims Incame(Icm)-Be(we <mNWtimsantlirznsks ]3251] 481 (116,995) 1,104,816 1,811089 Call Contributions than Ocebpers and Game Gull grants 16,986 - - 116,986 - Caplalcmvithmms 215,001 - - 235,661 - Total wri mnNiwgahs num dselopzrsandgrants 351,967 - - 351987 - TraiIn(NmeS) - - 36.000 38,000 - ChangeinNetPmRian 1,834114 461 (76,935) 1,491003 1,831,089 Net Pmilicn-Be9imirg ofyear 81.A6,]95 4,209,839 4,M258 g2,W3092 8,82,123 Net Pmilicn-Endofyear 584,661,329 $ 4,697,103 $ 4,746,M3 594,104,695 $ 9,70,212 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, 2013 The Notes to Financial Statements are an Integral Part of this Statement. 19 Nonfri attar Enterprise Fund Entertains Fund rated Enternme Internal Serves Water andSewer Hoi CalfCwr Fund Fund C6M1 Rors head Operating rlctirilig temple frown cataners 8 33291,2,18 8 1,354,4t2 8 1.655.554 8 36,3822511 8 12,9285415 Payments to suppliers (25,801 (518,681) OMZ332) (2],929,]11) (12,,1385415) Payments to emprgrees (3,]3],589) (,11],]83) (1,11,90 (,1297,238) Other resilis 21,195 3,965 - 25100 Not adh adamant (used In) operating activities 3,728,871 488,100 (2],]02) 4,1884HB 498,881 Cash Fbxs head Noaagtal Financing Activities- Nettram(ersfiomather Nnd - - 38800 38800 - Cash FN.ws Van Cari and Release] Nnancing Activities Issuance of once 42646 - - 42646 - Receiliofaptalgrants 116,986 - - 116,986 - NetWrmasesofaPialasets (12416,30 (12416,30 PrinciWl and Interest Mid on om4erm dN (1,897,6415) (589,10 - (160,794) SeBleneni recelretlMaPtal Wrpaes - 269.5fa - 2695fa - Netcash esetllnaptalantl rehtedfimncirgatliMies (2,181,951) (239637) - (2024,50 C6M1 Rors Van hassling Activation Interest receivetl on mostnents 51,356 I,602 48I M,tEa 8,518 Net purchases of investment acgnries (756,5711) (81,831) (5,300) (81 (1963,100) Net men mod In Investing acgnries (741214) (79,131) (1,983) (825,54) (195.921) Net Imrease meam e)in Cash and Cash Equhaknts ]96986 81,832 5,3E 88532] O"t6t.,920) Cash and Cash Equivalents - Beginning ofpar 7.687,982 295,8A 32831 8,815,775 3,967,818 and C- Cash and Cash Equiraknis End ar S 8,,186,888 S 3]68]1 S 37AD S 1,1@ 8,98 $ 25@,898 Balance SM1cet C1am8icetion of Cash am Cash Equivalents Cash andinvestments a 1381 a 753,723 a 74,817 a 14,788,88 a 8,,1325'4 Restrctetlessets(Note 7) ij 08 ij 08 Less investments (6935,581) (376,672) (37,424) (7}19,600) (4216,285) rata) adh atlass ecraments $ 8,486,&18 $ 3]68]1 $ 37AD $ 8,9111,10 $ 421628,1 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, 2013 R niliation of Operating Ircane(Loss) to Net Cosh fran Operating Activities Operating lncoare (ton) Pijustments to recmcile operating inconse road to net ash tom operating actiMia: oePeciaga, Changes In assets anchadfities: Re babes Inventor sisterhood otherasets Accounts tenons Accrued and other laroges oefaried revenue Nonni X4jw Entertains Fund Enterpise Fund Taal Enterase Internal Senses Water andSewer Housng GoffCourse Fund Fund 1,00,082 8 258,]'Y 8 (115,076) 8 1109,78 8 1' Y M1 2,610,684 11 11 2,9!9,60 - (20,436) - (52982) (73,024) (619,821) sin) - - sin) (1269.310) 2424 2424 136,596 (9,872) 1,981 him 3200, - 116,on (Bads) Zito 1061rd - (1 3,965 P1113) Net ash aro ided by (usactimi¢)rnti� $ 3,R8,O11 $ 400,18o $ (2),102) $ 4,10,069 S 490,881 During the year ended IN overturn 30, 2013, the City recewd $235,001 of handled Ines reported as cental assets In the Wester and Sever Fund The Notes to Financial Statements are an Integral Part of this Statement. 20 City of Livonia, Michigan Fiduciary Funds Statement of Fiduciary Net Position November 30, 2013 Liabilities Accounts payable Pension and $ 161,626 Due to other governmental units Other 7,898,509 Due to primary government Employee - Duetootherfunds Benefits Agency Funds Assets - 3,549,958 Cash and cash equivalents (Note 3) $ 6,885,737 $ 12,452,618 Investments (Note 3): 8,670,198 $12,565,776 U.S. government securities 14,598,598 - Construction loan 1,750,460 - Collateralized mortgage obligations 11,864,326 - Commonstock 126,084,013 - Common bonds 25,277,449 - Realestateinvestmenttrust 10,316,357 - Foreign bonds 4,487,097 - Mutual funds 106,325,502 - Securities lending collateral po ll - Mutual funds 1,826,515 - Accounts receivable 5,525 - Due from agency funds 842,525 113,158 Total assets 310,264,104 $12,565,776 Liabilities Accounts payable 6,097,280 $ 161,626 Due to other governmental units - 7,898,509 Due to primary government 552,9114 - Duetootherfunds - 955,683 Accrued and other liabilities - 3,549,958 Amounts due to broker under securities lending agreement 2,019,934 - Total liabilities 8,670,198 $12,565,776 Net Position Held in Trust for Pension and Other Employee Benefits $ 301,593,906 The Notes to Financial Statements are an Integral Part of this Statement. City of Livonia, Michigan Fiduciary Funds Statement of Changes in Fiduciary Net Position - Pension and Other Employee Benefits Trust Funds Year Ended November 30, 2013 The Notes to Financial Statements are an Integral Part of this Statement. 22 Pension and Other Employee Benefits Additions Investment income (loss): Interest and dividends $ 7,340,972 Net charge in fair value of investments 44,857,506 Less investment expenses (665,739) Net investment income 51,532,739 Contributions: Employer 8,525,832 Employee 1,047,844 Total contributions 9,573,676 Total additions 61,106,415 Deductions Pension benefit payments 15,226,472 Medical benefit payments 7,164,104 Refunds of contributions 860,931 Administrative expenses 228,349 Total deductions 23,479,856 Net Increase in Net Position Held in Trust 37,626,559 Net Position Held in Trust for Pension and Other Employee Benefits - Beginning of year 263,967,347 Net Position Held in Trust for Pension and Other Employee Benefits - End of year $ 301,593,906 The Notes to Financial Statements are an Integral Part of this Statement. 22 City of Livonia, Michigan Component Units Statement of Net Position November 30, 2013 The Notes to Financial Statements are an Integral Part of this Statement. 23 Economic Plymouth Road Development Development Corporation Authority Total Assets Cash and cash equivalents $ 23,619 $ 464,422 $ 488,041 Accounts receivable - 94,741 94,741 Capital assets (Note 4): Nondepreciable capital assets - 474,448 474,448 Depreciable capital assets- N at 5,671,571 5,671,571 Total assets 23,619 6,705,182 6,728,801 Liabilities Accounts payable - 67,992 67,992 Accrued and other liabilities - 9,972 9,972 Noncurrent liabilities: Due within one year - 475,000 475,000 Due in more than one year 2,150,000 2,150,000 Total liabilities - 2,702,964 2,702,964 Net Position Net investment in capital assets - 3,521,019 3,521,019 Unrestricted 23,619 481,199 504,818 Total net position $ 23,619 $ 4,002,218 $ 4,025,837 The Notes to Financial Statements are an Integral Part of this Statement. 23 City of Livonia, Michigan FunctioWProgmms Eoononrc Development General n- General government Plymouth Road Development AuNonty Community and econonrc development Interest on longterm @bt Total Plymouth Road Devebpment Authonty Totalgovemmental actiHties The Notes to Financial Statements are an Integral Part of this Statement. 24 Program Revenue Operating Capital Grants Charges for Grants and and Expenses Sertices Contnbuhnns Contnbuhnns 1 osa,7s8 - - - 127,920 1,191,678 - - - $ 1,191,6]8 $ $ $ General revenue: Property taxes Interest Total general revenue Charge in Net Position Net Position - Beginning of }ear Net Position - End of year The Notes to Financial Statements are an Integral Part of this Statement. 24 Not (Expense) Rewnue an Changes in Net Posdion Emmmic PNmo Road DewlWment DewlWment Co rahm Mftro Total (1063,756) (1063,756) (127,928) (127,928) - (1 is1s�8) (1 is1s�8) - (1 is1s�8) (1 is1s�8) - 699,5]8 699,5]8 25 ]3 96 25 899,651 899,6/6 25 (292,827) (292,882) 23,594 4,294,20.5 4,317,839 $ 23,619 $ 4,882,218 $ 4,825,837 25 Component Units Statement of Activities Year Ended November 30, 2013 City of Livonia, Michigan Notes to Financial Statements November 30, 2013 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. The District Court Funds of District No. 16 are reported within the Trust and Agency Funds. Although it is legally separate from the City, it is reported as if it were part of the primary government because of the fiduciary relationship it has with the City. 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, 2013 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. Government -wide and Fund Financial Statements The government -wide financial statements (i.e., the statement of net position 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 cortponent 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, 2013 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, 2013 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. 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 concerned. 29 City of Livonia, Michigan Notes to Financial Statements November 30, 2013 Note 1 -Nature of Business and Significant Accounting Policies (Continued) 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, inducing 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 position 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 (i.e., labor and materials to hook up new customers) as operating revenue. The portion intended to recover the cost of the infrastructure is recognized as nonoperating revenue. Operating expenses for proprietary funds include the cost of sales and services, administrative expenses, and depredation on capital assets. All revenue and expenses not meeting this definition are reported as nonoperating revenue and expenses. Property Tax Revenue Properties are assessed as of December 31 and the related property taxes become a lien when billed. These taxes are billed on duly 1 and December 1 ofthe 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 2012 taxable valuation of the City totaled $3.98 billion. Properties in the Plymouth Road Development Authority (PRDA) are assessed a millage of 2.0000 on duly 1. The 2013 taxable valuation of PRDA totaled $491 million. The millages levied by the City and the resulting revenue are as follows: 30 City of Livonia, Michigan Notes to Financial Statements November 30, 2013 Note 1 -Nature of Business and Significant Accounting Policies (Continued) Approximate These amounts are recognized in the respective General, Special Revenue, Debt Service, and Plymouth Road Development Authority 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 2013. Wayne County delinquent real property taxes have been recorded as revenue in the current year. Assets, Liabilities, and Net Position or Equity Bank Deposits and Investments - Cash and cash equivalents include cash on hand, demand deposits, and short-term investments with a maturity of three months or less when acquired. Investments are stated at fair value. Pooled investment income from the Investment Agency Fund is generally allocated to each fund using a weighted average balance for the principal held for each fund on a daily basis. Receivables and Payables - In general, outstanding balances between funds are reported as "due to/from other funds." Any residual balances outstanding between the governmental activities and the business -Type activities are reported in the government - wide financial statements as "internal balances." All trade and property tax receivables are shown as net of allowance for uncollectible amounts. Millage Revenue Purpose of Millage Rate (in millions) Operating purposes 4.0447 $ 15.49 Police and fire 0.8088 3.10 Police and fire and snow 1.2134 4.65 Library 0.8088 3.09 Refuse and recycling 2.8746 10.97 Industrial development 0.0128 0.05 Roads, sidewalks, and trees 0.8893 3.40 Recreation 0.7855 3.01 Public safety 1.7000 6.51 Culture and senior services 0.2500 0.96 Transit and capital improvement 0.5000 1.91 Plymouth Road Development Authority 2.0000 0.88 These amounts are recognized in the respective General, Special Revenue, Debt Service, and Plymouth Road Development Authority 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 2013. Wayne County delinquent real property taxes have been recorded as revenue in the current year. Assets, Liabilities, and Net Position or Equity Bank Deposits and Investments - Cash and cash equivalents include cash on hand, demand deposits, and short-term investments with a maturity of three months or less when acquired. Investments are stated at fair value. Pooled investment income from the Investment Agency Fund is generally allocated to each fund using a weighted average balance for the principal held for each fund on a daily basis. Receivables and Payables - In general, outstanding balances between funds are reported as "due to/from other funds." Any residual balances outstanding between the governmental activities and the business -Type activities are reported in the government - wide financial statements as "internal balances." All trade and property tax receivables are shown as net of allowance for uncollectible amounts. City of Livonia, Michigan Notes to Financial Statements November 30, 2013 Note 1 -Nature of Business and Significant Accounting Policies (Continued) Inventories and Prepaid Items - Inventories are valued at cost, on a first -in, first -out basis. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. Certain payments to vendors reflect costs applicable to future fiscal years and are recorded as prepaid items in both government -wide and fund financial statements. In inventory where real estate is included, 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, which include property, plant, equipment, and infrastructure assets (i.e., 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, 2013 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 position. 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, 2013 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, 2012 $ (1,523,353) Current year building permit revenue 1,801,162 Related expenses: Direct costs $ 1,232,386 Estimated indirect costs 367,030 1,599,416 Current year net revenue 201,746 Cumulative shortfall at November 30, 2013 $ (1,321,607) 34 City of Livonia, Michigan Notes to Financial Statements November 30, 2013 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 347 of 2012 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, 2013, 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 $4 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, 2013 Note 3 - Deposits and Investments (Continued) The City of Livonia Employees' Retirement System and the borrower maintain the right to terminate all securities lending transactions on demand. The cash collateral received on each loan was invested, together with the cash collateral of other lenders, in an investment pool. The average duration of such investment pools as of November 30, 2013 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, 2013, 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, 2013 were $2,019,934 and $1,826,515, 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 $38,767,796 of bankdeposits (certificates of deposit, checking, and savings accounts) that were uninsured and uncollateralized. In addition, the District Court, a component unit, had $1,779,126 of bank deposits (checking and savings accounts, certificates of deposit) 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 as a result of a rise in interest rates. The Citys investment policy does not restrict investment maturities, other than commercial paper which can only be purchased with a 270 -day maturity. At year end, the average maturities of investments areas follows: prIMR aoeernment FarWW 9ro5Y®a 6m19Ymrs Drer 10Ymm Os. weryeemrlea s 63nM s 22,7996 $ 3621 p6 s - comma®Ipapa 131$515 138,515 T✓s s 27,72798 s 2e 1W 5M $ 3641e s C" of lFrons Fpbyss' Rairement Wm FANLe oto5Y®rs filo OYmrs Dwr1RYmm capae[e�s 10170F s 6imm $ 7M79 s 428 M Faelgn Dorms 3190,732 1 1576 1M M5 221751 35.8er wmrbm 7060,907 56,@9 82,591 BWW LLS. Tr�rY�rltla 17MW9 215iM 39i2A 1 213 Cd emllxe4rt eo]mm 0339611 26,1W 1M= ficom Td i s 33,957@6 s 3110613 $ 12126,919 s 1071956/ M$ City of Livonia, Michigan Notes to Financial Statements November 30, 2013 Note 3 - Deposits and Investments (Continued) City on Lome mseee Head" and Disbday earns: Plan air vme May®R into 10 van Dyer notice Corporate bond s 7106,®2 s 2 mr142 s 3275M s 1125501 rorelgnbord 1u2as 515049 Gel 70072 O5. a2em dee 235,1419 65,3s0 2292aa 2,Deep Os. Triyouryseal 2,412,213 351,0P3 de) 006 1,341021 caaserauied anal mlnesaie —3524sai 90,047 734 in 2,700505 Toral s 17270,374 s 3725,714 a 5733,61 s 7"Posi9 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 fol lows: Rating Inveshnent Fair Value Rating Organization Primary Government Bank investment pods $ 1]83,071 Aaa Mootlys U 5. agencies securi0es 26,379,385 Aaa Mootlys Commercial paper 1348,515 P-1 Mootlys Total $ 29,430,971 Fiduciary Funds Corporate bond $ 1371565 AM 68P Corporate bond 3,729,229 M 58P Corporate bond 6,588,]9] A 58P Corporate bond 11248,474 BBB 58P Corporate bond 1246,626 BB 58P Corporate bond 10,200 B 58P Corporate bond 1170,556 NR 58P Foreign bonds 581,820 M 58P Foreign bonds 999,966 A 58P Foreign bonds 21A,563 BBB 58P Foreign bonds 72],]28 BB 58P US. agencies securities 1 G7n/,842 M 58P US. agencies securites 552,142 A 58P US. agencies social 8,289,422 NR 58P US. Treasury securities 4,279,192 NR 58P Cdlateralized mortgage obligations 204,974 AM 58P Cdlateralized mortgage obligations 2,081390 M 58P Cdlateralized mortgage obligations 2,195,282 A 58P Cdlateralized mortgage obligations 1534,639 BBB 58P Cdlateralized mortgage obligations 5,848,041 NR Na Total $ 56,22],4]0 Component Unib - Bank investment pools $ 464,422 Aaa Mootlys krs City of Livonia, Michigan Notes to Financial Statements November 30, 2013 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, Nevennber 30, 2812 Retlasilatims Acclims tell 2013 f nmenNU¢rivilia GpUI mets nd Wing deprecated laic 8 3.851019 8 8 12, 8 - 8 3.863.765 Cmstruclim in ac9res Ao,388 (135632 snxD 252391 suaaal 35,611$07 (135632 83o616 - 35,116,156 Capital mi Wing Rpecialed ll 103150074 - 4389616 - 101,539]2o Ratlrights 8,393601 B7274 8,838875 tailings antl lnnarwenrenta 1W,413,9,15 1133.0]2 60,860 (49,170) 187,618,787 E4iprenlandvahl 31'W'eTio 223255 2,o16MO (189,797) 33,46]658 suddal M'M528o 1355327 6,S432o (1898,967) 26]386968 4ccumilatea Rpecialim: InhslrmWre 43119,752 - 3,37,894 - 46.1]]646 Ratlrights 7,860803 - 57,493 8418296 tailings antl lnnarwenrenta M'no819 - 2,M5]3] (983) 42.835683 E4iprenlandvahl 21,117213 2,40$626 (1032,768) 21.8338]1 suddal 111&8617 8,329750 (1693,751) 118464616 Net aphi sets bung dsPreciaten ygt'3,653 1355327 (1A5143o) M5216)i 148,843344 Net aPta'asob 8 184,938070 8 - 8 (]44,]51) 8 (M5216) $ 183,958588 38 City of Livonia, Michigan Notes to Financial Statements November 30, 2013 Note 4 - Capital Assets (Continued) daze dance oeemeer 1, Novembar 30, 2812 Reclassifiatima Aditima tell 2013 Nes1raes:bPenNNme 8 4]4,448 8 - 8 4]4,448 Captalasetsbeing RpeciateJ- landimprwmren[s 1153322] Qptal assets not berg 15,3322] PicumJateJRpeciatim- landimprwmren[s 9.X6,495 35161 10,031656 Rpeciated 6,456,32 (35161) 5,6]15]1 Net deal assets 8 6,931180 8 Land 8 5.1151'r36 8 8 8 - 8 5,1151"13(1 CmNructim in progress 158,624 (1,35!839) I,0N,196 '@2891 suWNal 6,023868 (1,354839) I,0N,186 - 5,741 Captal assets ming tlepeciated Water and sewer tlutributim 1Ni,3t9,889 '1,3548A 1113288 - 1N,A8,016 Buldrgs and burning Imywemen6 9,483,866 - - - 9483888 XA<M1nery antle4ipneN 2,116}52 - 2,129352 Verses 1']6 - 3EM514 (334324) 1.829]32 Land imprwmren[s 2,916,844 2.916844 suddal 142,534,412 '1,3548A ' 18w (331 14,0]],832 Ac<u and tlsViWtim Watings R,EFb 985 - 2,'x],626 - 65,E4jU and to turnings and Wiltlig im ,616,628 - 186946 - ,M,x£ ande[s Vehicles antle4ipneN 1,848,853 - 88119 1,9289]2 Venids 1,W3,461 - 93583 (Z18,]]9) 1,426,185 Land impwerren[s 2,W8213 53,410 2,611 1,623 suddal 73,536,052 2,919606 (Z18,]N) 3,214879 Net cartel assets being deVeciated 63.938 F68 1,354839 Q42],SM) (63,442) a,HG2,153 Net aptal assets 8 ]5,821,]28 8 - 8 (1348,698) 8 (63,442) 8 3.W3088 dance dame December 1, November 30, 2012 Aditims 2013 CanporeN Ilnils- P[PnoNM1 Rutl OerelagneN slutM1aily Captal assets not bens esVeaateJ-!antl 8 4]4,448 8 - 8 4]4,448 Captalasetsbeing RpeciateJ- landimprwmren[s 1153322] - 15,3322] PicumJateJRpeciatim- landimprwmren[s 9.X6,495 35161 10,031656 Net deal assets being delarmiated 6,456,32 (35161) 5,6]15]1 Net deal assets 8 6,931180 8 (35.161) s 6,'W6,019 39 City of Livonia, Michigan Notes to Financial Statements November 30, 2013 Note 4 - Capital Assets (Continued) Depreciation expense was charged to programs ofthe primarygovernment as follows: Governmental activities: 2,674,684 General government $ 664,687 Public safety 1,524,794 Public works 4,294,566 Recreation and culture 1,935,793 Total governmental activities $ 8,329,750 Business -type activities Water and sewer $ 2,674,684 Golf course 127,577 Newburgh and Silver Village 147,345 Total business-typeactimbes $ 2,949,606 Construction Commitments - The City has active construction projects at year end. At year end, the City's commitments with contractors are as follows: Remaining Spentto Date Commitment Street and sidewalk projects $ 6,777,808 $ 2,950,128 Dain and sewer projects 343,635 2,601,781 Park improvements 160,363 266,590 Equipment 138,078 2,459,184 City hall improvements 318,015 119,090 40 City of Livonia, Michigan Notes to Financial Statements November 30, 2013 Note 5 - Interfund Receivables, Payables, and Transfers Receivable Fund Payable Fund Amount Due to/from Other Funds General Fund Nonmajorgovernmental funds $ 158,814 VEBA Fund Investment Administration Agency Fund 785,721 Employees' Retirement System Fund Investment Administraton Agency Fund 56,804 Court Depository Agency Fund Court Bond Agency Fund 86,452 Court Volunteer Work Program Agency Fund Court Bond Agency Fund 22,346 Court Civil Drug Agency Fund Court Bond Agency Fund 4,380 Total $ 1,114,487 These balances result from the time lag between the dates that goods and services are provided or reimbursable expenditures occur, transactions are recorded in the accounting system, and payments between funds are made. Interfund transfers reported in the fund financial statements are comprised of the foliming: Transfer Out Transfer In Amount General Fund Nonmajorgovernmental funds $ 2,608,926 ' Golf Course Fund 38,000 ' Community Recreation Fund Nonmajor governmental funds 2,669,951 " Nonmajor governmental funds General Fund 40,000 Nonmajorgovernmental funds 2,239,955 •••• Total $ 7,596,832 ` Transfer of unrestdcted resources to 8mnce capital project and general obligation debt service in accomance 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. 41 City of Livonia, Michigan Notes to Financial Statements November 30, 2013 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. Long-term debt activity can be summarized as follows: mturat Principal Me Maturity Beginning Ends Due when Rage= Range= Balance Adtons Recitations Balance One year GovernmentaUmtiuities Building Authority Bonds: 2005 MBA refunding Bmd< Amoumi-$3,730,000 390%- $155,05 - Maturing through 2025 425% Bel $ 2,455,000 $ - $ (275,000)$ 2580,000 $ 275,000 2007 MBA refunding Dome Amounmrrsue-$31,025,000 400%- $135s,000 - Maturing through Z30 as% $1,705,000 28.5 oo - (1240,000) 27305,000 1,355,000 2008 MBA Cmtl Construction Bond Amountofisue-$8500,000 375%- $235,083 - Maturing through 2033 525% 5580,000 7,005,000 - (225,000) 7,660,000 235,000 Total gouemmental activity Rd 39,285,000 - (1740,000) 37,5g[5,000 I,E65,000 Other long-@rm odigatims: General really caina,workere nmpenstion, and heath a�n(Note 8) 2,]64549 - (649W 2,114,721 - IandrJdolethiat<Imure hourly 592,140 254 - 592391 - OPEBreally 2,2]4,767 689,45 2,964,20 Corryemz@dau:ences 9,111 2547,6£1 (3,038,510) 8,625,593 2874,910 Total acB„tismmental SS4.R32898 $323],351 $(5628.3%)$518419V $4,]39,910 42 City of Livonia, Michigan Notes to Financial Statements November 30, 2013 Note 6 - Long-term Debt (Continued) Interest Pnncllnl Rate Maturity Beginning Ending Due Witht Ramses Ranges Balance Acdl Reductions Balance One Year BusiressfIl AmMilies Building Nithorty Bmd: 209 WA Refunding Bmd: Amour ofisue-a3,380o0D Maturing through M15 100% g 000 $?33s,00Ds Weser Supply adwaste.ater - System Bmd: 1150,000 20B Slate of Morgan Clean 99,110 Weser Program Slate ReMvirg Loan: Amoumofisue-&3620OJ0 8125,W0 Maturing through MM 200% 82200W 203 waterSupAyand Waata-,ater system Revenue Bmd: Pmwntofisue-U.M.W0 375%- 53300W - Maturing through MO 5W% $4000W zoos WaterSupAyand Wadmater Sestem Revenue Refundrg Bond: Amountofisue U,110O00 375%- $ 0W - Maturing through Z20 5W% $ DW Less deferred amount m refunding Total dsine�tyge adi ly dN Counlycomratual nNigatims: Slate Rervdving EundLoan- N. Hurm Valley/Rorge Valley WstmaterCmtrd System: Pmmntofmane - 810,02d,7D3 Maturing through 2021 225% 55,000 Other Img4erm odigatims: OPEB really CorrpematedaWemes Total dsine�ty acti lis Total gouemmental and Wsinesty actirlies 2,90,000 - s (a .DOol 90,000 $ 415,000 az,W - az,W - - (315,000) 2,00,O00 330,000 3,535000 - (M0000) 3,M5,000 410,000 (zi,w) (3,1897 (B6.]M) 7,663,359 42,016 (1,11M,103) 6,550,302 ? M5,ODD 170,000 - (20,000) 1150,000 n'000 99,110 30535 T23615 560653 195,032 (226,939) 526,706 223315 8,193,122 2b1,613 (? 002,412) 7,358,693 1,Z33415 W.526,D20 8 3,500 Wd 8 (6,830,378) S59,2D0606 86,193255 eomPonem unn Acmmes 20%Dmdmn Developnem Refunding Bmd: Amoumnfisue-$0p]0WD azs%- $175,ODD- Maturing through Mot 5O0% Y70O00 6320,000s - s (155,000)s 2,5L',000$ 015,000 43 City of Livonia, Michigan Notes to Financial Statements November 30, 2013 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 $6.7 million. During the current year, net revenue of the system was approximately $3.9 million compared to the annual debt requirements of approximately $1.6 million. During fiscal year 2013, the City was approved for a State of Michigan Clean Water Program State Revolving Loan in the amount of $3,620,000. Proceeds from the loan are to provide for the acquisition and construction of additions, extensions, and improvements to the water supply and wastewater system of the City of Livonia. During the year, the City drew down $42,046 of the authorized debt amount The project is still ongoing and the City expects to draw down the full amount before principal payments began in 2015. 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. 44 City of Livonia, Michigan Notes to Financial Statements November 30, 2013 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, 2013, the City set aside $1,550,724 of cash and cash equivalents to comply with these requirements. Note 8 - Risk Management The City is exposed to various risks of loss related to property loss, torts, errors and omissions, and employee injuries (workers' compensation), as well as medical benefits provided to employees. The City has purdiased commercial insurance for medical benefits and workers' compensation and participates in the Michigan Municipal Risk Management Authority (the "Authority'). The Midiigan 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 nsk-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 position. Changes in the estimated liability for the past two fiscal years were as follows: Genera'Labllly wotl:ms'cannm atiw Med lc6ims 2013 2012 2013 2012 2013 2012 intinnledhaNlly B6innngofraf $ 799E40 $ 932914 $ 963,856 $ 1.992927 $ 990,303 $ 793291 intinxleddainm incurred indudM changes In estinrelin 9,61,795 1,93690 185,953 (400535) 12,101105 12,838,596 claimmyrrenls (W.488) (1,315,961) (368,595) (68586) (12,613,103) 1 Eslinn ledIiaNily- End ofyeaf S 65.747 S 790,640 $ 60,674 $ 963806 $ MUM $ 930,303 45 City of Livonia, Michigan Notes to Financial Statements November 30, 2013 Note 9 - Defined Benefit Pension Plan Plan Description - The City of Livonia Employees' Retirement System (the "System") is a single -employer defined benefit pension plan that is administered by the City of Livonia Employees' Retirement System; this plan covers the following employee of the City unless they elected to transfer to the Citys 401(a) defined contribution pension plan (see Note 10): • General employee members - All members hired prior to March 17, 1997 and their beneficiaries • Police lieutenant and sergeant members - All members hired prior to December 8, 1997 and their beneficiaries • Police officer members - All members hired prior to November 24, 1998 and their beneficiaries • Firefighter members - All members hired prior to July 1, 1998 and their beneficiaries The System provides retirement, disability, and death benefits to plan members and their beneficiaries. At November 30, 2012, the date of the most recent actuarial valuation, membership consisted of 588 retirees and beneficiaries currently receiving benefits and terminated employees entitled to benefits but not yet receiving them, and 155 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 referto 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. City of Livonia, Michigan Notes to Financial Statements November 30, 2013 Note 9 - Defined Benefit Pension Plan (Continued) Annual Pension Cost - For the year ended November 30, 2013, the Citys annual pension cost of $2,082,220 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, 2011 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 of4 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 2013 2012 2011 Annual pension cost (APC) $ 2,082,220 $ 747,119 $ - Percentage ofAPC contributed 100% 100 % 100 Net pension obligation $ - $ - $ - Reserves - As of November 30, 2013, the plan's legally required reserves have been fully funded as follows: Legally required reserves: Reserve for employees' contributions $ 10,610,082 Reserve for retired benefit payments 49,390,520 Additional reserves- Reserve for employer contributions 158,367,169 Total reserves $ 218,367,771 Note 10 - Defined Contribution Pension Plan The City established a defined contribution pension plan under Section 401(a) of the Internal Revenue Code for the following employees: • General employee members - All members hired on or after March 17, 1997 • Police lieutenant and sergeant members - All members hired on or after December 8, 1997 • Police officer members - All members hired on or after November 24, 1998 • Firefighter members - All members hired on or after July 1, 1998 In addition, the plan covers all employees electing to transfer from the Citys defined benefit pension plan (see Note 9). 47 City of Livonia, Michigan Notes to Financial Statements November 30, 2013 Note 10 - Defined Contribution Pension Plan (Continued) In a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. As established by the City through collective bargaining agreements, the City contributes a percentage of employees' earnings as follows: Employees Tansferringfromlhe New Employees HirA After the Defiretl Benefit Pension Plan Effective Dales Notm Above Employer Employee Employer Employee Contribution Contnbution Contnbution 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 Citys 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 $2,195,562 during the current year and employees contributed $784,266. 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, 2012, the date of the most recent actuarial valuation, merrbership consisted of 511 active participants, 631 retired participants, and 33 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. m City of Livonia, Michigan Notes to Financial Statements November 30, 2013 Note 11 - Other Postemployment Benefits (Continued) 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, 2013, the City has estimated the cost of providing retiree healthcare benefits through an actuarial valuation as of November 30, 2011. The valuation computes an annual required contribution which represents a level of funding that, if paid on an ongoing basis, is projected to cover normal costs each year and amortize any unfunded actuarial liabilities over a period not to exceed 30 years. This valuation's computed contribution and actual funding are summarized as follows: Annual required contribution (recommended) $ 7,078,024 Interest on the prior years net OPEB obligation 189,910 Less adjustment to the annual required contribution (104,351) Annual OPEB cost 7,163,583 Contributions to VEBA (6,443,612) Increase in net OPEB obligation 719,971 OPEB obligation - Beginning of year 2,373,877 OPEB obligation - End of year $ 3,093,848 The annual OPEB costs, the percentage contributed to the plan, and the net OPEB obligation for the current and two preceding years were as follows: Percentage Fiscal Year Annual OPEB OPEB Costs Net OPEB Ended Costs Contributed Obligation 11/30/11 $ 6,685,510 91.3 % $ 1,631,490 11/30/12 7,318,583 89.9 2,373,877 11/30/13 7,163,583 89.9 3,093,848 49 City of Livonia, Michigan Notes to Financial Statements November 30, 2013 Note 11 - Other Postemployment Benefits (Continued) 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 A nuxl Unfunded Fun@tl Ratio Covered Percentage Valuation Assets' Liability AAL(UML) (Percent) Payroll of Coierecl Date (a) (MIL) (b) (ba) (alb) (c) Paymll 11/30/10 $ 60,361 $ 153,223 $ 92,862 394% $ 34,862 2726% 11/30/11 62,491 156,260 93,769 49.9 32,871 2853 11/30/12 65,667 169,363 103,696 388 30,964 3349 - Valuatl using the tv�year'smoolhetl fuming' market value Actuarial Methods and Assumptions - Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplemental information following the notes to financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing overtime relative to the actuarial accrued liabilities for benefits. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the November 30, 2012 actuarial valuation, the entry age actuarial cost method was used. The actuarial assumptions included an 8 percent investment ate of return (net of administrative expenses), which is a blended ate of the expected long-term investment returns on plan assets and on the employer's own investments calculated based on the funded level of the plan at the valuation date, and an annual healthcare cost rate of 6 percent for fiscal year 2013, 5.5 percent for the following year, and 4.75 percent thereafter. Both rates included a 4 percent inflation assumption. The actuarial value of assets was determined using techniques that spread the effects of short-term volatility in the market value of investments over a five-year period. The UAAL is being amortized as a level percentage of projected payroll on an open basis, over 30 years. 50 City of Livonia, Michigan Notes to Financial Statements November 30, 2013 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 Position Cash and investments Other assets Liabilities Net position Statement of Changes in Net Position Investment income Contributions Benefit payments Other decreases Change in Net Position Note 13 - Deferred Revenue Employees' Retirement System VEBA $223,914,837 $ 85,501,217 56,976 791,074 5,604,042 3,066,156 $218,367,771 $ 83,226,135 $ 37,533,422 $ 13,999,317 2,524,152 7,049,524 (15,226,472) (7,164,104) (1,071,597) (17,683) $ 23,759,505 $ 13,867,054 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 Governmental Funds MhvRies Mivilies Unavailabk Ureametl Total unaon tl Uneame Property tax, sl a al assessment, andotherreceivables $ 1725,478 $ - $ 1725,478 $ - $ - C nnunity recreation center annual passes - 611,635 611,635 611,635 - Interest receivable on sewer connections - - - - 114,375 911 surcharge rownue not received within 68 dan 312,482 - 312,482 - - Grant revenue not received within 68&n 12],87] 12],87] Total $ 2,165,749 $ 611,635 $ 2,771,384 $ 611,635 $ 114,375 City of Livonia, Michigan Notes to Financial Statements November 30, 2013 Note 14 - Upcoming Accounting Pronouncements In March 2012, the GASB issued 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 outflows 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 outflows 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 spring 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 filed claims against the City for flood damage. The City has been served with a class action lawsuit for those daims. The City believes it has governmental immunity from such daims as there was no sewer system defect that would eliminate this immunity. As such, no estimated liability has been recorded related to this event. 52 Required Supplemental Information 53 City of Livonia, Michigan Required Supplemental Information Budgetary Comparison Schedule - General Fund Year Ended November 30, 2013 Expenditures Vanancewith General Government Original Budget Final Budget Actual Final matter Revenue Property Taxes $ 31,199,536 $ 31199536 $ 30,746,396 $ (453,140) Licenses and Permits 500,186 522,686 522,569 37 Business 129,000 Mudd 166,744 37,744 Nonbusiness 1,492,200 1492200 1817,115 324,915 Total licenses and permits 1,621200 1,621,200 1 963,859 362,659 Intergovernmental Revenue 362,981 382961 389,131 (6,150) Stale and local 8,011114 8,011114 8,106,692 95,578 Federal 111,000 111,000 225,097 114,097 Total intergoiemmental revenue 8,122,114 8,122,114 8,331 789 209,675 Charges for Services 3,928,832 3928,832 4,156,372 227,540 I merest and Rents 2,412,797 2,412,797 2,434,168 21,371 Fines and Forfeitures 3,539,000 3,479,000 4,156,967 6]7,96] Miscellaneous Revenue Sale offered assets 50,000 50,000 41,061 (8,939) Other miscellaneous 1377,457 137]457 784,811 (592,646) Total miscellaneous revenue 1,427,457 1427457 825,872 (601,585) Total revenue $ 52250,936 $ 52,190,936 $ 52,635,423 $ 444,197 Expenditures General Government Legislative City Couml $ Wl'8d% $ 331,855 $ 315,356 $ 16,499 City aerk 500,186 522,686 522,569 37 Elections 263,454 240,954 156,533 84,421 Total bmelative 1,895,415 1895,415 994458 100,957 Judicial 3,140,618 3,080,618 3,104,077 (23,459) Executive-Ivlsyors ofice 362,981 382961 389,131 (6,150) Human resources: Laborielations 96,500 92888 30,535 62,265 Civil service 580,573 686901 688,811 90 Total human resources 677,073 701,701 639,346 62,355 54 City of Livonia, Michigan Required Supplemental Information Budgetary Comparison Schedule - General Fund (Continued) Year Ended November 30, 2013 Vanancewith Original Budget Final Budget Pctual Final Bud3et apenditures (Continued) General Gsvernnnent(( nhnned) Finanaal administration: Accounting $ 214,472 $ 214472 $ 174,542 $ 39,930 Assessing 483,821 483,821 454,949 28,872 Finance 261,820 261,820 259,302 2,518 Independent audt 39,571 39571 39,000 511 Board of Review 5,467 5,467 2,818 2,649 Treasurer 509,811 509,811 467,042 42,769 Information systems 539,178 539,178 504,174 35,004 Total finanaal administration 2,054,140 2,054,140 1901827 152,313 other acbvaies: Legal 693,890 693,890 561,612 132,218 Utildies and supplies 603,412 603,412 412,168 130,644 Acquisibon of laud 3,000 1,500 - 1,500 Dues and subscriptions 39,000 40,500 40,041 453 Total other octanes 1339,302 1,339,302 1814,421 264,815 Total general government 8,689,529 8,654,151 8,103,266 550,891 Public Salety Police: Traffic bureau 1210,669 1108,669 1108,239 430 Administration 2,230,519 2,433534 2,433,211 263 Data processing 731,095 528,095 521,395 100 Detective Bureau 2,494,412 2,463,412 2,462,128 684 Automobve service 561,000 553,000 552,985 15 Communicetrons/Records Bureau 129,295 616,295 616,060 235 Crossingguards 60,984 56,984 56,831 141 School liaison 393,185 31],185 316,344 841 Office of emergency preparedness 103,906 151,283 156,194 489 Reserve police 313,411 306,967 306,911 56 Patrol bureau 11,458,628 10,528,120 10,681,232 (159,112) Intelligence bureau 1984,366 1851,368 1856,901 467 Total police 22,211540 21,046,912 21201,691 (154,185) Fire: ABninistration 894,111 892,1]1 882,599 10,112 Firefighbng 11229,953 12,429,953 12,409,191 20,156 Fire prevention 552,020 554,020 553,103 911 Total fire 12,676,144 13,816,144 13845,499 31245 55 City of Livonia, Michigan Cultural: Required Supplemental Information Budgetary Comparison Schedule - General Fund (Continued) Senior services 443,449 Year Ended November 30, 2013 379 Gmenmead and cultural 692,156 691656 Vanancewilh 48,364 Onginal Buciget Final Budget Actual Final Budget apendituma(Continued) Total parks and recreation and cultural 1,541,701 1541]01 1491,607 Public Safety (Continued) Community and Economic DevelopmerR Protective inspection: City Planning Commission 518,305 518,305 485,808 Building Onda Board of Appeals $ 1,080 $ Two $ 118 $ 962 Inspection 1,127,203 1127,203 1894,886 32,317 Total protective inspection 1,128,283 1128,283 1995,004 33,279 Other pmtective- Tmficcommission 2,088 2,088 1817 271 Total Public safety 36,078,655 36,054,027 36,144,017 (89,990) Public Works Public services - Highways, streets, and maintunance: Engineenng 157,332 116907 103,960 12,947 Parks maintunance 1,361,634 1,361,634 1302,4]] 59,157 Administration 4,831 78,256 ]],932 324 Eclopment maintenance (151105) (111105) (1 69339) 58,234 Building maintunance 1,003,892 1,M892 18]],300 592 Sheet lighting 337,416 405,416 297,534 107,882 Maintenance: Streets 261,131 46,131 33,244 12,887 Traffic sermons 21,430 21430 13,037 8393 Forestry 16,291 16,291 1,736 14,555 Total Pudic works 3,012,852 3,012,852 2,]3],881 2]4,9]1 Parks and Recreation and Cultural Parks and recreation: Adininishation 275,128 303,128 302,501 627 Recreation facildies 33,708 24,708 24,292 416 Recreation atuk:tics 97,260 78,260 ]],952 308 Total parks and recreation 406,096 406,096 404,745 1,351 Cultural: Senior services 443,449 443949 443,570 379 Gmenmead and cultural 692,156 691656 643,292 48,364 Total cultural 1,135,60.5 1135,605 1886,862 48,743 Total parks and recreation and cultural 1,541,701 1541]01 1491,607 50,894 Community and Economic DevelopmerR City Planning Commission 518,305 518,305 485,808 32,497 Zoning Board of Appeals 53,038 53838 39,909 13,129 Total community and economic development 571343 571343 525,]1] 45,626 Employee Benefits, Insurance, and Other 2,394,618 2394,618 2,13],23] 257,381 Total ex ndiwos $ 52,288,898 $ 52,228,898 $ 51,139,725 $ 1,088,9]3 City of Livonia, Michigan Required Supplemental Information Budgetary Comparison Schedule - Major Special Revenue Funds Community Recreation Year Ended November 30, 2013 Revenue Property taxes State -shared nown re and grants Charges far services Interest Miscellanrous rein re Total revenue Expenditures Recreation and wlWre Tanskrsoul TolalexpeudRures Net Change in Fund Balance Fund Balance - Beginning of }ear Fund Balance- End of year Varianww4h Ameudetl Annencied Onginal Budjel Budget Achral BuMat $ 3,043,084 $ 3,04$084 $ 3,006,519 $ (36,565) - 321,886 534,525 212,639 3,942,700 3,942,700 4,102,710 160,010 20,000 20,000 4,253 (15,747) 75,700 75,700 84,425 8,725 7,081,484 7,483,370 7,732,432 329,062 4,768,596 5,318,533 4,675,498 643835 2,669,951 2,669,951 2,669,951 $ 3,103,247 7,438,547 7,988,484 7,345,449 643835 (357,063) (585,114) 386,963 972,097 3,46310 3,46310 3,46310 $ 3,103,247 $ 2,875,196 $ 3,817,293 $ 9YL,097 57 City of Livonia, Michigan Required Supplemental Information Budgetary Comparison Schedule - Major Special Revenue Funds Refuse Disposal System Year Ended November 30, 2013 58 Vanancew4h Am ndetl Anna W Onginal Budjel BWWt &Mal Budget Revenue PmNrty taxes $ 11,13],85] $ 11,13],85] $ 10,913,884 $ (163,973) Charges far services 135,500 135,500 170,819 35,319 Interest 25,000 25,000 - (25,000) Mis iiannus revenue 25,000 25,000 10,512 (14,428) Total revenue 11323,351 11323,351 11155,215 (166,082) E aenditunas- Sandabon 11906,011 11,921,507 11649,561 211926 Net Change in Fund Balance (582,654) (596,150) (494,306) 103,844 Fund Balance- Beginning of year 3,348,91] 3,348,91] 3,348,91] Fund Balance -End of year $ 2,766,323 $ 2,]58,82] $ 2,854,6]1 $ 10.1.894 58 City of Livonia, Michigan Required Supplemental Information Pension System Schedule of Funding Progress Year Ended November 30, 2013 The schedule of funding progress is as follows (000s omitted): Valued using the five-}ear"smoothing funding' market value Schedule of Employer Contributions Murarial Valuation Actuanal Percentage Fiscal Year Ensued Date Contribution Contnbutetl Actuanal A nuod $ 392,639 100 11/30N4 UAAL as a - Value of Liadlity(AAD Unfunsuktl Funded Ratio Cesered Percentage of Actuanal Assets' Entry Age AAL(UAAD (Percent) Payroll Levered Valuation Date (a) (b) (ba) (alb) (c) Payroll 11/30/07 $ 215,675 $ 173,486 $ (42,189) 1243 % $ 15,657 (2695)96 11/30/08 210,519 179,096 (31,423) 1175 16,055 (1957) 11/30/09 207,959 190,134 (17,825) 1094 15,8% (1124) 11/30/10 203,934 195,105 (8,829) 1045 13,800 (640) 11/30/11 194,515 196,420 1,906 990 12,455 153 11/30/12 186,245 200,224 13,979 930 11,282 1239 Valued using the five-}ear"smoothing funding' 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, 2012, the latest actuarial valuation, is as follows: Actuarial cost method Murarial Valuation Annual Regiiretl Percentage Fiscal Year Ensued Date Contribution Contnbutetl 11/30N3 11/30/01 $ 392,639 100 11/30N4 11/30/02 - 100 11/30N5 11/30/03 - 100 11/30N6 11/30/04 - 100 11/30W 11/30/05 - 100 11130N8 11/30/06 - 100 11/30N9 11/30/07 - 100 11/30/10 11/30/06 - 100 11/30/11 11/30/09 - 100 11/30/12 11/30/10 ]4],119 100 11/30/13 11/30/11 2,082,220 100 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, 2012, the latest actuarial valuation, is as follows: Actuarial cost method Aggregate (employer contribution) entry age normal (schedule of funding progress) Amortintion method Level percent- Closed Remaining amortintion period Expected future working lifetime Asset valuation methotl Five-year smoothed market Actuarial assumption: Investment rate of return 8.80% Projected salary increases - Including inflation at 4.00 percent 4.00%-11.92% 59 City of Livonia, Michigan Required Supplemental Information Retiree Health and Disability Benefits Plan Schedule of Funding Progress Year Ended November 30, 2013 The schedule of fundi rig progress is as follows (000s omitted): Valued using the tw-year"smoothing fmWi q'market value Schedule of Employer Contributions Aduanal Valuation Annual Required Percentage Fiscal Year Ended Date Cmhibuton- Contributed" 11138N8 11/38N6 $ 6,218,636 100 % 11/38N9 11/38N7 6,197,363 92 11/38/18 11138N8 6,155,752 92 11/38/11 11/38N9 6,639,853 92 11/38/12 11/38/18 7,259,781 91 11/38/13 11/38/11 7,878,824 91 The require l centribution is expmssealto the aty as a percentage of payroll. " The laical }ear eiWed November 38, 2889 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 regiire l 30-yearamortization. Pmvicuslythe GtyumclMor5Byears. The information presented above was determined as part of the actuarial valuations at the dates indicated. Additional information as of November 30, 2012, 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 EM Actuanal Aduanal A¢med UML as a Value of Duality(AAD Untrn a Funded Ratio Covered Percentage of Actuanal Assets' Entry Age AAL(DAAD (Percent) Paymll Covered Valuation Date (a) (b) Mrs) (alta) (c) Paymll 11/38/87 $ 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 11/38/18 68,361 153,223 92,862 394 34,862 2726 11/38/11 62,491 156,268 93,769 468 32,871 2853 11/38/12 65,667 169,363 183,696 388 30,964 334.9 Valued using the tw-year"smoothing fmWi q'market value Schedule of Employer Contributions Aduanal Valuation Annual Required Percentage Fiscal Year Ended Date Cmhibuton- Contributed" 11138N8 11/38N6 $ 6,218,636 100 % 11/38N9 11/38N7 6,197,363 92 11/38/18 11138N8 6,155,752 92 11/38/11 11/38N9 6,639,853 92 11/38/12 11/38/18 7,259,781 91 11/38/13 11/38/11 7,878,824 91 The require l centribution is expmssealto the aty as a percentage of payroll. " The laical }ear eiWed November 38, 2889 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 regiire l 30-yearamortization. Pmvicuslythe GtyumclMor5Byears. The information presented above was determined as part of the actuarial valuations at the dates indicated. Additional information as of November 30, 2012, 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 EM City of Livonia, Michigan Note to Required Supplemental Information Year Ended November 30, 2013 Reconciliation of Budgeted Amounts to Basic Financial Statements - The budgetary conpanson schedules for the General and Major Special Revenue Funds are presented on the same basis of accounting used in preparing the adopted budget. The following is a reconciliation of the budgetary comparison schedule to the governmental funds (statement of revenue, expenditures, and changes in fund balances): Total Total Revenue Expenditures General Fund Amounts per operating statement $ 52,595,423 $ 48,492,799 Operating transfers budgeted as revenue and expenditures 40,060 2,646,926 Amounts per budget statement $ 52,635,423 $ 51,139,725 Total Expenditures Community Recreation Fund Amounts per operating statement $ 4,675,498 Operating transfers budgeted as revenue and expenditures 2,669,951 Amounts per budget statement $ 7.345.449 Budgetary Information - Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America for the General Fund and all special revenue funds except that operating transfers and debt proceeds have been included in the "revenue' and "expenditures" categories, rather than as "other financing sources (uses)." All annual appropriations lapse at fiscal year end; encumbrances are not included as expenditures. During the year, the budget was amended in a legally permissible manner. The City follows these procedures in establishing the budgetary data reflected in the financial statements: 1. On or before September 15, the mayor submits to the City Council a proposed operating budget for the fiscal year commencing the following December 1. The operating budget includes proposed expenditures and the means offinancing them. 2. Public hearings are conducted to obtain citizen comments. 3. As provided for by the City Charter, not later than November 1, the City Council shall adopt the budget through the passage ofa budget resolution and transmit the budget to the mayor. Not later than November 15, the mayor shall either approve or disapprove the adopted budget, in whole or in part. City of Livonia, Michigan Note to Required Supplemental Information (Continued) Year Ended November 30, 2013 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 Pchial Variance Generalgoiemment-Judioal $ 3,888,618 $ 3,184,M $ (23,0.59) General goiemment-Execubw-MayoYs office 382,981 389,131 (6,158) Public satety - Police - Patrol bureau 10,528,128 10,687,232 (159,112) 62 Other Supplemental Information 63 City of Livonia, Michigan v Street Quo wblcsey ndpdmed Mayr Ssem LomlStede Grans Lgmay Tdepnon DMry commdmnon ronenared a n Cap and lrvaLreMe $ 1 $ 1126,m4 $ 3 !aFl $ 137N4 $ 8 TFI $ 1145M $ 25m125 $ 1IlW Bee num Taxes 2195 Spmalaavren6 Due Romdda gwernnneran unl5 741 A)! 2fi5,m 182511 - - - olne 6 13),881 582fi Teal assets $ 2.105 S1,91 as S ye,ois S 13]A34 S ffi 7N S1.167]5a S ZW2106 S1}11,in Dabnmmand Fund eamreen Dabnmea Among payable $ 1m%m $ ymo $ WM $ - $ TO $ m1w $ 12m $ 195¢2 Duewdneerdr - - 1mMe - - - Rmuelanddnelmbmdm - 19W - nsm z25,m - DeFerredrwenue w MM s24C2 Teal lnblllnm lmmy 7M ow,29d - 11w3 WT5 mim 195¢2 Fund gamma emo-aed Streets , rand, andsdwallo 1m,@8 imm - - - - - Rdfudw[elmnenured - - - - - - 191x1 Grace - - 81m - - - - - Gplhllnprwenere - - - - - - - 4mNlgttlry - - - 137W - - - Dbmry - - - - - w6,$A3 - wbucmlaya nunmlaxn - - - - - - 291 me - comrmnlytamn - - - - - - - - corernned Cabeamme ldmoen- n gree Gdlmumeaphll Inprw creno - - - - - - - - cernbuldlrplrrerwereno - - - - - - - - Teal Md balamm 1m,@8 1mm 81 Ni 137W 882&1 85,443 291M 191 m1 Totalndm nandnnd nuances D S 2.10 S1,91 as S y S 13/A81 S ffi 7N S1.167]5a S ZW2106 S1}11,in 64 Other Supplemental Information Combining Balance Sheet Nonmajor Governmental Funds November 30, 2013 5pe ll Rmmerid: Gm15ewu oda ouol npemwim rmnclwl Taal MUM Dmi ye G fl m Nwna Gm W R®6aM ABS MBP 2N7MM MR * Prqe QPb11 QPb11 spwal CwR Buildim Gpea nrt ll Trai Sg lh 84undim Rau ig and Gl r Cacti w InP "l InP "l 0.eawen8 Imprwerte Fw s $ 58,M $ 1418415 $ - $ - $ - $ - $ 455,581 $ 488,318 $ M5 $ X294 $171MM 135 2492 - - - - - - - W49fi 91,912 128jS) $ 662,195 $1,M a $ S S S S 45fi.381 54,891}18 S ijO,714 S 891.994 $19,MM7 $ 24432 $ MM $ - $ - s - $ - $ - s 514W $ 22,24 $ - $ 1Z 183 158814 5316 942 27165 12825 235fi1 M]� 69228 V5 2$745 514W 314151 - 2MM - 1182,6m 452g4m 3151 81 9 39I,fifi1 8P,21 - 44])222 3 W X1443 617 619 619617 fi19fi1] 455,594 619617 1182,G9 455,584 392,6fi1 8P,21 X294 16941fi28 $ 662,195 $I p$ a $ S S S S 455,w4 $ M9Z3a8 S1,2a,214 S M,, $19,m,392 65 City of Livonia, Michigan Sp®m Reveruewnda S sren ode HUNebfeFl Mydla@d Lm S3iale Garb L m Tani NMry CcmnunMlw FOReilur¢ Rete PropemWdd $ s - s $ - $ - $ 30d164 Fedaal revenue 120,73 1131,911 midM 5 eandloal revenue 4527$6 1711 047 1 1270 - Chagerforeei - - - - - 49,913 24x1 Fina' and WelWra' - 61114 ffi]5 Interest 2411 145s m - m9 - 3042 101 Other syeaeinueasrrenN - - - 1,3]3,08 - MlsmIlan®uFr¢ne 555141 lmiGM Kim Tonal revenue 401 m) 171285 1132019 1ID3,99 Yb,@0 348)3 5 8730) 03,514 Expenditures CuneR Wblh:Wity 8)!Idd - - Ti)A 242315 Pod9ewora 2325,195 1,m,m1 - 1235ildd - - - - Comnaiiemnonvc derdoprrent- Rm®tlmandNNe - - - - 183935 35 T4 - - CaplUleNay gm ere Frlrgpal reererrent - - - - - - - - Interertanddiher Tonal expenditures 2 051552),8)1z�4)112��9353314 Ti)A 2345 Excess of Radii OwnjUnM) Eiperprtura 182482 lm (1L, ) n 35115 MM) 2!1,04 365,10 Man Finarcng Sourrm Inds) Transfers in 153,0)3 - - - - - Tramiout 053,0)3) 161503) (400)9) Taal diner nrerclrg (nser)swrm P 513,0)9) 150)3 ( mmo)--- Nat Change In Fund 3adnan 1074332 Had 3)d (1L, ) n 35115 MM) 01,0)4 365,10 Fund-Be]Innlrg diyaar Ywr 924607 1174M 227233 0,]14 0)795 Mm 29,20) P5,332 Fundeamnrea-Endayear 51,999,026 $ 1.3831 $ 31,736 S 131 $ 332,341 $ 0)00213 $ 261,0)3 S 1".%l 66 Other Supplemental Information Combining Statement of Revenue, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds Year Ended November 30, 2013 Speml Ri Reds DM ServiamFwds opal Rg was Munclad 1103M - Troll Budd oralrw3e WfOdume Nunrraiur Cnm dy P®da aM 2315 M19A ID3IM61 AIM1MrTy Pdeds (Sp101 (Sp101 Spinal Co u[ B all dllg dwernei ll Trars Sdrvnlb P4undlg Peruad g and Other Comtu m IWdidial IrrpaerreM 0.ea * IrryrwermJs Funds - - - - $ 6)4412 S 3�94e S - S - $ - S - S $ 12 M $ - S - $ 31 m 2d M 16i$ - 3021M2 275033 1 en 193 96,342 1740,03 346 72710 - - - - - 124M - - Medd - - - - 4033] 3857111 241595 575034 1142253 505 2d M 1035U 9 962 1113 3d im 28,216 19031 - 1101 ON 13W 28(n (578 112) ( 1`01) 841595) (®13381 103035 (12$9n) 803])1 W07 3V30 571503 R129,9d) 9 20297 1 U42) in M1 52)$45 ddb dl3 67 1103M - 4033, 9037® 6)0942 314032 - - - - - - 49581 4413214 2d M 16i$ - 3021M2 275033 1244) 9$033 1740,03 1107111 117595 M33B 1 w 284 0148E 4033] 3857111 241595 ®133B 4®214 2d M 1035U 9,784(Ga n36 (578 112) ( 1`01) 841595) (®13381 9 (12$9n) (1161m) 12ffi7 571503 R129,9d) - 6150]) 3 Ml 241595 ®1338 213G7 24Tna - 7518M (x316) (174331) (m133e) R25,9s) 6150]) 386,1111 --- 241595 ®1338 (9316) 213G7 2333510 (031 338) 523891 V 835 %M (92&) 03M 1idim 12ffia' (2nn 310d® 5T ]82 ifld) 4 392& WdM 23])038 886,034 916716 13flVW $ 619517 $1111 $ $ $ $ $ 45650it $3.577561 S 899.•])1 $ 892.934 $16.9f1520 67 City of Livonia, Michigan 68 Trui Fn6[ aamm anomer EnpMyee Fair wie Mem Funds invention Rational MmR9nlon Special Tint Llagra t System vsen Taal wed wed wed Jo ea Cost end pad eporveleRs s 4W 153 s 131347 s seas 232 s 1233p® s 111(2,724 s 151a3 Ids LLSUS gow. wemrteireevM1la 9251 5i3143i612 145004e CaNeralze 13216 1]55, 1,Sli - - - CdMerallEedrtoRgqeodlp[grs 3524615 114064,013 - - - Comrton4wk 31471W 113 17103i01fi 1252Sr`a13 m Corporate dimpatient 10,165,24 ini 5mfi,fiu 15,316,327 - - - adlenbonds mmo-me 13flEpiren',1NM Z53 330m3k5 15,314352 - - Foreign bonds 31e392 3325572 - - ®6N,fiN nd)m5 d5,695,a18 1f5,P5552 Semi Semdtlm lendllg mlleferelpml —MWnI rated 1824515 1&5S5 - - rec laggards receivable ffi 5145 0�ehoma2enry Nati 5fi8U iam3 R5,R1 812,535 T✓nl edgers 29,721813 81 31051,104 S 1,Ai,069 SS UW'Wd $ 15183 blIINes laggards payable 3501,158 251318 needled $ 161 62% $ - $ - ommrtnroowemrrernlonrt: - - - - Due mprlrmryporemrmm - 54,9x xz,sal - - omled imhm _ _ _ Andorra drcdelmdmae - - - M91 z4s1a zm2,7n 151m Mwrc:anem broker under securities lemlly �r��rc 2,01 2,019,731 Tonal m ® 5iieflri512 3"1533 0370i193 S 1j6i,069 i ZUU2.glS S 15,183 Ne[paRbn HeMl lnTmrtbr ven:Mn nne omen Enpgee eere2m $218E2,T21 583,21415 S381j73,7W 68 Other Supplemental Information Combining Statement of Net Position Fiduciary Funds November 30, 2013 C ww aw Mw Comm%ion undntiM l oe�tm Com Bond vaonee SMrF Comas $ 22]851 $ Fund Fund onAglrg Fund Ta wnd Aman Aman RaMm ay Fund Trial 8 - 8 - S - S S S - S - S 3 27A 3 MM) 3 280.5 $ 6148931 3 1®855 3 318952 3 5W,616 3 1AA8 3 12152.618 $ 111 $ 85.889 $ 2,885 S CMM S 170,,518 S 318,W $ WZ9Q $ 183856 $12$65 69 Pi,A52 2236 dM) 113151 $ 22]851 $ M,M $ 4M $ 6,10,931 $ 1)43,518 S 318,W $ W49U S 183856 S12$65 8 - 8 - S - S S S - S - S - S 161fi5' 61 931 1719518 778358 - - 113158 A M 27A 85, 8H 2815 - - 25,A1 R,M 18{88 35 03 $ 111 $ 85.889 $ 2,885 S CMM S 170,,518 S 318,W $ WZ9Q $ 183856 $12$65 69 City of Livonia, Michigan Other Supplemental Information Combining Statement of Changes in Fiduciary Net Position Fiduciary Funds Year Ended November 30, 2013 Additions Investr lent imeme (loss): Interest and dividends Net change in fair value of investments Less investment related expenses Net investr lent imeme C Mfl mons: Employer Empbyee Toblcontnbu pins Total additions - Net Deductions Pension benefit payments Medrol profit payments Refunds of mntnbu0ons Administrative expenses Totaldeductions Net Increase Net Position Held in Trust for Pension and Other Employee Benefits- Beginning of year Net Position Held in Trust for Pension and Other Employee Benefits- End of year 70 Employees' Retirement System WBA Total $ 5,616365 $ 1730,607 $ 7,340,972 32p51313 12,486,193 44857,586 (528,256) (137,483) (665,739) 37,533,422 13,999,317 51532,739 2,862,228 6,443,612 6525,832 441932 605,912 1047,844 2,524,152 7,049,524 5573,676 40,65574 21048,841 61106,415 15,226,472 - 15,226,472 -7,164,104 7,164,104 860,931 - 860,931 210,666 17,683 228,349 16,298,069 7,181787 23,479,856 23,759,505 13867,054 37,626,559 194608,266 69359,081 263967,347 $ 218,W,M $ W,226,IW $ J81,59J,986 City of Livonia, Michigan Report to the City Council November 30, 2013 City of Livonia, Michigan Contents Introduction 1 Section 1 -Communications Required Under AU 260 2-6 Section II - Other Recommendations and Related Information 7-11 Section III - Legislative and Informational Items 12-19 Attachment 1 20 April 3, 2014 To the Mayor and Members of the City Council City of Livonia, Michigan We have audited the financial statements of the Gty of Livonia, Michigan (the "City') as of and for the year ended November 30, 2013 and have issued our report thereon dated April 3, 2014. Professional standards require that we provide you with the following information related to our audit which is divided into the following sections: Section I - Communications Required Under AU 260 Section 11- Other Recommendations and Related Information 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 the City of Livonia. Section 11 presents recommendations related to internal control, procedures, and other matters 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 to you. 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. 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 Frank W. Audia Maw - Marie L. Stiegel To the Mayor and Members of the City Council April 3, 2014 City of Livonia, Michigan Section I - Communications Required Under AU 260 Our Resoonsibilitv Under U.S. Generally Accented Auditina Standards As stated in our engagement letter dated October 21, 2013, our responsibility, as described by professional standards, is to express an opinion about whether the financial statements prepared by management with your oversight are fairly 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 are obligated to communicate certain matters that come to our attention related to our audit to those responsible for the governance of the City, including compliance with certain provisions of laws, regulations, contracts, grant agreements, certain instances of error or fraud, illegal acts applicable to government agencies, and significant deficiencies in internal control that we identify during our audit. Toward this end, we issued a separate letter dated April 3, 2014 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. 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 regarding planning matters dated January 17, 2014. To the Mayor and Members of the City Council April 3, 2014 City of Livonia, Michigan Significant Audit Findings Quafitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. In accordance with the terms of our engagement letter, we will advise management about the appropriateness of accounting policies and their application. The significant accounting policies used by the City are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during 2013 except for the implementation of GASB No. 63, Financial Reporting of Deferred Outflows of Resoumes, Deferred Inflows of Rewurtes, and Net Positron, and GASB No. 61, The Financial Reporting Entity, Omnibus. There were no significant changes as a result of the implementation of GASB No. 63 other than a terminology change in the financial statements from net assets to net position. In accordance with GASB No. 61, the City included the 16t District Court as a blended component unit and reported their agency funds in the financial statements. The activity within these funds did not represent a material change to the financial statements. Management also evaluated the applicability of GASB No. 60, Accounting and Financial Reporting for Service Concession Arrangements. Based on the construct of agreements involving City facilities operated by third parties, none were deemed to meet the definition of service concession arrangements. We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. There are no significant transactions that have been recognized in the financial statements in a different period than when the transaction occurred. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements are as follows: • Incurred but not reported amounts related to the City's self-insured medical claims, workers' compensation, and general liability • Unbilled water and sewer receivables • The collectibility of any delinquent receivables, including property taxes and utility billing • The landfill closure and postclosure 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 as well as the Seminole Funding Resources, LLC loan participation agreement To the Mayor and Members of the City Council April 3, 2014 City of Livonia, Michigan • The estimate of chargebacks from Wayne County for delinquent real property taxa previously purchased from the City • Reporting of flood damage claims • Relationship of water and sewer units billed to units purchased 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 in conjunction with assessing. 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. 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, 2012 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, 2013 to November30, 2013. Management has reported the Seminole Funding Resources, LLC loan participation agreement based on the value of loan funding provided to date. We obtained the agreement and reviewed the payments as well as the repayment schedule in determining the appropriateness ofthe amount recorded. 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 Citys 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. To the Mayor and Members of the City Council April 3, 2014 City of Livonia, Michigan Management has not made any adjustment for water and sewer units purchased during the 12 - month period ended November 30, 2013. The City's ratio of water and sewer units billed to units purchased changed significantly in the current year compared to historical trends. Management believes that the amounts the City has been invoiced for are accurate and that the Citys contract with its supplier stipulates that due to the fact the billings were actual rather than estimated meter reads, there is no additional liability to be recorded. We have reviewed this matter with management, including analysis from the Department of Public Works and the City's contract with its supplier, 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. 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. 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 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. Management has corrected all other misstatements. Significant Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, business conditions affecting the City, and business plans and strategies that may affect the risks of material misstatement with management each year prior to retention as the City's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition of our retention. Management Representations We have requested certain representations from management that are included in the management representation letter dated April 3, 2014. To the Mayor and Members of the City Council April 3, 2014 City of Livonia, Michigan Management Consultations with OMerindependent 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 or a determination of the type of auditors opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with otheraccountants. To the Mayor and Members of the City Council April 3, 2014 City of Livonia, Michigan Section II - Other Recommendations and Related Information During our audit, we noted areas where we believe there are opportunities for the City to further strengthen internal control or to increase operating efficiencies. Our observations on those areas and other financial matters are presented for your consideration belov: General Fund Like other Metro Detroit local governments, the City has experienced General Fund revenue declines from 2008 to 2011 as a result of significant property tax -related events and changes caused by the recession that impacted the nation and this region. The City has reacted by reducing the City's General Fund expenditures during that time period and by also enacting two new voter -approved millages in 2011. As a result, the City was able to maintain its General Fund fund balance during this very difficult and continually challenging period for local governments. For the year ended November 30, 2013, General Fund revenue exceeded General Fund expenditures by approximately $1.5 million as actual spending in the General Fund was over $1.1 million less than budget and actual revenue in the General Fund was approximately $445,000 greater than budget. This result, along with actions taken previously, is very important to preserving the financial health of the City's General Fund. While the overall economy is improving as reflected by lower unemployment and increased home sale activity, these trends do not directly translate into better financial times for Michigan local units of government and the City of Livonia. 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 State's Constitution to the lesser of inflation or 5 percent. Given the overriding challenges that exist with the Michigan municipal finance model at a macro level which we have discussed a number of times with the City, we continue to encourage all of our governmental dients, including the City of Livonia, to consider these structural limitations as part of its annual budget process. Plymouth Road Development Authority The economic collapse of several years ago and the declining property values also negatively impacted the fiscal health of the Plymouth Road Development Authority (PRDA). The recent enactment of a 2 mill property tax levy on PRDA property (which was levied in 2013) rased approximately $882,000 in property tax revenue for the year ended November 30, 2013. This new millage has currently prevented the General Fund from becoming responsible for payments on the remaining $2.625 million of debt service related to the 2006 Downtown Development Refunding Bond issue. To the Mayor and Members of the City Council April 3, 2014 City of Livonia, Michigan Street Funding The renewal of the road improvement millage in August 2012 has allowed the City to stabilize the fund balance of its road funds (Major Streets, Local Streets, and Roads and Sidewalks Funds). Between 2006 and 2012, the combined fund balance of the three funds declined from approximately $5.5 million to $3.2 million (while annual spending in 2006 was $10.4 million versus $9.4 million in 2012). The fund balance of these three funds increased in 2013 to $4.6 million. The State of Michigan's challenges with road funding are well documented. The level of Act 51 monies from the State of Michigan has not kept pace with the needs of the State's infrastructure system. Even with the Citys dedicated rrillage, it will remain a challenge to continue to maintain and improve the City's road system. Refuse Disposal System Fund This year, the Refuse Fund incurred an anticipated revenue shortfall of nearly $495,000 despite raising the dedicated refuse and recycling millages from 2.3746 mills to 2.8746 mills, leaving only 0.15 mills left before reaching the maximum allowable millage levy of 3.0246. As a result, fund balance was reduced to approximately $2.9 million. This is the fourth consecutive year the Refuse Disposal System Fund has incurred an operating deficit. We are aware that the City's 2013-2014 budget raised the dedicated refuse and recycling millages to 3.0246 mills for 2014, the maximum allowable millage levy. 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. Fiscal year 2013 also required a contribution to the defined benefit pension plan. The Employees' Retirement System recognized contributions from the City totaling $747,119 in 2012 and $2,082,220 in 2013. During fiscal year 2014, the required contribution will be approximately $4.1 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, 2012, according to theactuary, the system's funding remained below 100 percent. Water and Sewer Fund Based on our testing of the City's utility billing system data for the year ended November 30, 2013, units of water sold in fiscal year 2013 are down approximately 13 percent from 2012 as opposed to a 12 percent increase from 2011 to 2012. Despite the reduction in units sold, the City's Water and Sewer Fund reported an operating income and income before capital contributed from developers and grants after having reported losses for the previous four consecutive years. To the Mayor and Members of the City Council April 3, 2014 City of Livonia, Michigan The Water and Sewer Fund revenue bonds include several 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 must 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 City's budget for the Water and Sewer Fund does, in fact, plan to cover all necessary costs. As part of last year's audit, we recommended that certain practices and policies concerning water and sewer billing, including the waiving of interest and penalties, be formalized. This was completed during fiscal year 2013. Retiree Health Care The City has been actuarially funding the growing liability associated with postemployment health care for many years, ahead of the accounting standards and, as a result, has been able to accumulate as of November 30, 2013 approximately $83 million for these costs. According to the most recent actuarial valuation (November 30, 2012), the plan is approximately 39 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, 2013, that liability is now over $129,000 in the Water and Sewer Fund and approximately $3.0 million in the government - wide financial statements. Michigan's Public Pension Systems - Impact of PA 347 of 2012 In December 2012, Governor Rick Snyder signed Public Act 347 of 2012 into law. This legislation makes some significant changes that will impact all public retirement systems in Michigan. Amending Public Act 314 of 1965, these new rules are meant to provide greater flexibility to these systems as to how funds are invested while at the same time imposing additional requirements aimed at transparency and accountability. These changes, which went into effect in March 2013, are summarized below: Changes to Allowable Investment Vehicles Generally, rather than making it more restrictive, the new rules raise the maximums for several investment categories, such as real estate and global equities. As an example, the limitations within the "basket clause" are increasing by 10 percentage points, with most plans now allowed to invest between 15 percent and 20 percent within this section, depending upon plan size. Monitoring under these new limitations will continue to be important. Toward this end, plans will need to ensure their investment consultants, advisors, and managers are "on board" with the charges. To the Mayor and Members of the City Council April 3, 2014 City of Livonia, Michigan Spending Limitations This act would limit the amount of spending on professional training, education, and travel. Under the legislation, the retirement system's board of trustees would be required to adopt an annual budget for professional training and education, including travel. This budget will be capped at the lesser of $150,000 or an amount equal to $12,000 multiplied by the number of board members, with professional training, education, and travel costs not to exceed $30,000 for any one board member. Additional Documentation and Reporting Requirements Additional transparency reporting requirements for retirement systems, investment fiduciaries, and investment service providers are being imposed by this new public act. First, the legislation would require the publication by the plan of a summary annual report (SAR). Although similar reporting requirements exist in the old legislation, this act requires more detailed reporting than what we are used to. The SAR would include several additional disclosures, including the following: names of investment service providers, the system's itemized budget (including professional training, education, and travel), disclosure of the systems investment returns, and numerous pieces of information from the systems most recent annual actuarial valuation report. The system is required to make its SAR available to plan participants and citizens via posting to its website if the system has a website or, alternatively, would require the plan sponsor to post i[ to their website. In addition, investment service providers are now required to give the investment fiduciary a complete written disclosure of all fees or other compensation associated with its relationship with the retirement system. This disclosure would be required both before providing any investment services as well as on an annual ongoing basis. Finally, financial records of the system must be retained fora minimum six-year period. The City's Retirement System and Retiree Health and Disability Benefits Plan System are required under Public Act 347 of 2012 to adopt an annual budget for professional training and education, which has not yet been completed. In addition, the systems currently prepare an annual summary, however, not all of the information required under Public Act 347 was included, nor was the summary made available on the system: websites. Currently, the summary is included in the City's annual report on the website; however, i[ should be a stand- alone item. The systems are working toward becoming compliant with these requirements. There was no financial impact as a result of this noncompliance. 10 To the Mayor and Members of the City Council April 3, 2014 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 beef 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. GASB Statement No. 67, Financial Reporting for Pension Plans, and No. 68, Accounting and Financial Reporting for Pensions, 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. It will be imperative that the City and the Retirement System coordinate with the actuary early on in the process of implementation of these standards to determine a measurement date, agree on a timeframe to receive the needed information from the actuary, agree on any new information that will be needed from the actuary, and ensure the appropriate assumptions are being used. We have a large amount of information available on this topic including webinars, workaids, and checklists that we will provide the City and the Retirement System to assist with this process. 11 To the Mayor and Members of the City Council April 3, 2014 City of Livonia, Michigan Section III - Legislative and Informational Items Revenue Sharing The State's FY 2013-2014 budget agreement brought forth many changes to each of the three categories with the most dramatic change to the newly titled Category 3: Unfunded Accrued Liability Plan. Category 3 is the only remaining deadline for the 2013-2014 State budget year. Below are the new requirements for Category 3: Category 3 - Unfunded Accrued Liability Plan (UALP)- Due Date 6/1/2014 If the most recent audited financial report includes unfunded accrued liabilities for employee pensions or other postemployment benefits, a plan to lower all unfunded accrued liabilities must be completed with the following elements: • Listing of all previous actions taken to reduce unfunded accrued liabilities. This should include an estimated cost savings. • Detailed plan of how the previous actions will continue to be implemented and maintained • A list of additional actions that could be taken • In the event that no actions have been taken to reduce the liabilities, an explanation as to why this is the case and what potential actions could be taken • Note that any actuarial assumption changes and issuance of debt do not qualify as a new proposal • The plan shall be readily available in the derk's office or posted on a publicly accessible website. In addition, the entity should certify with the Department of Treasury that the plan is publicly available. • If there are no unfunded accrued liabilities, the unit must certify to the Department of Treasury by the deadline and explain why none exist. Governor Snyder's 2014-2015 Proposed Budget Plans for Revenue Sharing Governor Snyder's 2014-2015 budget proposal was announced in early February 2014. The proposed budget calls for increases in both Constitutional revenue sharing and EVIP (Economic Vitality Incentive Program) payments. The revenue sharing "pot" for 2014-2015 would total $1.3 billion and would be distributed as follows: Amount Description $764.9 M Constitutionally required payments $271.8 M $169.0M EVIP County revenue sharing $ 42.2 M County incentive program $ 5.0M Competitive grant assistance program 12 To the Mayor and Members of the City Council April 3, 2014 City of Livonia, Michigan The figures above represent a 3 percent increase in the Constitutionally required payments and a 15 percent increase in EVIP. The EVIP provides $243 million for qualified cities, villages, and townships that adopt best practices plus an additional $28.8 million for supplemental payments to all qualified local units of government on a population basis, with high -performing and high - need communities receiving the larger share of the proposed payments. EVIP Best Practices - There are two best practices "paths' a city, village, or township could take to meet the requirements under this standard: (1) If a community so chooses, it could continue to comply with the three existing best practices: accountability and transparency, consolidation of services, and unfunded accrued liability requirements and (2) Under the new budget plan, there would be an alternative second option to the existing EVIP best -practices compliance requirements. A community would have to comply with all four of these new standards below and certify as such by October 1, 2014: Best Practices Under Alternative#2 1. Have an unrestricted fund balance equal to or greater than 6 percent of the most recently adopted General Fund expenditures 2. Make defined benefit pension contributions that are equal to or greater than the annual required contribution amounts determined by actuarial valuation or indicate you have no DB pension plans 3. Pre -fund postemployment benefd plans at levels that are equal to or greater than the annual required contribution amounts determined by the actuarial valuation or indicate you have no DB -type OPEB plans 4. Have a general obligation bond or credit rating that is at least AA- or the equivalent of that rating from two out of three rating agencies (Fitch, Moody's, and S&P) The remaining $28.8 million of proposed EVIP funding would be used for supplemental payments to qualified cities, townships, and villages and would be calculated based on population with entities that meet one or more of the following four criteria receiving a larger share: 1. Meet the new four best practices standards for EVIP 2. Are in the top 25 percent of Michigan communities with populations of at least 5,000 based on violent crime rates 3. Are in the top 25 percent of Michigan communities with populations of at least 20,000 based on unemployment rates 4. Have a deficit elimination plan approved by the Department of Treasury 13 To the Mayor and Members of the City Council April 3, 2014 City of Livonia, Michigan For each criterion a community meets, its population would be adjusted upwards 10 percent for the purpose of calculating its total aid. This methodology would increase an eligible community's overall relative percentage as compared to others and would increase their share of the available funding. It was stated that this methodology is an attempt to reward the communities that are adhering to best practices but also to provide some additional funding for challenged communities. Counties would continue to receive both CIP (incentive -based payments) and revenue-sharing payments. Counties would also have the same alternative "best practice" to that outlined above for cities, townships, and villages. The proposed budget also calls for the 74 eligible counties to receive the maximum allowed funding under the statutory provisions. In response to this proposal, there has been talk that the Senate budget version may continue to appropriate dollars for EVIP but remove the program requirements. The funds budgeted for EVIP in the Senate proposal would move into the revenue-sharing formula. We will continue to keep you updated on any significant changes to this proposal. Personal Property Tax Significant personal property tax legislation is moving quickly through the Legislature. Key provisions of the 10 -bill package include: 1. In August 2014, Michigan voters will be asked to approve a shift in use tax dollars to create a replacement fund. If rejected, the eligible manufacturing exemption described below will not occur, and the $40,000 Small Taxpayer Exemption under PA 48 of 2012 would be effective for just the 2014 tax year (personal property tax would be levied again in 2015 for these small businesses). 2. The much talked -about local essential services assessment (ESA) would be replaced with a State -assessed ESA, which is actually a tax but is being referred to as an assessment simply so that it is recognized as the substitute for the local ESA. Since this is a new tax, the vote in August is technically a Headlee vote. 3. The new bills increase the reirrbursement to local units for lost personal property tax revenue to an amount stated as 100 percent replacement. Two key provisions under the previous personal property tax reform legislation (PA 408 of 2012) remain: 1. Under PA 408 of 2012, businesses with less than $40,000 of combined industrial and commercial personal property TV ($80,000 true cash value) would not have to file PPT returns or pay any personal property tax This provision remains unchanged in these new bills. This exemption begins with the 2014 tax year (December 31, 2013 assessments). 14 To the Mayor and Members of the City Council April 3, 2014 City of Livonia, Michigan 2. "Eligible Manufacturing" property would be exempt from PPT. This would be phased in beginning in 2016 (December 31, 2015 assessment date) with the following provisions: a. Any property purchased subsequent to December 31, 2012 would be exempt immediately. b. Property purchased prior to December 31, 2012 would be reduced to zero by its 10th year of existence (should take nine years). Reimbursement to Communities Under these bills, reimbursements to local units of government would occur in several forms: • Debt Loss - Debt loss is defined as the amount of ad valorem and dedicated taxes that go toward debt that are lost as a result of the personal property tax exemption. During FY 2014-2015 and 2015-2016, revenue distributed by the newly created Local Community Stabilization Authority (LCSA) would equal either a community's debt loss or, in the case of a TIF, the small taxpayer loss. Through the 2015-2016 fiscal year, the Imes are limited to the impact of the $40,000 small business exemption. When the phase-out of Eligible Manufacturing property would begin to occur when tax bilk go out in 2016, the debt loss (and corresponding reimbursement) will increase. Nondebt Loss - Nondebt loss is calculated using the lowest rate of each individual millage levied in the period between 2012 and the year immediately preceding the current year. This will exclude debt millage. The department will compute the loss by conparing the current year taxable value of commercial and industrial property to the taxable value that existed at December 31, 2012 (2013 tax year). In 2016, cities will be reimbursed for nondebt loss for 2014 and 2015 related to the small taxpayer exemption loss. This is for cities only. For 2014 and 2015, townships will be getting reimbursed for the debt loss related to the small business exemption, but not the other losses created by the small business exemption. Starting in 2016, all municipalities are reimbursed for nondebt loss. • Essential Services Reimbursement - Beginning in 2015-2016, the LCSAwould receive a portion of the State's use tax as well as the full essential services assessments in which to reirrburse local units. This assessment is set at a prescribed millage rate based on the acquisition cost of property (depreciation will no longer apply). The ate is set at 2.4 mills for a property's first five years, 1.25 mills for the next five years, and 0.9 mills thereafter. Essential services are defined as ambulance, fire, and police services as well as jail operations. This includes the cost of related pension funding. The losses described by the bill are to be paid in order of this priority: school debt, Intermediate School District losses, school operations, government essential services, debt and TIFA forgone increases, and all other reimbursements. In theory, if them is not enough money available, the lower priority items may not be fully reimbursed. However, that department has indicated that they expect the fund to have enough to cover all reimbursements. 15 To the Mayor and Members of the City Council April 3, 2014 City of Livonia, Michigan • All Other Reimbursements - These reimbursements would also begin in 2015-2016 and initially be proportional to each local unit's share of total "qualified losses," taking into account the losses of all municipalities. Over time, the reimbursement will shift to be based on each entity's share of industrial real property on which exempt eligible manufacturing personal property is located. Beginning in FY 2017-2018, 5 percent of the revenue would be distributed proportionally based on each local unit's share of industrial real property on which exempt personal property is located. The 5 percent portion would increase in 5 percent increments in each subsequent year. By FY 2036-2037, all revenue in the last category of reimbursements would be distributed based on the local unit's share of industrial real property on which exempt eligible manufacturing personal property was located. In short, in the beginning, the reimbursement is closely tied to the amount of lost personal property taxes but, over time, the community's reimbursement will be tied to the level of industrial real property. Pension Obligation Bonds and Other Postemployment Benefits Obligation Bonds Michigan Public Act 329 of 2012 was passed on October 17, 2012 with immediate effect. The act allows communities that 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 benefd 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. • Be assigned a credit rating of AA rating or higher by one of the nationally recognized rating agencies (Standards & Pooes, 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 16 To the Mayor and Members of the City Council April 3, 2014 City of Livonia, Michigan • 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. We are aware that the City has worked with its bond counsel and actuary to evaluate the advantages of this law for the City. IMP -like Requirements Tied to Act 51 Monies (Public Act 506 of 2012) A new reporting requirement by MDOT will be due each September 30 starting in 2014. This requirement is a result of Public Act 506 of 2012 which places EVIP-like limitations on pension and healthcare benefits paid to transportation employees. For the purposes of this act, "transportation employee" means an employee paid in whole or in part through Act 51 revenues or who is engaged in work funded through Act 51 revenues. The act requires local units receiving Act 51 money for the construction or maintenance of roads to comply with one of the following conditions by September 30, 2014: 1. Develop and publicize a transportation employee compensation plan that the local agency intends to implement with any new, modified, or extended employment contracts or agreements. This compensation plan must include all of the following: o For new employee hires, the employer contribution toward retirement plans must be capped at 10 percent of base salary. o Defined benefit pension plans my use a maximum multiplier of 1.5 percent of final average compensation if postemployment health care is provided and 2.25 percent if postemployment health care is not provided. o For defined benefit pension plans, the final average compensation must be calculated using a minimum of three years of compensation and must not include more than 240 hours of paid leave. Overtime hours cannot be used in calculating final average compensation. o The employer contribution for healthcare coverage for new employee hires is capped at 80 percent of the employee's premium or must be competitive with the new state preferred provider organization health plan on a per - employee basis. 17 To the Mayor and Members of the City Council April 3, 2014 City of Livonia, Michigan 2. Comply with Public Act 152 of 2011, which requires public employers to place hard caps on the amounts they contribute toward healthcare costs with an option to elect an 80 percent contribution cap rather than a hard cap. These hard caps are adjusted annually for inflation. The caps in 2012 were $5,000 for single coverage, $11,000 for individual and spousal coverage, and $15,000 for family coverage. See below for a discussion of Senate Bill 542 that proposes changes to the individual and spousal coverage limit from $11,000 to $13,455. 3. Certify that the local road agency does not offer medical benefits to its transportation employees or elected public officials. If a local unit receiving Act 51 money does not certify that it complies with one of the above criteria by September 30 of each year, the Department of Transportation may withhold Act 51 distributions until compliance is established. Act 506 also requires local road agencies to maintain a searchable website (accessible to the public) that includes the current budget, the number of active transportation employees by job classification and wage rate, a financial performance dashboard, the names and contact information ofthe governing body, and a copy of the annual certification provided to MDOT. For our communities that are already complying with the requirements of Public Act 152 of 2011, we do not expect this new legislation to have a significant impact on operations since it essentially just creates a new reporting requirement; however, please contact your audit team if you would like to talk through the details of the act and your community's compliance. Amendments to Public Act 152 of 2011 (Healthcare Limitations) On December 11, 2013, legislation was passed (formerly SB 541-545) in an effort to clarify PA 152 of 2011. These amendments are effective immediately. SB 542 and 543 have perhaps the most direct financial impact on communities. SB 542 - This bill modified the current law which allows employers to opt between a percentage -based cap or a dollar-lirrit (hard cap) on employee health insurance premiums. The bill increases the dollar -cap for individual and spouse coverage from the current limit under PA 152 of $11,000 to $13,455. This applies for all medical plan coverage years beginning in calendar year 2014 according to the current language. The $13,455 cap is increased annually for any changes in medical CPI on an annual basis. Please keep in mind that if your coverage year began after January 1, 2014, this could have resulted in an unanticipated additional cost of $2,455 per employee. Several communities have questioned this aspect but it does not appear to have been addressed in the bill. Currently, PA 152 excludes elected officials from the number of employees in the dollar cap formula This would no longer be the case; they would become part of that calculation. f[7 To the Mayor and Members of the City Council April 3, 2014 City of Livonia, Michigan SB 543 - This bill applies only to those public employers that adopt the 8020 percentage -based option. It clarifies that all public employers (excluding the State) have to have support of a 2/3 vote by the governing body prior to the start of each medical benefit plan coverage year. If this does not occur, the public employer would then have to follow the hard cap requirement. Occupancy Rate - WPW Case Legislation has been introduced (Senate Bill 114) that would increase property tax dollars by preventing permanent reductions in taxable value that would occur under the old act when occupancy rates declined. Communities have seen the detrimental impact of a tax reduction loophole created by a Michigan Supreme Court decision in 2002 (WPW Acquisition Company vs. City of Troy). The prior legislation allowed for an increase and decrease of certain commercial property's taxable value based on their occupancy rates. This seemed to make sense as it reflected ups and downs in the market. However, there was a glitch in actually applying the provisions for an increase. Communities were not being allowed to increase the value beyond the Proposal A limits of 5 percent or the rate of inflation even when occupancy significantly increased. Under the newly proposed act, values can increase beyond the Proposal A limits if a loss had been previously allowed because of a decrease in occupancy rate or if the value of new construction was reduced because of below-market occupancy rate. 19 To the Mayor and Members of the City Council April 3, 2014 City of Livonia, Michigan Attachment 1 ch,,b City a -roma, MidbiWn oPeoo nc Governnxnfal ACEvkks rte 1113012013 SUMMARYOFUNRECOROEO POSSIBLE AOJUSWENTS would betoim bwn )themese vimnpnmesmmisasiremm�o ameninm eeiw PASS® DISCLOSURES: C1 w-te a mar[_ mme � e FAULMLL MISSTATEMENFS:mm At TomplLlarmlrsoirszntamYNio E Y 801 E PM8011 E 260801 JUWMENTLLAUIU TMfNTS'. rreWrere Torg it3 A, do. o 9 peTobl P6nA xm PROIKTEUAUIUtMJnNTS: C1 ry PASS® DISCLOSURES: C1 City of Livonia, Michigan Federal Awards Supplemental Information November 30, 2013 City of Livonia, Michigan Contents Independent Auditors Reports: Report on Schedule of Expenditures of Federal Awards Required by OMB Circular A-133 1 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with GovemmentAuditing Standards 2-3 Report on Compliance for Each Major Federal Program; Report on Internal Control Over Compliance 4-6 Schedule of Expenditures of Federal Awards 7-8 Reconciliation of Basic Financial Statements Federal Revenue with Schedule of Expenditures of Federal Awards 9 Notes to Schedule of Expenditures of Federal Awards 10.11 Schedule of Findings and Questioned Costs 12-14 Report on Schedule of Expenditures of Federal Awards Required by OMB Circular A-133 Independent Auditor's Report To the 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, 2013 and the related notes to the financial statements, which collectively comprise the Citys basic financial statements. We issued our report thereon dated April 3, 2014, which contained an unmodified opinion on 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. Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the basic financial statements. We have not performed any procedures with respect to the audited basic financial statements subsequent to April 3, 2014. 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 as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non -Profit Organizations, 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 underying 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 basic 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. t 24�1 '04L it April 3, 2014 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 Management and the City Council City of Livonia, Michigan We have audited, 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, 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, 2013 and the related notes to the financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated April 3, 2014. Internal Control Over Financial Reporting In planning and performing our audit of the basic financial statements, we considered the City of Livonia, Michigan's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the basic financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the Citys internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies; therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as described in the accompanying schedule of findings and questioned costs, we identified a certain deficiency in internal control that we considerto be a material weakness. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely bass. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity'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 2013-001 to be a material weakness. To Management and the City Council City of Livonia, Michigan Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of Livonia, Michigan's basic financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standard's. City of Livonia, Michigan's Response to Finding 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. The City of Livonia, Michigan's response was not subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on iL Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. AV& 001.4 11 Southfield, Michigan April 3, 2014 Report on Compliance for Each Major Federal Program; Report on Internal Control Over Compliance Independent Auditor's Report To the City Council City of Livonia, Michigan Report on Compliance for Each Major Federal Program We have audited the Oty of Livonia, Michigan's (the "City") compliance 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, 2013. The City of Livonia, Michigan's major federal programs are identified in the summary of auditors results section of the accompanying schedule offindings and questioned costs. Management's Responsibility Management is responsible forcompliance with the requirements of laws, regulations, contracts, and grants applicable to each of its federal programs. Auditors Responsibility Our responsibility is to express an opinion on compliance for each of the City of Livonia, Michigan's major federal programs based on our audit of the types of compliance requirements referred to above. 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 on compliance for each major federal program. However, our audit does not provide a legal determination of the City of Livonia, Michigan's compliance. To the City Council City of Livonia, Michigan Opinion on Each Major Federal Program In our opinion, the City of Livonia, Michigan complied, in all material respects, with the types of 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, 2013. Report on Internal Control Over Compliance The management of the City of Livonia, Michigan is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the City of Livonia., Michigan's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program 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. Our consideration of internal control over compliance was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over compliance 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 discussed below, we identified a certain deficiency in internal control over compliance that we consider to be a material weakness. A deficiency in internal control over compliance exists when the design or operation of acontrol 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 noncompliancewith a type of compliance requirement of a federal program will not be prevented or detected and corrected on a timely basis. We consider the deficiency in internal control over compliance described in the accompanying schedule offndings and questioned costs as Finding 2013-002 to be a material weakness. The City of Livonia, Michigan's response to the internal control over compliance finding identified in our audit is described in the accompanying schedule of findings and questioned costs and corrective action plan. The City of Livonia, Michigan's response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on it. To the City Council City of Livonia, Michigan The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. l Aww, PLLC Southfield, Michigan April 3, 2014 City of Livonia, Michigan Schedule of Expenditures of Federal Awards Year Ended November 30, 2013 See Notes to Schedule of Expenditures of Federal Awards. 7 Passthrough Edgy yearn! Feel Federal Agencyrass-mroum Aoemymrorammle CFMNumeer mediming Number amt Exreencitures US Department o krio,rcure- Earergemy Foodr�sumeamter- Pasetlthrough the Wayne MctmrmidnCommrvrySeMc¢Pgemy- Ererg=. FoodA is®nm Prmmm(Fo Co tin) 10566 N/A $ 55,0.% $ 55,0.% US Department ofHoosingandUrban De elopmd: CDBG Eamemea Grants Closter. Commnity Development Block Grant: Programyear20t3-B05MG2688t3 14218 HIM 326,936 t8l Programyear2012-B05MG268012 14218 HIM 281 291666 Total Community Devel¢nent dockGrant 671,166 Passed through the Morison Slate Honed Deaelopmnt ANhonly N eiglhnhood 4ladlizatim Progaml 14218 NSP-MUD5068 1'v'BW M317 Total mac Edmement crams cluster 49a`FU6 Passed through the Mich can Kale Horsier Deaeloonent A8iM8µ HOMElnvstment PartnershipProgram-Progamyer2W3 142A M2002-5068 271200 965 Pasetlihrwgh Wayne County- HOME ImsLrenl Partnership ProgramHomesCmvrtium Funds 142A HIM 226,BW 16,671 Taal D s. Defamed of Users and Urban Developnea 571 US Departmentofrodee mprogaincid er. Passedmropgh Wayne county fil 20WEdyard Byme Memrollstice Asi9ase Graf 168m Halo MI SU 66276 E6371 Mll) Eduard Byrne Memorial torsos Passional 16766 Dle%-1066 13,986 13,986 2011 Edvartle)lure Memorial torsos Passional lance Dle%-2481 122M Taal Pasedthrwgh Wayne County 61$71 Poseu rmgM1 Mkhiwn Slate Pais: A4RA-2066 Edrartl Byme Menwal lsti<e Frsi9ame Graf 168M SUH9d017 A,BW A,BW M12 Eduard Byrne Memorial torous As¢lame Grad 16138 Dle%-0109 A,BWLBW Taal Posedthrogh Mdiigan Sae Pi 1 W BW Taal Yd. ProyainD sten 161$71 Federal Eculatle Starts shoal 16922 N/A s16E2 s16E2 Dmq Enforcement Atlmnistraion Task Force 16 mdwxn N/A 1/,738 1/,738 11SMacllsDetroit Furtive ABVehenim Task Force 16ndvxn N/A 19,10 19,10 Bulletpm(Vest PaMeMipProgram 16666 N/A 1,1061109 Total D 5. DelsNred of "ties 291218 See Notes to Schedule of Expenditures of Federal Awards. 7 City of Livonia, Michigan Schedule of Expenditures of Federal Awards (Continued) Year Ended November 30, 2013 Federal gency/Pasthrough lgenryNrograir le U s oeradment ofTramfortatim: Nighway Planning a CmstmQion Custer- Passed through the Michigan oeraNmem ofTrampontamn- naw.- wghl Planning and Construction: Fve Mletolaurel Park Noth EastkvndWes@'und Schooluat Total Highway Planning & Cm?mQion Cluster Highway4kly Cluster- Pavedthrmghthe Michiq OMsof Highvay S3kly- Slateand Comrtunity Highs Sakty-Bel Enforcement Tool us. oeleNmentofTraspoemion U s Environmental Protection eager Posetl[r Were Col Congressionally Madded Project River Rots Natural Wet Weather Project- WM1islenrg Wrlom River Rots Natural Wet" eather Project- Rennold; Ravine TotaIUS.Endmnneeddll Protectionski US oemNment ofHomelandfiammy. Aiesioncem Firefighters Grant Pasedthroul the Michigan Captured crSlate force 2011 Erreryency Manaaerrent Perkdrrmnce Grant Pasedthragh Wayne County- Horreland Securty Gram Program (Fact Total US. Geledrrem of HorrelandSecurily Tonal %cera' amid; See Notes to Schedule of Expenditures of Federal Awards. 8 Pserthrough Full Aeard Fri CFonuumher Ideal ying Number Arrant Expenditures 2o205 hall s 5N,om s 53509 1630 Hrill ri 35511 8020 2D60) Pr -13-17 16551 16551 10571 66202 PRO 15 2wDOD 156536 66202 PRO 14 i W,936 i W,936 261 97641 fUplE61 263521 263521 97612 N/A 613211 613211 97Wy N/A 6226 6226 3310 0 $ 1707 City of Livonia, Michigan Reconciliation of Basic Financial Statements Federal Revenue with Schedule of Expenditures of Federal Awards Year Ended November 30, 2013 Revenue from federal sources- As reported on financial statements (includes all funds) $ 1,819,276 Less other nonfederal reimbursements recorded as grants (225,097) Less change in deferred revenue (38,792) Add value of noncash assistance 55,456 Revenue earned in excess of expenditures 22,684 Other differences (1,820) Federal expenditures per the schedule of expenditures of federal awards $ 1,631,707 City of Livonia, Michigan Notes to Schedule of Expenditures of Federal Awards Year Ended November 30, 2013 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, 2013. 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 position, or cash flows, if applicable, of the City of Livonia, Michigan. Pass-through entity identifying numbers are presented where available. Note 2 - Noncash Assistance The value 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, 2013 that is included in 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 10.569 USDA Food Distribution $ 55,456 10 City of Livonia, Michigan Notes to Schedule of Expenditures of Federal Awards Year Ended November 30, 2013 Note 3 - Subrecipient Awards Of the federal expenditures presented in the Schedule, federal awards were provided to subrecipients as follows: Amount CFDA Provided to Federal Program Title Number Subrecipients Community Development Block Grant 14.218 f 14,655 City of Livonia, Michigan Schedule of Findings and Questioned Costs Year Ended November 30, 2013 Section I - Summary of Auditor's Results Name of Federal Program or Cluster Financial Statements CDBG Entitlement Grants Cluster. Type ofauditors report issued: Unmodified Community Development Block Grant Internal control over financial reporting: Neighborhood Stabilization Program -1 • Material weakness(es) identified? X Yes No • Significant deficiency(ies) identified that are Assistance to Firefighters 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? X Yes 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: Unmodified Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of Circular A-133? X Yes 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 66.202 River Rouge National Wet Weather Project 97.044 Assistance to Firefighters Dollar threshold used to distinguish between type A and type B programs: $300,000 Auditee qualified as low-risk auditee? Yes X No 12 City of Livonia, Michigan Schedule of Findings and Questioned Costs (Continued) Year Ended November 30, 2013 Section II -Financial Statement Audit Findings Reference Number 2013-001 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, 2013. Context - Three entries were made to various funds to reflect current year activity. The adjustments affected liabilities, expenses, receivables, and revenue and included: a correction to the incurred but not reported liability related to payments made by the City used in the calculation; increase to the receivable and revenue related to the Economic Vitality Incentive Program portion of state -shared revenue for a payment that was earned but not recorded at year end; and a decrease to liabilities and expenditures as a result of a liability that was recorded twice. Cause - For certain financial statement accounts, the City did not have a system in place to ensure that year-end balances agree to detail and are properly stated. Effect - As a result of these three transactions not being completely recorded, several account balances required adjustments as of November 30, 2013. The financial statements were misstated priortothe 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. Viexa of Responsible Officials and Planned Corrective Actions - The City concurs with the recommendation and will put a process in place to address the issue. 13 City of Livonia, Michigan Schedule of Findings and Questioned Costs (Continued) Year Ended November 30, 2013 Section III - Federal Program Audit Findings Reference Number 2013-002 Program Name - Assistance to Firefighters Grant Program - CFDA #97.044; CDBG Entitlement Grants Cluster - Neighborhood Stabilization Program - CFDA #14.218; River Rouge National Wet Weather Project - CFDA #66.202; Highway Safety Cluster- CFDA #22.205 Pass-through Entity - CFDA #14.218 - Michigan State Housing Development Authority; CFDA #66.202 - Wayne County, CFDA #22.205 - Michigan Office of Highway Safety Finding Type - Material weakness Criteria - A complete and accurate schedule of expenditures of federal awards (SEFA) is necessary to record all program expenditures as required by OMB Circular A-133. Condition - Management's goal is to prepare a complete and accurate SEFA to record all program expenditures in order to comply with the above criteria. Questioned Costs - None Context - The original SEFA provided by the City of Livonia, Michigan as part of the audit did not include the correct amount of expenditures related to the Assistance to Firefighters Grant Program, the Neighborhood Stabilization Program, the River Rouge Wet Weather Program, and the Highway Safety Cluster. Cause and Effect - The City did not have appropriate procedures in place to ensure the completeness of the SEFA. As a result, the SEFA required changes during the course ofthe audit in order to ensure amounts on the SEFA reflected the appropriate activity per the City's general ledger. The incorrect amounts noted on the original SEFA did not impact major program determination. Recommendation - We recommend that the City implement an additional level of review to ensure the completeness ofthe SEFA. Views of Responsible Officials and Planned Corrective Actions- The City concurs with the recommendation and will add another review prior to completing the SEFA. 14