HomeMy WebLinkAbout2015 Annual Financial Report City of Livonia, Michigan
Financial Report
with Supplemental Information
November 30, 2015
City of Livonia, Michigan
Contents
Report Letter 1-3
Management's Discussion and Analysis 4-10
Basic Financial Statements
Government-wide Financial Statements:
Statement of Net Position 11-12
Statement of Activities 13-14
Fund Financial Statements:
Governmental Funds:
Balance Sheet 15
Reconciliation of the Balance Sheet to the Statement
of Net Position 16
Statement of Revenue, Expenditures, and Changes in Fund Balances 17
Reconciliation of the Statement of Revenue, Expenditures, and Changes in
Fund Balances of Governmental Funds to the Statement of Activities 18
Proprietary Funds:
Statement of Net Position 19-20
Statement of Revenue, Expenses, and Changes in Net Position 21
Statement of Cash Flows 22-23
Fiduciary Funds:
Statement of Fiduciary Net Position 24
Statement of Changes in Fiduciary Net Position - Pension and Other
Employee Benefits Trust Funds 25
Component Units:
Statement of Net Position 26
Statement of Activities 27-28
Notes to Financial Statements 29-64
City of Livonia, Michigan
Contents (Continued)
Required Supplemental Information 65
Budgetary Comparison Schedule - General Fund 66-68
Budgetary Comparison Schedule - Refuse Disposal System 69
Pension System - Schedule of Investment Returns 70
Pension System - Schedule of Changes in the City Net Pension Asset and Related
Ratios 71
Pension System - Schedule of City Contributions 72-73
Retiree Health and Disability Benefits Plan - Schedule of Funding Progress 74
Note to Required Supplemental Information 75
Other Supplemental Information 76
Nonmajor Governmental Funds:
Combining Balance Sheet 77-79
Combining Statement of Revenue, Expenditures, and Changes in Fund
Balances 80-82
Fiduciary Funds:
Combining Statement of Net Position 83-84
Combining Statement of Changes in Fiduciary Net Position 85
plante 74Nrt Moran,igh
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P.O.Box 307
moran Southfield 48007
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Independent Auditor's 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 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, 2015 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 based on our audit.We conducted
our audit in accordance with auditing standards generally accepted in the United States of America and
the standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States.Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free 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 significant 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.
• ' „
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I
To the Honorable Mayor and
Members of the City Council
City of Livonia, Michigan
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 aggregate
discretely presented component units, each major fund, and the aggregate remaining fund information of
the City of Livonia, Michigan as of November 30, 2015 and the respective changes in its financial position
and, where applicable, cash flows for the year then ended in accordance with accounting principles
generally accepted in the United States of America.
Emphasis of Matter
As discussed in Note 18 to the basic financial statements, in fiscal year 2015, the City adopted
Governmental Accounting Standards Board (GASB) Statement No. 68,Accounting and Financial Reporting
for Pensions, which establishes accounting and financial reporting standards for defined benefit pensions
provided to the employees of governmental employers through pension plans. Our opinion is not
modified with respect to this matter.
Other Matters
Required Supplemental Information
Accounting principles generally accepted in the United States of America require that the management's
discussion and analysis and required supplemental information, 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.
2
To the Honorable Mayor and
Members of the City Council
City of Livonia, Michigan
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated April 5, 2016 on
our consideration of the City of Livonia, Michigan's internal control over financial reporting and on our
tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements, and other
matters. The purpose of that report is to describe the scope of our testing of internal control over
financial reporting and compliance and the results of that testing, and not to provide an opinion on the
internal control over financial reporting or on compliance. That report is an integral part of an audit
performed in accordance with Government Auditing Standards in considering City of Livonia, Michigan's
internal control over financial reporting and compliance.
AV94,
April 5, 2016
3
City of Livonia, Michigan
Management9s Discussion and Analysis
Overview of the Financial Statements
The City of Livonia, Michigan's (the "City") 2015 annual report consists of four parts: (1)
management's discussion and analysis, (2) basic financial statements, (3) required supplemental
information, and (4) other supplemental information that presents combining statements for
nonmajor governmental funds, proprietary funds, and fiduciary funds. The basic financial
statements include two kinds of statements that present different views of the City. The first
two statements are government-wide financial statements that are intended to provide longer-
term information about the City's overall financial status. The remaining statements are fund
financial statements that focus on individual parts of the City's government, reporting the City's
operations in more detail than the government-wide financial statements.
Government-wide Financial Statements
The government-wide financial statements report information about the City as a whole using
accounting methods similar to those used by private sector companies. The statement of net
position includes all of the City's assets, liabilities, deferred inflows, and deferred outflows. 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/deferred outflows and
liabilities/deferred inflows, 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 Authority. Although legally separate, these "component units"
are important because the City is financially accountable for them, including debt, which is
issued on behalf of the authorities by the City.
4
City of Livonia, Michigan
Management9s Discussion and Analysis (Continued)
Fund Financial Statements
The fund financial statements provide more detailed information about the City's most
significant funds - not the City as a whole. Funds are accounting tools that the City uses to keep
track of specific sources of funding and spending for particular purposes. Some funds are
required by state law and bond covenants. Other funds are established to control and manage
money for particular purposes.
The City has three kinds of funds:
• Governmental Funds - Most of the City's basic services are included in governmental
funds, which focus on how cash and other financial assets that can be converted to cash, flow
in and out, and the balance left at year end that is available for spending. The governmental
fund statements provide a detailed short-term view that helps you determine if there are
more or fewer financial resources available to spend in the near future to finance the City's
programs.
• Proprietary Funds - Services that are intended to be entirely self-supporting by customer
fees are generally reported in proprietary funds. Proprietary fund statements, like
government-wide statements, provide both short- and long-term financial information.
• Fiduciary Funds - The City is responsible for ensuring that the assets in these funds are
used for their intended purposes. We exclude these activities from the government-wide
financial statements because the City cannot use these assets to finance its operations.
5
City of Livonia, Michigan
Management9s 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, 2015 to the prior year.
Summary Condensed Statement of Net Position (in millions of dollars)
Governmental Activities Business-type Activities Total
2015 2014* 2015 2014* 2015 2014*
Assets
Current and other assets $ 72.4 $ 62.0 $ 29.1 $ 32.9 $ 101.5 $ 94.9
Capital assets 187.7 184.9 83.9 78.9 271.6 263.8
Total assets 260.1 246.9 1 13.0 1 11.8 373.1 358.7
Deferred Outflows of Resources
Bond refunding loss being amortized - - 0.1 0.1 0.1 0.1
Deferred outflows related to pensions 9.8 0.7 - 10.5 -
Total deferred outflows 9.8 - 0.8 0.1 10.6 0.1
Liabilities
Current liabilities 6.9 6.7 5.2 5.1 12.1 11.8
Long-term liabilities 50.7 54.5 12.0 14.5 62.7 69.0
Total liabilities 57.6 61.2 17.2 19.6 74.8 80.8
Net Position
Net investment in
capital assets 154.0 149.3 72.6 67.6 226.6 216.9
Restricted 27.9 26.3 1.4 1.0 29.3 27.3
Unrestricted 30.4 10.1 22.6 23.7 53.0 33.8
Total net position $ 212.3 $ 18s.7 $ 96.6 $ 92.3 $ 308.9 $ 278.0
The 2014 figures above have not been restated to reflect the impact of GASB 68, which was implemented in
2015.
City of Livonia - Net Position
The City's assets/deferred outflows exceed its liabilities at the end of the fiscal year by $308.9
million (net position). However, a major portion (73 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 for
future spending.
Unrestricted net position of the City's governmental activities increased from $10.1 million at
November 30, 2014 to $30.4 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. The large increase was due to
the implementation of GASB 68, which is discussed further below.
6
City of Livonia, Michigan
Management9s Discussion and Analysis (Continued)
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.
The following table shows the changes in net position during the current year and as compared
to the prior year:
Summary Condensed Statement of Changes in Net Position (in millions of dollars)
Governmental Activities Business-type Activities Total
2015 2014* 2015 2014* 2015 2014*
Revenue
Program revenue:
Charges for services $ 18.1 $ 17.5 $ 37.0 $ 34.8 $ 55.1 $ 52.3
Operating grants and
contributions 8.8 9.2 - - 8.8 9.2
Capital grants and
contributions 1.6 3.2 3.4 0.4 5.0 3.6
General revenue:
Property taxes 54.0 53.5 - - 54.0 53.5
State-shared revenue 9.0 8.3 - - 9.0 8.3
Rental income and fees 2.7 2.8 - - 2.7 2.8
Interest 0.1 0.3 0.1 0.1 0.2 0.4
Transfer and miscellaneous 0.2 0.3 - 0.1 0.2 0.4
Total revenue 94.5 95.1 40.5 35.4 135.0 130.5
Program Expenses
General government 10.3 9.7 - - 10.3 9.7
Public safety 40.3 37.7 - - 40.3 37.7
Public works 24.5 28.5 - - 24.5 28.5
Community and economic
development 1.1 1.2 - - 1.1 1.2
Recreation and culture 12.4 12.8 - - 12.4 12.8
Interest on long-term debt 1.5 1.6 - - 1.5 1.6
Water and sewer - - 34.6 31.7 34.6 31.7
Golf course - - 1.8 1.8 1.8 1.8
Housing - - 1.2 1.2 1.2 1.2
Total expenses 90.1 91.5 37.6 34.7 127.7 126.2
Extraordinary Item - - - (2.5) - (2.5)
Change in Net Position 4.4 3.6 2.9 (1.8) 7.3 1.8
Net Position-Beginning of year 185.7 182.1 92.3 94.1 278.0 276.2
Impact of GASB Statement No.68** 22.2 - 1.4 - 23.6 -
Net Position-End of year $ 212.3 $ 18S.7 $ 96.6 $ 92.3 $ 308.9 $ 278.0
The 2014 figures above have not been restated to reflect the impact of GASB 68,which was implemented in
2015.
The implementation of GASB 68 required an adjustment to beginning of year net position,which is discussed
in Note 18.
7
City of Livonia, Michigan
Management9s Discussion and Analysis (Continued)
Governmental Activities
In reviewing governmental activities in the above table, it can be noted that revenue decreased
by $.06 million and expenses decreased by $1.4 million. The change in revenue is primarily
attributable to the receipt of one-time supplemental road funding from the State of Michigan.
The significant factors impacting expenses were increased public safety spending on personnel
and equipment and reduced public works expenses due to a one-time settlement cost for a
sanitary sewer overflow event that was expensed in 2014.
Business-type Activities
The City has three business-type activities. These include the water and sewer system, the
operating fund for the Fox Creek, Idyl Wyld, and Whispering Willows golf courses, and
nonfederal senior housing at Silver Village and Newburgh Village.
The following table shows the operating 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
2015 2014 2015 2014 2015 2014
Operating Revenue $ 33,851 $ 31,843 $ 1,747 $ 1,536 $ 1,388 $ 1,389
Operating Expenses3( 4,192) (31,346) (1,790 (1,797 1,169) (1,212
Operating Income (Loss) 1___C341) $ 497C43) $ C261) $ 219 $ 177
The operating income (loss) of the Water and Sewer Fund declined between 2014 and 2015.
Units of water sold actually increased by 2 percent, but water loss increased at a higher
percentage, resulting in the cost of water purchases rising faster than revenue from water sales.
The golf course operating loss also decreased as a result of the better weather conditions in the
2015 golf season compared to 2014, resulting in a 12 percent increase in greens fee revenue.
Capital Assets and Debt Distribution
At the end of fiscal year 2015, the City has $485.2 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 $33.7 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.
8
City of Livonia, Michigan
Management9s Discussion and Analysis (Continued)
Debt related to the water and sewer system totaling $11.3 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 2015 include $9.3 million invested in the
construction of infrastructure and improvements to roads, $1.9 million invested in equipment
and vehicles, and $7.5 million in water and sewer system infrastructure. Significant disposals of
capital assets during fiscal year 2015 included the disposal of vehicles and equipment with a total
cost of$1.9 million.
The City's Funds
The fund financial statements begin on page 15 and provide detailed information on the most
significant governmental funds - not the City as a whole. Funds are created to help manage
money for special purposes, as well as to show accountability for certain activities, such as
special property tax millages. The City's major governmental funds for 2015 include the General
Fund and Refuse Disposal Fund.
The City's governmental funds reported a combined fund balance of $42.7 million. This is an
increase of approximately $3.6 million for the year. The increase was caused primarily by
spending constraint in the General Fund and capital improvement projects which began in 2015
but will not be completed until 2016.
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 $232,000 below the final budget. Shortfalls
were experienced as a result of fewer vacant home inspections ($137,000), reduced transfers
from the Refuse Fund ($400,000), and reduced transfers of 911 fees to the General Fund
($900,000). These shortfalls were offset by better than anticipated revenue for personal
property tax loss reimbursement ($421,000), licenses and permits ($384,000) and court fines
($529,000).
Actual General Fund expenditures were approximately$433,000 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.
9
City of Livonia, Michigan
Management9s 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 75 percent of the City's total
governmental activities revenue. Revenues are beginning to slowly increase after many years of
reductions. Property assessments are projected to increase in fiscal year 2016. State-shared
revenue is projected to increase slightly in fiscal year 2016.
On the expense side, aging infrastructure and delayed capital improvement projects will require
additional funding in coming years. 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 diminished programs and service response
capabilities.
Contacting the City's Financial Management
The financial report is designed to provide our citizens, taxpayers, customers, investors, and
creditors with a general overview of the City's finances and to show the City's accountability for
the money it receives. If you have questions about this report or need additional financial
information, contact the director of finance at the City of Livonia, 33000 Civic Center Drive,
Livonia, Michigan 48154.
10
City of Livonia, Michigan
Statement of Net Position
November 30, 2015
Primary Government
Governmental Business-type Component
Activities Activities Total Units
Assets
Cash and investments $ 47,944,051 $ 11,244,595 $ 59,188,646 $ 495,246
Accounts receivable:
Taxes 193,076 - 193,076 330,717
Customers - 13,449,306 13,449,306 -
Workers'compensation 17,367 - 17,367 -
Due from other governmental units 4,194,283 - 4,194,283 -
VEBA 196,828 - 196,828 -
Other accounts receivable 4,467,428 1,108,460 5,575,888 -
Special assessments 286,021 557,178 843,199 40
Allowance for doubtful accounts - (2,083) (2,083) -
Due from primary government - - - 1 1,1 12
Inventory, prepaid expenditures,and
deposits 6,579,393 768,804 7,348,197 117,468
Restricted assets(Note 7) - 1,352,260 1,352,260 -
Net pension asset(Note 13) 8,464,623 615,878 9,080,501 -
Capital assets(Note 4):
Nondepreciable capital assets 34,931,913 10,71 1,200 45,643,1 13 474,448
Depreciable capital assets-Net 152,805,286 73,201,774 226,007,060 3,136,389
Total assets 260,080,269 1 13,007,372 373,087,641 4,565,420
Deferred Outflows of Resources
Bond refunding loss being amortized - 61,961 61,961 -
Deferred outflows related to pensions 9,825,056 714,862 10,539,918 -
Total deferred outflows of
resources 9,825,056 776,823 10,601,879 -
Liabilities
Accounts payable 3,978,189 1,440,723 5,418,912 278,540
Due to other governmental units 28,458 3,271,619 3,300,077 -
Due to component units 1 1,1 12 - 1 1,1 12 -
Accrued liabilities and other 2,308,956 168,432 2,477,388 10,151
Unearned revenue 565,833 50,636 616,469 -
Bonds and deposits - 242,232 242,232 -
Noncurrent liabilities(Note 6):
Due within one year:
Compensated absences 2,986,918 247,008 3,233,926 -
Current portion of long-term debt 2,075,000 1,140,000 3,215,000 525,000
Due in more than one year:
Compensated absences 9,027,074 254,899 9,281,973 -
Landfill closure and postclosure 633,707 - 633,707 -
Net OPEB obligation 4,377,416 192,082 4,569,498 -
Long-term debt 31,660,000 10,147,585 41,807,585 1,125,000
Total liabilities 57,652,663 17,155,216 74,807,879 1,938,691
The Notes to Financial Statements are an
Integral Part of this Statement. I I
City of Livonia, Michigan
Statement of Net Position (Continued)
November 30, 2015
Primary Government
Governmental Business-type Component
Activities Activities Total Units
Net Position
Net investment in capital assets $ 154,002,199 $ 72,687,350 $ 226,689,549 $ 1,960,837
Restricted for:
Community recreation 3,437,975 - 3,437,975 -
Municipal refuse 3,083,964 - 3,083,964 -
Street, roads,and sidewalks 6,004,310 - 6,004,310 -
Library 1,380,773 - 1,380,773 -
Public safety communication 4,308,266 - 4,308,266 -
Grants 48,894 - 48,894 -
Street lighting 273,513 - 273,513 -
Adjudicated forfeitures 1,799,639 - 1,799,639 -
Community transit 634,590 - 634,590 -
Ordinance requirements - 1,352,260 1,352,260 -
Capital improvements 6,900,468 - 6,900,468 -
Unrestricted 30,378,071 22,589,369 52,967,440 665,892
Total net position $212,252,662 $ 96,628,979 $308,881,641 $ 2,626,729
The Notes to Financial Statements are an
Integral Part of this Statement. 12
City of Livonia, Michigan
Program Revenue
Operating Grants Capital Grants
Charges for and and
Expenses Services Contributions Contributions
Functions/Programs
Primary government:
Governmental activities:
General government $ 10,260,100 $ 3,397,095 $ - $
Public safety 40,299,715 8,582,862 660,013 -
Public works 24,483,198 1,497,781 7,473,206 1,442,656
Community and economic development 1,136,1 16 281,003 482,896 -
Recreation and culture 12,387,389 4,372,047 204,716 1 13,828
Interest on long-term debt 1,528,021 - - -
Total governmental activities 90,094,539 18,130,788 8,820,831 1,556,484
Business-type activities:
Water and sewer 34,647,109 33,850,898 - 3,420,897
Housing 1,176,791 1,388,509 -
Golf course 1,790,035 1,747,294 -
Total business-type activities 37,613,935 36,986,701 3,420,897
Total primary government $ 127,708,474 $ 55,1 17,489 $ 8,820,831 $ 4,977,381
Component units:
Plymouth Road Development Authority $ 2,063,032 $ - $ - $ -
Brownfield Redevelopment Authority 246,795
Total component units $ 2,309,827 $ - $ - $ -
General revenue:
Property taxes
State-shared revenue
Investment income
Cable franchise fees
Other miscellaneous income
Gain on sale of fixed assets
Total general revenue
Transfers
Change in Net Position
Net Position-Beginning of year-As restated(Note 18)
Net Position-End of year
The Notes to Financial Statements are an
Integral Part of this Statement. 13
Statement of Activities
Year Ended November 30, 2015
Net(Expense) Revenue and Changes in Net Position
Primary Government
Governmental Business-type Component
Activities Activities Total Units
$ (6,863,005) $ $ (6,863,005) $
(31,056,840) (31,056,840)
(14,069,555) (14,069,555)
(372,217) (372,217)
(7,696,798) (7,696,798)
(1,528,021) (1,528,021)
(61,586,436) (61,586,436)
2,624,686 2,624,686
211,718 211,718
(42,741) (42,741)
2,793,663 2,793,663
(61,586,436) 2,793,663 (58,792,773)
- (2,063,032)
(246,795)
- - (2,309,827)
54,009,902 54,009,902 1,144,262
8,977,884 - 8,977,884 -
84,844 53,612 138,456 285
2,703,920 - 2,703,920 -
224,663 - 224,663
- 9,625 9,625 -
66,001,213 63,237 66,064,450 1,144,547
(52,600) 52,600 - -
4,362,177 2,909,500 7,271,677 (1,165,280)
207,890,485 93,719,479 301,609,964 3,792,009
$ 212,252,662 $ 96,628,979 $ 308,881,641 $ 2,626,729
14
City of Livonia, Michigan
Governmental Funds
Balance Sheet
November 30, 2015
Major Special
Revenue Fund
Refuse Disposal
General Fund System Nonmajor Funds Total
Assets
Cash and investments $ 10,915,675 $ 5,188,843 $ 27,471,198 $ 43,575,716
Receivables:
Property taxes receivable 110,122 39,913 43,041 193,076
Special assessments receivable - - 286,021 286,021
Workers'compensation 17,367 - 17,367
Due from other governmental units 2,096,932 - 2,097,351 4,194,283
VEBA 196,828 - - 196,828
Other 2,282,631 75,967 475,672 2,834,270
Due from other funds(Note 5) 105,567 - - 105,567
Inventory,prepaid expenses,and deposits 310,911 - 727,938 1,038,849
Total assets $ 16,036,033 $ 5,304,723 $ 31,101,221 $ 52,441,977
Liabilities
Accounts payable $ 1,370,332 $ 1,544,825 $ 1,063,032 $ 3,978,189
Due to other governmental units - - 28,458 28,458
Due to component units(Note 5) 1 1,1 12 - - 1 1,1 12
Due to other funds(Note 5) - - 105,567 105,567
Accrued and other liabilities 1,925,456 42,227 219,217 2,186,900
Unearned revenue - - 565,833 565,833
Total liabilities 3,306,900 1,587,052 1,982,107 6,876,059
Deferred Inflows of Resources-Unavailable revenue 1,333,328 38,982 1,494,396 2,866,706
Fund Balances
Nonspendable-Inventory and prepaid assets 310,91 1 - 727,938 1,038,849
Restricted:
Streets.roads,and sidewalks - - 5,224,806 5,224,806
Adjudicated forfeitures - - 1,799,639 1,799,639
Capital improvements - - 5,916,510 5,916,510
Community recreation - - 3,426,908 3,426,908
Municipal refuse - 3,678,689 - 3,678,689
Street lighting - - 273,513 273,513
Library - - 1,369,377 1,369,377
Public safety communication - - 3,985,949 3,985,949
Community transit - - 627,545 627,545
Committed-Cable access television - - 1,136,024 1,136,024
Assigned:
Capital improvements - - 1,767,261 1,767,261
Golf course capital improvements 474,077 474,077
Court building improvements - 953,324 953,324
Unassigned 11,084,894 - (58,153) 11,026,741
Total fund balances 11,395,805 3,678,689 27,624,718 42,699,212
Total liabilities,deferred inflows of
resources,and fund balances $ 16,036,033 $ 5,304,723 $ 31,101,221 $ 52,441,977
The Notes to Financial Statements are an
Integral Part of this Statement. 15
City of Livonia, Michigan
Governmental Funds
Reconciliation of the Balance Sheet to the Statement
of Net Position
November 30, 2015
Total Fund Balances of Governmental Funds $ 42,699,212
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 187,737,199
Certain receivables are expected to be collected over several years,
including special assessments, delinquent personal property
taxes, and grants 1,633,158
Net pension asset is not a financial resource in the current year and
is not reported in the funds 8,464,623
Certain changes in pension plan net position are reported as
deferred outflows of resources in the statement of net position,
but are not reported in the funds 9,825,056
Grants and other receivables that are collected after year end, such
that they are not available to pay bills outstanding as of year end,
are not recognized in the funds 2,866,706
The liability for compensated absences is recorded when incurred in
the statement of activities (8,961,651)
Landfill closure and postclosure liability is not due and payable in the
current period and is not reported in the funds (633,707)
Long-term liabilities are not due and payable in the current period
and are not reported in the funds (33,735,000)
Net OPEB obligation is not due and payable in the current period
and is not reported in the funds (4,377,416)
Accrued interest payable (122,053)
The Internal Service Fund (self-insurance) is included as part of the
governmental activities 6,856,535
Net Position of Governmental Activities $ 212,252,662
The Notes to Financial Statements are an
Integral Part of this Statement. 16
City of Livonia, Michigan
Governmental Funds
Statement of Revenue, Expenditures, and Changes in Fund Balances
Year Ended November 30, 2015
Major Special
Revenue Fund
Total
Refuse Disposal Governmental
General Fund System Nonmajor Funds Funds
Revenue
Property taxes $ 30,983,776 $ 11,633,491 $ 11,485,432 $ 54,102,699
Licenses and permits 2,348,818 - - 2,348,818
Federal revenue 118,892 - 1,141,894 1,260,786
State and local revenue 8,690,011 150,584 7,830,167 16,670,762
Charges for services 3,719,676 141,340 4,792,223 8,653,239
Fines and forfeitures 4,527,404 - 1,271,523 5,798,927
Interest 35,259 3,731 34,476 73,466
Other revenue:
Special assessments - - 1,442,906 1,442,906
Other miscellaneous income 3,243,276 19,305 667,714 3,930,295
Total revenue 53,667,112 11,948,451 28,666,335 94,281,898
Expenditures
Current:
General government 8,555,153 - - 8,555,153
Public safety 34,896,258 - 688,799 35,585,057
Public works 3,429,653 11,272,735 13,553,836 28,256,224
Community and economic development 545,637 - 590,479 1,136,1 16
Recreation and culture 1,521,366 - 8,823,608 10,344,974
Employee benefits,insurance,and other I,1 15,547 - - I,1 15,547
Capital outlay - - 2,130,857 2,130,857
Debt service - - 3,447,758 3,447,758
Total expenditures 50,063,614 11,272,735 29,235,337 90,571,686
Excess of Revenue Over(Under)Expenditures 3,603,498 675,716 (569,002) 3,710,212
Other Financing(Uses)Sources
Face value of debt issue - - 2,050,000 2,050,000
Transfers in(Note 5) - - 9,541,036 9,541,036
Transfers out(Note 5) (3,558,919) - (6,034,717) (9,593,636)
Payment to bond refunding escrow agent - - (2,082,610) (2,082,610)
Total other financing(uses)sources (3,558,919) - 3,473,709 (85,210)
Net Change in Fund Balances 44,579 675,716 2,904,707 3,625,002
Fund Balances-Beginning of year 11,351,226 3,002,973 24,720,011 39,074,210
Fund Balances-End of year $ 11,395,805 $ 3,678,689 $ 27,624,718 $ 42,699,212
The Notes to Financial Statements are an
Integral Part of this Statement. 17
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, 2015
Net Change in Fund Balances -Total Governmental Funds $ 3,625,002
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 11,494,180
Depreciation expense (8,590,344)
Loss on disposal of fixed assets (1 15,439)
Certain revenue reported in the statement of activities is recorded in the
governmental funds as unavailable revenue 66,626
Decrease in net pension asset and related deferred outflows related to
pensions reported in the statement of activities does not require the
use of current resources, and therefore, is not reported in the fund
statements until it comes due for payment (3,875,417)
Bond proceeds provide financial resources to governmental funds, but
issuing debt increases long-term liabilities in the statement of net
position (2,050,000)
Repayment of bond principal is an expenditure in the governmental funds,
but not in the statement of activities (where it reduces long-term debt) 3,995,000
Interest expense is recorded when incurred in the statement of activities 7,347
Net decrease in accumulated employee sick and vacation pay is recorded
when incurred in the statement of activities 167,264
Increase in landfill liability is recorded when incurred in the statement of
activities (21,324)
Increase in net OPEB obligation is recorded when incurred in the
statement of activities (657,276)
Internal service funds are included as part of governmental activities 316,558
Change in Net Position of Governmental Activities $ 4,362,177
The Notes to Financial Statements are an
Integral Part of this Statement. 18
City of Livonia, Michigan
Proprietary Funds
Statement of Net Position
November 30, 2015
Major Enterprise Governmental
Funds Nonmajor Enterprise Funds Activities
Total Enterprise Internal Service
Water and Sewer Housing Golf Course Funds Fund
Assets
Current assets:
Cash and investments $ 10,456,996 $ 529,915 $ 257,684 $ 11,244,595 $ 4,368,335
Accounts receivable:
Customers 13,449,306 - - 13,449,306 -
Other 1,093,880 2,765 11,815 1,108,460 -
Allowance for doubtful accounts - - (2,083) (2,083) -
Inventory,prepaid expenses,and
deposits 768,804 - - 768,804 5,540,544
Total current assets 25,768,986 532,680 267,416 26,569,082 9,908,879
Noncurrent assets:
Restricted assets(Note 7) 1,352,260 - - 1,352,260 -
Special assessment receivables 557,178 - 557,178
Net pension asset(Note 13) 558,244 57,634 - 615,878 -
Capital assets(Note 4):
Nondepreciable capital assets 5,544,914 1,583,798 3,582,488 10,71 1,200 -
Depreciable capital assets-Net 69,028,409 3,285,409 887,956 73,201,774 -
Total noncurrent
assets 77,041,005 4,926,841 4,470,444 86,438,290 -
Total assets 102,809,991 5,459,521 4,737,860 113,007,372 9,908,879
Deferred Outflows of Resources
Bond refunding loss being amortized 61,961 - - 61,961 -
Deferred outflows related to pensions 647,965 66,897 714,862
Total deferred
outflows 709,926 66,897 - 776,823 -
Liabilities
Current liabilities:
Accounts payable 1,327,337 32,382 81,004 1,440,723 -
Due to other governmental units 3,271,619 - - 3,271,619 -
Accrued liabilities and other 147,740 16,253 4,439 168,432 -
Unearned revenue 50,636 - - 50,636
Bonds and deposits 96,895 145,337 - 242,232
Compensated absences-Due
within one year 218,080 23,244 5,684 247,008 -
Current portion of Tong-term debt 1,140,000 - - 1,140,000 -
Total current liabilities 6,252,307 217,216 91,127 6,560,650 -
Noncurrent liabilities:
Compensated absences-Due in
more than one year 145,578 80,463 28,858 254,899
Net OPEB obligation 192,082 - - 192,082 -
Long-term debt-Net of current
portion(Note 6) 10,147,585 - - 10,147,585 3,052,344
Total noncurrent
liabilities 10,485,245 80,463 28,858 10,594,566 3,052,344
Total liabilities 16,737,552 297,679 119,985 17,155,216 3,052,344
The Notes to Financial Statements are an
Integral Part of this Statement. 19
City of Livonia, Michigan
Proprietary Funds
Statement of Net Position (Continued)
November 30, 2015
Major Enterprise Governmental
Funds Nonmajor Enterprise Funds Activities
Total Enterprise Internal Service
Water and Sewer Housing Golf Course Funds Fund
Net Position
Net investment in capital assets $ 63,347,699 $ 4,869,207 $ 4,470,444 $ 72,687,350 $ -
Restricted-Ordinance requirements 1,352,260 - - 1,352,260 -
Unrestricted 22,082,406 359,532 147,431 22,589,369 6,856,535
Total net position $ 86,782,365 $ 5,228,739 $ 4,617,875 $ 96,628,979 $ 6,856,535
The Notes to Financial Statements are an
Integral Part of this Statement. 20
City of Livonia, Michigan
Proprietary Funds
Statement of Revenue, Expenses, and Changes in Net Position
Year Ended November 30, 2015
Major Enterprise
Fund Nonmajor Enterprise Funds
Total Enterprise Internal Service
Water and Sewer Housing Golf Course Funds Fund
Operating Revenue
Customer billings $ 31,936,575 $ $ $ 31,936,575 $
Fines and forfeitures 1,833,888 1,833,888
Service connections 31,413 31,413
Greens fees - 1,529,553 1,529,553
Golf cart fees 118,000 118,000 -
City contributions - - 11,235,458
Rental income - 1,388,349 4,000 1,392,349 -
Other revenue 49,022 160 95,741 144,923 -
Total operating revenue 33,850,898 1,388,509 1,747,294 36,986,701 11,235,458
Operating Expenses
Cost of water 11,582,736 - - 11,582,736 -
Cost of sewage disposal 14,052,103 14,052,103
System maintenance and operation 5,020,659 5,020,659
General and administrative 725,043 725,043 -
Reinsurance charges and claims - - - - 10,930,028
Salaries and wages 461,643 150,239 611,882 -
Supplies 22,812 209,937 232,749
Other services and charges - 524,223 1,327,306 1,851,529
Depreciation 2,811,061 160,813 102,553 3,074,427 -
Total operating expenses 34,191,602 1,169,491 1,790,035 37,151,128 10,930,028
Operating(Loss)Income (340,704) 219,018 (42,741) (164,427) 305,430
Nonoperating Revenue(Expenses)
Investment income(loss) 53,031 1,046 (465) 53,612 11,128
Interest expense (455,507) (7,300) - (462,807) -
Gain on sale of assets 300 8,425 900 9,625 -
Total nonoperating
(expenses)revenue (402,176) 2,171 435 (399,570) 11,128
(Loss)Income-Before contributions and
transfers (742,880) 221,189 (42,306) (563,997) 316,558
Capital Contributions from Developers and
Grants
Capital grants 2,605,946 - 2,605,946 -
Special assessments 454,715 454,715
Capital contributions 360,236 360,236
Total capital contributions
from developers and
grants 3,420,897 - 3,420,897
Transfers In(Note 5) - - 52,600 52,600 -
Change in Net Position 2,678,017 221,189 10,294 2,909,500 316,558
Net Position-Beginning of year-As restated
(Note 18) 84,104,348 5,007,550 4,607,581 93,719,479 6,539,977
Net Position-End of year $ 86,782,365 $ 5,228,739 $ 4,617,875 $ 96,628,979 $ 6,856,535
The Notes to Financial Statements are an
Integral Part of this Statement. 21
City of Livonia, Michigan
Proprietary Funds
Statement of Cash Flows
Year Ended November 30, 2015
Major Enterprise
Fund Nonmajor Enterprise Funds
Total Enterprise Internal Service
Water and Sewer Housing Golf Course Funds Fund
Cash Flows from Operating Activities
Receipts from customers $ 32,951,600 $ 1,388,374 $ 1,747,275 $ 36,087,249 $ 11,882,057
Payments to suppliers (27,068,259) (542,693) (1,494,613) (29,105,565) (12,603,058)
Payments to employees (3,859,692) (451,095) (150,024) (4,460,811) -
Claims paid (2,500,000) - - (2,500,000) (3,000,000)
Other payments (419,896) - - (419,896) -
Net cash(used in)provided by
operating activities (896,247) 394,586 102,638 (399,023) (3,721,001)
Cash Flows from Noncapital Financing
Activities-Net transfers from other funds - - 52,600 52,600
Cash Flows from Capital and Related
Financing Activities
Issuance of bonds 5,701,019 - - 5,701,019 -
Receipt of capital grants 2,605,946 - - 2,605,946 -
Special assessment collections 7,690 - - 7,690
Proceeds from sales of capital assets 300 8,425 901 9,626
Net purchases of capital assets (8,230,590) (48,617) - (8,279,207) -
Principal and interest paid on long-term
debt (5,712,256) (443,749) - (6,156,005) -
Net cash(used in)provided by
investing activities (5,627,891) (483,941) 901 (6,110,931) -
Cash Flows from Investing Activities
Interest(loss)received on investments 53,031 1,046 (465) 53,612 11,128
Net sales(purchases)of investments 3,436,906 44,154 (77,837) 3,403,223 1,703,483
Net cash provided by(used in)
investing activities 3,489,937 45,200 (78,302) 3,456,835 1,714,611
Net(Decrease)Increase in Cash and Cash
Equivalents (3,034,201) (44,155) 77,837 (3,000,519) (2,006,390)
Cash and Cash Equivalents-
Beginning of year 9,615,209 309,112 51,005 9,975,326 4,039,104
Cash and Cash Equivalents-
End of year $ 6,581,008 $ 264,957 $ 128,842 $ 6,974,807 $ 2,032,714
Balance Sheet Classification of Cash and
Cash Equivalents
Cash and investments $ 10,456,996 $ 529,915 $ 257,684 $ 11,244,595 $ 4,368,335
Restricted assets(Note 7) 1,352,260 - - 1,352,260 -
Less investments (5,228,248) (264,958) (128,842) (5,622,048) (2,335,621)
Total cash and cash equivalents $ 6,581,008 $ 264,957 $ 128,842 $ 6,974,807 $ 2,032,714
The Notes to Financial Statements are an
Integral Part of this Statement. 22
City of Livonia, Michigan
Proprietary Funds
Statement of Cash Flows (Continued)
Year Ended November 30, 2015
Major Enterprise
Fund Nonmajor Enterprise Funds
Total Enterprise Internal Service
Water and Sewer Housing Golf Course Funds Fund
Reconciliation of Operating(Loss)Income
to Net Cash from Operating Activities
Operating(loss)income $ (340,704) $ 219,018 $ (42,741) $ (164,427) $ 305,430
Adjustments to reconcile operating(loss)
income to net cash from operating
activities:
Depreciation 2,811,061 160,813 102,553 3,074,427 -
Changes in assets and liabilities:
Receivables (899,298) (135) (19) (899,452) -
Inventories (115,329) - - (115,329) -
Prepaid and other assets (110,020) - - (110,020) (1,026,431)
Accounts payable 541,577 4,342 42,630 588,549 -
Estimated claims liability (2,500,000) - - (2,500,000) (3,000,000)
Accrued and other liabilities 25,167 (2,606) 215 22,776 -
Other assets (419,896) - - (419,896)
Net pension asset 759,160 80,051 - 839,211 -
Deferred outflows of
resources (647,965) (66,897) - (714,862) -
Net cash(used in)
provided by operating
activities $ (896,247) $ 394,586 $ 102,638 $ (399,023) $ (3,721,001)
During the year ended November 30,2015,the City received$360,236 of donated lines reported as capital assets in the Water and Sewer Fund.
The Notes to Financial Statements are an
Integral Part of this Statement. 23
City of Livonia, Michigan
Fiduciary Funds
Statement of Fiduciary Net Position
November 30, 2015
Pension and
Other Employee
Benefits Agency Funds
Assets
Cash and cash equivalents (Note 3) $ 698,572 $ 10,943,746
Investments (Note 3):
U.S.government securities 16,932,716 -
Collateralized mortgage obligations 9,097,723 -
Common stock 142,719,467 -
Corporate bonds 22,333,576 -
Real estate investment trust 11,204,006 -
Foreign bonds 3,353,413 -
Mutual funds 103,072,633 -
Securities lending collateral pool - Mutual funds 3,835,277 -
Accounts receivable 9,772 -
Due from agency funds 1,006,854 47,541
Total assets 314,264,009 $10,991,287
Liabilities
Accounts payable 1,247,067 $ -
Due to other governmental units 22,533 6,273,458
Due to primary government 196,828 -
Due to fiduciary/agency funds - 1,054,395
Accrued and other liabilities - 3,663,434
Amounts due to broker under securities lending agreement 3,997,649 -
Total liabilities 5,464,077 $10,991,287
Net Position Held in Trust for Pension and Other Employee
Benefits $ 308,799,932
The Notes to Financial Statements are an
Integral Part of this Statement. 24
City of Livonia, Michigan
Fiduciary Funds
Statement of Changes in Fiduciary Net Position - Pension and Other
Employee Benefits Trust Funds
Year Ended November 30, 2015
Pension and
Other
Employee
Benefits
Additions
Investment income:
Interest and dividends $ 10,673,726
Net change in fair value of investments (4,266,121)
Less investment expenses (881,376)
Net investment income 5,526,229
Contributions:
Employer 7,520,840
Employee 925,576
Total contributions 8,446,416
Total additions 13,972,645
Deductions
Pension benefit payments 16,017,300
Medical benefit payments 5,490,021
Refunds of contributions 206,488
Administrative expenses 242,468
Total deductions 21,956,277
Net Decrease in Net Position Held in Trust (7,983,632)
Net Position Held in Trust for Pension and Other Employee Benefits -
Beginning of year 316,783,564
Net Position Held in Trust for Pension and Other Employee Benefits -
End of year $308,799,932
The Notes to Financial Statements are an
Integral Part of this Statement. 25
City of Livonia, Michigan
Component Units
Statement of Net Position
November 30, 2015
Economic Plymouth Road Brownfield
Development Development Redevelopment
Corporation Authority Authority Total
Assets
Cash and cash equivalents $ 23,739 $ 448,681 $ 22,826 $ 495,246
Accounts receivable - 65,481 265,276 330,757
Due from primary government 1 1,1 12 - 1 1,1 12
Prepaid expenses 117,468 117,468
Capital assets(Note 4):
Nondepreciable capital assets 474,448 474,448
Depreciable capital assets-Net - 3,136,389 - 3,136,389
Total assets 23,739 4,253,579 288,102 4,565,420
Liabilities
Accounts payable - 66,319 212,221 278,540
Accrued and other liabilities 10,151 - 10,151
Noncurrent liabilities:
Due within one year 525,000 525,000
Due in more than one year - 1,125,000 - 1,125,000
Total liabilities - 1,726,470 212,221 1,938,691
Net Position
Net investment in capital assets - 1,960,837 - 1,960,837
Unrestricted 23,739 566,272 75,881 665,892
Total net position $ 23,739 $ 2,527,109 $ 75,881 $ 2,626,729
The Notes to Financial Statements are an
Integral Part of this Statement. 26
City of Livonia, Michigan
Program Revenue
Operating Capital Grants
Charges for Grants and and
Expenses Services Contributions Contributions
Functions/Programs
Economic Development Corporation-
General government $ - $ - $ - $ -
Plymouth Road Development Authority:
Community and economic
development 1,975,754 - - -
Interest on long-term debt 87,278 - - -
Total Plymouth Road
Development Authority 2,063,032 - - -
Brownfield Redevelopment Authority-
Community and economic
development 246,795 - - -
Total component units $ 2,309,827 $ - $ - $ -
General revenue:
Property taxes
Interest
Total general revenue
Change in Net Position
Net Position - Beginning of year
Net Position - End of year
The Notes to Financial Statements are an
Integral Part of this Statement. 27
Component Units
Statement of Activities
Year Ended November 30, 2015
Net(Expense) Revenue and Changes in Net Position
Economic Plymouth Road Brownfield
Development Development Redevelopment
Corporation Authority Authority Total
(1,975,754) - (1,975,754)
(87,278) - (87,278)
(2,063,032) - (2,063,032)
(246,795) (246,795)
(2,063,032) (246,795) (2,309,827)
- 835,768 308,494 1,144,262
19 254 12 285
19 836,022 308,506 1,144,547
19 (1,227,010) 61,711 (1,165,280)
23,720 3,754,119 14,170 3,792,009
$ 23,739 $ 2,527,109 $ 75,881 $ 2,626,729
28
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note I - Summary of Significant Accounting Policies
The following is a summary of the significant accounting policies used by the City of
Livonia, Michigan:
Reporting Entity
The City of Livonia, Michigan (the "City") is governed by an elected seven-member
council. The City's administration operates under the overall direction of an elected
mayor. The accompanying financial statements present the City and its component units,
entities for which the City is considered to be financially accountable. Although blended
component units are legal separate entities, in substance, they are part of the City's
operations. Each discretely presented component unit is reported in a separate column
in the government-wide financial statements to emphasize that it is legally separate from
the City (see discussion below for description).
Blended Component Units - The Municipal Building Authority of Livonia is governed
by a board that is appointed by the mayor. Although it is legally separate from the City, it
is reported as if it were part of the primary government because its primary purpose is
to finance and construct the City's public buildings. The operations of the Municipal
Building Authority are reported as a nonmajor 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
(the "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.
29
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note I - Summary of Significant Accounting Policies (Continue
The Brownfield Redevelopment Authority was created, pursuant to Public Act 381 of
1996, to promote revitalization of environmentally distressed areas within the 36-square
mile boundary of the City. The Brownfield Redevelopment Authority is funded primarily
by property tax revenue captures. The Brownfield Redevelopment Authority is
governed by a nine-member board that is designated by the mayor and appointed by the
City Council.
The 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.
Accounting and Reporting Principles
The City follows accounting principles generally accepted in the United States of
America (GAAP) as applicable to governmental units. Accounting and financial reporting
pronouncements are promulgated by the Governmental Accounting Standards Board.
Report Presentation
Governmental accounting principles require that financial reports include two different
perspectives - the government-wide perspective and the fund-based perspective. The
government-wide financial statements (i.e., the statement of net position and the
statement of activities) report information on all of the nonfiduciary activities of the
primary government and its component units. The government-wide financial
statements are presented on the economic resources measurement focus and the full
accrual basis of accounting. 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. The statements also
present a schedule reconciling these amounts to the modified accrual-based
presentation found in the fund-based statements.
The statement of activities demonstrates the degree to which the direct expenses of a
given function or segment are offset by program revenue. Direct expenses are those
that are clearly identifiable with a specific function or segment. Program revenue
includes: (1) charges to customers or applicants for goods, services, or privileges
provided; (2) operating grants and contributions; and (3) capital grants and contributions,
including special assessments. Taxes and other items not properly included among
program revenue are reported instead as general revenue.
For the most part, the effect of interfund activity has been removed from these
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.
30
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note I - Summary of Significant Accounting Policies (Continue
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.
Fund Accounting
The City accounts for its various activities in several different funds in order to
demonstrate accountability for how we have spent certain resources - separate funds
allow us to show the particular expenditures that specific revenues were used for. The
various funds are aggregated into three broad fund types:
Governmental Funds include all activities that provide general governmental services
that are not business-type activities. This includes the General Fund, special revenue
funds, debt service funds, capital project funds, and permanent funds. The City reports
the following funds as "major" governmental funds:
• The General Fund is the primary operating fund because it accounts for all financial
resources used to provide general government services, other than those
specifically assigned to another fund;
• The Refuse Disposal Fund accounts for the operations of the refuse disposal
activities of the City. Funding is provided primarily through a local dedicated
property tax levy
Proprietary Funds include enterprise funds (which provide goods or services to users
in exchange for charges or fees) and internal service funds (which provide goods or
services to other funds of the City). The City reports the following funds as "major"
enterprise funds:
• The Water and Sewer Fund accounts for the activities of the water and sewer
distribution system and sewage collection system. Funding is provided primarily
through user charges.
• The City's Internal Service Fund is used to fund general, workers' compensation,
and employee healthcare liability claims 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.
Fiduciary Funds include amounts held in a fiduciary capacity for others. These amounts
will not be used to operate our government's programs. Activities that are reported as
fiduciary include:
• Pension and Other Employee Benefits Trust Fund, which accounts for the activities
of employee benefit plans that accumulate resources for pension and other
postemployment benefit payments to qualified employees.
31
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note I - Summary of Significant Accounting Policies (Continue
The City of Livonia Employees' Retirement System and the City of Livonia Health
and Disability Plan have been blended into the City's financial statements. These
systems are governed by a five-member pension board that includes three
individuals chosen by the City Council and/or 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, which 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.
Interfund Activity: During the course of operations, the City has activity between funds
for various purposes. Any residual balances outstanding at year end are reported as due
from/to other funds and advances to/from other funds. While these balances are
reported in fund financial statements, certain eliminations are made in the preparation of
the government-wide financial statements. Balances between the funds included in
governmental activities (i.e., the governmental and internal service funds) are eliminated
so that only the net amount is included as internal balances in the governmental activities
column. Similarly, balances between the funds included in business-type activities (i.e.,
the enterprise funds) are eliminated so that only the net amount is included as internal
balances in the business-type activities column.
Further, certain activity occurs during the year involving transfers of resources between
funds. In fund financial statements, these amounts are reported at gross amounts as
transfers in/out. While reported in fund financial statements, certain eliminations are
made in the preparation of the government-wide financial statements. Transfers
between the funds included in governmental activities are eliminated so that only the net
amount is included as transfers in the governmental activities column. Similarly, balances
between the funds included in business-type activities are eliminated so that only the net
amount is included as transfers in the business-type activities column.
Basis of Accounting
The governmental funds use the current financial resources measurement focus and the
modified accrual basis of accounting. This basis of accounting is intended to better
demonstrate accountability for how the government has spent its resources.
32
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note I - Summary of Significant Accounting Policies (Continue
Expenditures are reported when the goods are received or the services are rendered.
Capital outlays are reported as expenditures (rather than as capital assets) because they
reduce the ability to spend resources in the future; conversely, employee benefit costs
that will be funded in the future (such as pension and retiree healthcare-related costs, or
sick and vacation pay) are not counted until they come due for payment. In addition,
debt service expenditures, claims, and judgments are recorded only when payment is
due.
Revenues are not recognized until they are collected, or collected soon enough after the
end of the year that they are available to pay for obligations outstanding at the end of the
year. For this purpose, the City considers amounts collected within 60 days of year end
to be available for recognition. 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 federal grant reimbursements will be collected after the period of
availability; receivables have been recorded for these, along with a "deferred inflow of
resources."
Proprietary funds and fiduciary funds use the economic resources measurement focus
and the full accrual basis of accounting. Revenue is recorded when earned and expenses
are recorded when a liability is incurred, regardless of the timing of related cash flows.
Specific Balances and Transactions
Cash, Cash Equivalents, 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 statements as "internal balances." All trade and property tax receivables are shown
as net of allowance for uncollectible amounts.
Inventories and Prepaid Items - Inventories are valued at cost, on a first-in, first-out
basis. Inventories of governmental funds are recorded as expenditures when consumed
rather than when purchased. Certain payments to vendors reflect costs applicable to
future fiscal years and are recorded as prepaid items in both government-wide and fund
financial statements.
Restricted Assets - The revenue bonds of the Enterprise Funds require amounts to be
set aside for a bond reserve. These amounts have been classified as restricted assets.
33
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note I - Summary of Significant Accounting Policies (Continue
Capital Assets - Capital assets, which include property, plant, equipment, and
infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in
the applicable governmental or business-type activities column in the government-wide
financial statements. Capital assets are defined by the City as assets with an initial
individual cost of more than $5,000 and an estimated useful life in excess of one year.
Such assets are recorded at historical cost or estimated historical cost if purchased or
constructed. Donated capital assets are recorded at estimated fair market value at the
date of donation.
Infrastructure, buildings, equipment, and vehicles are depreciated using the straight-line
method over the following useful lives:
Capital Asset Class 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
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 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 expensed at the time they are incurred.
In the fund financial statements, governmental fund types recognize bond issuances as an
"other financing source," as well as bond premiums and discounts. The General Fund
and debt service funds are generally used to liquidate governmental long-term debt.
34
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note I - Summary of Significant Accounting Policies (Continue
Deferred Outflows/Inflows of Resources
In addition to assets, the statement of net position and/or balance sheet will sometimes
report a separate section for deferred outflows of resources. This separate financial
statement element represents a consumption of net position that applies to a future
period and so will not be recognized as an outflow of resources (expense/ expenditure)
until then. The City reports bond refunding loss being amortized as a deferred outflow
of resources. The City also reports deferred outflows of resources related to the
defined benefit pension plan. The deferred outflows of resources related to the defined
benefit pension plan are reported in the government-wide financial statements, the
Water and Sewer Fund, and the Housing Fund. The deferred outflows of resources
result from the variance between the plan's actual investment earnings compared to the
plan's assumed investment earnings.
In addition to liabilities, the statement of net position and/or balance sheet will
sometimes report a separate section for deferred inflows of resources. This separate
financial statement element represents an acquisition of net position that applies to a
future period and so will not be recognized as an inflow of resources (revenue) until that
time. The City has one item that qualifies for reporting in this category. Unavailable
revenue is reported only in the governmental funds balance sheet. The governmental
funds report unavailable revenue from various sources shown in Note 16. These
amounts are deferred and recognized as an inflow of resources in the period that the
amounts become available.
Net Position Flow Assumption
Sometimes the City will fund outlays for a particular purpose from both restricted (e.g.,
restricted bond or grant proceeds) and unrestricted resources. In order to calculate the
amounts to report as restricted net position and unrestricted net position in the
government-wide and proprietary fund financial statements, a flow assumption must be
made about the order in which the resources are considered to be applied. It is the
government's policy to consider restricted net position to have been depleted before
unrestricted net position is applied except as noted below.
35
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note I - Summary of Significant Accounting Policies (Continue
Fund Balance Flow Assumption
Sometimes the City will fund outlays for a particular purpose from both restricted and
unrestricted resources (the total of committed, assigned, and unassigned fund balance).
In order to calculate the amounts to report as restricted, committed, assigned, and
unassigned fund balance in the governmental fund financial statements, a flow
assumption must be made about the order in which the resources are considered to be
applied. It is the City's policy to consider restricted fund balance to have been depleted
before using any of the components of unrestricted fund balance. The exception to this
are the Community Recreation Fund and Capital Improvement Fund, which apply
unrestricted fund balance first. Further, when the components of unrestricted fund
balance can be used for the same purpose, committed fund balance is depleted first,
followed by assigned fund balance. Unassigned fund balance is applied last. 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.
Fund Balance Policies
Fund balance of governmental funds is reported in various categories based on the
nature of any limitations requiring the use of resources for specific purposes. The City
itself can establish limitations on the use of resources through either a commitment
(committed fund balance) or an assignment (assigned fund balance).
The committed fund balance classification includes amounts that can be used only for
the specific purposes determined by a formal action of the City's highest level of
decision-making authority. The City Council is the highest level of decision-making
authority for the City that can, by adoption of an ordinance prior to the end of the fiscal
year, commit fund balance. Once adopted, the limitation imposed by the ordinance
remains in place until a similar action is taken (the adoption of another ordinance) to
remove or revise the limitation.
Amounts in the assigned fund balance classification are intended to be used by the City
for specific purposes but do not meet the criteria to be classified as committed. The City
Council has by resolution authorized the finance director to assign fund balance. The
City Council may also assign fund balance as it does when appropriating fund balance to
cover a gap between estimated revenue and appropriations in the subsequent year's
appropriated budget. Unlike commitments, assignments generally only exist temporarily.
In other words, an additional action does not normally have to be taken for the removal
of an assignment. Conversely, as discussed above, an additional action is essential to
either remove or revise a commitment.
36
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note I - Summary of Significant Accounting Policies (Continue
Property Tax Revenue
Property taxes are levied on each July I and December I on the taxable valuation of
property as of the preceding December 31. These taxes are due on September 14 and
February 14, respectively. Taxes are considered delinquent on March 1, at which time
penalties and interest are assessed.
The City's 2014 tax is levied and collectible on December 1, 2014 and is recognized as
revenue in the year ended November 30, 2015, when the proceeds of the levy are
budgeted and available for the financing of operations.
The 2014 taxable valuation of the City totaled $3.94 billion. Properties in the Plymouth
Road Development Authority (PRDA) are assessed a millage of 2.0000 on July 1. The
2015 taxable valuation of PRDA totaled $452 million. The millages levied by the City
and the resulting revenue are as follows:
Approximate
Revenue
Purpose Millage Rate (in 000s)
Operating purposes 4.0447 $ 15,607
Police and fire 0.8088 3,121
Police and fire and snow 1.2134 4,682
Library 0.8088 3,113
Refuse and recycling 3.0246 1 1,633
Industrial development 0.0129 50
Roads, sidewalks, and trees 0.8893 3,423
Recreation 0.7855 3,024
Public safety 1.7000 6,560
Culture and senior services 0.2500 965
Transit and capital improvement 0.5000 1,925
Plymouth Road Development Authority 2.0000 841
Total 16.0380 $ 54,944
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 2015. Wayne County delinquent real property taxes have been
recorded as revenue in the current year.
37
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note I - Summary of Significant Accounting Policies (Continue
Pension - The City offers a defined benefit pension plan to its employees. The City
records a net pension asset for the difference between the total pension liability
calculated by the actuary and the pension plan's fiduciary net position. For purposes of
measuring the net pension asset, deferred outflows of resources and deferred inflows of
resources related to pensions, and pension expense, information about the fiduciary net
position of the City of Livonia Employees' Retirement System and additions
to/deductions from the pension plan's fiduciary net position have been determined on
the same basis as they are reported by the pension plan. For this purpose, benefit
payments (including refunds of employee contributions) are recognized when due and
payable in accordance with the benefit terms. Investments are reported at fair value.
Other Postemployment Benefit Costs - The City offers 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 OPEB 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.
Compensated Absences (Vacation Leave, Sick Leave, and Comp Time) - It is the
City's policy to permit employees to accumulate earned but unused sick and vacation
pay benefits as well as comp time. Under the City's policy, employees earn benefits
based on time of service with the City. All vacation and sick pay as well as comp time
are 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. All other accrued compensated absences are
reported in the government-wide financial statements; generally the funds that report
each employee's compensation (the General Fund and Water and Sewer Fund,
primarily) are used to liquidate obligation.
Proprietary Funds Operating Classification - 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 revenues of the Water and Sewer Fund and internal service funds are charges
to customers for sales and services. The Water and Sewer Fund also recognizes as
operating revenue the portion of tap fees intended to recover the cost of connecting
new customers to the system. Operating expenses for enterprise funds and internal
service funds include the cost of sales and services, administrative expenses, and
depreciation on capital assets. All revenue and expenses not meeting this definition are
reported as nonoperating revenue and expenses.
38
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note I - Summary of Significant Accounting Policies (Continued)
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 since
January 1, 2000 is as follows:
Cumulative shortfall at December 1, 2014 $ (795,180)
Current year building permit revenue 2,157,910
Related expenses:
Direct costs $ 1,330,526
Estimated indirect costs 395,321 1,725,847
Current year net revenue 432,063
Cumulative shortfall at November 30, 2015 $ (363,1 17)
Note 3 - Deposits and Investments
Michigan Compiled Laws Section 129.91 (Public Act 20 of 1943, as amended) authorizes
local governmental units to make deposits and invest in the accounts of federally insured
banks, credit unions, and savings and loan associations that have offices in Michigan. The
law also allows investments outside the state of Michigan when fully insured. The local
unit is allowed to invest in bonds, securities, and other direct obligations of the United
States or any agency or instrumentality of the United States; repurchase agreements;
bankers' acceptances of United States banks; commercial paper rated within the two
highest classifications, which matures not more than 270 days after the date of purchase;
obligations of the State of Michigan or its political subdivisions, which are rated as
investment grade; and mutual funds composed of investment vehicles that are legal for
direct investment by local units of government in Michigan.
39
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note 3 - Deposits and Investments (Continued)
The Pension Trust Fund and Retiree Health Care Fund are also authorized by Michigan
Public Act 314 of 1965, as amended, to invest in certain reverse repurchase agreements,
stocks, diversified investment companies, annuity investment contracts, real estate
leased to public entities, mortgages, real estate (if the trust fund's assets exceed $250
million), debt or equity of certain small businesses, certain state and local government
obligations, and certain other specified investment vehicles.
The City has designated six banks for the deposit of its funds. The investment policy
adopted by the City 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") lends securities to broker-dealers and banks for the 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, 2015, only United States
currency was received as collateral. The City then converts that cash received as
collateral into other investments.
The System imposed 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.
The 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, 2015 was one day because the
loans are terminable on demand; their duration did not generally match the duration of
the investments made with cash collateral. On November 30, 2015, 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 for the System as of November 30, 2015 were
$3,997,649 and $3,835,277, respectively.
The City's cash and investments are subject to several types of risk, which are examined
in more detail below:
40
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note 3 - Deposits and Investments (Continued)
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 $41,109,573 of
bank deposits (certificates of deposit and checking and savings accounts) that were
uninsured and uncollateral ized. In addition, the District Court, a component unit, had
$672,693 of bank deposits (checking and savings accounts and certificates of deposit)
that were uninsured and uncollateral ized. 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 City's investment policy does not
restrict investment maturities, other than commercial paper which can only be
purchased with a 270-day maturity.
At year end, the City had the following investments and maturities:
Primary Government Fair Value 0 to 5 Years 6 to 10 Years Over 10 Years
U.S.agency securities $ 20,284,394 $ 20,284,394 $ - $ -
Municipal bonds 2,860,424 2,860,424 - -
U.S.Treasury securities 4,022,1 12 4,022,1 12 - -
Commercial paper 997,625 997,625
Total $ 28,164,555 $ 28,164,555 $ - $ -
City of Livonia Employees'Retirement System Fair Value 0 to 5 Years 6 to 10 Years Over 10 Years
Corporate bonds $ 15,383,713 $ 4,928,513 $ 7,069,866 $ 3,385,334
Foreign bonds 2,244,743 672,480 1,362,779 209,484
U.S.agency securities 7,272,844 353,930 89,393 6,829,521
U.S.Treasury securities 2,786,136 212,078 445,808 2,128,250
Collateralized mortgage obligations 5,937,342 133,305 55,460 5,748,577
Total $ 33,624,778 $ 6,300,306 $ 9,023,306 $ 18,301,166
City of Livonia Retiree Health and Disability
Benefits Plan Fair Value 0 to 5 Years 6 to 10 Years Over 10 Years
Corporate bonds $ 6,949,863 $ 2,814,132 $ 3,079,857 $ 1,055,874
Foreign bonds 1,108,670 581,409 450,621 76,640
U.S.agency securities 3,163,904 117,658 13,642 3,032,604
U.S.Treasury securities 3,709,832 1,057,751 1,089,028 1,563,053
Collateralized mortgage obligations 3,160,381 97,700 25,209 3,037,472
Total $ 18,092,650 $ 4,668,650 $ 4,658,357 $ 8,765,643
41
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note 3 - Deposits and Investments (Continued)
Credit Risk - State law limits investments in commercial paper to the top two ratings
issued by nationally recognized statistical rating organizations. The City has no
investment policy that would further limit its investment choices. As of year end, the
credit quality ratings of debt securities (other than the U.S. government) are as follows:
Rati ng
Investment Fair Value Rating Organization
Primary Government
Bank investment pools $ 21 1,265 AI/PI Moody's
Bank investment pools 1,352,260 A2/P I Moody's
Bank investment pools 68,874 A3/P2 Moody's
U.S. agencies securities 20,284,394 AA+ S&P
Municipal bonds 2,860,424 AA- S&P
U.S.Treasury securities 4,022,1 12 AA+ S&P
Commercial paper 997,625 A-I S&P
Total $ 29,796,954
Fiduciary Funds
Corporate bond $ 2,909,613 AAA S&P
Corporate bond 509,262 AA S&P
Corporate bond 3,779,600 A S&P
Corporate bond 12,332,575 BBB S&P
Corporate bond 1,105,389 BB S&P
Corporate bond 516,092 B S&P
Corporate bond 1,181,045 NR S&P
Foreign bonds 779,666 AA S&P
Foreign bonds 1,330,422 A S&P
Foreign bonds 722,571 BBB S&P
Foreign bonds 406,952 BB S&P
Foreign bonds 1 13,802 NR S&P
U.S. agencies securities 268,985 A S&P
U.S. agencies securities 10,167,763 NR S&P
U.S.treasury securities 6,495,968 NR S&P
Collateralized mortgage obligations 1,416,328 AAA S&P
Collateralized mortgage obligations 1,167,385 AA S&P
Collateralized mortgage obligations 2,181,500 A S&P
Collateralized mortgage obligations 612,563 BBB S&P
Collateralized mortgage obligations 3,719,947 NR S&P
Total $ 51,717,428
42
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note 4 - Capital Assets
Capital asset activity of the City's governmental and business-type activities was as
follows:
Balance
Governmental Activities
Balance November 30,
December I,2014 Reclassifications Additions Disposals 2015
Capital assets not being depreciated:
Land $ 34,858,329 $ $ - $ (17,617) $ 34,840,712
Construction in progress 78,241 (166,337) 179,297 91,201
Subtotal 34,936,570 (166,337) 179,297 (17,617) 34,931,913
Capital assets being depreciated:
Infrastructure 112,341,532 9,224,293 121,565,825
Road rights 20,139,353 60,811 20,200,164
Buildings and improvements 108,530,842 - 103,519 (19,378) 108,614,983
Equipment and vehicles 33,604,821 166,337 1,926,260 (1,918,247) 33,779,171
Subtotal 274,616,548 166,337 11,314,883 (1,937,625) 284,160,143
Accumulated depreciation:
Infrastructure 49,322,843 - 3,223,895 52,546,738
Road rights 8,979,620 581,235 9,560,855
Buildings and improvements 44,207,492 2,381,783 (4,264) 46,585,011
Equipment and vehicles 22,094,362 2,403,431 (1,835,540) 22,662,253
Subtotal 124,604,317 - 8,590,344 (1,839,804) 131,354,857
Net capital assets being depreciated 150,012,231 166,337 2,724,539 (97,821) 152,805,286
Net capital assets $ 184,948,801 $ - $ 2,903,836 $ (115,438) $ 187,737,199
Balance
Business-type Activities
Balance Disposals and November 30,
December I,2014 Reclassifications Additions Adjustments 2015
Capital assets not being depreciated:
Land $ 5,164,436 $ - $ - $ - $ 5,164,436
Construction in progress 4,288,083 (6,004,741) 7,259,482 3,940 5,546,764
Subtotal 9,452,519 (6,004,741) 7,259,482 3,940 10,711,200
Capital assets being depreciated:
Water and sewer distribution 132,288,088 6,004,741 277,011 - 138,569,840
Buildings and building improvements 9,403,888 - - 9,403,888
Machinery and equipment 2,135,197 247,395 (15,197) 2,367,395
Vehicles 1,804,315 324,980 (27,978) 2,101,317
Land improvements 2,916,044 - - 2,916,044
Subtotal 148,547,532 6,004,741 849,386 (43,175) 155,358,484
Accumulated depreciation:
Water and sewer distribution 67,954,235 - 2,650,996 70,605,231
Buildings and building improvements 4,990,510 186,946 - 5,177,456
Machinery and equipment 1,978,514 71,575 3,401 2,053,490
Vehicles 1,469,887 120,751 (28,961) 1,561,677
Land improvements 2,714,697 44,159 2,758,856
Subtotal 79,107,843 - 3,074,427 (25,560) 82,156,710
Net capital assets being depreciated 69,439,689 6,004,741 (2,225,041) (17,615) 73,201,774
Net capital assets $ 78,892,208 $ - $ 5,034,441 $ (13,675) $ 83,912,974
43
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note 4 - Capital Assets (Continue
Component Units-Plymouth Balance Balance
Road Development December 1, November 30,
Authority 2014 Additions Disposals 2015
Capital assets not being
depreciated - Land $ 474,448 $ - $ - $ 474,448
Capital assets being depreciated
-Land improvements 15,703,227 - (3,507,439) 12,195,788
Accumulated depreciation-
Land improvements 10,816,817 777,854 (2,535,272) 9,059,399
Net capital assets being
depreciated 4,886,410 (777,854) (972,167) 3,136,389
Net capital assets $ 5,360,858 $ (777,854) $ (972,167) $ 3,610,837
Depreciation expense was charged to programs of the primary government as follows:
Governmental activities:
General government $ 686,136
Public safety 1,567,849
Public works 4,409,379
Recreation and culture 1,926,980
Total governmental activities $ 8,590,344
Business-type activities:
Water and sewer $ 2,81 1,061
Golf course 102,553
Newburgh and Silver Village 160,813
Total business-type activities $ 3,074,427
Construction Commitments - The City has active construction projects at year end.
At year end, the City's commitments with contractors are as follows:
Remaining
Spent to Date Commitment
Street and sidewalk projects $ 14,995,315 $ 1,205,001
Drain and sewer projects 12,598,833 5,513,217
Equipment - 145,349
Police improvements 61,733 213,268
Community recreation center improvements - 100,000
44
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note S - Interfund Receivables, Payables, and Transfers
Receivable Fund Payable Fund Amount
Due to/from Other Funds
General Fund Nonmajor governmental funds $ 105,567
VEBA Fund Investment Administration
Agency Fund 673,570
Employees' Retirement System Investment Administration
Fund Agency Fund 333,284
Court Volunteer Work Program
Agency Fund Court Bond Agency Fund 26,091
Court Civil Drug Agency Fund Court Bond Agency Fund 4,730
Court Depository Agency Fund Court Bond Agency Fund 16,720
Total $ 1,159,962
Receivable Fund Payable Fund Amount
Due to/from Primary Government and Component Units
Plymouth Road Development
Authority General Fund $ 1 1,1 12
These balances result from the time lag between the dates that goods and services are
provided or reimbursable expenditures occur, transactions are recorded in the
accounting system, and payments between funds are made.
Interfund transfers reported in the fund financial statements are comprised of the
following:
Transfer Out Transfer In Amount
General Fund Nonmajor governmental funds $ 3,506,319
Golf Course Fund 52,600
Total General Fund 3,558,919
Nonmajor governmental funds Nonmajor governmental funds 6,034,717
Total $ 9,593,636
45
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note S - Interfund Receivables, Payables, and Transfers (Continued)
Transfer of unrestricted resources to finance capital projects and general obligation
debt service in accordance with budgetary authorizations
The majority of transfers are for gas and weight tax revenue from the Major Streets
Fund to the Local Streets Fund and from these funds to the Road and Sidewalk Fund
in accordance with Act 51. Most of the remaining transfers relate to debt service.
Note 6 - Long-terra 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. County contractual agreements are also general obligations of the
City. 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 re-assessment of the City) are received. Revenue bonds involve a
pledge of specific income derived from the acquired or constructed assets to pay debt
service.
46
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note 6 - Long-terra Debt (Continue
Long-term debt activity can be summarized as follows:
Principal
Interest Rate Maturity Beginning Ending Due Within
Ranges Ranges Balance Additions Reductions Balance One Year
Governmental Activities
Building Authority Bonds:
2005 MBA Refunding Bonds:
Amount of issue-$3,730,000
Maturing through 2025 4.00%-4.25% - $ 2,305,000 $ - $ (2,305,000) $ - $ -
2007 MBA Refunding Bonds:
Amount of issue-$31,025,000 $1,525,000-
Maturing through 2030 4.00%-4.75% $1,705,000 25,950,000 - (1,445,000) 24,505,000 1,525,000
2008 MBA Court Construction
Bonds:
Amount of issue-$8,500,000 $260,000-
Maturing through 2033 4.00%-5.25% $580,000 7,425,000 - (245,000) 7,180,000 260,000
2015 MBA Refunding Bonds:
Amount of issue-$2,050,000 $175,000-
Maturing through 2025 2.47% $300,000 - 2,050,000 - 2,050,000 290,000
Total governmental activity debt 35,680,000 2,050,000 (3,995,000) 33,735,000 2,075,000
Other long-term obligations:
General liability claims,workers'
compensation and health
insurance claims(Note 8) 2,405,745 646,599 - 3,052,344 -
Provision for claims 3,000,000 - (3,000,000) - -
Landfill closure and postclosure
liability 612,383 21,324 - 633,707 -
OPEB liability 3,720,140 657,276 - 4,377,416 -
Compensated absences 9,128,912 2,875,403 (3,042,667) 8,961,648 2,986,918
Total governmental activities $ 54,547,180 $ 6,250,602 $(10,037,667) $ 50,760,1 15 $ 5,061,918
Compensated absences attributable to the governmental activities will be liquidated
primarily by the General Fund. The claims liability will generally be liquidated through
the City's self-insurance internal service funds. That fund will finance the payment of
those claims by charging the other funds based on management's assessment of the
relative insurance risk that should be assumed by individual funds. The net OPEB
obligation will be liquidated from the funds that the individual employee's salaries are
paid from, generally the General Fund.
47
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note 6 - Long-terra Debt (Continued)
Principal
Interest Rate Maturity Beginning Ending Due Within
Ranges Ranges Balance Additions Reductions Balance One Year
Business-type Activities
Building Authority Bonds:
2007 MBA Refunding Bonds:
Amount of issue-$3,380,000
Maturing through 2015 4.00% - $ 435,000 $ - $ (435,000) $ - $
Water Supply and Wastewater
System Bonds:
2013 State of Michigan Clean Water
Program State Revolving Loan:
Amount of issue-$3,620,000 $125,000-
Maturing through 2034 2.00% $220,000 2,749,705 666,025 (125,000) 3,290,730 145,000
2014 State of Michigan Drinking
Water Program Revolving Loan:
Amount of issue-$3,552,013 $145,000-
Maturing through 2036 2.50% $235,000 3,006,861 545,152 (145,000) 3,407,013 150,000
2015 State of Michigan Drinking
Water Program Revolving Loan
Amount of issue-$7,104,415 $355,000-
Maturing
355,000-Maturing through 2040 2.50% $570,000 319,842 319,842
2015 Water Supply and Wastewater
Refunding Bonds:
Amount of issue-$4,170,000 $820,000-
Maturing through 2020 1.90% $840,000 - 4,170,000 - 4,170,000 820,000
2005 Water Supply and Wastewater
System Revenue Bonds:
Amount of issue-$4,885,000
Maturing through 2020 3.75%-5.00% - 2,300,000 - (2,300,000) - -
2006 Water Supply and Wastewater
System Revenue Refunding Bonds:
Amount of issue-$4,110,000
Maturing through 2020 3.75%-5.00% _ 2,655,000 - (2,655,000) - -
Total business-type
activity debt 11,146,566 5,701,019 (5,660,000) 11,187,585 1,115,000
County contractual obligations:
State Revolving Fund Loan-
N.Huron Valley/Rouge Valley
Wastewater Control System
Amount of issue-$14,428,703
Maturing through 2021 2.25% $25,000 125,000 - (25,000) 100,000 25,000
Other long-term obligations:
Provision for claims 2,500,000 - (2,500,000) - -
OPEB liability 163,414 28,668 192,082 -
Compensated absences 524,454 216,560 (239,107) 501,907 247,008
Total business-type
activities $ 14,459,434 $ 5,946,247 $(8,424,107) $ 11,981,574 $ 1,387,008
48
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note 6 - Long-terra Debt (Continue
Principal
Interest Rate Maturity Beginning Ending Due Within
Ranges Ranges Balance Additions Reductions Balance One Year
Component Unit Activities
2006 Downtown Development
Refunding Bonds:
Amount of issue-$4,470,000 $500,000-
Maturing through 2018 4.25%-5.00% $570,000 $ 2,150,000 $ - $ (500,000) $ 1,650,000 $ 525,000
Annual debt service requirements to maturity for the above bonds and note obligations
are as follows:
Governmental Activities Business-type Activities* Component Unit Activities
Years Ending
November 30 Principal Interest Total Principal Interest Total Principal Interest Total
2016 $ 2,075,000 $ 1,413,976 $ 3,488,976 $ 1,1 15,000 $ 276,816 $ 1,391,816 $ 525,000 $ 65,100 $ 590,100
201 7 2,160,000 ,322,037 3,482,037 1,419,415 224,826 1,644,241 555,000 38,100 593,100
2018 2,230,000 1,238,095 3,468,095 1,200,427 179,215 1,379,642 570,000 12,1 13 582,1 13
2019 2,160,000 1,153,006 3,313,006 1,165,000 155,519 1,320,519 - - -
2020 2,165,000 1,061,642 3,226,642 1,170,000 124,204 1,294,204 - - -
2021-2025 11,015,000 3,893,670 14,908,670 1,785,000 464,009 2,249,009 - - -
2026-2030 10,275,000 1,587,522 11,862,522 2,000,000 322,347 2,322,347 - - -
2031-2035 1,655,000 133,219 1,788,219 1,332,743 90,067 1,422,810 - - -
Total $ 33,735,000 $ 1 1,803,167 $ 45,538,167 $ 1 1,187,585 $ 1,837,003 $ 13,024,588 $ 1,650,000 $ 115,313 $ 1,765,313
* State of Michigan Clean Water Program State Revolving Loan and Drinking Water Program Revolving Fund Loan principal and interest reported above are based on amounts
drawn as of November 30,2015.
Revenue Bond - 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 revenue of the water and sewer
system. The remaining principal and interest to be paid on the bonds total approximately
$13.1 million. During the current year, net revenue of the system was approximately
$5.7 million compared to the annual debt requirements of approximately$1.9 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. As of
November 30, 2015, the City drew down $3,415,730 of the authorized debt amount.
The project is still ongoing and the City expects to draw down the full amount in 2016.
49
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note 6 - Long-terra Debt (Continue
During fiscal year 2015, the City was approved for a State of Michigan Drinking Water
Program Revolving Fund Loan in the amount of$7,104,415. Proceeds from the loan are
to provide for the purchase, acquisition, construction, improvement, enlargement,
extension, and repair of public improvements to the water supply and wastewater
system of the City of Livonia. During the year, the City drew down $319,942 of the
authorized debt amount. The project is still ongoing and the City expects to draw down
the full amount before principal payments begin in 2017.
No Commitment Debt - The City has issued Industrial Development Revenue Bonds
and Economic Development Corporation Bonds under state law which authorizes
municipalities under certain circumstances to acquire and lease industrial sites, buildings,
and equipment and lease them to third parties. The revenue bonds issued are payable
solely from the net revenue derived from the respective leases and are not a general
obligation of the City. After these bonds are issued, all financial activity is taken over by
the paying agent. The bonds and related lease contracts are not reflected in the City's
financial statements. Information regarding the status of each bond issue, including
possible default, must be obtained from the paying agent or other knowledgeable
source. The aggregate original issue amount was $83,667,000.
Advance Refundings - During the year, the City issued $2,050,000 in Building
Authority Bonds with an average interest rate of 2.47 percent. The proceeds of these
bonds were used to advance refund $2,025,000 of outstanding Building Authority bonds
with an average interest rate of 4.14 percent. The net proceeds of $2,054,792 (after
payment of $34,208 in underwriting fees, insurance, and other issuance costs) plus an
additional $39,000 of Debt Service Fund monies were used to purchase U.S.
government securities. Those securities were deposited in an irrevocable trust with an
escrow agent to provide for all future debt service payments on the original bonds. As a
result, the bonds are considered to be defeased and the liability for the bonds has been
removed from the governmental activities. The advance refunding reduced total debt
service payments over the next 10 years by $1 17,576, which represents an economic
gain of$105,196.
50
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note 6 - Long-terra Debt (Continued)
During the year, the City also issued $4,170,000 in Water Supply and Wastewater
System Revenue Bonds with an average interest rate of 1.90 percent. The proceeds of
these bonds were used to advance refund $4,170,000 of outstanding Water Supply and
Wastewater System Revenue Bonds with an average interest rate of 4.22 percent. The
net proceeds of $4,250,522 (after payment of $53,041 in underwriting fees, insurance,
and other issuance costs) plus an additional $133,563 of Debt Service and Reserve Fund
monies were used to purchase U.S. government securities. Those securities were
deposited in an irrevocable trust with an escrow agent to provide for all future debt
service payments on the original bonds. As a result, the bonds are considered to be
defeased and the liability for the bonds has been removed from the governmental
activities. The advance refunding reduced total debt service payments over the next five
years by$187,239, which represents an economic gain of$174,442.
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, 2015, the City set aside $1,352,260 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 purchased commercial insurance for medical
benefits and workers' compensation and participates in the Michigan Municipal Risk
Management Authority(the "Authority").
The Michigan Municipal Risk Management Authority risk pool program operates as a
claims servicing pool for amounts up to member retention limits and operates as a
common risk-sharing management program for losses in excess of member retention
amounts. Although premiums are paid annually to the Authority that the Authority uses
to pay claims up to the retention limits, the ultimate liability for those claims remains
with the City.
51
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note 8 - Risk Management (Continued)
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 claims that
have been reported as well as those that have not yet been reported. These estimates
are recorded in the Self-insurance Internal Service Fund. The estimated liability for
property loss, general liability, workers' compensation, and medical 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:
General Liability Workers'Compensation Medical Claims
2015 2014 2015 2014 2015 2014
Estimated liability-
Beginning of year $ 1,415,198 $ 865,747 $ 577,161 $ 800,674 $ 413,386 $ 448,305
Estimated claims
incurred,including
changes in estimates 2,317,916 1,299,154 708,798 238,915 9,970,274 10,906,740
Claim payments (2,297,682) (749,703) (362,142) (462,428) (9,690,565) (10,941,659)
Estimated liability-End
of year $ 1,435,432 $ 1,415,198 $ 923,817 $ 577,161 $ 693,095 $ 413,386
Note 9 - Defined Contribution Pension Plan
The City of Livonia Employees' Retirement System Defined Contribution Plan is
administered by the City of Livonia Employees' Retirement System and the City of
Livonia. The plan was established 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 City's defined
benefit pension plan (see Note 10).
52
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note 9 - 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 Transferring from the New Employees Hired After the
Defined Benefit Pension Plan Effective Dates Noted Above
Employer Employee Employer Employee
Contribution Contribution Contribution Contribution
General 13% 3.1%to 3.66% 8% 3.1%to 3.66%
Police lieutenants and sergeants 13% 5.21% 11% 5.21%
Police 13% 5% 11% 5%
Fire 13% 3.56% 11% 3.56%
The employee contribution percentages noted above represent the minimum required
contribution. Employees are permitted to contribute additional amounts up to the
maximum allowed by law.
The City's contributions for each employee (plus interest allocated to the employee's
account) are fully vested after four years of service.
In accordance with the above requirements, the City contributed $2,341,367 during the
current year and employees contributed $875,460.
Note 10 - Pension Plan Description
Plan Description - The City of Livonia Employees' Retirement System administers the
City of Livonia Employees' Retirement System (the "System") - a single-employer defined
benefit pension plan that provides retirement, disability, and death benefits to the
following employees of the City unless they elected to transfer to the City's 401(a)
defined contribution pension plan (see Note 9):
• 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
53
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note 10 - Pension Plan Description (Continue
Management of the plan is vested in the System board of trustees, which consists of five
members - the mayor or mayor's designated administrative representative, a member of
the City Council to be selected by the Council, a member of the Civil Service
Commission, a police or fire member to be elected by the police and fire members, and
a member of any retirement plan established by City ordinance who is not a police or
fire member to be elected by the members of any retirement plan established by City
ordinance other than police and fire members.
Employees Covered by Benefit Terms - At November 30, 2015, the following
employees were covered by the benefit terms:
Inactive plan members or beneficiaries currently receiving benefits 544
Inactive plan members entitled to but not yet receiving benefits 19
Active plan members 116 .
Total employees covered by the plan 679
Benefits Provided - The System provides retirement, disability, and death benefits as
follows:
General Members: Eligible after 30 years of service regardless of age, or age 55 with 10
years of service. Permanent part-time general members need only 10 calendar years of
membership instead of 10 years of credited service. Pension amount is 2.5 percent of
the member's average final compensation (AFC) times years of credited service
(maximum is 75 percent of AFC).
Police Officers, Sergeants and Lieutenants: Eligible after 25 years of service regardless of
age, or age 52 with 10 years of service. (Age 50 with 10 years but less than 25 years of
service - early retirement with reduced benefit of '/z percent per month below age 52.)
Pension amount is 2.8 percent of the member's average final compensation (AFC) times
the first 24 years of credited service, plus 7.8 percent of AFC for the 25th year of
credited service (maximum is 75 percent of AFC).
Police Command: Eligible after 27 years of service regardless of age, or age 50 with 10
years of service. (Age 48 with 10 years but less than 27 years of service - early
retirement with reduced benefit of '/z percent per month below age 50.) Pension
amount is 2.8 percent of the member's average final compensation (AFC) times the
years of credited service (maximum is 75 percent of AFC).
Fire Members: Eligible after 27 years of service regardless of age, or age 52 with 10
years of service. (Age 50 with 10 years but less than 27 years of service - early
retirement with reduced benefit of '/z percent per month below age 52.) Pension
amount is 2.8 percent of the member's average final compensation (AFC) times the
years of credited service (maximum is 75 percent of AFC).
54
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note 10 - Pension Plan Description (Continue
Average Final Compensation (AFC) is the average of the highest annual compensation
received during any three years of service contained within the 10 years of service
immediately preceding retirement, including base salary, longevity, shift differential, paid
time off, holiday pay, and payment of accumulated vacation time up to the limits
established by the respective bargaining agreements. In addition, merit pay is included
for police members and paramedic/EMT or ALS bonuses are included for firefighters.
Benefit terms provide for annual cost of living adjustments to each member's retirement
allowance subsequent to the member's retirement date. The monthly adjustments vary
between $20 and $250 depending on year of retirement and amount of years past
retirement.
Plan members are eligible for disability retirement upon termination of City employment
by reason of total and permanent disability after completing at least 10 full years of
credited service, except that in the event of a duty disability, the 10-year service
requirement is waived. Special age and service requirements apply in the calculation of
the disability benefit provided.
Contributions - Article 9, Section 24 of the State of Michigan constitution requires that
financial benefits arising on account of employee service rendered in each year be
funded during that year. Accordingly, the System board of trustees retains an
independent actuary to determine the annual contribution. The actuarially determined
rate is the estimated amount necessary to finance the costs of benefits earned by plan
members during the year with an additional amount to finance any unfunded accrued
liability. Contribution requirements of plan members are established and may be
amended by the board of trustees in accordance with the City Charter, union contracts,
and plan provisions. For the year ended November 30, 2015, the average active
member contribution rate ranged from 2.55 to 7.30 percent of annual pay. The funding
policy provides for periodic employer contributions at actuarially determined rates.
Note I I - Pension Plan Reserves
In accordance with plan documents, the following reserves are required to be set aside
within the pension plan:
The pension reserve fund (retiree reserve) is to be computed annually by the actuary as
the present value of estimated benefit payments for all current retirees. The amounts
reserved may be used solely to pay monthly retiree benefit payments.
The pension savings fund (employee reserve) is credited as employee contributions are
received throughout the year; the System maintains a record of the amount contributed
by each employee, and credits interest annually at a rate of 4 percent. For any employee
who terminates before vesting in the pension plan, their balance is returned to them; for
those who stay until retirement, the balance is transferred into the retiree reserve.
55
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note I I - Pension Plan Reserves (Continued)
The pension accumulation fund (employer reserve) account is used to account for the
residual net position balance in the pension plan after funding the above two reserves.
The balances of the reserve accounts at November 30, 2015 are as follows:
Required Reserve Amount Funded
Pension reserve fund $ 141,149,999 $ 141,149,999
Pension savings fund 7,454,751 7,454,751
Pension accumulation fund N/A 67,913,768
Note 12 - Defined Benefit Pension Plan Investments - Policy and Rate of
Return
Investment Policy - The System's policy in regard to the allocation of invested assets is
established and may be amended by the System board of trustees by a majority vote of
its members. It is the policy of the System board of trustees to pursue an investment
strategy that manages risk through the prudent diversification of the portfolio across a
broad selection of distinct asset classes. The System's investment policy discourages the
use of cash equivalents, except for liquidity purposes, and aims to refrain from
dramatically shifting asset class allocations over short time spans. The following was the
System's adopted asset allocation policy as of November 30, 2015:
Asset Class Target Allocation
Domestic equity 45 %
International equity 5
U.S. Core fixed income 30
Global fixed income 5
High yield fixed income 5
Real estate 10
Rate of Return - For the year ended November 30, 2015, the annual money-weighted
rate of return on pension plan investments, net of pension plan investment expense, was
1.40 percent. The money-weighted rate of return expresses investment performance,
net of investment expense, adjusted for the changing amounts actually invested.
56
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note 13 - Net Pension Asset of the City
The components of the net pension asset of the City at November 30, 2015 were as
follows:
Total pension liability $ 207,438,016
Plan fiduciary net position (216,518,517)
City's net pension asset $ (9,080,501)
Plan fiduciary net position as a percentage of the total pension liability 104.4 %
The City has chosen to use November 30, 2015 as its measurement date for the net
pension asset. The November 30, 2015 reported net pension asset was determined
using a measure of the total pension liability and the pension net position as of
November 30, 2015. The November 30, 2015 total pension liability was determined by
an actuarial valuation performed as of that date.
Changes in the net pension asset during the measurement year were as follows:
Increase (Decrease)
Net Pension
Total Pension Plan Net Liability
Changes in Net Pension Asset Liability Position (Asset)
Balance at November 30, 2014 $202,434,682 $226,054,863 $ (23,620,181)
Service cost 1,530,027 - 1,530,027
Interest 15,607,024 - 15,607,024
Differences between expected and
actual experience (673,125) - (673,125)
Changes in assumptions 4,763,196 - 4,763,196
Contributions - Employer - 2,158,913 (2,158,913)
Contributions - Employee - 386,983 (386,983)
Net investment income - 4,353,881 (4,353,881)
Benefit payments, including refunds (16,223,788) (16,223,788) -
Administrative expenses - (212,335) 212,335
Net changes 5,003,334 (9,536,346) 14,539,680
Balance at November 30, 2015 $207,438,016 $216,518,517 $ (9,080,501)
Assumption Changes - The mortality rate assumption was changed from the 1983
Group Annuity Mortality Table to the RP 2000 Combined Healthy Mortality Table
projected to 2014. This change was the result of an experience study conducted by the
plan during the year ended November 30, 2015.
57
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note 13 - Net Pension Asset of the City (Continue
Pension Expense and Deferred Outflows of Resources Related to Pensions
For the year ended November 30, 2015, the City recognized pension expense of
$6,158,675. At November 30, 2015, the City reported deferred outflows of resources
related to pensions from the following sources:
Deferred
Outflows of
Resources
Net difference between projected and actual earnings on pension plan
investments $ 10,539,918
Amounts reported as deferred outflows of resources related to pensions will be
recognized in pension expense as follows:
Years Ending
November 30 Amount
2016 $ 2,634,980
2017 2,634,980
2018 2,634,980
2019 2,634,978
Actuarial Assumptions - The total pension liability in the November 30, 2015 actuarial
valuation was determined using the following actuarial assumptions, applied to all
periods included in the measurement:
Inflation 4.0 %
Salary increases 11.9 -4.0 % Average, including inflation
Investment rate of return 8.0 % Net of pension plan investment
expense, including inflation
Mortality rates were based on the RP 2000 Mortality Table projected to 2014.
The actuarial assumptions used in the November 30, 2015 valuation were based on the
results of an actuarial experience study for the period from December 1, 2008 through
November 30, 2014.
Discount Rate - The discount rate used to measure the total pension liability was 8.0
percent. The projection of cash flows used to determine the discount rate assumed that
employee contributions will be made at the current contribution rate and that City
contributions will be made at rates equal to the difference between actuarially
determined contribution rates and the employee rate.
58
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note 13 - Net Pension Asset of the City (Continue
Projected Cash Flows
Based on those assumptions, the pension plan's fiduciary net position was projected to
be available to make all projected future benefit payments of current active and inactive
employees. Therefore, the long-term expected rate of return on pension plan
investments was applied to all periods of projected benefit payments to determine the
total pension liability.
The long-term expected rate of return on pension plan investments was determined
using a building-block method in which best-estimate ranges of expected future real
rates of return (expected returns, net of pension plan investment expense, and inflation)
are developed for each major asset class. These ranges are combined to produce the
long-term expected rate of return by weighting the expected future real rates of return
by the target asset allocation percentage and by adding expected inflation.
Sensitivity of the Net Pension Liability (Asset) to Changes in the Discount
Rate - The following presents the net pension liability (asset) of the City, calculated
using the discount rate of 8.0 percent, as well as what the City's net pension liability
(asset) would be if it were calculated using a discount rate that is I percentage point
lower (7.0 percent) or I percentage point higher (9.0 percent) than the current rate:
I Percent Current I Percent
Decrease Discount Rate Increase
(7.0%) (8.0%) (9.0%)
Net pension liability (asset) of the City $ 10,122,623 $ (9,080,501) $ (25,586,946)
Note 14 - Other Posternployment 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 "VEBA"). 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, 2014, the date of
the most recent actuarial valuation, membership consisted of 547 active participants,
651 retired participants, and 34 inactive vested participants.
59
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note 14 - Other Posternployrnent Benefits (Continue
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 began to provide Health
Reimbursement Savings Accounts (HRSA) to all new hires in lieu of the VEBA medical
benefits.
Contributions - Employer contributions to the trust are recognized when due and the
employer has made a formal commitment to provide the contributions. Benefits are
recognized when due and payable in accordance with the terms of the plan.
The obligation to contribute to and maintain the System for these employees was
established by negotiation with certain bargaining units, including general and
administrative employees. These employees are required to make a contribution of 2
percent beginning December 1, 2006. The funding policy provides for periodic
employer contributions at actuarially determined rates. Administrative costs of the plan
are financed through investment earnings.
Funding Progress - For the year ended November 30, 2015, the City has estimated
the cost of providing retiree healthcare benefits through an actuarial valuation as of
November 30, 2013. 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) $ 5,907,902
Interest on the prior year's net OPEB obligation 310,684
Less adjustment to the annual required contribution (170,713)
Annual OPEB cost 6,047,873
Contributions to VEBA (5,361,926)
Increase in net OPEB obligation 685,947
OPEB obligation - Beginning of year 3,883,551
OPEB obligation - End of year $ 4,569,498
60
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note 14 - Other Postemployment Benefits (Continue
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
11/30/13 $ 7,163,583 89.9 $ 3,093,848
11/30/14 7,177,792 89.0 3,883,554
11/30/15 6,047,873 88.7 4,569,498
The funding progress of the plan as of the most recent valuation date and two preceding
dates is as follows (in 000s):
Actuarial Actuarial UAAL as a
Actuarial Value of Accrued Unfunded Funded Ratio Covered Percentage
Valuation Assets* Liability AAL(UAAL) (Percent) Payroll of Covered
Date (a) (AAL) (b) (b-a) (a/b) (c) Payroll
11/30/12 $ 65,667 $ 169,363 $ 103,696 38.8 $ 30,964 334.9
11/30/13 74,550 160,552 86,002 46.4 30,560 281.4
11/30/14 83,134 159,855 76,721 52.0 31,408 244.3
Valued using the five-year"smoothed funding" 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 over time 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.
61
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note 14 - Other Postemployment Benefits (Continued)
In the November 30, 2014 actuarial valuation, the entry age actuarial cost method was
used. The actuarial assumptions included an 8 percent investment rate of return (net of
administrative expenses), which is a blended rate 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 2015, 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.
Note 15 - Pension and Other Employee Benefit Trust Funds
The following are condensed financial statements for the City's defined benefit plan (see
Notes 10 through 13) and the postemployment healthcare plan (see Note 14). The
plans do not issue separate financial statements.
Employees'
Retirement
System VEBA
Statement of Net Position
Cash and investments $221,059,139 $ 92,188,244
Other assets 336,165 680,461
Liabilities 4,876,786 587,291
Net position $216,518,5 18 $ 92,281,414
Statement of Changes in Net Position
Investment income $ 4,353,881 $ 1,172,348
Contributions 2,545,897 5,900,519
Benefit payments (16,017,300) (5,490,021)
Other decreases (418,823) (30,133)
Change in Net Position $ (9,536,345) $ 1,552,713
62
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note 16 - Deferred Inflows of Resources
At the end of the current fiscal year, the various components of deferred inflows of
resources are as follows:
Governmental
Funds
Property taxes, special assessments, and other receivables -
Unavailable $ 1,023,560
State sources - Unavailable 1,413,781
911 surcharge revenue - Unavailable 322,319
Grant revenue - Unavailable 107,046
Total deferred inflows $ 2,866,706
Note 17 - Upcoming Accounting Pronouncements
In February 2015, the Governmental Accounting Standards Board issued GASB
Statement No. 72, Fair Value Measurement and Application. The requirements of this
statement will enhance comparability of financial statements among governments by
requiring measurement of certain assets and liabilities at fair value using a consistent and
more detailed definition of fair value and acceptable valuation techniques. This
statement also will enhance fair value application guidance and related disclosures in
order to provide information to financial statement users about the impact of fair value
measurements on a government's financial position. GASB Statement No. 72 is
required to be adopted for years beginning after June 15, 2015. The City is currently
evaluating the impact this standard will have on the financial statements when adopted
during the City's 2016 fiscal year.
In June 2015, the GASB issued two new standards addressing accounting and financial
reporting by state and local governments for postemployment benefits other than
pensions (OPEB). GASB Statement No. 74, Financial Reporting for Postemployment
Benefit Plans Other Than Pension Plans, addresses reporting by OPEB plans whereas
GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits
Other Than Pensions, addresses accounting and reporting by employer governments that
provide OPEB benefits to their employees. Along with the currently required statement
of fiduciary net position and statement of changes in fiduciary net position, OPEB plans
will now be required to include in the financial statements more extensive footnote
disclosures and required supplemental information related to the measurement of the
OPEB liabilities for which assets have been accumulated. In addition, the City will, after
adoption of GASB Statement No. 75, recognize on the face of the financial statements
its net OPEB liability. The City is currently evaluating the impact these standards will
have on the financial statements when adopted. GASB Statement No. 74 is effective for
the City's 2017 fiscal year whereas GASB Statement No. 75 is effective one year later.
63
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2015
Note 17 - Upcoming Accounting Pronouncements (Continued
In August 2015, the GASB issued Statement No. 77, Tax Abatement Disclosures. This
statement will require governments to disclose in their financial statements information
related to tax abatement agreements. The City is currently evaluating the impact this
standard will have on the financial statements when adopted during the City's 2017 fiscal
year.
Note 113 - Change in Accounting
During the current year, the City adopted Governmental Accounting Standards Board
(GASB) Statement No. 68, Accounting and Financial Reporting for Pensions. As a result,
the government-wide statements and the proprietary funds now include an asset for our
overfunded legacy costs. Some of the changes in this net pension asset will be
recognized immediately as part of the pension expense measurement, and part will be
deferred and recognized over future years. Refer to the pension footnote for further
details. This change does not impact the General Fund or any other governmental fund.
As a result of implementing this statement, the beginning net position of governmental
activities, business-type activities, Water and Sewer Fund, and Housing Fund has been
restated as follows:
Governmental Business-type Water and
Activities Activities Sewer Housing
Net position -November 30,
2014-As previously reported $ 185,725,389 $ 92,264,393 $ 82,786,947 $ 4,869,865
Adjustment for implementation
of GASB Statement No. 68 22,165,096 1,455,086 1,317,401 137,685
Net position -November 30,
2014-As restated $ 207,890,485 $ 93,719,479 $ 84,104,348 $ 5,007,550
Note 19 - Subsequent Events
Refunding bonds in the amount of $6,180,000 were issued in March 2016 and the
proceeds were used to refund a portion of the 2008 MBA Court Construction Bonds,
which had an ending balance of$7,180,000 at November 30, 2015.
64
Required Supplemental Information
65
City of Livonia, Michigan
Required Supplemental Information
Budgetary Comparison Schedule - General Fund
Year Ended November 30, 2015
Variance with
Original Budget Final Budget Actual Final Budget
Revenue
Property Taxes $ 30,994,273 $ 30,994,273 $ 30,983,776 $ (10,497)
Licenses and Permits
Business 154,800 154,800 145,859 (8,941)
Nonbusiness 1,810,200 1,810,200 2,202,959 392,759
Total licenses and permits 1,965,000 1,965,000 2,348,818 383,818
Intergovernmental Revenue
State and local 8,406,132 8,406,132 8,690,011 283,879
Federal 229,200 229,200 118,892 (110,308
Total intergovernmental revenue 8,635,332 8,635,332 8,808,903 173,571
Charges for Services 4,045,574 4,045,574 3,719,676 (325,898)
Interest and Rents 2,471,102 2,471,102 2,444,151 (26,951)
Fines and Forfeitures 3,998,000 3,998,000 4,527,404 529,404
Miscellaneous Revenue
Sale of fixed assets 50,000 50,000 130,900 80,900
Other miscellaneous 1,739,601 1,739,601 703,484 (1,036,1 17)
Total miscellaneous revenue 1,789,601 1,789,601 834,384 (955,217)
Total revenue $ 53,898,882 $ 53,898,882 $ 53,667,1 12 $ (231,770)
Expenditures
General Government
Legislative:
City Council $ 341,624 $ 341,624 $ 330,228 $ 11,396
City Clerk 510,589 476,589 476,498 91
Elections 272,751 177,751 176,347 1,404
Total legislative 1,124,964 995,964 983,073 12,891
judicial 2,998,122 2,998,122 2,989,219 8,903
Executive-Mayor's office 412,578 412,578 392,346 20,232
Human resources:
Labor relations 93,000 49,000 48,831 169
Civil service 637,766 596,766 595,908 858
Total human resources 730,766 645,766 644,739 1,027
66
City of Livonia, Michigan
Required Supplemental Information
Budgetary Comparison Schedule - General Fund (Continued)
Year Ended November 30, 2015
Variance with
Original Budget Final Budget Actual Final Budget
Expenditures (Continued)
General Government(Continued)
Financial administration:
Accounting $ 212,467 $ 200,467 $ 195,964 $ 4,503
Assessing 506,634 462,634 462,151 483
Finance 370,818 304,818 304,433 385
Independent audit 34,374 34,374 34,221 153
Board of Review 4,606 4,606 3,100 1,506
Treasurer 534,161 491,161 490,485 676
Information systems 972,271 972,271 967,899 4,372
Total financial administration 2,635,331 2,470,331 2,458,253 12,078
Other activities:
Legal 595,539 617,739 617,235 504
Utilities and supplies 631,589 565,589 565,265 324
Acquisition of land 2,500 2,500 - 2,500
Dues and subscriptions 42,000 42,000 40,873 1,127
Total other activities 1,271,628 1,227,828 1,223,373 4,455
Total general government 9,173,389 8,750,589 8,691,003 59,586
Public Safety
Police:
Traffic bureau 1,135,279 1,146,265 1,145,721 544
Administration 2,454,496 2,193,999 2,192,942 1,057
Data processing 861,403 778,286 774,217 4,069
Detective bureau 2,445,550 2,545,664 2,545,342 322
Automotive service 585,000 457,381 449,818 7,563
Communications/Records bureau 691,424 692,950 692,433 517
Crossing guards 60,984 54,508 54,364 144
School liaison 409,515 388,160 387,888 272
Office of emergency preparedness 170,495 176,187 176,152 35
Reserve police 303,638 313,315 313,253 62
Patrol bureau 11,582,243 12,004,251 12,003,432 819
Intelligence bureau 1,880,577 1,829,638 1,828,040 1,598
Total police 22,580,604 22,580,604 22,563,602 17,002
Fire:
Administration 934,349 938,619 937,318 1,301
Firefighting 12,002,004 12,000,234 11,995,823 4,411
Fire prevention 647,335 644,835 644,201 634
Total fire 13,583,688 13,583,688 13,577,342 6,346
67
City of Livonia, Michigan
Required Supplemental Information
Budgetary Comparison Schedule - General Fund (Continued)
Year Ended November 30, 2015
Variance with
Original Budget Final Budget Actual Final Budget
Expenditures (Continued)
Public Safety(Continued)
Protective inspection:
Building Code Board of Appeals $ 1,420 $ 1,420 $ 915 $ 505
Inspection 1,278,385 1,185,385 1,184,865 520
Total protective inspection 1,279,805 1,186,805 1,185,780 1,025
Other protective-Traffic commission 2,034 2,034 2,028 6
Total public safety 37,446,131 37,353,131 37,328,752 24,379
Public Works
Public services-Highways,streets,and
maintenance:
Engineering 58,232 326,644 321,753 4,891
Parks maintenance 1,387,446 1,207,1 10 1,205,570 1,540
Administration 1 199,568 195,754 3,814
Equipment maintenance 91,945 (150,751) (159,406) 8,655
Building maintenance 1,085,760 844,431 841,072 3,359
Street lighting 298,949 244,238 243,718 520
Maintenance-streets 532,464 783,557 781,192 2,365
Total public works 3,454,797 3,454,797 3,429,653 25,144
Parks and Recreation and Cultural
Parks and recreation:
Administration 288,804 307,404 307,216 188
Recreation facilities 34,424 27,124 27,085 39
Recreation athletics 94,778 83,478 83,383 95
Total parks and recreation 418,006 418,006 417,684 322
Cultural:
Senior services 492,344 464,344 462,523 1,821
Greenmead and cultural 715,734 697,734 695,234 2,500
Total cultural 1,208,078 1,162,078 1,157,757 4,321
Total parks and recreation and cultural 1,626,084 1,580,084 1,575,441 4,643
Community and Economic Development
City Planning Commission 589,700 504,835 504,636 199
Zoning Board of Appeals 48,867 48,867 41,001 7,866
Total community and economic
development 638,567 553,702 545,637 8,065
Employee Benefits, Insurance,and Other 1,550,475 2,209,975 2,052,047 157,928
Total expenditures $ 53,889,443 $ 53,902,278 $ 53,622,533 $ 279,745
68
City of Livonia, Michigan
Required Supplemental Information
Budgetary Comparison Schedule - Major Special Revenue Funds
Refuse Disposal System
Year Ended November 30, 2015
Variance with
Amended Amended
Original Budget Budget Actual Budget
Revenue
Property taxes $ 11,641,293 $ 11,641,293 $ 11,633,491 $ (7,802)
State-shared revenue and grants - - 150,584 150,584
Charges for services 150,200 150,200 141,340 (8,860)
Interest 25,000 25,000 3,731 (21,269)
Miscellaneous revenue 15,000 15,000 19,305 4,305
Total revenue 11,831,493 11,831,493 11,948,451 116,958
Expenditures-Sanitation 12,123,862 12,123,862 11,272,735 851,127
Net Change in Fund Balance (292,369) (292,369) 675,716 968,085
Fund Balance -Beginning of year 3,002,973 3,002,973 3,002,973 -
Fund Balance-End of year $ 2,710,604 $ 2,710,604 $ 3,678,689 $ 968,085
69
City of Livonia, Michigan
Required Supplemental Information
Pension System
Schedule of Investment Returns
2015 2014
Annual money-weighted rate of return - Net of investment
expense 1.4 % 9.6 %
70
City of Livonia, Michigan
Required Supplemental Information
Pension System
Schedule of Changes in the City Net Pension Asset
and Related Ratios
2015 2014
Total Pension Liability
Service cost $ 1,530,027 $ 1,647,392
Interest 15,607,024 15,516,271
Changes in benefit terms - -
Differences between expected and actual experience (673,125) 401,554
Changes in assumptions 4,763,196 -
Benefit payments, including refunds (16,223,788) (16,520,444)
Net Change in Total Pension Liability 5,003,334 1,044,773
Total Pension Liability- Beginning of year 202,434,682 201,389,909
Total Pension Liability- End of year $207,438,016 $202,434,682
Plan Fiduciary Net Position
Contributions - Employer $ 2,158,913 $ 3,634,058
Contributions - Member 386,983 400,503
Net investment income 4,353,881 20,367,342
Administrative expenses (212,335) (194,367)
Benefit payments, including refunds (16,223,788) (16,520,444)
Net Change in Plan Fiduciary Net Position (9,536,346) 7,687,092
Plan Fiduciary Net Position - Beginning of year 226,054,863 218,367,771
Plan Fiduciary Net Position - End of year $216,518,517 $226,054,863
City's Net Pension Asset- Ending $ (9,080,501) $ (23,620,181)
Plan Fiduciary Net Position as a Percent of Total Pension
Liability 104.38 % 111.67 %
Covered Employee Payroll $ 9,070,569 $ 9,312,278
City's Net Pension Asset as a Percent of Covered Employee
Payroll (100.1)% (253.6)%
71
City of Livonia, Michigan
2015 2014 2013 2012
Actuarially determined contribution $ 2,158,913 $ 3,634,058 $ 2,082,219 $ 747,1 19
Contributions in relation to the
actuarially determined contribution 2,158,913 3,634,058 2,082,219 747,119
Contribution Deficiency $ - $ - $ - $ -
Covered Employee Payroll $ 9,070,569 $ 9,312,278 $ 9,870,211 $ 11,282,045
Contributions as a Percentage of
Covered Employee Payroll 23.8 % 39.0 % 21.1 % 6.6 %
Notes to Schedule of City Contributions
Actuarial valuation information relative to the determination of contributions:
Valuation date Actuarially determined contribution rates are calculated as of
November 30, two years prior to the end of the fiscal year in which
the contributions are reported. Covered employee payroll is as of
November 30 of the current fiscal year
Methods and assumptions used to determine contribution rates:
Actuarial cost method Aggregate
Amortization method N/A
Remaining amortization period Future working lifetime
Asset valuation method 5-year smoothed market
Inflation 4.0%
Salary increases 11.9- 4.0%, including inflation
Investment rate of return 8.0%
1983 Group Annuity(changed to RP 2000 Combined Healthy
Mortality Table projected to 2014 beginning with November 30,
Mortality 2015 valuation)
72
Required Supplemental Information
Pension System
Schedule of City Contributions
Last Ten Fiscal Years
2011 2010 2009 2008 2007 2006
$ 12,455,231 $ 13,799,848 $ 15,854,893 $ 16,054,563 $ 15,657,398 $ 16,134,618
73
City of Livonia, Michigan
Required Supplemental Information
Retiree Health and Disability Benefits Plan
Schedule of Funding Progress
Year Ended November 30, 2015
The schedule of funding progress is as follows (000s omitted):
Actuarial
Actuarial Accrued UAAL as a
Value of Liability(AAL) Unfunded Funded Ratio Covered Percentage of
Actuarial Assets* Entry Age AAL(UAAL) (Percent) Payroll Covered
Valuation Date (a) (b) (b-a) (a/b) (c) Payroll
11/30/09 $ 57,845 $ 137,822 $ 79,977 42.0 % $ 36,981 216.3 %
11/30/10 60,361 153,223 92,862 39.4 34,062 272.6
11/30/11 62,491 156,260 93,769 40.0 32,871 285.3
11/30/12 65,667 169,363 103,696 38.8 30,964 334.9
11/30/13 74,550 160,552 86,002 46.4 30,560 281.4
11/30/14 83,134 159,855 76,721 52.0 31,408 244.3
Valued using the five-year"smoothing funding" market value
Schedule of Employer Contributions
Actuarial Valuation Annual Required Percentage
Fiscal Year Ended Date Contribution* Contributed
11/30/10 11/30/08 $ 6,155,752 92 %
1 1/30/11 1 1/30/09 6,639,053 92
11/30/12 11/30/10 7,259,781 91
11/30/13 1 1/30/1 1 7,078,024 91
1 1/30/14 1 1/30/12 7,066,283 90
11/30/15 11/30/13 5,907,902 91
The required contribution is expressed to the City as a percentage of payroll.
The information presented above was determined as part of the actuarial valuations at the dates
indicated. Additional information as of November 30, 2014, 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
74
City of Livonia, Michigan
Note to Required Supplemental Information
Year Ended November 30, 2015
Reconciliation of Budgeted Amounts to Basic Financial Statements - The budgetary
comparison schedules for the General Fund and Major Special Revenue Fund 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
Expenditures
General Fund:
Amounts per operating statement $ 50,063,614
Operating transfers budgeted as revenue and expenditures 3,558,919
Amounts per budget statement $ 53,622,533
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:
I. On or before September 15, the mayor submits to the City Council a proposed operating
budget for the fiscal year commencing the following December I. The operating budget
includes proposed expenditures and the means of financing them.
2. Public hearings are conducted to obtain citizen comments.
3. As provided for by the City Charter, not later than November 1, the City Council shall adopt
the budget through the passage of a budget resolution and transmit the budget to the mayor.
Not later than November 15, the mayor shall either approve or disapprove the adopted
budget, in whole or in part.
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.
75
Other Supplemental Information
76
City of Livonia, Michigan
Special Revenue Funds
Major Community SAD Street Cable
Streets Local Streets Recreation Grants Lighting Television
Assets
Cash and investments $ 1,667,559 $ 2,445,168 $ 4,190,592 $ 59,778 $ 271,191 $ 1,150,094
Receivables:
Taxes - - 11,331 - - -
Special assessments - - - -
Due from other governmental units 1,661,879 295,478 - 137,488 - -
Other 13,970 - - 5,908 2,322 -
Prepaid expenses - - -
Total assets $3,343,408 $2,740,646 $4,201,923 $ 203,174 $ 273,513 $1,150,094
Liabilities
Accounts payable $ 102,359 $ - $ 135,367 $ 28,017 $ - $ 2,135
Due to other governmental units - - - -
Due to other funds - 105,567 -
Accrued liabilities and other 62,748 20,696 11,935
Unearned revenue 565,833 - -
Total liabilities 102,359 - 763,948 154,280 - 14,070
Deferred Inflows of Resources-Unavailable
revenue 766,974 - 11,067 107,047 - -
Fund Balances
Nonspendable - - -
Restricted:
Streets,roads,and sidewalks 2,474,075 2,740,646 - - - -
Adjudicated forfeitures - -
Capital improvements -
Community recreation 3,426,908
Street lighting - - - - 273,513 -
Library -
Public safety communication
Community transit -
Committed-Cable access television 1,136,024
Assigned:
Capital improvements -
Golf course capital improvements
Court building improvements
Unassigned (58,153) - -
Total fund balances 2,474,075 2,740,646 3,426,908 (58,153) 273,513 1,136,024
Total liabilities,deferred inflows of
resources,and fund balances 3,343,408 2,740,646 4,201,923 203,174 273,513 1,150,094
77
Other Supplemental Information
Combining Balance Sheet
Nonmajor Governmental Funds
November 30, 2015
Special Revenue Funds Debt Service Funds
Municipal
Building
Public Safety Adjudicated Community Roads and 2005 MBA 2007 MBA 2015 MBA Authority
Library Communication Forfeitures Transit Sidewalks Refunding Refunding Refunding and Other
$ 1,499,982 $ 3,894,115 $ 1,771,327 $ 686,017 $ 556,849 $ - $ - $ - $ -
11,668 - - 7,213 12,829 - - - -
- - 2,506
415,754 37,718 - - - - - -
$1,51 1,650 $ 4,309,869 $1,809,045 $ 695,736 $ 569,678 $ $ $ $
$ 30,794 $ 1,603 $ 9,406 $ 11,178 $ 544,818 $ - $ - $ - $ -
- - - 28,458 -
100,083 - - 21,510 2,245 - - - -
130,877 1,603 9,406 61,146 547,063 - - - -
11,396 322,317 - 7,045 12,530 - - - -
- 10,085
1,799,639 - - - - - -
1,369,377 - - - - - - - -
- 3,985,949 - - - - - - -
- 627,545
1,369,377 3,985,949 1,799,639 627,545 10,085 - - - -
1,511,650 4,309,869 1,809,045 695,736 569,678
78
City of Livonia, Michigan
Other Supplemental Information
Combining Balance Sheet (Continued)
Nonmajor Governmental Funds
November 30, 2015
Capital Projects Funds
Total
Golf Course Nonmajor
Capital Capital Special Court Building Governmental
Improvement Improvement Assessments Improvements Funds
Assets
Cash and investments $ 474,077 $ 6,865,871 $ 985,254 $ 953,324 $ 27,471,198
Receivables:
Taxes - - - - 43,041
Special assessments 286,021 286,021
Due from other governmental units - 2,097,351
Other - - - - 475,672
Prepaid expenses - 727,938 - - 727,938
Total assets $ 474,077 $ 7,593,809 $ 1,271,275 $ 953,324 $ 31,101,221
Liabilities
Accounts payable $ - $ 58,843 $ 138,512 $ - $ 1,063,032
Due to other governmental units - - 28,458
Due to other funds - - - - 105,567
Accrued liabilities and other 219,217
Unearned revenue - - 565,833
Total liabilities - 58,843 138,512 - 1,982,107
Deferred Inflows of Resources-Unavailable
revenue - - 256,020 - 1,494,396
Fund Balances
Nonspendable 727,938 - 727,938
Restricted:
Streets,roads,and sidewalks - - - - 5,224,806
Adjudicated forfeitures - - - - 1,799,639
Capital improvements - 5,039,767 876,743 - 5,916,510
Community recreation - - 3,426,908
Street lighting - - - - 273,513
Library - - - - 1,369,377
Public safety communication 3,985,949
Community transit - - - - 627,545
Committed-Cable access television - - - - 1,136,024
Assigned:
Capital improvements - 1,767,261 - - 1,767,261
Golf course capital improvements 474,077 - - 474,077
Court building improvements - 953,324 953,324
Unassigned - - - - (58,153)
Total fund balances 474,077 7,534,966 876,743 953,324 27,624,718
Total liabilities,deferred inflows of
resources,and fund balances 474,077 7,593,809 1,271,275 953,324 31,101,221
79
City of Livonia, Michigan
Special Revenue Funds
Community SAD Street Cable
Major Streets Local Streets Recreation Grants Lighting Television
Revenue
Property taxes $ - $ $ 3,023,791 $ - $ $
Federal revenue 117,027 - 901,506
State and local revenue 5,523,650 1,832,529 82,118 - - -
Charges for services - - 3,921,103
Fines and forfeitures - - - -
Interest 4,888 1,733 4,430 50 - 626
Other revenue:
Special assessments - - - 1,21 1,849 -
Miscellaneous income - - 90,679 - 556,780
Total revenue 5,645,565 1,834,262 7,122,121 901,556 1,211,849 557,406
Expenditures
Current:
Public safety - - - 130,661 - -
Public works 5,282,785 1,308,495 - - 1,161,211 -
Community and economic development - - - 590,479 - -
Recreation and culture - - 4,486,687 - - 411,196
Capital outlay - -
Debt service:
Principal retirement
Interest and other - - - - - -
Total expenditures 5,282,785 1,308,495 4,486,687 721,140 1,161,211 411,196
Excess of Revenue Over(Under)Expenditures 362,780 525,767 2,635,434 180,416 50,638 146,210
Other Financing Sources(Uses)
Face value of debt issue - - - - - -
Transfers in - 1,210,677
Transfers out (1,210,677) (1,475,000) (2,745,382) - - -
Payment to bond refunding escrow agent
Total other financing(uses)sources (1,210,677) (264,323) (2,745,382) - - -
Net Change in Fund Balances (847,897) 261,444 (109,948) 180,416 50,638 146,210
Fund Balances-Beginning
of year 3,321,972 2,479,202 3,536,856 (238,569) 222,875 989,814
Fund Balances-End of year $ 2,474,075 $ 2,740,646 $ 3,426,908 $ (58,153)$ 273,513 $ 1,136,024
80
Other Supplemental Information
Combining Statement of Revenue, Expenditures, and Changes in
Fund Balances
Nonmajor Governmental Funds
Year Ended November 30, 2015
Special Revenue Funds Debt Service Funds
Municipal
Building
Public Safety Adjudicated Community Roads and 2005 MBA 2007 MBA 2015 MBA Authority and
Library Communication Forfeitures Transit Sidewalks Refunding Refunding Refunding Other
$ 3,1 13,496 $ - $ - $ 773,819 $ 3,423,360 $ - $ - $ - $ -
- 123,361 - -
205,265 - - 140,020 46,585 - - - -
44,800 668,554 - 65,309 - - - - -
55,284 - 572,535 - - - - - -
622 2,668 1,244 501 3,056 - - - -
4,100 - 2,925 9,180 4,050 - - - -
3,423,567 671,222 700,065 988,829 3,477,051 - - - -
- 213,019 345,119 - -
- - - 5,801,345 - - - -
3,161,745 - - 763,980 - - - - -
- 145,309 -
- - 280,000 1,445,000 - 245,000
- - - - - 51,725 1,067,375 - 358,658
3,161,745 213,019 345,119 909,289 5,801,345 331,725 2,512,375 - 603,658
261,822 458,203 354,946 79,540 (2,324,294) (331,725) (2,512,375) - (603,658)
- - - - - - - 2,050,000 -
1,475,000 331,725 2,512,375 32,610 603,658
- - - (2,082,610) -
1,475,000 331,725 2,512,375 - 603,658
261,822 458,203 354,946 79,540 (849,294) - - - -
1,107,555 3,527,746 1,444,693 548,005 859,379 - - - -
$ 1,369,377 $ 3,985,949 $ 1,799,639 $ 627,545 $ 10,085 $ $ $ $
81
City of Livonia, Michigan
Other Supplemental Information
Combining Statement of Revenue, Expenditures, and Changes in
Fund Balances (Continued)
Nonmajor Governmental Funds
Year Ended November 30, 2015
Capital Projects Funds
Golf Course Total Nonmajor
Capital Capital Special Court Building Governmental
Improvement Improvement Assessments Improvements Funds
Revenue
Property taxes $ - $ 1,150,966 $ - $ - $ 11,485,432
Federal revenue - 1,141,894
State and local revenue - - - - 7,830,167
Charges for services 92,457 4,792,223
Fines and forfeitures - - - 643,704 1,271,523
Interest 344 3,893 9,624 797 34,476
Other revenue:
Special assessments - - 231,057 - 1,442,906
Miscellaneous income - - - - 667,714
Total revenue 92,801 1,154,859 240,681 644,501 28,666,335
Expenditures
Current:
Public safety - - - - 688,799
Public works 13,553,836
Community and economic development 590,479
Recreation and culture - - - - 8,823,608
Capital outlay 177,358 1,611,623 196,567 - 2,130,857
Debt service:
Principal retirement - - - - 1,970,000
Interest and other - - - - 1,477,758
Total expenditures 177,358 1,61 1,623 196,567 - 29,235,337
Excess of Revenue Over(Under)Expenditures (84,557) (456,764) 44,114 644,501 (569,002)
Other Financing Sources(Uses)
Face value of debt issue - - - 2,050,000
Transfers in - 3,374,991 - - 9,541,036
Transfers out - - - (603,658) (6,034,717)
Payment to bond refunding escrow agent - - - - (2,082,610)
Total other financing(uses)sources - 3,374,991 - (603,658) 3,473,709
Net Change in Fund Balances (84,557) 2,918,227 44,114 40,843 2,904,707
Fund Balances-Beginning
of year 558,634 4,616,739 832,629 912,481 24,720,011
Fund Balances-End of year $ 474,077 $ 7,534,966 $ 876,743 $ 953,324 $ 27,624,718
82
City of Livonia, Michigan
Pension Trust Funds Agency Funds
Employees' Investment
Retirement Total Pension Administration Special Trust
System VEBA Trust Funds Fund Fund
Assets
Cash and cash equivalents $ 514,579 $ 183,993 $ 698,572 $ 1,170,332 $ 2,251,456
Investments:
U.S.government securities 10,058,980 6,873,736 16,932,716 - -
Collateralized mortgage obligations 5,937,342 3,160,381 9,097,723 - -
Common stock 106,073,533 36,645,934 142,719,467 - -
Corporate bonds 15,383,713 6,949,863 22,333,576 - -
Real estate investment trust 10,953,209 250,797 11,204,006 -Foreign bonds 2,244,743 1,108,670 3,353,413 - -
Mutual funds 66,057,763 37,014,870 103,072,633 - -
Securities lending collateral pool-
Mutual funds 3,835,277 - 3,835,277 - -
Accounts receivable 2,881 6,891 9,772 - -
Due from agency funds 333,284 673,570 1,006,854 -
Total assets 221,395,304 92,868,705 314,264,009 $ 1,170,332 $2,251,456
Liabilities
Accounts payable 856,604 390,463 1,247,067 $ - $ -
Due to other governmental units 22,533 - 22,533 - -
Due to primary government - 196,828 196,828 -
Due to fiduciary/agency funds - - 1,006,854
Accrued liabilities and other liabilities - - 163,478 2,251,456
Amounts due to broker under securities
lending agreement 3,997,649 - 3,997,649 - -
Total liabilities 4,876,786 587,291 5,464,077 $ 1,170,332 $2,251,456
Net Position Held in Trust for
Pension and Other Employee Benefits $ 216,518,518 $ 92,281,414 $ 308,799,932
83
Other Supplemental Information
Combining Statement of Net Position
Fiduciary Funds
November 30, 2015
Agency Funds
Court
Historical Art Court Volunteer
Commission Commission Undistributed Depository Court Bond Work Court Civil Total Agency
Fund Fund Tax Fund Fund Fund Program Drug Fund Funds
$ 294,383 $ 70,966 $ 5,734,755 $ 521,983 $ 218,582 $ 449,230 $ 232,059 $ 10,943,746
- - - 16,720 - 26,091 4,730 47,541
$ 294,383 $ 70,966 $ 5,734,755 $ 538,703 $ 218,582 $ 475,321 $ 236,789 $ 10,991,287
5,734,755 538,703 - - - 6,273,458
47,541 - - 1,054,395
294,383 70,966 - - 171,041 475,321 236,789 3,663,434
$ 294,383 $ 70,966 $ 5,734,755 $ 538,703 $ 218,582 $ 475,321 $ 236,789 $ 10,991,287
84
City of Livonia, Michigan
Other Supplemental Information
Combining Statement of Changes in Fiduciary Net Position
Fiduciary Funds
Year Ended November 30, 2015
Employees'
Retirement
System VEBA Total
Additions
Investment income:
Interest and dividends $ 6,731,793 $ 3,941,933 $ 10,673,726
Net change in fair value of investments (1,756,030) (2,510,091) (4,266,121)
Less investment related expenses (621,882) (259,494) (881,376)
Net investment income 4,353,881 1,172,348 5,526,229
Contributions:
Employer 2,158,914 5,361,926 7,520,840
Employee 386,983 538,593 925,576
Total contributions 2,545,897 5,900,519 8,446,416
Total additions-Net 6,899,778 7,072,867 13,972,645
Deductions
Pension benefit payments 16,017,300 - 16,017,300
Medical benefit payments - 5,490,021 5,490,021
Refunds of contributions 206,488 - 206,488
Administrative expenses 212,335 30,133 242,468
Total deductions 16,436,123 5,520,154 21,956,277
Net(Decrease) Increase in Net Position Held in Trust (9,536,345) 1,552,713 (7,983,632)
Net Position Held in Trust for Pension and Other
Employee Benefits -Beginning of year 226,054,863 90,728,701 316,783,564
Net Position Held in Trust for Pension and Other
Employee Benefits - End of year $216,518,518 $ 92,281,414 $308,799,932
85
City of Livonia, Michigan
Federal Awards
Supplemental Information
November 30, 201 S
City of Livonia, Michigan
Contents
Independent Auditor's 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 Government Auditing Standards 2-3
Report on Compliance for Each Major Federal Program;
Report on Internal Control Over Compliance 4-5
Schedule of Expenditures of Federal Awards 6-7
Reconciliation of Basic Financial Statements Federal Revenue with Schedule of
Expenditures of Federal Awards 8
Notes to Schedule of Expenditures of Federal Awards 9-10
Schedule of Findings and Questioned Costs 11-12
Summary Schedule of Prior Audit Findings 13
plante 74Nrt Moran,igh
Plante27400 Northwestern Highway
P.O.Box 307
moran Southfield 48007
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Fax:248.352.0018
elantemoran.com
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 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, 2015 and the related notes to the financial statements, which
collectively comprise the City's basic financial statements. We issued our report thereon dated
April 5, 2016, which contained unmodified opinions on the financial statements of the
governmental activities, the business-type activities, the aggregate discretely presented
component units, each major fund, and the aggregate remaining fund information. Our audit
was conducted for the purpose of forming opinions on the financial statement that collectively
comprise the basic financial statements. We have not performed any procedures with respect
to the audited financial statements subsequent to April 5, 2016.
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 the 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 underlying accounting and other
records used to prepare the financial statements. The information has been subjected to the
auditing procedures applied in the audit of the financial statements and certain additional
procedures, including comparing and reconciling such information directly to the underlying
accounting and other records used to prepare the financial statements or to the financial
statements themselves, and other additional procedures in accordance with auditing standards
generally accepted in the United States of America. In our opinion, the information is fairly
stated in all material respects in relation to the financial statements as a whole.
2)t ot�, P L L C
April 5, 2016
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GA.OISA[.ALI..IAIV{',I::bI
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plante 74Nrt Moran,igh
Plante27400 Northwestern Highway
P.O.Box 307
moran Southfield 48007
Tel::248.352.2552,2500
Fax:248.352.0018
elantemoran.com
Report on Internal Control Over Financial Reporting and on Compliance
and Other Matters Based on an Audit of Financial Statements
Performed in Accordance with Government Auditing Standards
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 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, 2015 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 5, 2016.
Internal Control Over Financial Reporting
In planning and performing our audit of the 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 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 City's 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 and 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 consider to 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 basis. A material weakness is a
deficiency, or a combination of deficiencies, in internal control such that there is a reasonable
possibility that a material misstatement of the City's financial statements will not be prevented,
or detected and corrected, on a timely basis. A significant deficiency is a deficiency or a
combination of deficiencies, in internal control that is less severe than a material weakness, yet
important enough to merit attention by those charged with governance. We consider the
deficiency described in the accompanying schedule of findings and questioned costs as Finding
2015-001 to be a material weakness.
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MOUAI Ildi�l.1"INIII:IgI IIAIV,i
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 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 Standards.
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 financial
statements and, accordingly, we express no opinion on it.
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.
2totf PLLC
April 5, 2016
3
plante 74Nrt Moran,igh
Plante27400 Northwestern Highway
P.O.Box 307
moran Southfield 48007
Tel::248.352.2552,2500
Fax:248.352.0018
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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 City of Livonia, Michigan's (the "City") compliance with the types of
compliance requirements described in the U.S. Office of Management and Budget (OMB)
Compliance Supplement that could have a direct and material effect on each of its major federal
programs for the year ended November 30, 2015. The City of Livonia, Michigan's major federal
programs are identified in the summary of auditor's results section of the accompanying schedule
of findings and questioned costs.
Management's Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts,
and grants applicable to each of its federal programs.
Auditor's 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 Standards, issued by the Comptroller General of the United States; and
OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those
standards and OMB Circular A-133 require that we plan and perform the audit to obtain
reasonable assurance about whether noncompliance with the types of compliance requirements
referred to above that could have a direct and material effect on a major federal program
occurred. An audit includes examining, on a test basis, evidence about the City of Livonia,
Michigan's compliance with those requirements and performing such other procedures as we
considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for each
major federal program. However, our audit does not provide a legal determination of the City
of Livonia, Michigan's compliance.
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GA.OISA[.ALI..IAIUML 01
4
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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, 2015.
Report on Internal Control Over Compliance
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 City's internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control
over compliance does not allow management or employees, in the normal course of performing
their assigned functions, to prevent, or detect and correct, noncompliance with a type of
compliance requirement of a federal program on a timely basis. A material weakness in internal
control over compliance is a deficiency, or a combination of deficiencies, in internal control over
compliance such that there is a reasonable possibility that material noncompliance with a type of
compliance requirement of a federal program will not be prevented, or detected and corrected,
on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a
combination of deficiencies, in internal control over compliance with a type of compliance
requirement of a federal program that is less severe than a material weakness in internal control
over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in
the first paragraph of this section and was not designed to identify all deficiencies in internal
control over compliance that might be material weaknesses or significant deficiencies. We did
not identify any deficiencies in internal control over compliance that we consider to be material
weaknesses. However, material weaknesses may exist that have not been identified.
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 the OMB Circular A-133. Accordingly, this report is not suitable for any other
purpose.
April 5, 2016
5
City of Livonia, Michigan
Schedule of Expenditures of Federal Awards
Year Ended November 30, 2015
Pass-through
CFDA Entity Identifying Award Federal
Federal Agency/Pass-through Agency/Program Title Number Number Amount Expenditures
U.S.Department of Agriculture-Food Distribution Cluster-
Passed through the Wayne Metropolitan Community Services Agency-
Emergency Food Assistance Program(Food Commodities) 10.569 N/A $ 66,002 $ 66,002
U.S.Department of Housing and Urban Development:
Community Development Block Grant:
Program year 2015-B05 MC-26-0015 14.218 N/A 323,905 180,442
Program year 2014-B05 MC-26-0014 14.218 N/A 328,256 312,937
Total CDBG Entitlement Grants 493,379
Passed through the Michigan State Housing Development Authority-
HOME Investment Partnership Program-Program year 2003 14.239 M-2002-5068 277,200 625
Passed through Wayne County-HOME Investment Partnership
Program-Home Consortium Funds 14.239 N/A 226,000 96,564
Total U.S. Department of Housing and
Urban Development 590,568
U.S.Department of Justice:
Federal Equitable Sharing Program 16.922 N/A 123,058 123,058
Drug Enforcement Administration Task Force I6.unknown N/A 6,387 6,387
U.S.Marshals-Detroit Fugitive Apprehension Task Force I6.unknown N/A 15,825 15,825
Bulletproof Vest Partnership Program 16.607 2014 BUBX 7,664 7,664
Passed through Wayne County:
2012 Edward Byrne Memorial Justice Assistance Grant 16.738 DJ-BX-0730 10,161 9,769
2013 Edward Byrne Memorial Justice Assistance Grant 16.738 H4084-MI-DJ 10,693 1,150
Total Passed through Wayne County 10,919
Passed through Michigan State Police:
2012 Edward Byrne Memorial Justice Assistance Grant 16.738 DJ-BX-0109 15,000 15,000
Total JAG Program 25,919
Total U.S. Department of Justice 178,853
See Notes to Schedule of Expenditures
of Federal Awards. 6
City of Livonia, Michigan
Schedule of Expenditures of Federal Awards (Continued)
Year Ended November 30, 2015
Pass-through
CFDA Entity Identifying Award Federal
Federal Agency/Pass-through Agency/Program Title Number Number Amount Expenditures
U.S.Department of Transportation:
Highway Planning&Construction Cluster-Passed through the Michigan
Department of Transportation-Highway Planning and
Construction-Levan-School craft to North of 5 Mile 20.205 HKO090 $ 114,250 $ 114,250
Highway Safety Cluster-Passed through the Michigan Office of
Highway Safety-State and Community Highway Safety-
Belt Enforcement 20.600 PT-13-17 18,375 18,375
Federal Transit Cluster-Passed through the Southeast Michigan
Council of Governments-Livonia Community Transit Grant 20.500 N/A 213,594 850
Total U.S. Department of Transportation 133,475
U.S.Environmental Protection Agency-
Passed through the Michigan Department of Environmental Quality:
Drinking Water State Revolving Fund Cluster-Capitalization Grants
for Drinking Water State Revolving Funds 66.468 7355-01 3,775,000 201,189
Drinking Water State Revolving Fund Cluster-Capitalization Grants
for Drinking Water State Revolving Funds 66.468 7356-01 9,050,000 2,326,890
Total U.S. Environmental Protection Agency 2,528,079
U.S.Department of Homeland Security:
Passed through the Michigan Department of State Police-
2015 Emergency Management Performance Grant 97.042 N/A 55,640 55,640
Total federal awards $3,552,617
See Notes to Schedule of Expenditures
of Federal Awards. 7
City of Livonia, Michigan
Reconciliation of Basic Financial Statements
Federal Revenue with Schedule of Expenditures
of Federal Awards
Year Ended November 30, 201 S
Revenue from federal sources -As reported on financial statements
(includes all funds) $ 1,260,786
Add value of loans received 2,528,079
Less other nonfederal reimbursements recorded as federal revenue (118,892)
Add value of noncash assistance 66,002
Add change in unavailable revenue (196,120)
Revenue earned in excess of expenditures (303)
Other differences 13,065
Federal expenditures per the schedule of expenditures of federal awards $ 3,552,617
8
City of Livonia, Michigan
Notes to Schedule of Expenditures of Federal Awards
Year Ended November 30, 201 S
Note I - Basis of Presentation
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, 2015. The information in this Schedule is
presented in accordance with the requirements of the Office of Management and
Budget (OMB) Circular A-133, Audits of States, Local Governments, and Non-Profit
Organizations. Because the Schedule presents only a selected portion of the operations
of City of Livonia, Michigan, it is not intended to, and does not, present the financial
position, changes in net assets, or cash flows of the City of Livonia, Michigan.
Note 2 - Summary of Significant Accounting Policies
Expenditures reported on the Schedule are reported on the same basis of accounting.
Such expenditures are recognized following, as applicable, either the cost principles in
OMB Circular A-133, Cost Principles for A-87, or the cost principles contained in Title 2
U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost
Principles, and Audit Requirements for Federal Awards, wherein certain types of
expenditures are not allowable or are limited as to reimbursement. Negative amounts
shown on the Schedule represent adjustments or credits made in the normal course of
business to amounts reported as expenditures in prior years. Pass-through entity
identifying numbers are presented where available.
Note 3 - 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, 2015 that is included on the schedule of
expenditures of federal awards:
CFDA
Federal Program Number Description Amount
U.S. Department of
Agriculture - Passed
through Wayne
Metropolitan Community
Services Agency 10.569 USDA Food Distribution $ 66,002
9
City of Livonia, Michigan
Notes to Schedule of Expenditures of Federal Awards
Year Ended November 30, 201 S
Note 4 - Subrecipient Awards
Of the federal expenditures presented in the Schedule, federal awards were provided to
subrecipients as follows:
Amount
Provided to
Federal Program Title CFDA Number Subrecipients
Community Development Block Grant 14.218 $ 6,150
10
City of Livonia, Michigan
Schedule of Findings and Questioned Costs
Year Ended November 30, 201 S
Section 1 - Summary of Auditor's Results
Financial Statements
Type of auditor's report issued: Unmodified
Internal control over financial reporting:
• Material weakness(es) identified? X Yes No
• Significant deficiency(ies) identified that are
not considered to be material weaknesses? Yes X None reported
Noncompliance material to financial
statements noted? Yes X No
Federal Awards
Internal control over major programs:
• Material weakness(es) identified? Yes X No
• Significant deficiency(ies) identified that are
not considered to be material weaknesses? Yes X None reported
Type of auditor's 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? Yes X No
Identification of major programs:
CFDA Numbers Name of Federal Program or Cluster
14.218 Community Development Block Grant
66.468 Drinking Water State Revolving Fund Cluster- Capitalization
Grants for Drinking Water State Revolving Funds
Dollar threshold used to distinguish between type A and type B programs: $300,000
Auditee qualified as low-risk auditee? Yes X No
II
City of Livonia, Michigan
Schedule of Findings and Questioned Costs (Continued)
Year Ended November 30, 201 S
Section 11 - Financial Statement Audit Findings
Reference
Number Finding
2015-001 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, 2015.
Context - Four entries were made to various funds to reflect current year
activity. The adjustments affected liabilities, expenses, receivables, revenue,
deferred inflows of resources, assets, and investment gains and included: a
reduction to the Water and Sewer Fund receivable and revenue to correct a
calculation error; an increase to liabilities and expenditures in the Roads and
Sidewalks Fund to accrue an invoice amount incurred during the fiscal year; a
reduction to revenue and an increase to deferred inflows of resources in the
General Fund for service billings not received within the period of availability; and
a reduction to investments and unrealized gain recorded in the Pension Fund
related to a calculation error.
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 four transactions not being completely recorded,
several account balances required adjustment as of November 30, 2015. The
financial statements were misstated prior to the auditor proposing the entries.
Recommendation - The City should develop controls to ensure that all
appropriate journal entries are made so that ending balances are correct.
Views of Responsible Officials and Planned Corrective Actions - The City
concurs with the recommendation and will put a process in place to address the
issue.
Section 111 - Federal Program Audit Findings
None
12
City of Livonia, Michigan
Summary Schedule of Prior Audit Findings
Year Ended November 30, 201 S
Planned
Prior Year Original Finding Corrective
Finding Number Federal Program Description Status Action
2014-002 Home Consortium The original SEFA Fully corrected N/A
Funds Program - provided by the City of
CFDA#14.239 Livonia, Michigan as
and Federal Transit part of the audit did
Cluster- CDFA not include the correct
#20.500 amount of
expenditures related
to the Home
Consortium Funds
Program and the
Federal Transit
Cluster.
13
plante 74Nrt Moran,igh
Plante27400 Northwestern Highway
P.O.Box 307
moran Southfield 48007
Tel::248.352.2552,2500
Fax:248.352.0018
elantemoran.com
April 5, 2016
To the Mayor and Members of the City Council
City of Livonia, Michigan
We have audited the financial statements of the City of Livonia, Michigan (the "City") as of and
for the year ended November 30, 2015 and have issued our report thereon dated April 5, 2016.
Professional standards require that we provide you with the following information related to our
audit which is divided into the following sections:
Section I - Required Communications with Those Charged with Governance
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
Praxity
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To the Mayor and Members of the City Council April 5, 2016
City of Livonia, Michigan
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
Marie L. Stiegel
2
Section 1 - Required Communications with Those Charged with Governance
Our Responsibility Under U.S. Generally Accepted Auditing Standards
As stated in our engagement letter dated January 20, 2016, 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 5, 2016 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 on January 22, 2016.
Significant Audit Findings
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. In
accordance with the terms of our engagement letter, we will advise management about the
appropriateness of accounting policies and their application. The significant accounting policies
used by the City are described in Note I to the financial statements. As described in Note 18, the
City adopted Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting
and Financial Reporting for Pensions. The objective of GASB Statement No. 68 is to improve
accounting and financial reporting by state and local governments for pensions.
3
Section 1 - Required Communications with Those Charged with Governance
(Continued)
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
• In the Employees' Retirement System, the value of the SAS equity real estate investment
trust (the "REIT") managed by the Seminole Companies
• Pension actuarial total liability(actuarial methods and assumptions)
Management's estimate of the various incurred but not reported amounts and unbilled water
and sewer receivables is based on historical information. All delinquent receivables are
considered collectible by the City finance department based on past history. Also, the City won
a court case related to a significant outstanding receivable recorded in the Water and Sewer
Fund that is collateralized with a security interest in the customer's real property. 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, 2014 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, 2015 to
November 30, 2015. 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.
4
Section 1 - Required Communications with Those Charged with Governance
(Continued)
During the current year, the City was required to report additional pension disclosures, record a
net pension asset, and record deferred outflows related to pensions in accordance with GASB
Statement No. 68. Based on our review of the actuarial study performed in connection with
these requirements, we noted that the methods and assumptions used in the actuarial study are
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 which were requested to be recorded. 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 our 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 5, 2016.
5
Section 1 - Required Communications with Those Charged with Governance
(Continued)
Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and
accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation
involves application of an accounting principle to the City's financial statements or a
determination of the type of auditor's opinion that may be expressed on those statements, our
professional standards require the consulting accountant to check with us to determine that the
consultant has all the relevant facts. To our knowledge, there were no such consultations with
other accountants.
6
Section 11 - Other Recommendations and Related Information
As part of our audit, we offer the following comments 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.
General Fund
Like other Metro Detroit local governments, the City experienced General Fund revenue
declines from 2008 to 2011 as a result of significant property tax-related events and changes
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
voter-approved millages in 201 1. 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, 2015, General Fund revenue exceeded General Fund
expenditures by approximately $45,000 as actual spending in the General Fund was
approximately $280,000 less than budget while actual revenue in the General Fund was
approximately$232,000 less than budget.
The City's financial management practices through the economic downturn have been critical to
preserving the financial health of the City's General Fund. While the overall economy continues
to improve 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 as property values 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. State-shared revenue funding levels are still
significantly below the levels from more than a decade ago. 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 clients,
including the City of Livonia, to consider these structural limitations as part of its annual budget
process.
Public Safety Millage and Cultural/Senior Services Millage Expiration Dates
As a reminder, the City, through a vote of the people, enacted two dedicated millages in 201 1 as
part of its fiscal sustainability plan. The City's public safety and cultural/senior services millages
of 1.7000 and .2500 mills, respectively, expired after the 2015 tax year levy and their renewals
will be on the August 2016 ballot. These millages provided approximately $7,700,000 in tax
revenue during fiscal year 2015 within the General Fund to specifically support public safety and
cultural/senior service expenditures. These millages provide an important funding source to
allow the City to continue to provide the current level of service and, as noted above, have been
a key to the City's ability to maintain a healthy fund balance during these very difficult economic
times for Michigan local governments. The expenditures related to just public safety in the
General Fund exceeded $37 million for the year ended November 30, 2015.
7
Section 11 - Other Recommendations and Related Information
(Continued)
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).
In 2014, the State provided various one-time supplemental funds that helped to increase the
total fund balance of these three funds to $6.7 million in 2014. There were some additional
supplemental funds provided by the State in 2015; however, the level of spending required on
roads in 2015 exceeded revenue and the fund balance of these funds was reduced to $5.2
million with fund balance in the Roads and Sidewalks Special Revenue Fund (the fund where the
City's dedicated road millage is reported) down to approximately $10,000. 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.
Legislation was passed in 2015 that promises some additional road funding to cities like Livonia in
the coming years. Even with the City's dedicated millage and some additional promised revenue
from the State in coming years, it will remain a challenge to continue to maintain and improve
the City's road system.
Legacy Costs - Pension
Legacy costs and the challenge of funding them continue to be a topic of discussion. GASB
pronouncements of late have placed even more focus on the net long-term liability arising from
these benefit promises. The City's defined benefit pension system is 104 percent funded as of
November 31, 2015. To the extent that you have been able to make some gains in terms of
your funded status, some changes to assumptions may result in the funding level decreasing
which may result in higher contributions going forward. For example, as of the November 30,
2015 valuation, the pension system mortality tables were updated to show that people are living
longer. Also, investment performance can impact the amount of future employer contributions
to the system.
At previous points in the past, the defined benefit pension system was greater than 100 percent
funded and for a number of years, employer contributions to the pension system were not
actuarially required. In fiscal years 2012 through 2015, the City was once again required to make
contributions to the defined benefit pension plan for the first time since 2003. The Employees'
Retirement System recognized contributions from the City of approximately $747,000 in 2012,
$2.1 million in 2013, $3.6 million in 2014, and $2.2 million in 2015. During fiscal year 2016, the
required contribution will be approximately$857,000.
As noted above, because 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., future contributions by the City may be required and should be considered for
budget and long-term financial planning purposes.
Beginning with the City's November 30, 2015 year end, GASB Statement No. 68, Accounting and
Financial Reporting for Pensions, significantly revised the employer's accounting and reporting
requirements for pensions.
8
Section 11 - Other Recommendations and Related Information
(Continued)
Employers providing defined benefit pensions to their employees began to recognize their
unfunded or overfunded pension benefit as a liability or asset for the first time, and began to
measure the costs of pension benefits as the employees' service is rendered, rather than as the
employer funds the benefit. As a result, the City recorded a net pension asset of approximately
$9.1 million as well as related deferred outflows of resources of $10.5 million on the
government-wide statement of net position.
Legacy Costs - 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, 2015 approximately $92 million in net assets for these costs.
According to the most recent actuarial valuation (November 30, 2014), the plan is
approximately 52.0 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 current financial reporting 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 current financial reporting standards.
As a result, since the adoption of GASB Statement No. 45 in 2009, the City has been required to
record a liability for the difference between the ARC and what the City actually contributes to
the VEBA. As of November 30, 2015, that liability is now over $192,000 in the Water and
Sewer Fund and approximately$4.4 million in the government-wide financial statements.
In June 2015, the GASB issued two new standards addressing accounting and financial reporting
by state and local governments for postemployment benefits other than pensions (OPEB, which
refers to retiree healthcare). GASB Statement No. 74, Financial Reporting for Postemployment
Benefit Plans Other Than Pension Plans, addresses reporting by OPEB plans whereas GASB
Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than
Pensions, addresses accounting and reporting by employer governments that provide OPEB
benefits to their employees.
Along with the currently required statement of fiduciary net position and statement of changes in
fiduciary net position, OPEB plans will now be required to include in the financial statements
more extensive footnote disclosures and required supplementary information related to the
measurement of the OPEB liabilities for which assets have been accumulated. In addition, the
City will, after adoption of GASB 75, recognize on the face of the financial statements its net
OPEB liability. The City is currently evaluating the impact these standards will have on the
financial statements when adopted. GASB 74 is effective for the City's November 30, 2017 fiscal
year whereas GASB 75 is effective one year later.
9
Section 11 - Other Recommendations and Related Information
(Continued)
Legacy Cost Impact -When Both New Pension and OPEB Standards are Fully
Implemented
A pro forma of how the reporting of the GASB Statement No. 68 net pension asset and deferred
outflows impacts the City's government-wide net position and how GASB Statement No. 75 net
OPEB liability is expected to impact the City's government-wide net position is shown below:
1 1.30.15 with
1 1.30.15 Without 1 1.30.15 as Pension Asset and
Pension Asset or Reported with Estimated OPEB
OPEB Liability Pension Asset Liability
Net position:
Net investment in capital assets $ 226,627,588 $ 226,627,588 $ 226,627,588
Restricted 29,224,652 29,224,652 29,224,652
Unrestricted 33,408,982 53,029,401 (19,122,101)
Total net position $ 289,261,222 $ 308,881,641 $ 236,730,139
This pro-forma indicates that City will still have a positive total net position but a significant
negative unrestricted net position. This generally means that the City has successfully funded the
total cost of government services provided to date. The fact that the unrestricted portion is
negative indicates that legacy costs earned to date have not been funded; this is offset by the
capital assets that have been funded in advance of their use. When viewed from a combined
perspective, the residents have paid the cost of services received in total.
We are happy to continue to work with the City and its actuarial firm over the next several years
to ensure smooth implementation of this new standard.
Water and Sewer Fund
Based on our testing of the City's utility billing system data for the year ended November 30,
2015, units of water sold in fiscal year 2015 increased approximately 2.5 percent from 2014.
There were decreases from 2013 to 2014 and from 2012 to 2013 of 9.5 and 13.7 percent,
respectively. Despite the overall reduction in units sold since 2012, the City's Water and Sewer
Fund reported an operating income and income before capital contributed from developers and
grants in 2013 and 2014 after having reported losses from fiscal years 2009 through 2012.
There was a slight operating loss in 2015 of approximately $341,000 and a loss before capital
contributions of approximately $743,000. We are encouraging the City and other local units to
continue to monitor the rate-making methodology of the City's supplier of water and sewer
services and to consider the impact of changes made to the City's rate structure.
10
Section 11 - Other Recommendations and Related Information
(Continued)
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 the Detroit Water and Sewerage Department
(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.
During our review of the aged trial balance as of November 30, 2015, we noted that there were
a significant number of customer accounts with balances over 120 days past due. We encourage
the City to monitor this data and continue its collection practices, including application of
penalties on past due balances where appropriate.
II
Section 111 - Legislative and Informational Items
Revenue Sharing
The FY 2017 governor's budget recommendation includes $1.3 billion for revenue sharing
broken down as follows:
Governor's
FY 2016 2017
FY 2016 Forecasted Recommended
Description Budget Actual Budget
Constitutionally required $783.8 M $752.1 M $781.5 M
payments
CVTRS 243.0 M 243.0 M 243.0 M
CVTRS - One-time payments 5.8 M 5.8 M 0 M
County revenue sharing 171.8 M 171.8 M 172.2 M
County incentive program 42.9 M 42.9 M 43.0 M
Fiscally distressed community 5.0 M 5.0 M 5.0 M
rants
Competitive grants 11.0 M
Total $1,252.4 M $1,220.6 M $1,255.7
It should be noted that the governor's budget notes a 3.9 percent increase in constitutional
revenue sharing, but as you can see above, the 2016 budget included $783.8 million which never
materialized and was adjusted downward as sales tax revenue failed to come in as projected. As
a result, the 3.9 percent increase is comparing the lower estimate of$752.1 million to the 2017
budget of$781.5 million. If you compared the 2017 budget to the 2016 budget, there is actually
a decrease in this line item. The FY 2017 budget also includes the "City, Village, and Township
Revenue Sharing" (CVTRS) which was established in FY 2015 and that number remains flat at
$243 million. Each community's overall increase will vary as each has a different mix of
constitutional and CVTRS.
In order to receive the CVTRS payments in FY 2017, qualified local units will once again need to
comply with the same best practices as they did last year:
- A citizen's guide to local finances with disclosure of unfunded liabilities
- Performance dashboard
- Debt service report
- Two-year budget projection
The "one-time" additional CVTRS payments that existed in the 2015 and 2016 budgets are not
in the governor's 2017 budget. If the payments are not reinstated in the final 2017 budget,
approximately 100 townships will no longer benefit from these CVTRS payments, leaving only
34 of the state's 1,240 townships in the CVTRS allocation.
12
Section 111 - Legislative and Informational Items
(Continued)
Personal Property Tax
In August 2014, Michigan voters put the last piece of personal property tax reform in place. As a
result, personal property taxes will be reduced in two respects:
I. Small Taxpayer Exemption Loss (STEL) - Small taxpayers with total personal property within
a taxing unit valued at less than $80,000 true cash value are able to sign an affidavit
exempting this personal property from taxation. This exemption began with the 2014 tax
billings.
2. Beginning with 2016 tax filings, an affidavit can be filed to exempt eligible property used in a
manufacturing process that was purchased either prior to 2006 or after December 31, 2012.
For 2014 and 2015, all communities were qualified to be reimbursed for losses related to debt
millages and lost TIF capture arising from the STEL. Only cities were reimbursed for the balance
of the Small Taxpayer Exemption Loss. However, for 2016, the legislation is generally intended
to fully reimburse all local units of government for revenue losses that result from all exempt
personal property.
The changes include creation of a new Local Community Stabilization Authority (LCSA) that will
receive money from two sources:
• Use Tax: The legislation includes specific amounts of the use tax that will be diverted from
the State's General Fund to the new LCSA; and
• Essential Services Assessment: Manufacturers will pay a "local community essential services
assessment" to the LCSA based on the value of their exempt manufacturing property. The
rate is set at 2.4 mills for a property's first five years; then 1.25 mills for the next five; then
0.9 mills thereafter.
Please keep in mind that if these two sources do not generate sufficient revenue for 100 percent
of the losses, there could be a potential for something less than full reimbursement.
Local Community Stabilization Authority Revenue - As noted above, eligible communities
began receiving reimbursements for certain lost personal property taxes. The State agency
making those reimbursements is the Local Community Stabilization Authority (LCSA). These
reimbursements should NOT be reported on the financial statements with property taxes;
instead, they should be included with other intergovernmental revenue from the State (state
shared revenue, grants, and other). The State has created a new account number for the
revenue, 573, and titled it "Local Community Stabilization Share Appropriation". As always,
communities should follow the State's guidance related to the Uniform Chart of Accounts.
The State Department of Treasury will compute the reimbursements and are scheduled to
make the payments by October 20 of each year. The State will compare the total current year
Taxable Value of Commercial and Industrial Personal Property to the value as of 2013 (the year
before PPT reform).
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Section 111 - Legislative and Informational Items
(Continued)
The exception is for TIFs, which still require action on the part of the community- see below.
TIF Authority Personal Property Tax Reimbursement Forms Due lune 15
The two forms created by the Treasury for reimbursement of TIF plans for Small Parcel
Exemption Losses are available on the Treasury's website under Local Government Services/
Forms/Instructions/Local Government Officials Forms. The forms are:
- Form 5176 - Non-Brownfield Authorities (to be used for DDAs, LDFAs, CIAs, etc.)
- Form 5176BR- Brownfield Authorities
Authorities can only receive reimbursement for the Small Parcel Exemption Loss to the extent
the exemption actually causes revenue loss. In the case where an Authority has "negative
capture" overall and would not have any tax increment revenue regardless of the Small Parcel
Exemption Loss, they are not eligible for any reimbursement. Therefore, one step on the form
requires the estimated 2015 tax increment revenue for all property by class to be provided.
Since Brownfield Authorities cannot have negative capture, that step is omitted from the Form
5176BR.
New Rules Governing Management of Federal Programs
The Office of Management and Budget (OMB) has issued significant reforms to the compliance
requirements that must be followed by non-federal entities receiving federal funding. All entities
receiving federal dollars will need to understand the changes made as a result of these reforms
and may be required to make changes to internal procedures, processes, and controls.
These reforms impact three key areas of federal grants management:
I. Audit Requirements - For fiscal years beginning on or after January 1, 2015, the threshold
for obtaining a federal awards audit will increase from the current threshold of $500,000 of
annual federal spending to $750,000. There will also be significant changes to the criteria for
qualifying as a low-risk auditee and a reduction in the number of major programs required to
be tested for some clients. The City has historically been above the current $500,000
threshold as well as the new higher$750,000 threshold.
2. Cost Principles - Effective for all federal awards received on or after December 26, 2014,
the grant reforms related to cost principles go into effect. Not only were certain changes
made to allowable costs under this new guidance, but there were significant changes in the
area of time and effort reporting and indirect costs. Applicable changes to the City's federal
grants were subject to testing in 2015.
3. Administrative Requirements - Also effective for all federal awards received on or after
December 26, 2014, non-federal entities receiving federal funding must adhere to new rules
related to administering federal awards. Most notably, these requirements may impact the
City's procurement systems, including maintaining written conflict of interest policies and
disclosures. Applicable changes to the City's federal grants were subject to testing in 2015.
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Section 111 - Legislative and Informational Items
(Continued)
These revisions are clearly the most significant changes to occur to federal grants management in
recent history. Entities receiving federal funding will need to carefully digest these changes.
Plante & Moran, PLLC has been on the cutting edge of these reforms, offering our clients free
webinars, implementation checklists, and other tools to aid in implementation. The
implementation date has passed and the City will need to continue to ensure that the
implementation of the new regulations is occurring. Plante & Moran, PLLC has many experts in
this area and we welcome any questions or needs you may have in this area.
PA 298 of 2012 - Act 51 Performance Audits
Public Act 298 of 2012 allows the Michigan Department of Transportation (MDOT) to conduct
performance audits and make investigations of the disposition of all Act 51 state funds received
by county road commissions, cities, and villages. The act states that these audits will be
conducted by either an independent CPA or an employee of MDOT; however, recent
communications sent to all cities, villages, and road commissions from MDOT indicate that you
will need to have your CPA conduct the performance audit.
Based on this communication, the City will need a performance audit for its fiscal year ending
November 30, 2016. These procedures will be focused on evaluating the procedures the City
puts in place to ensure it complies with the requirements of Public Act 51, and we will issue a
separate report for this engagement. We are currently in the process of writing programs to
address the key compliance areas. It is not clear to us whether this will be an annual
requirement, but we will keep you apprised as additional information is provided by the State.
A key aspect of the compliance testing will focus on support for allocated costs. Recent
communication from MDOT stated that MDOT auditors have determined that because time
cards support, as a fundamental accounting record, the amounts billed for labor, equipment, and
materials, that cost allocations plans are not acceptable and therefore labor costs must be based
on actual time, which can be verified by signed and approved time cards. Given the October 1,
2015 commencement of the audit time period, we encourage you to review your
documentation methods to ensure compliance with this critical aspect.
Administrative Charges
The services provided by employees that are traditionally charged to the General Fund
(Treasury, Finance, HR, etc.) oftentimes significantly benefit other funds. As a result, it is a fairly
common practice to charge administrative fees to the other funds. Administrative fees can take
many forms such as Interfund Allocations, Chargebacks, Payment In Lieu of Taxes to other funds
(such as a golf course), etc. While the practice of charging for administrative services provided
to water and sewer funds, streets (see item above), TIF districts, and such may certainly be
justified, there seems to be a heightened focus lately on the methodology and amount of
charges. Given the fact that many cost allocation methodologies were implemented many years
ago, it would be prudent to revisit your current methodology and the related inputs to ensure
that any administrative charges are fully substantiated.
15
Section 111 - Legislative and Informational Items
(Continued)
Proposed Legislation
House Bill 4213 of 2015 - This bill would change the calculation of taxable value to eliminate
inflation adjustments in years in which state equalized value does not increase by at least
inflation. Currently, the taxable value of a specific parcel can increase each year by the lesser of
inflation or 5 percent. Under this bill, the state equalized value would have to increase by
inflation as well, otherwise the parcel value stays at the prior year taxable value.
House Bill 4201 of 2015 - This one sentence bill would establish a requirement that at least 75
percent of the proceeds of a county millage shall be expended within the city, village, or
township where it was collected.
House Bill 4909 of 2015 - Commonly referred to as "Dark Stores" legislation, this bill would
prohibit negative use restrictions that do not allow occupancy or use that is otherwise lawful.
An example would be a term in a commercial lease that prevents the owner from leasing the
property to another retailer. This bill would also require a plan for re-lease, reuse,
redevelopment, or sale of the property in the event of a vacancy.
16
Attachment
®lent:City of Livonia,Michigan
Y/E: 11/30/2015 SUM MARY OF UNRECORDED POSSIBLE ADJUSTMENTS
TheeffectofmisstatemeMeand classification errors id,mified would be to increase(decrease)thereportedam—in the fi nancialstat—mcategories
id.mified below.
Deferred Deferred
Long-term Outflows of Currern Long-term Inflows of Net Income
Ref# Descripd—f Miostat—m Currern Assets Assets Resourc Liabilities Liabilities Resourc Equity R-en Ep— Statememlmpact
FACTUAL MISSTATEMENTS:
Al
A2
UDGMENTALADJUSTMENTS:
BI Business-type actwites and Water and Sewer Fund-
To adjust December 2015 and January 2016 unbilled
water and sewer r-.-.to actual $ 1 13,324 $ 1 13,324 $ 1 13,324
PROJECTED ADJUSTMENTS:
c1
$ $ $ $ $ $ $
Total $ 113,324 $ $ $ $ $ $ $ 113,324 $ $ 113,324
PASSED DISCLOSURES:
DI Governmental activities-The cur—portion ofliabilities recorded in the self-insurance funds has rot been broken out on the g---wide statemerns.
17