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Home My WebLink About2006 Annual Financial ReportCity of Livonia, Michigan Financial Report November 30, 2006 City of Livonia, Michigan Contents Report Letter 1-2 Management's Discussion and Analysis 3-9 Basic Financial Statements Government -wide Financial Statements: Statement of Net Assets 10 Statement of Activities 11-12 Fund Financial Statements: Governmental Funds: Balance Sheet 13 Reconciliation of the Balance Sheet to the Statement of Net Assets 14 Statement of Revenue, Expenditures, and Changes in Fund Balances 15 Reconciliation of the Statement of Revenue, Expenditures, and Changes in Fund Balance of Governmental Funds to the Statement of Activities 16 Proprietary Funds: Statement of Net Assets 17 Statement of Revenue, Expenses, and Changes in Net Assets 18 Statement of Cash Flows 19-20 Fiduciary Funds: Statement of Fiduciary Net Assets 21 Statement of Changes in Fiduciary Net Assets - Pension and Other Employee Benefits Trust Funds 22 Component Units: Statement of Net Assets 23 Statement of Activities 25 Notes to Financial Statements 26-52 Required Supplemental Information 53 Budgetary Comparison Schedule - General Fund 54-56 Budgetary Comparison Schedule - Major Special Revenue Funds 57-58 Pension System Schedule of Funding Progress 59 Postemployment Benefit Plans Schedule of Funding Progress 60 Note to Required Supplemental Information 61-62 City of Livonia, Michigan Contents (Continued) Other Supplemental Information Nonmajcr Governmental Funds 63 Combining Balance Sheet 64-67 Combining Statement of Revenue, Expenditures, and Changes in Fund Balances 68-71 Fiduciary Funds: Combining Statement of Net Assets 72 Combining Statement of Changes in Fiduciary Net Assets 73 Independent Auditors Report To the Honorable Mayor and Members of the City Council City of Livonia, Michigan We have audited the accompanying financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Livonia, Michigan as of and for the year ended November 30, 2006, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Livonia, Michigan's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and signtiicant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable bass for our opinions. In our opinion, the financial statements referred to above present faidy, 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, 2006 and the respective charges in financial position and cash flows, where applicable, thereof for the year then ended, in conformity with accounting principles generally accepted in the United States of America. The management's discussion and analysis, pension system schedules of funding progress and employer contributions, postemployment benefit plans schedule of funding progress and employer contributions, and the budgetary comparison schedules, as identified in the table of contents, are not a required part of the basic financial statements but are supplemental information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management, regarding the methods of measurement and presentation of the required supplemental information. However, we did not audit the information and express no opinion on it. r.CAn,o -.r i .,A Independent Auditors Report To the Honorable Mayor and Members of the City Council City of Livonia, Michigan We have audited the accompanying financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Livonia, Michigan as of and for the year ended November 30, 2006, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Livonia, Michigan's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and signtiicant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable bass for our opinions. In our opinion, the financial statements referred to above present faidy, 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, 2006 and the respective charges in financial position and cash flows, where applicable, thereof for the year then ended, in conformity with accounting principles generally accepted in the United States of America. The management's discussion and analysis, pension system schedules of funding progress and employer contributions, postemployment benefit plans schedule of funding progress and employer contributions, and the budgetary comparison schedules, as identified in the table of contents, are not a required part of the basic financial statements but are supplemental information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management, regarding the methods of measurement and presentation of the required supplemental information. However, we did not audit the information and express no opinion on it. To the Honorable Mayor and Members of the City Council City of Livonia, Michigan Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Livonia, Michigan's basic financial statements. The accompanying other supplemental information, as identified in the table of contents, is presented for the purpose of additional analysis and is not a required part of the basic financial statements. The other supplemental information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as awhole. In accordance with Gommment Auditing Standards, we have also issued our report dated February 16, 2007 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, contacts, and grant agreements. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide opinions on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. rx&tr. f f4#Z4vt PLLC February 16, 2007 City of Livonia, Michigan Management's Discussion and Analysis Overview of the Financial Statements The City of Livonia, Michigan's 2006 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 Citys overall financial status. The remaining statements are fund financial statements that focus on individual parts of the City's government, reporting the City's operations in more detail than the government -wide statements. Government -wide Financial Statements The government -wide financial statements report information about the City as a whole using accounting methods similar to those used by private -sector companies. The statement of net assets includes all of the government's assets and liabilities. All of the current year's revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The two government -wide statements report the City's net assets and him they have changed. Net assets, the difference between the City's assets and liabilities, are one way to measure the Citys financial health or position. The government -wide financial statements of the City are divided into three categories: 0 Government Activities - Most of the City's basic services are included here, such as the police, fire, public works, pads departments, and general administration. Property taxes, state -shared revenue, and charges for services provide most of the funding for these activities. 0 Business -type Activities - The City charges fees to customers to cover the costs of certain services it provides. The City's water and sewer system, golf course operations, and non- federal senior housing are treated as business -type activities. 0 Component Units - The City includes two other entities in its report, the Plymouth Road Development Authority and the Economic Development Corporation. Although legally separate, these "component units" are important because the City is financially accountable for them, including debt, which is issued on behalf of the authorities by the City. City of Livonia, Michigan Management's Discussion and Analysis (Continued) Fund Financial Statements The fund financial statements provide more detailed information about the City's most significant funds - not the City as a whole. Funds are accounting tools that the City uses to keep track of specific sources of funding and spending for particular purposes. Some funds are required by State law and bond covenants. Other funds are established to control and manage money for particular purposes. The City has three kinds of funds: 0 Governmental Funds - Most of the City's basic services are included in governmental funds, which focus on him cash and other financial assets that can be converted to cash, flan in and out, and the balance left at year end that is available for spending. The governmental fund statements provide a detailed short-term view that helps you determine if there are more or fewer financial resources available to spend in the near future to finance the City's program. 0 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. 0 Fiduciary Funds - The City is responsible for ensuring that the assets in these funds are used for their intended purposes. We exclude these activities from the government -wide financial statements because the City cannot use these assets to finance its operations. City of Livonia, Michigan Management's Discussion and Analysis (Continued) The City as a Whole In a condensed format, the table below shows a comparison of the net assets as of November 30, 2006 to the prior year. Net Assets (in millions of dollars) Gowmmental Activities Busiress4ype Activities Total 2006 2005 2006 2005 2006 20M Assets Current aiW other assets $ 581 $ 589 $ 328 $ 275 $ 989 $ 784 Capital assets 169 1649 61.1 1634 822 82.9 247.1 2463 Total assets 2230 2143 1150 1104 3380 3247 LiaNlities Current liabilities 174 160 60 55 234 215 Longterm liabilities 442 448 169 144 61.1 592 Total liabilities 616 608 229 199 845 807 Net Assets Imestetl in capital asset - Not ofrelated dabl 1265 1219 679 676 1944 189.5 Restricted 256 223 232 219 48.8 442 Unrestricted 93 93 10 10 10.3 103 Total not assets $ 161.4 $ 153.5 $ 92.1 $ 90.5 $ 253.5 $ 2AA0 City of Livonia - Net Assets The City's assets exceed its liabilities at the end of the fiscal year by $253.5 million (net assets). However, a major portion (77 percent) of the City's net assets represents its investments in capital assets (e.g., land, roads, infrastructure, buildings, and equipment) less any related debt used to acquire or construct these assets. The City uses these physical assets to provide services to its citizens. These assets are illiquid and not available for future spending. Unrestricted net assets of the City did not significantly change during the year. The amount represents the part of net assets that can be used to finance day-to-day operations without constraints established by debt covenants, enabling legislation, or other legal requirements. Further, the City is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental and business -type activities. 5 City of Livonia, Michigan Management's Discussion and Analysis (Continued) The following table shows the changes in net assets during the current year, and as compared to the prior year. Changes in Net Assets (in millions of dollars) GowmarrantalA ivRies Busaaaes pe ActiHties Total 2006 2005 2006 2005 2006 2005 Revenue Program revenue: Charges for services $ 1]] $ 166 $ 264 $ 287 $ 441 $ 453 Operating grants and conhibu0ons 86 99 - - 86 99 Cap9al grants and conhibu0ons 92 02 11 26 13 28 General revenue: Promrtytaxes 53.4 511 - - 53.4 511 State -shared nownue 91 92 - - 91 92 Rental income and tees 11 14 - - 11 14 Interest 37 19 11 94 48 23 Transreraid miscellaneous 05 (92) 05 05 03 Total rownue 943 997 286 32.2 122.9 122.9 Program apenses General government 92 91 - - 92 91 PUNicsatety 35.] 33.1 - - 35.] 33.1 PUNicwcrk 252 230 - - 252 230 Health and welfare 91 - - - 91 - Commun9y and economic deielognent 16 18 - - 16 18 Recreation and culbse 136 131 - - 136 131 Interest on cngterm debt 18 24 - - 18 24 Water and sewer - - 241 252 241 252 Golfcoune - - 18 17 18 1 Housing 11 09 11 09 Total program expenses 864 825 20 28 1134 1103 Charge in Net Assets 79 82 16 44 95 126 Net Assets -Beginning ofWar 1535 1453 905 86.1 2440 2314 Net Assets-Endof year $ 161A $ 153.5 $ 92.1 $ 90.5 $ 253.5 $ 2A4.0 City of Livonia, Michigan Management's Discussion and Analysis (Continued) Governmental Activities In reviewing the above table, it can be noted that revenues increased by $3.6 million and expenses increased by $3.9 million. The significant factors impacting revenue include increases in property taxes ($1.7 million) and interest income ($1.8 million). The most significant factor impacting the expenses were increases to public safety ($2.6 million) and public works ($2.2 million). Business -type Activities Livonia has three business -type activities. These include the water and sewer system, the operating fund for the Fox Creek, Idyl Wyld, and Whispering Willows golf courses, and non- federal senior housing at Silver Village, Newburgh Village, and 13 scattered site homes. The following table shows the operating income (loss) before contributions, transfers, and interest for each of these activities in the current and prior year: (in thousands of dollars) Water and Sewer Goff Courses Mousing 2006 20M 2006 20M 2006 20M Operating Revenue $ 23,433 $ 25,979 $ 1,653 $ 1,692 $ 1,279 $ 1,258 Operating Rxiaenres (23,338) (24,874) (1,755) (1,734) (948) (749) Operating Income (Loss) $ 95 $ 1,105 $ (102) $ (42) $ 331 $ 509 Capital Assets and Debt Distribution At the end of fiscal year 2006, the City has $382.5 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 $39.1 million related to the construction of the above-mentioned capital assets is reported as a liability in the governmental activities in the statement of net assets. Debt related to the water and sewer system totaling $14.6 rrillion and debt related to the housing and golf course activities of $4.0 rrillion is recorded as a liability in the business -type activities in the statement of net assets. This debt represents construction of and improvements to existing water and sewer lines and improvements to the golf course and City residential rental facilities. 7 City of Livonia, Michigan Management's Discussion and Analysis (Continued) Significant additions to capital assets during fiscal year 2006 include $4.6 million invested in the construction of and improvements to roads and $1.1 million invested in the construction of and improvements to water and sewer lines. There were no significant disposals of capital assets during fiscal year 2006. The City's Funds The fund financial statements begin on page 13 and provide detailed information on the most significant governmental funds - not the City as a whole. Funds are created to help manage money for special purposes, as well as to show accountability for certain activities, such as special property tax millages. The Citys major governmental funds for 2006 include the General Fund, Community Recreation Fund, and Refuse Disposal Fund. The City's governmental funds reported a combined fund balance of $35.1 million. This is an increase of approximately $3.7 million for the year. The increases were caused primarily by ongoing cost containment efforts to restrain spending at a level below expected revenues. General Fund Budgetary Highlights Over the course of the year, the City administration and City Council monitor and amend the budget, primarily to prevent expenditures in excess of budget, as required by the State of Michigan Budget Act The final amended budget included $300,000 more revenue and $300,000 more expenditures than the original adopted budget. The primary causes of the budget increases were a result of amending the General Fund budget to reflect better than expected interest income, as well as an increased contribution to the Capital Improvement Fund. Actual General Fund revenues were approximately $368,000 above the final budget Specifically, licenses and permits were $298,000 greater than the final budget because of better than expected new building activity, charges for services were $317,000 greater than the final budget primarily because of improved collection of fees for ambulance transports, and interest income was $325,000 greater than the final budget because of increased interest rates resulting in a higher return on invested assets. These increases were offset by Court fine revenue that was $334,000 less than the final budget because of fewer traffic tickets being issued and collected. Actual General Fund expenditures were approximately $98,000 below the final budget All departments held expenditures below the final budget. City of Livonia, Michigan Management's Discussion and Analysis (Continued) Current Economic Conditions The City continues to maintain positive fund balances in each of its funds. However, concerns arse when considering the revenues and expenses that the City is facing in upcoming years. The majority of the City's revenue base is constrained by factors outside the City's control. Property taxes, state -shared revenue, and interest income total 70 percent of the City's total governmental activities revenue. Property tax revenue increases are limited to very small increases because of Proposal A and Headlee state constitutional limitations. The State of Michigan has experienced budget deficits and has significantly reduced revenue-sharing payments to local governments to help reduce their deficit. Interest rates have increased recently and improved the City's total revenues. On the expense side, certain expenses continue to rise at a rate far in excess of inflation. In particular, health care expenses have continued their trend of double-digit increases. Hiring and capital outlay freezes, among other measures, have been implemented 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. City of Livonia, Michigan Statement of Net Assets November 30, 2006 Phoney Government Governmental BusinesstypeComponent Activities Activities Total Unit Assets Cash and cash e4rvalent $ 49,052,102 $ 14,11`1]81 $ 63834483 $ 2,174,370 Rerervables: Property taxes receivable 122112 - 122112 - Specialassessmentreceivahle 531907 - 531907 - Rerervables fromsales to crstomers on account - 9,151385 9,151385 - Benefitfeesrereivable 881951 - 881951 - Other receivables 1,761`,330 750,051 2,517381 2,035 Du a from other govern mental un Rs 3,802014 - 3,802014 - Prepaidexpensesandotherasset 1,162,062 447,198 1,fi092fi0 Restricted asset 916,194 7718,655 8,634880 - Capaal asset: Asset notsubjed to depeciabon 34&15,532 6,440620 41246152 474,448 Asset subject todepeciabon 180,164,122 75,11`6,196 205,941518 10,621931 Total asset 223,017326 115,056487 338,&3813 13,21`2,684 Liabilities Account payable 4,543950 1,510,926 6,054876 fi80310 Due to other governmental units - 7&,583 7&,583 - Refundable deposit, tonds,etc . - 424,309 424,309 - AccnedholadibesandoMer 6,&3,188 2&,017 6,88!1205 21949 Dashed revenue 917,728 1'W239 499h`,961 Noncurrent liabilities Due within one year: Compensded absences 3,214,1m 1&,592 3,471122 - Currentportionoflongtemi 2,036,144 1,810,000 3,846,144 380000 Due in more than one year: Compensated absences ->1yr 4,x6166 159251 4,,149,317 - Proverionportiere ->1yr 2M,624 - 2M,624 - Landfill dosure and postdonere -> 1 yr &a,1W - &a,1W - Longtermdebi- Net dormant portion 37108,636 16,861510 sntorn146 5,035000 Total liabilities 61,643368 22,988,417 84,631]85 6,017159 Net AsseE Invested in capital asset - Net of raided debt 126543fifi2 68,W2,644 194,516,306 5,731279 Restricted for: Street, road;, and sidewallo 5,525,109 - 5,525,109 - Water and sewer - 19,844222 19,844222 - Debtservme 40,351 - 40,351 - Capital projects 1,891,616 - 1,881,616 - Community recreation 6,218,418 - 6,218,418 - Municipal refuse 6,619,180 - 6,619,780 - Other restrictions 5240109 3354,310 8585,018 - Unrestdcted 9293,641 836894 10130,541 4524246 Total net asset $ 161,373,959 $ 92,068400 $ 253,"2,028 $ 7,255,525 The Notes to Financial Statements are an Integral Part of this Statement 10 City of Livonia, Michigan Total general revenues Sale of Fixed Assets Transfers Charge in Net Assets Net Assets - Beginning of }ear Net Pounds - Nd of year The Notes to Financial Statements are an Integral Part of this Statement 11 Program Revenues Operating Capital Grants Charges for Grants and and Expenses Services Contributions Contributions FunctiaWPrograms Primarygovernment Governmental activities General government $ 9,233,639 $ 4,169,155 $ - $ Public safety 35,713,096 6,644,283 99],]60 - Publieworks 25,249,352 1798,050 6,433597 236,842 Health and welfare 55,710 - - - Communityandemnomic development 1566,293 433,613 ]96,25] - Recreatimandculture 13,623,245 4,678,334 359,264 - InterestonmTtermdebt 1813,620 Total governmental activities 86,454,955 1],]23,435 8,586878 236,842 Businesstyfae activities: Water and sewer 24,085307 23,432935 - 1886,150 Housing 1162,658 1279,494 - - Goff mum 1184,694 1853,012 - - Total tusiness ty" activlties 27,032,659 26,365,441 1886,150 Total pdmarygovernment $113,487,614 $ 44,088,8]6 $ 8,586,8]8 $ 1,322,992 Component units $ 1,581,543 $ $ $ General revenues: Pmpertytaxes State shared revenue Unrestricted mwstmant income Cattefranchisefees Miscellaneous Total general revenues Sale of Fixed Assets Transfers Charge in Net Assets Net Assets - Beginning of }ear Net Pounds - Nd of year The Notes to Financial Statements are an Integral Part of this Statement 11 Statement of Activities Year Ended November 3O, 2006 Primary Govemmenl Ga mmental Businesstype Component P Ivins P Ivfts Total UnRs $ (5,064,484) $ - $ (5,064,484) $ (28,071053) - (28,071053) (16,788,863) - (16,788,863) (55,710) - (66,710) (336,423) - (336,423) (8585,647) - (8,585,647) (1013,628) - (1013,628) (59,90 800) - (59,90 800) - 433,7]8 433,7]8 - - 116,836 116,836 - - (131,662) (131,662) - 418,932 418,932 (59,90800) 418,932 (59,488,868) (1,581,543) 53,416,294 - 53,416,294 2,363,182 9,884,923 - 9,884,923 - 3,694,281 1084,975 4,779,176 74,M 1184,316 - 1184,316 - 520,35B 520,350 2,071 67,82B,B84 1084,975 68,906,59 2,439,552 - (2,M) (z,as7) 858,009 (47,500) 47,500 7,864,784 1,548,510 9,413,4 850,009 153,589,174 98,519,568 244,828,734 6,397,516 $161,373,958 $ 82,868,878 $253,412,828 $ 7,255,525 12 City of Livonia, Michigan Governmental Funds Balance Sheet November 30, 2006 Community Municipal Nonmejor General Fund Recreation Refuse Disposal Funds Total Assets Cash Ernest ecuidlents $ 9,EI2,388 $ 7192,336 $ 8,451558 $ 15,534292 $ 40,950,584 Rererdbles: Property tams receivable 65,178 8,424 Zf,610 A,9W 122112 Special assessments receivable - - - 531907 531907 Employees Rebrement system and VF6A 881951 - - - 881951 Other receivables 512,182 - 18,637 8,456 539285 Du a from other govern mental un is; 2,044262 1W,CC2 - 1,4C8330 3,1502814 Prepaid expenses and other assets 253,587 - - - 253,587 Restricted assets 916,194 916,194 Total asset $ 13,529,540 $ 7,350,982 $ 0,497,015 $ 18,420,089 $ 47,790,434 Liabilities and! Fund Redazes Liabilities Account payable $ 1220,T/3 $ 156,085 $ 1,843321 $ 1,313,T/1 $ 4,543950 Accrued liabilifies and other 6,303676 65,507 15,181 110,917 6,496381 Deferred revenue 19f,670 8%,872 19,s3a 516,912 1,1523,987 Total liabilifies 7,712,119 1,132,554 1,878035 1,941500 12,554318 Fund! 11ahnces Reserved for Prepaid expenses 122353 - - 122353 Capital project - - - 899323 399,323 Unreserved, reported in: General Fund - Undesignated 5,fi95,Ofi6 - - - 5,595955 Debt Service Funds - - - 40,357 4x357 Special Revenu a Fonds - 6,218,418 6,619,780 12,14202 24,980830 Capital Project Funds 3,a9s,4n 3,396,177 Total L nd balances 5817,429 6,218,418 6619,7W 16478489 35134,115 Total liabilifies and End balances $ 13,529,548 $ 7,350,902 $ 0,497,015 $ 10,420,089 $ 47,790,434 The Notes to Financial Statements are an Integral Part of this Statement 13 City of Livonia, Michigan Governmental Funds Reconciliation of the Balance Sheet to the Statement of Net Assets Year Ended November 30, 2006 Fund Balance Reported in Governmental Funds $ 35,134,116 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and are not reported in the funds 164,970,254 Internal Service Funds are included as part of governmental activities 6,649,969 Fines and fees are not available to pay for currentyear expenditures 1,228,045 Certain receivables are expected to be collected over several years relating tospecial assessments and delinquent personal property taxes 706,259 Landfill closure and postdosure liability is not due and payable in the current period and is not reported in the funds (678,192) Bonds payable and capital lease obligations are not due and payable in the current period and are not reported in the funds (39,145,380) Employee compensated absences are payable over a long period of years and do not represent a claim on current financial resources; therefore, they are not reported as fund liabilities (7,314,306) Accrued interest payable on long-term debt is not recorded in the funds (176,807) Net Assets of Governmental Activities $ 161,373,958 The Notes to Financial Statements are an Integral Part of this Statement 14 City of Livonia, Michigan Governmental Funds Statement of Revenue, Expenditures, and Changes in Fund Balances Year Ended November 30, 2006 Total other financing Community Municipal Nonmejor sources(uses) General Fund Recreation Refuse Disposal Fonds Total Revenue (1,130196) (2,210241) 4,010,449 M9,412 Property tams $ 28,637546 $ 3,676288 $ 12,019,631 $ 9,122,589 $ 53,456,054 Licenses and periods 2,4KI6,978 - - - 2,486978 Federal grants 160587 - - 1,517,T/0 1,670351 State and local revenue 9084,923 - - 0674,fi48 15159,571 Othercharges forsereces 3,871]34 3,961912 111,578 1,390189 9347473 Otherfines and forfeitures 3,552,435 - - 410,914 3,983349 Investment Income 1,914,870 313,188 348,312 751,655 3384,025 Other revenue 1,827,192 2,222,564 4,509158 Total revenue 51,542265 7951448 12,509521 22,102329 94,105553 Expenditures - Current General government 9123260 - - - 8,123260 Puthesafety 32520,114 - 912,968 33493,fi82 Publcworks 2,716221 - 11,267100 11,341950 25,325871 Employee benefits, insurance, and other 2663,193 - - - 2663,193 Community and economic development 150,941 - - 815352 1,5069 Recreation and nature 2,553522 5,170,109 - 5,816265 13,639096 Capital Dutlay - - - 1,:93,482 1,:93,482 DeM service 4,151268 4,151268 Total expendithres 49928451 5170109 11,267100 24,m1285 91'rifi 5 Excess of Revenue Over (Under) Expencitures 1,613814 2,181339 1,241,821 (2,591955) 3,092018 O[her Fedsfir rap Sources (Uses) Proum issuance ofdeb[ ceeds h - - - 125,912 726,912 Transferso 40,000 - - 716,465 0 TinMy,14 rs o Transfeut (1,170,196) (2,2102 41) (4,492 22,8) Vinyl Total other financing sources(uses) (1,130196) (2,210241) 4,010,449 M9,412 Net change in Fund Maines 483018 581038 1,241,821 1,415,493 3,721430 Fund! Balances- Beginning ofyear 5,334,411 5,637320 5,377959 15,062,996 31,412,fi86 Fund! Balanced -End ofyear $ 5,817,429 $ 6,218,418 $ 6,619,780 $ 16,410,489 $ 35,134,116 The Notes to Financial Statements are an Integral Part of this Statement 15 City of Livonia, Michigan Governmental Funds Reconciliation of the Statement of Revenue, Expenditures, and Changes in Fund Balance of Governmental Funds to the Statement of Activities Year Ended November 30, 2006 Net Change in Fund Balances - Total Governmental Funds $ 3,721,430 Amounts reported for governmental activities in the statement of activities are different because: (68,498) Governmental funds report capital outlays as expenditures; however, in the statement of activities, these costs are allocated over their estimated useful lives as depreciation: (728,038) Capital outlay 8,244,622 Depreciation expense (6,556,493) Net book value of assets disposed of (116,260) Certain revenue reported in the governmental funds was recorded as revenue in the statement of activities in previous years (68,498) Bond proceeds and other issuances of debt provide financial resources togovemmental funds, but issuing debt increases long-term liabilities in the statement of net assets (728,038) Repayment of bond principal is an expenditure in the governmental funds, but not in the statement of activities (where it reduces long-term debt) 3,122,205 Increase in accumulated employee sick and vacation pay, accrued interest, and other similar expenses reported in the statement of activities do not require the use of current resources, and therefore are not reported in the fund statements until they come due for payment (336,740) Internal Service Funds are included as part of governmental activities 582,556 Change in Net Assets of Governmental Activities S 7,864,784 The Notes to Financial Statements are an Integral Part of this Statement 16 City of Livonia, Michigan Proprietary Funds Statement of Net Assets November 30, 2006 Fnteraise Fund: N minajw Fund GcAf Protonotary - Walerbimer Hmsng Cmrse Total Internal Service Assets Current assets: Cash add hvestimNs 8 13,313,972 $ 697,395 8 8 13811,36] 8 9,072531 Receil 9,86310.5 125 18,Y£ 9901,636 Pretatlerpemesana dher asek 341 dull 1013,400 Total current assets 23SA,399 697,520 18,Y£ 24,055,0]5 10065911 Nmcurrentasets: Rstri<teaasets ],]18,656 ],]18,656 - Carl assets 701 6,132816 5,838]N 82217,416 Total nmcurrent assets ]'aadt,6/] 6,132816 5,838]N 89936042 ToWasets 101503,866 6,6383K 5,855,915 113,991,147 10085,931 Liabilities Current biddies: M<wnls teyade 1;123,%2 26,06] asi 1,419,758 - Buetoonergovemmentalunis ]8],533 - ]8],533 - RefundiRpaits,bnd,etc . 308894 123,415 424,309 - Accruetlliaestlesaddother 11 54,593 5,362 20],01] - Bebrrearevenue 1080,24 1080,24 - Compensteaah:ences 174,251 17,M 6,246 19],'92 - Currentpoaimoflong term obigatims 1155040 455W0 1818W0 Total current ladlAies 49]4,®1 6ffi,16o 2]3,65] 5,926,466 - Nmcurrentlia esti es: Compensteaah:ences->1yr ]5,4]6 ddW5 - 109251 Lmg@rm@N- Netofcurrentp5aim 13224,118 3511 16,]39118 2586182 Total noncurrent liadlities 13293,`94 3M8,775 16,848,369 2586182 Total hadlities 18274,395 4226,915 2]3,65] 22,]]4,857 2586182 Net Assts invested In cartel mob- N et of related debt 60031,049 2,162816 5,838]N 83,032644 Restricted 3,354,310 3304,310 Unrestricted 19,846122 2485&5 (25 drn 19,829,3e ]504,]49 Tota net assets 583,228581 S 2A03401 S 5583308 91216,D0 S ]501,]49 Ana,nts reloca w businesrype activities in the statensem of net assets are afferent because a Portion of the Internal Sema Fundis inductance Wessel adinties BSi zeo Net Assts of Business" Activities $ 920680ID The Notes to Financial Statements are an Integral Part of this Statement 17 City of Livonia, Michigan Proprietary Funds Statement of Revenue, Expenses, and Changes in Net Assets Year Ended November 3O, 2006 Enterprise Fund; Nommor Furd- prolxietary- Waleromer Homing GdfCmr Trial Internal Service Operating Revenue Sale nrwater s 10.165,411 s - s - s 10.165,411 s - Sewagecistro ldarges 12,053,607 - 12,053,607 - Gollmirtfees - 94,520 94,520 - interestandRenalNdarge Madan - Madan Greens fees - - 1,489,370 1,489,370 Charges to other funds - - 10,613385 rental ncome 178,(95 127a.m5 - Othermiscellanemarevenes 422615 I,209 69,118 492962 Total oReratirg reverse 23,432935 1279,494 1653,012 aeGraS 41 10,673,385 Operating Expense Cost of water 6521,914 - - 6521,914 - CostofseveagetreaNrent 8,836,,49 - - 8,836,,49 - Systemmaintenanceandoperatim 4528,833 - - 4528,833 Cost of Issuance some - - 105 2,12 General and administrative 81 mal - Supreme - 6,603 189.896 deal - 91a0esandwa3es - 313,07 232423 546,050 - Otherseraicesandcharges 4 6?4 1150,96 1,611 - Oefeecotion 2,565,978 165V9 182625 2913,742 Total operating expense 23,337,931 941 1]55,350 26,041,344 10532242 Operating Income (Loss) MW 331491 (102318) 324,(97 141,W Nanaperating Reserve (Experses) investment income 1y58,3ao 26,x35 - imal noires Interest expense (6 IMS) (2(1 mom) - Lossonaleofesets later) later) Inane 0.e:)-Berwe <annlsugons 475,276 ivelves (105,215) 526,(97 471,319 CapaalCanritai s -Innes constructed by d;velopee imstair - - imstair - Tranersln 475w 475w Change in Net Assets 156y426 i56fE6 (57735) 1659,747 471,319 Net Asxis-Beginningofyear 81668,155 2247,345 5,611043 89556,543 7,030,430 Net Asxis-Endofy®r S 83,229581 $ 2A03A01 $ 5583,308 $ 91,216,290 S 7501 Net CM1age in NeUteets-Total Enterp¢e Fund; $ 1659,747 Armor reposed for rosiness-tyge actmaie in the statement of activities are drcerent Iseeausethe Interval Servs Fund is allocated tertialy to WsnesNpe a<tiv0ie (111237) Change in Net Aral of BusinmlypeActfvities S 1548,510 The Notes to Financial Statements are an Integral Part of this Statement 18 City of Livonia, Michigan Proprietary Funds Statement of Cash Flows Year Ended November 3O, 2006 Governmental Enterprise Funds Activities Novi Fund 7011— ry WalerSeaer li GdfCmr Total Internal Service C6M1 Flows [ran Operating Activities Receitis tom customers 8 23.763,856 8 1279,369 8 I.641 8 26.665.]1] 8 10,613,385 Payaentatosuntea (17,024,962) (471,507) (1,366,397) (18,851,866) (10,1656,616) Payaentatoempgees (4,002x4) (315,890) (z6366s) (4602673) - Otherreceitis 269836 3,35 4,363 27],416 Net ash provided by (used in) operating activities 3,005,900 495,217 (5,5,13) 3095,594 50,749 Cash Flows iron NorupMl Financing Activities - Transkrs to other union - - 47,500 47,500 - Cash Flows than Carnal and headed Financing Activities CmtriWtiom tom custaners 1567172 - - 1567172 - Grantreinoursement 261 261 - Purchaseofsatalasets (1509,534) (W233) (J9052) (2.11 Pnnaie and Interest Mid on cartel dN (610116,125) - - (610116,125) - Proceedtamissuance ofdebt 6,9s5,50o 6,9s5,50o Net ash IxwiRd iy (used r) cartel add rehtetlfnaming activities 1,s635,11 (W233) (39062) 1200T36 - Cash Flows frau lovesonent Activues Interest honest on investments 1051 26,x5 i'ma 5 330176 Purchase ofiaestmentsecurities (336,x1) Mani (2x5) (301 (226,240) Net ash provided by (used ln)Investing activities 711 61,506 (2505) 7]8,410 103936 Net Increase (Decrease) in Cash and Cash Equivaents 5609240 (87,510) - 5521,700 611,685 Cash and Cash Equivaerds- Beginning ofyear 11579,250 450®0 - 12,029,910 6,011,262 Cash and Cash Equivaerds-Endofymr S 17,186,4911 S 363,150 S S 17,551,610 $ 6,62290 Balance Sheet ClasOicatim of Cash and Cash Equivalents Cash and lnvestnents a 13,313,972 $ 497,395 $ - $ 13811,36] $ 9,072x1 handed Investments 7,469,269 - - 7,469,269 - Lessamountsdownedas investments (3594,691) 01 (3,728,936) (2,449,W) Tnta ash and cal equivalents $ 17,186,490 S 363,150 S S 17,551,610 S 6,62290 The Notes to Financial Statements are an Integral Part of this Statement 19 City of Livonia, Michigan Proprietary Funds Statement of Cash Flows (Continued) Year Ended November 30, 2006 The Notes to Financial Statements are an Integral Part of this Statement 20 Governmental Fmeraise Fund Activities Nonnnjw Fmtl- 70ff— a WaletlSevaer Housing G:AfCourse Total Internal Service Recorcifeltion of Operating Intone (Lass) to Net GSM1 from Operating Activities Operating income Loss) 8 9E,91E 8 333 9 8 (982316) 8 320,(4] 8 141,143 Fnrystments to reconcile operating income Loss) to net ash from operating activities oeaecotiou antlanMieatim 2,565,416 91 982Q+` 2993,702 - ChangeslnasetsantlliaNities: aneieaan 516,737 (925) (90,532) 53660 prepa'tlantlaherassets (90,993) 4,263 (1 406o Acca,nistri Mead) (1733) Altai (75,179) Accmetlantl other 37,2,13 (2739) (51.46st (96,962) 326,596 retired revenue (903,66) - (903,66) - Bmdantltlepaits 3,361 3,361 Net son provided by (used in) operating activities S 3,005,400 S 495,23T $ (5,513) S 3p45,59a $ 51 Noncash Transactions Linn crostrueetlantlmnatetlby developers S 1,066,150 S - - $ $ 1,066,950 $ - The Notes to Financial Statements are an Integral Part of this Statement 20 City of Livonia, Michigan Fiduciary Funds Statement of Fiduciary Net Assets November 30, 2006 Assets Cash and cash equivalents Investments: U.S. government securities Foreign stock Mutual funds Bank investment pools Stocks Bonds Real estate Securities lending Receivables Total assets Liabilities Accounts payable Due to other governmental units Refundable deposits, bonds, etc. Obligations under securities lending agreements Total liabilities Net Assets Held in Trust for Pension and Other Employee Benefits The Notes to Financial Statements are an Integral Part of this Statement 21 Penson and Retirement Agency Funds $ 1,162,662 $ 856,066 43,115,421 - 5,229,175 - 24,996,372 - - 7,206,801 129,153,863 - 48,229,286 - 16,873,874 - 18,315,740 - 3,175,506 8,029 290,191,899 $ 8,072,896 3,920,122 $ 66,155 - 5,706,285 - 2,300,456 18,315,740 22,235,862 $ 8,072,896 $ 267,956,037 City of Livonia, Michigan Fiduciary Funds Statement of Changes in Fiduciary Net Assets Pension and Other Employee Benefits Trust Funds Year Ended November 30, 2006 Additions Investment income: Interest and dividends $ 8,898,152 Net increase in fair value of investments 23,884,040 Investment -related expemes (676,624) Net investment income 32,105,568 Securities lending income: Interest and dividends 1,099,942 Investment related expenses (1,050,561) Net securities lending income 49,381 Contributions: Employer contributions 7,755,379 Employee contributions 547,936 Total contributions 8,303,315 Total additions 40,458,264 Deductions Benefit payments 11,233,891 Refunds of contributions 340,474 Medical benefit payments 5,781,267 Administrative expenses 146,473 Total deductions 17,502,105 Net Increase in Net Assets Held in Trust 22,956,159 Net Assets Held in Trust for Pension and Other Employee Benefits - Beginning of year 244,999,878 Net Assets Held in Trust for Pension and Other Employee Benefits- End of year $ 267,956,037 The Notes to Financial Statements are an Integral Part of the Statement 22 City of Livonia, Michigan Component Units Statement of Net Assets November 30, 2006 Assets Cash and cash equivalents Receivables Capital assets: Assets not subject to depreciation Assets subject to depreciation Total assets Liabilities Accounts payable Accrued liabilities and other Due in more than one year Total liabilities Net Assets Invested in capital assets - Net of related debt Unrestricted Total net assets The Notes to Financial Statements are an Integral Part of this Statement 23 Plymouth Economic Road Development Development Corporation Authority Total 6,917,159 6,917,159 $ 2,552 $ 2,171,818 $ 2,174,379 2,935 2,935 - 474,448 474,448 _ 19,621,831 19,621,831 2,552 13,279,132 13,272,694 - 639,319 639,319 - 21,849 21,849 5,365,999 5,365,999 6,917,159 6,917,159 - 5,731,279 5,731,279 2,552 1,521,694 1,524,246 $ 2,552 $ 7,252,973 $ 7,255,525 City of Livonia, Michigan The Notes to Financial Statements are an Integral Part of this Statement 24 Program Revenues Operating Capital Grants Charges for Grants and and Expenses Serwas Contributions Contributions FurvationdProgrems Plymouth Road Development Authority $ 1581 543 $ - $ - $ - Governmental actiMies Commundy and economc doWlopment 1396,448 - - - Tom MN" 185,895 Total Plymou8n Road Development Authority 1,581,543 - - - EornomicDevelopmentComoration - - - - Total component and actiMies $ 1,581,54] $ $ $ General revenues: Pmpertytaxes Unrestricted ineshnent income Miscellaneous Total general revenues Charge in Net Assets Na Assets - Beginning of }ear Na Assets - End of year The Notes to Financial Statements are an Integral Part of this Statement 24 (1581543) - (1581543) 2,363,182 - Component Units ]4,19] 182 Statement of Activities 2,071 - Year Ended November 30, 2006 Net (Expense) Rownue and Changes in Net Assets 102 Plymouth Road Emnomic 857,907 102 Development Development 6,395,866 2,458 Mmorily Corporation Total 2,552 $ 7,255,525 $ (1581543) $ - $ (1581543) (1396,448) - (1396,448) (185,895) (185,895) (1581543) - (1581543) (1581543) - (1581543) 2,363,182 - 2,363,182 ]4,19] 182 74,299 2,071 - 2,071 2,439,450 102 2,439,552 857,907 102 850,009 6,395,866 2,458 6,397,516 $ ],252,9]3 $ 2,552 $ 7,255,525 25 City of Livonia, Michigan Notes to Financial Statements November 30, 2006 Note 1 - Summary of Significant Accounting Policies The accounting policies of the City of Livonia, Michigan (the "City") conform to accounting principles generally accepted in the United States of America (GAAP) as applicable to governmental units. The folloraing is a summary of the significant accounting policies used by the City of Livonia, Michigan: Reporting Entity The City of Livonia, Michigan's legislative branch 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 Authority are reported as a nonmajor Debt Service Fund. The City of Livonia Employees' Retirement System and the City of Livonia Health and Disability Plan have been blended into the Citys financial statements. These systems are governed by a five -member Pension Board that includes three individuals chosen by the City Council and/or the mayor. The systems are reported as if they were part of the primary government because of the fiduciary responsibility that the City retains relative to the operations of each system. The operations ofthe Employees' Retirement System and the City of Livonia Health and Disability Plan are reported as a Pension and Other Employee Benefits Fiduciary Fund. Discretely Presented Component Units - The Economic Development Corporation was created to provide means and methods for the encouragement and assistance of industrial and commercial enterprises in relocating, purchasing, constructing, improving, or expanding within the City so as to provide needed services and facilities of such enterprises to the residents of the City. The City's financial statements do not include a statement of activities for the EDC as there was no financial activity during the current year. The Corporation's governing body, which consists of eight individuals, is selected by the mayor and approved by the City Council. Internally prepared finsncial statements for the EDC can be obtained from the City of Livonia Finance Department at 33000 Civic Center Drive, Livonia, MI 48154. 26 City of Livonia, Michigan Notes to Financial Statements November 30, 2006 Note 1 - Summary of Significant Accounting Policies (Continued) The Plymouth Road Development Authority was created to encourage additional economic activity and growth in the Plymouth Road business district. The Authority's governing body, which consists of 12 individuals, is selected by the rmyor and approved by the City Council. Internally prepared financial statements for the Plymouth Road Development Authority can be obtained from the City of Livonia Finance Department at 33000 Civic Center Drive, Livonia, MI 48154. The City has excluded the Housing Commission from this report. Even though the City appoints the Housing Commission's directors, it does not have the ability to impose its will. Government -wide and Fund Financial Statements The government -wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the nonfiduciary activities of the City (the primary government) and its discretely presented component units. The effect of interfund activity has been removed from these statements. Governmental activities, normally supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely to a significant extent on fees and charges for support. Likewise, the prirmry government is reported separately from certain legally separate component units for which the primary government is fimncially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function (governmental activities) or segment (business -type activities) are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: (1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not applicable to specific programs are reported instead as general revenue. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government -wide financial statements. Major individual governmental funds and major individual Enterprise Funds are reported as separate columns in the fund financial statements. 27 City of Livonia, Michigan Notes to Financial Statements November 30, 2006 Note 1 - Summary of Significant Accounting Policies (Continued) Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government -wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund, fiduciary fund, and component unit financial statements. Revenue is recorded when earned and expenses are recorded when a liability is incurred, regardless ofthe timing of related cash flows. Property taxes are recognized as revenue in the year forwhich they are levied. Gants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenue is recognized as soon as it is both measurable and available. Revenue is considered to be available if it is collected within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. The following major revenue sources meet the availability criterion: state -shared revenue, state gas and weight tax revenue, district court fines, and interest associated with the current fiscal period. Conversely, special assessments and federal grant reimbursements will be collected after the period of availability; receivables have been recorded for these, along with a "deferred revenue" liability. Expenditures generally are recorded when a liability is incurred, as under accrual amounting. However, debt service expenditures, expenditures relating to compensated absences, and claims and judgments are recorded only when payment is due. The City reports the following major governmental funds: General Fund - The General Fund is the City's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. Refuse Disposal Fund - The Refuse Disposal Fund accounts for the operations of the refuse disposal activities of the City. Funding is provided primarily through a local property tax levy. Community Recreation Fund - The Community Recreation Fund accounts for the activities of the Livonia Community Recreation Center, ice rinks, and certain other recreation activities. Funding is provided primarily by a local property tax levy and user charges. City of Livonia, Michigan Notes to Financial Statements November 30, 2006 Note 1 - Summary of Significant Accounting Policies (Continued) The City reports the following major proprietary funds: Water and Sewer Fund - The Water and Sewer Fund accounts for the activities of the water distribution system and sewage collection system. Funding is provided primarily through u%rcharges. Housing Fund - The Housing Fund accounts for the Newburgh and Silver Village residential rental facilities. Funding is provided primarily through usercharges. Additionally, the City reports the following fund types: Internal Service Fund - The Internal Service Fund is used to fund general, workers' compensation, and employee health care liability claims and to purchase insurance that provides excess general liability coverage for City employees and property. The fund is financed primarily by charges to the various departments of the City. Pension and Other Employee Benefits Trust Funds - The Pension and Other Employee Benefits Trust Fund accounts for the activities of employee benefit plans that accumulate resources for pension and other postemployment benefit payments to qualified employees. Agency Funds - The Agency Funds account for assets held by the City in a trustee capacity. Agency Funds are custodial in nature (assets equal liabilities) and do not involve the measurement of results of operations. Private sector standards of accounting issued prior to December 1, 1989 are generally followed in both the government -wide and proprietary fund financial statements to the extent that those standards do not conflict with the standards of the Governmental Accounting Standards Board. The City has elected not to follow private sector standards issued after November 30, 1989 for its business -type activities. As a general rule, the effect of interfund activity has been eliminated from the government -wide financial statements. Exceptions to this general rule are charges between the City's water and sewer function and various other functions of the City. Eliminations of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenue include: (1) charges to customers or applicants for goods, services, or privileges provided, (2) operating grants and contributions, and (3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenue rather than as program revenue. Likewise, general revenue includes all taxes. When an expense is incurred for purposes for which both restricted and unrestricted net asses are available, the City's policy is to first appy restricted resources. 29 City of Livonia, Michigan Notes to Financial Statements November 30, 2006 Note 1 - Summary of Significant Accounting Policies (Continued) Proprietary funds distinguish operating revenue and expenses from nonoperating iter. Operating revenue and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenue of the City's proprietary fund (Water and Sewer Fund) relates to charges to customers for sales and services. The Water and Sewer Fund also recognizes the portion of tap fees intended to recover current costs (e.g., labor and materials to hook up new customers) as operating revenue. The portion intended to recover the cost of the infrastructure is recognized as nonoperating revenue. Operating expenses for proprietary funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenue and expenses not meeting this definition are reported as nonoperating revenue and expenses. Property Tax Revenue Properties are assessed as of December 31 and the related property taxes become a lien when billed. These taxes are billed on July 1 and December 1 of the following year, and are due on September 14 and February 14, respectively. After the final collection date of February 28, real property taxes are added to the county tax rolls. The 2005 taxable valuation of the City of Livonia totaled $4.889 billion (a portion of which is abated and a portion of which is captured by the PRDA). The delinquent real property taxes of the City are purchased by Wayne 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 August 2006. Receipts from Wayne County for delinquent real property taxes have been recorded as revenue in the current year. The millages levied by the City and the resulting revenues are as follows. These amounts are recognized in the respective General, Special Revenue, and Debt Service Funds financial statements as tax revenue. Approximate Revenue (in Millage Rate millions) Operating purposes 4.0447 $ 19.04 Police 0.8088 3.81 Police and fire 1.2134 5.71 Library 0.8088 3.79 Refuse and recycling 2.5746 12.05 Industrial development 0.0107 0.05 Debt service 0.2507 1.17 Roads, sidewalks, and trees 0.8893 4.16 Recreation 0.7855 3.68 30 City of Livonia, Michigan Notes to Financial Statements November 30, 2006 Note 1 - Summary of Significant Accounting Policies (Continued) Assets. Liabilities. and Net Assets or Eaui Bank Deposits and Investments - Cash and cash equivalents include cash on hand, demand deposits, and short-term investments with a maturity of three months or less when acquired. Investments are stated at fair value. Pooled investment income from the Investment Agency Fund is generally allocated to each fund using a weighted average of balance for the principal held for each fund on a daily basis. Receivables and Payables - In general, outstanding balances between funds are reported as "due to/from other funds." Any residual balances outstanding between the governmental activities and the business -type activities are reported in the government - wide financial statements as "internal balances." All trade and property tax receivables are shown as net of allowance for uncollectible amounts. Inventories and Prepaid Items - Inventories are valued at cost, on a fir in, first -out basis. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. Certain payments to vendors reflect costs applicable to future fiscal years and are recorded as prepaid items in both government -wide and fund financial statements. Restricted Assets -The revenue bonds of the Enterprise Funds require amounts to be set aside for construction, debt service principal and interest, operations and maintenance, and a bond reserve. Unspent bond proceeds have also been set aside for construction. These amounts have been classified as restricted assets, as well as amounts on deposit at the County and the State being held for the construction and debt service. The 1990 Street Improvement Capital Projects Fund has unspent bond proceeds that have been set aside for construction and that have been classified as restricted assets. Capital Assets - Capital assets, which indude 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 estirmted 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. City of Livonia, Michigan Notes to Financial Statements November 30, 2006 Note 1 - Summary of Significant Accounting Policies (Continued) Buildings, equipment, and vehicles are depreciated using the straight-line method over the following useful lives: Infrastructure 33 to 40 years Road rights 33 years Buildings and improvements 20 to 50 years Machinery, equipment, and vehicles 2 to 20 years Water and sewer distribution systems 50 years Compensated Absences (Vacation and Sick Leave) - It is the City's policy to permit employees to accumulate earned but unused sick and vacation pay benefits. Under the Citys policy, employees earn benefits based on time of service with the City. All vacation and sick pay is accrued when incurred in the government -wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only for employee terminations as of year end. Long-term Obligations - In the government -wide financial statements and the proprietary fund types in the fund financial statements, long-term debt and other long- term obligations are reported as liabilities in the applicable governmental activities, business -type activities, or proprietary fund -type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond prerriunu and discounts, as well as bond issuance costs during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other fimncing sources while discounts are reported as other financing uses. Issuance costs are reported as debt service expenditures. Fund Equity - In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. 32 City of Livonia, Michigan Notes to Financial Statements November 30, 2006 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: Shortfall at December 1, 2005 $ (1,052,386) Current year permit revenue 2,430,841 Related expenses: Direct costs $ 1,631,528 Estimated indirect costs 489,478 2 121 006 Current year surplus 309,835 Cumulative shortfall at November 30, 2006 $ (742,551) Note 3 - Deposits and Investments Michigan Compiled Laws Section 129.91 (Public Act 20 of 1943, as amended) authorizes local governmental units to make deposits and invest in the accounts of federally insured banks, credit unions, and savings and loan associations that have offices in Michigan. The local unit is allowed to invest in bonds, securities, and other direct obligations of the United States or any agency or instrumentality of the United States; repurchase agreements; bankers' acceptances of United States banks; commercial paper rated within the two highest classifications, which matures not more than 270 days after the date of purchase; obligations of the State of Michigan or its political subdivisions, which are rated as investment grade; and mutual funds composed of investment whides that are legal for direct investment by local units of government in Michigan. The Pension Trust Fund and Retiree Health Care Fund are also authorized by Michigan Public Act 314 of 1965, as amended, to invest in certain reverse repurchase agreements, stocks, diversified investment companies, annuity investment contracts, real estate leased to public entities, mortgages, real estate (if the trust fund's assets exceed $250 million), debt or equity of certain small businesses, certain state and local government obligations, and certain other specified investment vehicles. The City has designated five banks for the deposit of its funds. The investment policy adopted by the Council in accordance with Public Act 196 of 1997 has authorized investment in bonds and securities of the United States government and bank accounts and CDs, but notthe remainder of State statutory authority as listed above. The City of Livonia's deposits and investment policies are in accordance with statutory authority. 33 City of Livonia, Michigan Notes to Financial Statements November 30, 2006 Note 3 - Deposits and Investments (Continued) As permitted by state statutes and under the provisions of a securities lending authorization agreement, the City of Livonia Employees' Retirement System (the 'System') (see Note 10) lends securities to broker-dealers and banks for collateral that will be returned for the same securities in the future. The System's custodial bank manages the securities lending program and receives cash as collateral. Borrowers are required to deliver collateral for each loan equal to not less than 100 percent of the market value of the loaned securities. During the year ended November 30, 2006, only United States currency was received as collateral. The System did not impose any restrictions during the fiscal year on the amount of loans made on its behalf by the custodial bank. There were no failures by any borrowers to return loaned securities or pay distributions thereon during the fiscal year. Moreover, there were no losses during the fiscal year resulting from a default of the borrowers or custodial bank. The City of Livonia Employees' Retirement System and the borrower maintain the right to terminate all securities lending transactions on demand. The cash collateral received on each loan was invested, together with the cash collateral of other lenders, in an investment pool. The average duration of such investment pools as of November 30, 2006 was 112 days. 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, 2006, the System had no credit risk exposure to borrowers. The collateral held and the fair market value of underlying securities on loan for the System as of November 30, 2006 was $18,315,740 and $17,774,049, respectively. The City's cash and investments are subject to several types of risk, which are examined in more detail below: Custodial Credit Risk of Bank Deposits - Custodial credit risk is the risk that in the event of a bank failure, the City's deposits may not be returned to it. The City does not have a deposit policy for custodial credit risk. At year end, the City of Livonia had $41,854,380 of bank deposits (certificates of deposit, checking, and savings accounts) that were uninsured and uncollateralized. The City of Livonia believes that due to the dollar amounts of cash deposits and the limits of FDIC insurance, it is impractical to insure all deposits. As a result, the City of Livonia evaluates each financial institution with which it deposits funds and assesses the level of risk of each institution; only those institutions with an acceptable estimated risk level are used as depositories. 34 City of Livonia, Michigan Notes to Financial Statements November 30, 2006 Note 3 - Deposits and Investments (Continued) Interest Rate Risk - Interest ate risk is the risk that the value of investments will decrease as a result of a rise in interest rates. The City's investment policy does not restrict investment maturities, other than commercial paper which can only be purchased with a 270 -day maturity. At year end, the average maturities of investments are as follow: Ote5 6te15 More than 15 Inveshnent Fair Value Years Years Years Primary Government Bank investment pods $ 23,686,60.5 $ 23,686,60.5 $ - $ - Bankinvestmenlpods 2,139,468 2,139,468 - - City of Livonia Employees Retirement System Corporate bonds 39,160,038 13,555,284 10,064,416 15,540,338 US. agency seventies 32,137,383 24,799 6,670,129 25,442,455 US. Treasury secunhes 2,558852 1383,922 698,356 476,574 City a Livonia Retiree Health and Diubllity Benefits Plan Corporate bonds 9,,069,248 3,359,686 2,213,254 3,496308 U.5 agency secunhes 7,470852 92,049 1517,608 5,861195 US. Treasury secunhes 948334 40,078 421,005 487,251 35 City of Livonia, Michigan Notes to Financial Statements November 30, 2006 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 lirrit its investment choices. As of year end, the credit quality ratings ofdebt securities (other than the U.S. government) are as follows: Investment Fair Value Rating Rating Organization Bank investment pools $ 5,323,392 Aaa Moody's Bank investment pools 18,363,253 Al S&P U.S. agency securities 1,445,033 AAA S&P U.S. agency securities 35,262,555 Not Rated N/A U.S. Treasury securities 1,248,445 AAA S&P U.S. Treasury securities 5,159,388 Not Rated N/A Corporate bonds 3,527,265 A S&P Corporate bonds 2,259,036 A- S&P Corporate bonds 574,606 A+ S&P Corporate bonds 120,976 AA S&P Corporate bonds 2,300,848 AA- S&P Corporate bonds 17,527,126 AAA S&P Corporate bonds 1,145,605 B S&P Corporate bonds 204,250 BB S&P Corporate bonds 239,200 BB- S&P Corporate bonds 494,815 BB+ S&P Corporate bonds 7,665,517 BBB S&P Corporate bonds 3,5D6,365 BBB- S&P Corporate bonds 6,037,838 BBB+ S&P Corporate bonds 2,625,836 Not Rated N/A Component Unit - As of November 30, 20D6, The Plymouth Road Development Authority has $2,139,468 invested in bank investment pools (Aaa rating from Moody's). City of Livonia, Michigan Notes to Financial Statements November 30, 2006 Note 4 - Capital Assets Capital asset activity of the City's governmental and business-type activities was as follows: Balance Balance December 1, Novennter30, Governmental Activities 2105 Redasifrations Additions DElncsab 2106 Capital asset not being deprecated Land $ 34181310 $ - $ 283,000 $ - $ 34470310 Constudion in prngress 335222 335222 Subtotal 34181310 - 624222 - 34805,532 Capital asset being depreciated Inhffimctre 69,781325 - 4,172208 - 73,953,533 Read! right 15,718210 - 395,748 - 16,173,958 Buildings and iWovenent 90,258,536 - 272598 (6,637) 90,524,497 Equlprent andvehades 26358,552 (4806) 2719846 (121,346) 28,411,246 Subtotal 202,176623 (4,806) 1620,400 (128,993) 206,063234 Accum lded depredation: Inhatructre 25,969,495 - 2,072,744 - 28,052189 Road right 4,241430 - 478,627 - 4,726057 Buildings and iWovenent 25,:96,803 - 1,919,fi54 (206) 21516,191 Equiprent andvehides 17,125,870 (4,806) 2,085468 (612,457) 18,94075 Subtotal 72,959,548 (4,806) 6,556,493 (612,723) 78,898512 Net captal aset beingdepreciatd 129,211075 1,063907 (116260) 138164,722 Net captal aset $163,398385 $ $ 1,688,129 $ (116260) $164,910251 37 City of Livonia, Michigan Notes to Financial Statements November 30, 2006 Note 4 - Capital Assets (Continued) 38 Balance Balance December 1, Disposes and Novernber30, eusims-type Activities 2(105 Retlasifretions AcUftions Aclusbrents M06 Capdal assets not being deprecated Land $ 5,154,436 $ - $ - $ - $ 5,154,435 C nsbudrnn in progress 921,506 (535193) 990TH 1,215184 Subtotal 6095,042 (535193) 990TH - 6440520 Capital assets being depreciated Buildin gs and W ficin g 9,428598 - - - 9,428,596 Land iWrovenents 2,81 - - - z990,746 Vehicles 1,M979 4,805 3]8,927 (205,819) 1,956902 Machinery add ecuipnent 2,034,597 - 261,340 (13,593) $282,354 Water and sewerd [int ion 114,556,995 535,193 471255 115,553403 Subtotal 1W,fi90863 539898 1,111532 (221392) 132,222,001 Accumila[ed depreciation: Buildn gs and W ficin g 3,339,581 - 188]89 - 3,528370 Vehicles 1,124,543 4,815 157299 (299,317) 981,400 Made inery and eW ipnent 1,271054 - 165,075 (9,286) 1,326,853 Water and sewer distribution 46234833 - 2,292,061 - 48,526894 Land i"roverrents 1,955,169 110,519 2,975,588 Subtotal 53,835290 4,805 2,913,743 (308533) 56,445205 Net captal assets being depreciated 76,855573 535,193 (1,812211) 88241 75,716,796 Net captal assets $ 82,910615 $ $ (811440) $ 88241 $ 82,217416 Balance Balance Decanter 1, Disposals and Novernber30, Canpanent Unit AtivRies 2(105 Redasifretions Meiners Aclushrents 2197 Capdal assets not being deprecated - Land $ 474,448 $ - $ - $ - $ 474,448 Capdal assets being depreciated - Land i"roverrents 15,210,385 - 8,858 - 15,219243 Accumila[ed depreciation - Land i"roverrents 3,835874 769,538 4,:57412 Net captal assets being depreciated 11,313511 (151580) 10,521831 Net captal assets $ 11,847959 $ $ (751,M) $ $ 11,096279 38 City of Livonia, Michigan Notes to Financial Statements November 30, 2006 Note 4 - Capital Assets (Continued) Depreciation expense was charged to programs of the primary government as follows: Governmental activities: General government $ 496,115 Publicsafety 1,358,396 Publicworks 3,194,492 Recreation and culture 1,597,490 Total governmental activities $ 6,556,493 Business -Type activities: Water and sewer $ 2,565,980 Golfcourse 182,623 Newburgh and Silver Village 165,139 Total business -type activities $ 2,913,742 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 Streets and sidewalk projects $ 7,517,294 $ 1,992,862 Tree planting projects 286,404 83,596 Water and sewer projects 858,926 552,124 Total $ 8,662,624 $ 2,628,582 39 City of Livonia, Michigan Notes to Financial Statements November 30, 2006 Note 5 - Intertund Receivables, Payables, and Transfers Intertund transfers reported in the fund financial statements are comprised of the following: Fund Transferred From Fund Transferred To Amount General Fund Nonmajorgovemmental funds $ 1,123,296 Golf Course Fund ` 47,500 Total General Fund 1,170,796 Community Recreation Fund Nonmajorgovemmental funds" 2,200,241 Nonmajor governmental funds General Fund ` 40,000 Nonmajorgovemmental funds... 4,382,928 Total nonmajor governmental funds 4,422,928 Total $ 7,793,965 ` Transfer of unrestricted resources to finance capital projects and general obligation debt service in accordance with budgetary authorization " Transfer from Community Recreation Fund for debt service Primarily transfers of gas and weight tax revenues from Major Streets Fund and Local Streets Fund to the Road and Sidewalk Fund in accordance with ACT 51; also includes transfer to debt service 40 City of Livonia, Michigan Notes to Financial Statements November 30, 2006 Note 6 - Leases Capital Leases - The City has entered into a lease agreement as lessee for financing the purchase of police, fire, energy conservation, and transportation equipment. This lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the present value of the future minimum lease payments as of the inception date. The future minimum lease obligations and the net present value are as follows: Years Ending November 30 Amount 2007 $ 837,710 2008 229,691 2009 229,690 2010 229,692 2011 229,690 Total minimum lease payments 1,756,473 Less amount representing interest (126,093) Presentvalue $ 1,630,380 Note 7 - Long -tern Debt The City issues bonds to provide for the acquisition and construction of major capital facilities. General obligation bonds are direct obligations and pledge the full faith and credit of the City. County contractual agreements and installment purchase agreements are also general obligations of the government. Special assessment bonds provide for capital improvements that benefit specific properties, and will be repaid from amounts levied against those properties benefited from the construction. In the event that a deficiency exists because of unpaid or delinquent special assessments at the time a debt service payment is due, the City is obligated to provide resources to cover the deficiency until other resources (such as tax sale proceeds or a reassessment of the district) are received. Revenue bonds involve a pledge of specific income derived from the acquired or constructed assets to pay debt service. City of Livonia, Michigan Notes to Financial Statements November 30, 2006 Note 7 - Long-term Debt (Continued) Governmental Activities: Bunning Autlonty Bodes: 1996 MBA Eire Statim Bonds, wlth interest rate of 5 00%, maturing through 2007 2000 Recreation Bonds, wdh interest rate from 5 00% to 5 60%, maturing [hrnugh2010 2001 Recreation Bonds, wdh interest rate of 430% to 525%, maturing [hrnugh2030 2005 MBA Refunding Bonds, with interest rate of 00% to 425%, maturing [hrnugh2015 Subtotal Street and Ughway General OMgabon Udaunted Tax Bonds 1993 Street Improvement Bonds, with interest rate of 425%, maturing [hrnugh 2008 2002 General Obligation Refunding Bonds, wlth interest rate of3%, maturing [hrnugh 2008 Subtotal Capital Lease Obligations and Max Longterm Debt Energy Conservation EQnipment, wlth interest rate of 388%, maturing [hrnugh 2007 Eire Truck Pumper, wdh interest rate of 339%, maturing through 2011 Eire Truck Pumper, wdh interest rate of 378%, maturing through 2007 Transportation buses, wdh interest rate of 3 68%, maturing through 2011 Long-term portion of general and workers' compensation, and health insumnoadonne Landfill dosure and p Aclosuna Iialblo Subtotal Total governmental acbmty debt 42 Amount $ 75,999 375,000 32,330,000 3705.000 775,000 255,000 1030 000 454,906 316,730 131,W2 726 912 2,370,624 678.192 4679,196 $ 42,194196 City of Livonia, Michigan Notes to Financial Statements November 30, 2006 Note 7 - Long -teen Debt (Continued) Description Ar eunl Business -type Activities: Builtlim AuteontyBoiWs: 1996 MBA Refinancing Bonds, with interest rates from 450% to 520%, matting Mmugh 2015 $ 3,725,000 1999 MBA Refinancing Bonds, interest rates from 400% to 415%, maturing Mmugh 2008 245,000 Subtotal 3,970,000 Water SuWlyand Wastewater5ystem Bonds: 2000 Water Supply and Wastewater System Revenue Bonds, with interest rates From 5125% to 530%, maturing through 2009 375,000 2002 Water Supply and Wastewater System Revenue Refunding Bonds, with interest rates from 250% to 400%, maturing through 2012 5,204118 2005 Water Supply and Waste Water System Revenue Firms, with interest rates from 350% to 5.00%, maturing Mmugh 2020 4,615,000 2006 Water Supply and Wastewater system Revenue Ramming Bods, with interest rates from 350% to 500%, maturing through 2020 4,095,000 Subtotal 14289,118 County Contradual Obligations and Other Longterm Debt State Revolving Fund Loan -N. Huron Valley/Rouge Valley Wastewater Contd System, with intemA rate of2 5%, maturing through 2021 290,000 General liability claims, werkeff mmpensatien, and health insurance claims 122,392 Subtotal 412,392 Total businesstype adivltydebt $ 18,671 510 Component Units General Obligations: 1998 Downtown Development Bonds, with interest rates ranging from 4.60% to 470%, maturing thmugh 2009 $ 895,000 2006 Downtown Development Refunding Bonds, with interest rates ranging From 400% to 5 00%, maturing through 2018 4,470,000 Total componcnt unit debt $ 5,365,000 43 City of Livonia, Michigan Notes to Financial Statements November 30, 2006 Note 7 - Long -tern Debt (Continued) Long-term debt activity can be summarized as follows: Beginning Ending Due Wilhin Balance Addlions Reduabons Balance Ore Year Governmental Activities Bundnng AuOmnly Bonds $37,568000 $ - $ (1075,000) $36,485,000 $ 625,000 General Obligation Unlimded Tax Bonds 2,145,000 - (1115,000) 1030,000 630,000 Capital lease obligations and other 4,543,097 1068,304 (932,205) 4,679,196 781,744 Total $ 44,248,097 $ 1,068,304 $ (3,122,205) $ 42,194,196 $ 2,036,744 Compensated absences $ 6,963,517 $ 350,789 $ - $ 7,314,306 $ 3,274,140 Beginning Ending Due Wdhin Balance AdtRions Reductions Balance Ore Year Business -type Activities Building AuOmntyBonds $ 4,405,000 $ - $ (435,000) $ 3,970,000 $ 455,000 Water Supply and Wastewater System Bonds 10,652,594 8,995,000 (5,358,476) 14,289,118 1336,000 Countycontractualoblgabons andother 528,787 - (116,395) 412,392 20,000 Total $ 15,586,381 $ 8,995,999 $ (5,999,871) $ 18,671,519 $ 1,819,999 Compensated absences $ 462,748 $ - $ (155,915) $ 306,833 $ 197,582 Beginning Ending Due Wdhin Balance AdtRions Reduabons Balance Ore Year Component Unit Activities Downlovn Development Bonds $ 5,740,000 $ 4,479,999 $ (4,845,000) $ 5,365,000 $ 330,000 44 City of Livonia, Michigan Notes to Financial Statements November 30, 2006 Note 7 - Long -tern Debt (Continued) Advance and Current Refundings - During the year, the City issued $4,110,000 in Water Supply and Wastewater System Revenue Refunding bonds with an average interest ate of 4.00 percent. The proceeds of these bonds were used to advance refund $3,925,000 of outstanding 2000 Water Supply and Wastewater System Revenue bonds with an average interest ate of 5.20 percent. The net proceeds were used to purchase U.S. government securities. Those securities were deposited in an irevoosble 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 Water and Sewer Fund. The advance refunding reduced total debt service payments over the next 14 years by approximately $235,000, which represents an economic gain of approximately $176,000. Component Units - During the year, the Plymouth Road Development Authority issued $4,470,000 in Downtown Development Refunding bonds with an average interest ate of 4.25 percent The proceeds of these bonds were used to advance refund $4,535,000 of outstanding Downtown Development bonds with an average interest rate of 4.65 percent. The net proceeds 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 Plymouth Road Development Authority Fund. The advance refunding reduced total debt service payments over the next 12 year by approximately $240,000, which represents an economic gain ofapproximately $147,000. 45 Total interest expense for the year was approximately $2,800,000. Annual debt service requirements to maturity forthe above bonds and note obligations are as follows: GmemrteMnIASIHIa &en®Vwmmt¢ GnYp Uni[AQmtim Pana[ ll )qet Trial RMpl Iqet Trial RMpl Irtero TN II 2W7 S 2035744 S 1M9213 3 39iN,9 3 1n7595 3 7W852 3 2A "7 3 3i3,D13 3 239721 S 59721 2W0 11W,95 1799074 3 119 R4 iMSE6 W75N 2190,181 355,W] 212OW M7 OW 2W9 1013243 1]b, 09) 2M110 17125 e3 ug2M 127 3M" 195.35 56.35 2010 11 W005 1694026 2 4031 1713M 55,398 22fi7300 PI,W] 1W4W 5704W 2011 13A3530 1Q5154 2MM imm 407241 2M,231 410" 1644W 5744W 2012-2016 75W,W 7117505 148575[6 5419175 1421 W4 78W,75 2305," 54045 292545 2017-2@1 91m, 5034734 14, 154,T 3�1W 3K,03i 36W,213 1125," W213 1175213 2022-2v6 3YA 2 W1 7A5 11751 ]A5 2027-2030 6wO fi9],9P 72 M TrtI SW1L,3W 324315292 363,nl1 318519110 340052/0 523134W 35W5," 3150436/ 3 6M Advance and Current Refundings - During the year, the City issued $4,110,000 in Water Supply and Wastewater System Revenue Refunding bonds with an average interest ate of 4.00 percent. The proceeds of these bonds were used to advance refund $3,925,000 of outstanding 2000 Water Supply and Wastewater System Revenue bonds with an average interest ate of 5.20 percent. The net proceeds were used to purchase U.S. government securities. Those securities were deposited in an irevoosble 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 Water and Sewer Fund. The advance refunding reduced total debt service payments over the next 14 years by approximately $235,000, which represents an economic gain of approximately $176,000. Component Units - During the year, the Plymouth Road Development Authority issued $4,470,000 in Downtown Development Refunding bonds with an average interest ate of 4.25 percent The proceeds of these bonds were used to advance refund $4,535,000 of outstanding Downtown Development bonds with an average interest rate of 4.65 percent. The net proceeds 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 Plymouth Road Development Authority Fund. The advance refunding reduced total debt service payments over the next 12 year by approximately $240,000, which represents an economic gain ofapproximately $147,000. 45 City of Livonia, Michigan Notes to Financial Statements November 30, 2006 Note 7 - Long -tern Debt (Continued) 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 Citys financial statements. Information regarding the status of each bond issue, including possible default, must be obtained from the paying agent or other knowledgeable source. As of November 30, 2006, there is approximately $61,367,000 of no commitment debt outstanding. Note 8 - Restricted Assets Governmental Activities - The governmental activities have unspent bond proceeds relating to debt issued for the construction of streets and for police computer upgrades. The City also has a receivable from Wayne County relating to street construction financed by the City on behalf of the County with bond proceeds. Business -Type Activities - At November 30, 2006, the City was in compliance with the provisions of the Water Supply and Wastewater System Revenue bonds. The City has assets of $249,447 held at Wayne County that are restricted for future water and sewer obligations. The balances for the restricted asset accounts are as follows: Governmental Business -type Activities Activities Unspent bond proceeds and related interest $ 718,788 $ 4,364,346 Revenue bond reserves - 3,104,863 Assets held by Wayne County - 249,447 Receivable from Wayne County 197,406 Total restricted assets $ 916,194 $ 7,718,656 Note 9 - Risk Management The City is exposed to various risks of loss related to property loss, torts, errors and omissions, and employee injuries (workers' compensation), as well as medical benefits provided to employees. The City has purchased commercial insurance for medical benefits and workerscompensation and participates in the Michigan Municipal Risk Management Authority (the "Authority"). 46 City of Livonia, Michigan Notes to Financial Statements November 30, 2006 Note 9 - Risk Management (Continued) The Michigan Municipal Risk Management Authority risk pool program operates as a claims servicing pool for amounts up to member retention limits, and operates as a common risk -sharing management program for losses in excess of member retention amounts. Although premiums are paid annuallyto the Authority that the Authority uses to pay claims up to the retention limits, the ultimate liability for those claims remains with the City. The City estimates the liability for general liability, workers' compensation, and medical claims that have been incurred through the end of the fiscal year, including 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 and business -type activities columns of the statement of net assets. Changes in the estimated liability for the past two fiscal years were as follows: General Gabildy Worlerg Cmryensabon Medial Claim 2106 2105 2106 2105 Mm 2105 Esunmted liability - Beginningofyear $ 523,368 $ 536371 $ 1,W7221 $ 1,033,383 $ 1,095756 $ 328,398 Estinmted daimm a red, indudingdiznges in estimates 1,311675 1,463,159 268,812 449,042 8,891]55 6,405983 Claim payments (1,311555) (1,476,162) (356271) (435204) (8,836579) (5,68x625) Esumated liability - End ofyear $ 523,488 $ 523,368 $ 959,762 $ 1,W7221 $ 1,180932 $ 1,W,756 Note 10 - Defined Benefit Pension Plan Plan Description - The City of Livonia Employees' Retirement System (the "System') is a single -employer defined benefit pension plan that is administered by the City of Livonia Employees' Retirement System; this plan covers the following employees of the City unless they elected to transfer to the City's 401(a) defined contribution pension Plan (see Note 11): 0 General employee members - All members hired prior to March 17, 1997 and their beneficiaries 0 Police lieutenant and sergeant members - All members hired prior to December 8, 1997 and their beneficiaries 0 Police officer members - All members hired prior to November 24, 1998 and their beneficiaries 47 City of Livonia, Michigan Notes to Financial Statements November 30, 2006 Note 10 - Defined Benefit Pension Plan (Continued) 0 Fire fighter members - All members hired prior to duly 1, 1998 and their beneficiaries The System provides retirement, disability, and death benefits to plan members and their beneficiaries. At November 30, 2005, the date of the most recent actuarial valuation, membership consisted of 566 retirees and beneficiaries currently receiving benefits and terminated employees entitled to benefits but not yet receiving them, and 275 current active employees. The System does not issue a separate financial report. Contributions - Plan member contributions are recognized in the period in which the contributionsaredue. Employer contributions to the plan are recognized when due and the employer has made a formal commitment to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan. Please refer to Note 1 forfurther significant accounting policies. The obligation to contribute to and maintain the System for these employees was established by negotiation with the City's collective bargaining units and requires a contribution from the employees from 2.55 percentto 5.21 percent. The funding policy provides for periodic employer contributions at actuarially determined rates. Administrative costs of the plan are financed through investment earnings. Annual Pension Cost - For the year ended November 30, 2006, the City was not required to and did not make a contribution. The annual required contribution was determined as part of an actuarial valuation at November 30, 2005 using the aggregate actuarial cost method. Significant actuarial assumptions used include (a) an 8.25 percent rate of return and (b) projected salary increases of 4.75 percent to 12.67 percent per year. Projected salary increases (b) include an inflation component of 4.75 percent. The actuarial value of assets was determined using techniques that smooth the effects of short-term volatility over a five-year period. The unfunded actuarial liability is being amortized as a level percentage of payroll on a closed basis. The remaining amortization period is the expected future working lifetime. Reserves - As of November 30, 2006, the plan's legally required reserves have been fully funded as follows: Reserve for employees'contributions $ 9,726,425 Reserve for retired benefit payments 68,054,487 Reserve for employer contributions 140,875,420 48 City of Livonia, Michigan Notes to Financial Statements November 30, 2006 Note 10 - Defined Benefit Pension Plan (Continued) Three-year Trend Information Fiscal Year Ended November 30 2006 2005 2004 Annual pension cost (APC) $ - $ - $ - PercentageofAPCcontributed 100.0 % 100.0 % 100.0 Net pension obligation - - - Note 11 - Defined Contribution Pension Plan The City established a defined contribution pension plan under Section 401(a) of the Internal Revenue Code for the following employees: 0 General employee members - All members hired on orafter March 17, 1997 0 Police lieutenant and sergeant members - All members hired on or after December 8, 1997 0 Police officer members - All members hired on orafter November24, 1998 0 Fire fighter members - All members hired on or after duly 1, 1998 In addition, the plan covers all employees electing to transfer from the City's defined benefit pension plan (see Note 10). In a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings, as established by the City of Livonia through collective bargaining agreements. The employee contribution percentages represent the minimum required contribution. Employees are permitted to contribute additional amounts up to the maximum allowed by law. The City's contributions for each employee (plus interest allocated to the employee's account) are fully vested after four years of service and are vested immediately for employees transferring from the existing defined benefit pension. In accordance with the above requirements, the City contributed $1,834,721 during the current year, and employees contributed $658,521. 49 City of Livonia, Michigan Notes to Financial Statements November 30, 2006 Note 11 - Defined Contribution Pension Plan (Continued) The City's contribution as a percentage of employees' eamings is as follows: Employees Transferring New Employees Hired from the Defined Benefit After the Effective Dates Pension Plan Noted Above Employer Employee Employer Employee Contribution Contribution Contribution Contribution General 12% 3.1%to 3.66% 7% 3.1%to 3.66% Police lieutenants and sergeants 13% 5.21% 9% 5.21% Police 13% 5% 9% 5% Fire 13% 3.56% 11% 3.56% Note 12 - Other Postemployment Benefits The City of Livonia Postemployment Health Care Benefit Plan Plan Description - The City of Livonia Postemployment Health Care Benefit Plan is a single -employer defined benefit plan that is administered by the City of Livonia EmployeesRetirement System; this plan covers all full-time employees included in the Citys Defined Benefit Pension Plan (1) retiring on or after December 1, 1979, (2) retiring under disability provisions, and (3) retiring before December 1, 1979 if the person has attained age 65. The system provides poster ployment health care benefits to plan members and their beneficiaries. On November 4, 1998, the City created a separate plan to cover all postemployment health care benefits of all defined benefit pension plan and defined contribution pension plan members. After this date, all postemployment health care benefit contributions are recorded as revenue in this new plan (see Note 11). Benefit payments continued to be paid out of the Postemployment Health Care Benefit Plan as long as reserve balances refrained. During the year ended November 30, 2006, the remaining reserve balances were fully expended. At November 30, 2004, the date of the most recent actuarial valuation, membership consisted of 571 retirees and beneficiaries currently receiving benefits and terminated employees entitled to benefits but not yet receiving them, and 281 current active employees. The plan does not issue a separate financial report. Contributions - Employer contributions to the plan are recognized when due and the employer has made a formal commitment to provide the contributions. Benefits are recognized when due and payable in accordance with the terms of the plan. Please refer to Note 1 for further significant accounting policies. 761 City of Livonia, Michigan Notes to Financial Statements November 30, 2006 Note 12 - Other Postemployment Benefits (Continued) The obligation to contribute to and maintain the system for these employees was established by negotiation with the City's competitive bargaining units and requires no contributions from the employees. The funding policy provides for periodic employer contributions at actuarially determined rates. Administrative costs of the plan are financed through investment earnings. As discussed above, there were no contributions to the plan subsequent to November 4, 1998. 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 health care benefits, including hospitalization and disability benefits, for the welfare of all retirees and their spouses and eligible dependents. After November 4, 1998, all contributions related to postemployment benefits for all members of the Defined Benefit Pension Plan and Defined Contribution Pension Plan and their beneficiaries will be recorded as revenue in the City's Other Employee Benefits Trust Fund. Eligibility - All retirees of the Defined Benefit Pension plan and the Defined Contribution Pension Plan and their beneficiaries and future retirees who complete 10 years or more of credited service are eligible. Contributions - Employer contributions to the trust are recognized when due and the employer has made a formal emmitment to provide the contributions. Benefits are recognized when due and payable in accordance with the terns of the plan. Annual Cost - For the year ended November 30, 2006, the City's annual postemployment cost of $7,755,379 for the plan was equal to the Citys required and actual contribution. The annual required contribution was determined as part of an actuarial valuation at November 30, 2005, using the entry actual age cost method. Significant actuarial assumptions used include (a) an 8.25 percent investment rate of return and (b) a graduated projected annual inflation rate for medical care. A 6.00 percent annual rate for medical care inflation was assumed for the year following the valuation, 5.50 percent for the next year, and 4.75 percent thereafter. The actuarial value of assets was determined using techniques that smooth the effects of short-term volatility over a five-year period. The unfunded actuarial liability is being amortized as a level percentage of payroll on an open basis. The remaining amortization period is 50 years for health and 30 years for disability. The annual required contribution and the percentage contributed to the plan were as follows: Fiscal Year Ended November 30 2004 2005 2006 Annual required contribution $ 5,859,287 $ 5,534,608 $ 7,755,379 Percentage contributed 100.0% 100.0 % 100.0 City of Livonia, Michigan Notes to Financial Statements November 30, 2006 Note 12 - Other Postemployment Benefits (Continued) Upcoming Reporting Change - The Governmental Accounting Standards Board has recently released Statement Number 45, Accounting and Reporting by Employers for Postemployment Benefits Other Than Pensions. The new pronouncement provides guidance for local units of government in recognizing the cost of retiree health care, as well as any "other' postemployment benefits (other than pensions). The new rules will cause the government -wide financial statements to recognize the cost of providing retiree health care coverage over the working life of the enployee, rather than at the time the health care premiums are paid. The new pronouncement is effective for the year ending November 30, 2009. As of November 30, 2006, the trust reserves for employees' postemployment benefits have been fully funded as follows: Reserve for health insurance $ 47,891,583 Reserve for disability insurance 1,408,122 Total reserves $ 49,299,705 Note 13 - Deferred Revenue Governmental funds report deferred revenue in connection with revenue that is not considered to be available to liquidate liabilities of the current period. Governmental funds and Enterprise Funds also defer revenue recognition in connection with resources that have been received but not yet earned. At the end of the current fiscal year, the various components of deferred revenue are as follows: Unavailable Unearned Property taX special assessment, grants, and other receivables $ 706,259 $ - Community recreation center annual passes and other receivables - 917,214 Assets held at Wayne County - 276,017 Interest receivables on sewer connections 804,222 Total $ 706,259 $ 1,997,453 Note 14 - Subsequent Events Subsequent to November 30, 2006, the City approved the issuance of $34,405,000 of Building Authority Refunding Bonds. Interest rates range from 4.00 percent to 4.75 percent. The bonds are payable through May 1, 2023. The proceeds from the bonds will be used to refund the 2001 Recreation Bonds. 52 Required Supplemental Information 53 City of Livonia, Michigan Required Supplemental Information Budgetary Comparison Schedule - General Fund Year Ended November 30, 2006 Varian as with Bne1 54 Control Bucket Final Budget Haival Budget Revenues Property Taxes 8 28588.137 8 28581 8 28.6P1,546 8 19.E83 Lkemes and Permits Business 1M,400 138,400 136,742 (11658) NmWsiness 2,050200 2,050,200 2350,236 300,636 Total limens¢ and Permits 2,188600 2,188,600 2486,9* 293,3113 IMergovernnental Revenue State and loved SCOMOE6 9256386 9,081,929 (iTL653) Federal 1T1,661 1T{68f 1W,58] 3],903 Total Intergovernmental revenue 9,3]9,0]0 9879.079 9,245,510 (13{S0) Cranes la Seri 3273,0116 3273,046 3,581 35,734 interest 826,666 36zo,o* 1944,870 324810 Rome and FerleRura 3e11 3886,606 3552.435 (331,565) Miscellaneous Revenue Rent and ogalties 110.5,026 1,10.5,Oe'6 1,181,6234 4l &to of fixedassets - 150,000 48453 (101517) Other misoellanems 1.633,90.5 983945 919,067 Par, ) Total misoellanems revenue 2,7]89]1 22]8,9]1 2155,145 R ffi5) Total revenue $ 50,913824 $ 51213804 $ 51582265 $ 368,441 Expenditures (iepeml waernmem Lessees City Cannon $ 393,898 $ 393,8* $ 383001 $ 10,894 City Clerk 515,927 45392] soul n0 Elections 300,464 275961 270,431 5,533 Total leg¢lative 1210289 1;123,]89 1,106,662 17,127 ludavi 2,623079 2,709,979 2703,931 48 Executive XAyoh ogee 237,636 237,6* 229,479 8,159 Pilninstoalive services 226208 T162* 219,28 6,950 Total executive 463816 463,815 4111 15,109 Hum Human Relatiems Commisson 8,021 8,021 5,20 2,103 Law relations 137,000 115,0W 1%,352 618 Civil service 636.147 623.14] 612,517 too Total human resources ]63166 746,1683 74l 4,*1 54 City of Livonia, Michigan Required Supplemental Information Budgetary Comparison Schedule - General Fund (Continued) Year Ended November 3O, 2006 Variance with Film Original Budget Final Budget Actual Budget Expenditures (codnued) Gereml Government (cmtinoedt Financial administration eeccou im s 359689 s 480s89 s 681961 s 48 Assessing 5]1,65] 556,aA Sti,Bffi 312 Finan 26]32] 2n GP 271 181 Intlzpement audit 52,926 52936 58,33! 2,582 Board of Review 0,191 3,391 2,M 619 Treasurer 513,914 075,911 4hi 156 Oats processing 651,617 631 6213W 11,737 Total fnanaal adnnistratim 2533361 2680,361 2661.]16 15.5Et5 Other activities: Legal 6d0313 653,3V Real 75 Otilitis am natures 592922 606,122 601 27 Hc4isition of lam 9,000 9000 3,500 5,500 research and Investigation 26,000 26000 26,000 - Dusandsubucriaims 57,000 65,800 4,95 1565 Total deer xrinries 1313235 1336,235 1311000 1i Total general government 89383]s 8,E50,3M 8,801281 A,f wdc sdely Poll Trafic bureau 692915 719,215 719,131 86 Pilninstrdion 2958,922 2,8133,67fir 2883.550 132 Detective bureau 2,412$02 2,408554 240i s Automdiveseraice 661750 6661w 656,O]II s0 Communiatims'Records bureau 862361 s25,3s1 825365 16 Cling guards 0,022 66932 65,816 56 DA R E School liaison 656,495 593,1'% 593,154 61 Reserve pais 317,603 333665 331,612 53 Fatrol bureau 10,659,695 10,645,G% 10613133 1,962 Inheritance bureau 1511 1695'25 1(195'76 69 Total users 203713620 20611 20,61,001 2,481 Fire Pilninsirdion 892,489 630961 100,90it 52 Firefighting 9,0068M 9391632 9,3916P 15 Fire preuenlion 331218 6566ffi 6565ta 76 Total fire 10330511 10,6i 10,thi 111 Protediveinspection: Burning COR BoardofAKpza's 1,061 1,061 856 205 lnspedion 1236,922 1266022 12659°5 27 Total adecgve inspection 1235,983 1267,081 1265,851 M Omeradectw: Office of emergengaelerecines; 132,030 119,000 134,013 25 Traficcanmsion 62M 6,2M 5,33 909 Total other protective 11 160,312 1l 551 Total WtlK safely 32063365 3270,1,050 327002311 3,s1s W City of Livonia, Michigan Required Supplemental Information Budgetary Comparison Schedule - General Fund (Continued) Year Ended November 3O, 2006 variance with Fiml 56 Orignal 3u 01 Fiml Bud3et Actual Budget Pudic w«k Pudicsonic¢ - Highways, streak, and inarintenance Engineering $ 60,1,032 $ 510,333 $ 510308 $ 25 Parks maintenance 9325U 961j32 96!090 42 6Annistration 3265 3,920 976 2,9id EcuMent maintenance 260,3'@ 211 23561 n Building maintenance 1,851,]Zi 1.766u373 I,76627'] 56 Street lighting 31185! 311851 311 612 'Andenance Stread 56390 S,]90 8,]39 51 Tudicsenicin 13,022 7,022 7,015 ] Forestry raT 8,033 7,892 161 Total Wbicwork 6,06360 3,7A503 3,]3,]11 3,792 aacrenean and Cultural Park and recreakvr: Administration 326255 360,755 W,605 150 Recreation hdhles 60,961 60261 WIN 73 Recreation athletic 131882 111 10,]21 161 Recreation prcyrarm 839b 60,114 A,TM 379 Total prelude! recreation 581on 581,012 5@1,308 ]W Cultural: Historic Preservation Commkim 5,119 5,119 3,2b9 10`+1 Historical Commisim 75,182 75,182 73,056 2,128 LibaryCommisim 65000 656000 656000 - NkCommsim 26563 23063 211,766 22N Commrntyrsources 95508] 95],98] 95]955 32 Total cultural 1511331 1511,331 1,53,026 6,da Total recreation and cultural 2,092343 2,092343 2085,332 7,011 C nnunily and Ewromic Uevebpnent Cly Planing Commision 646,061 646,066 63],631 6,433 Zwing Board ofHluthels 125,386 113,386 113,310 76 Total anneal and emnomi< @mint nml ]69,45') ]5],850 750961 650 Enggee Bernal Insurance, and Omer 2950579 2,963979 293.712 ill Total eryendWres S 50,81 $ 51,19],]61 $ 51,099267 $ IN 56 City of Livonia, Michigan Required Supplemental Information Budgetary Comparison Schedule - Major Special Revenue Funds Community Recreation Year Ended November 30, 2006 57 Variancewdh Anneidetl Annaded Original BLKINt Butlget &teal Butlget Revenue Propertytons $ 3,685,183 $ 3,685,183 $ 3,676,288 $ (8,895) Other charges for sermons 3,963,631) 3,964061) 3,961972 (2,108) Inwstmenticeome 100,000 100,000 313,188 213,188 Total revenue 7,748,813 7,749,263 7,951 448 202,185 Falaenditum-Current - Recrea9on and culture 7,635,347 7,674,197 7,370,350 303,847 Net charge in Fund Balance 113,466 75,066 581,098 506932 Fund Balance- Beginning of year 5,637,320 5,637,320 5,637,320 - FundBalance- End of year $ 5,758,786 $ 5,712,]86 $ 6,218,418 $ 586,0.12 57 City of Livonia, Michigan Required Supplemental Information Budgetary Comparison Schedule - Major Special Revenue Funds Municipal Refuse Disposal Year Ended November 30, 2006 58 Variancewdh AnaancM Annenc ecl Original BLAget BuMat &teal BuMat Revenue Protertytsaes $ 12,0]8,]68 $ 12,0]8,]68 $ 12,049,631 $ (29,137) Other charges for services 120,500 120,500 111,578 (8,922) Inieshoanticeome 100,000 100,000 3x8,312 2x8,312 Total rewrare 12,299,268 12,299,268 12,509521 210,253 Ealaend ituree - Current saoga9on 12,21],032 12,283 832 11267,100 1,016,132 Net Change in Fund Balance 22,236 15,436 1241821 1226,385 Fund Balance- Beginning of }ear 5,31],959 5,31],959 5,31],959 - FundBalance- Fool of year $ 5,499,195 $ 5,393,395 $ 6,619,799 $ 1,226,395 58 City of Livonia, Michigan Required Supplemental Information Pension System Schedule of Funding Progress (000s omitted) The schedule of funding progress is as follms Valuetl using the fiv�year"smoofhedfuWinn' market value The schedule of employer contributions is as fellows Annual Unfrreac Percentage Actuarial Actuarial Contnbution ConlnbuMd 11130N1 (OverfuWW) $ 837,116 Value of Pcauetl UnfunJetl Fundal Ratio CoverW AHL as Actuarial Assets Llablllty(AAL) AAL(UAAL) (Percent) Payroll Percentageof Valuation Date (a)' Entry Age (b) ure) (aIM (c) CoverW Payrdl 11130N0 $ 192,4]] $ 148,670 $ (43,807) 1295 $ 17,132 (255.]) 11130N1 299,937 151438 (49,499) 1327 16,721 (2960) 11130N2 199,627 159,272 (49,355) 1253 17,285 (233.5) 11130N3 20,505 159,900 (43,695) 1273 17,199 (2549) 11130N4 199578 164378 (35,299) 1214 16,079 (2190) 11130N5 290,995 167,226 (32,]]9) 1196 15,885 (2964) Valuetl using the fiv�year"smoofhedfuWinn' market value The schedule of employer contributions is as fellows The required centribution is expressW tu 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, 2006, the latest actuarial valuation, follows: Actuanal cost method Aggregate Amortization method Level percent, closW Remaining amortization pend Erpected future working Ifetime Asset valuation method 5 -year snwofhed market Actuanal assumptions: Investment rate of return 825% Pmjeded salary increases i W Wing inflation at 475% 475% 1267% 59 Annual Required Percentage Hi lYear Ended Pctuarial Valuation Dale Contnbution ConlnbuMd 11130N1 11130N0 $ 837,116 1880 11130N2 11130N1 64 ,W5 1880 11130N3 11130N2 417,464 1880 11130N4 11130N3 392,639 1880 11130N5 11130N4 - 1080 11130N6 11130N5 - 1080 The required centribution is expressW tu 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, 2006, the latest actuarial valuation, follows: Actuanal cost method Aggregate Amortization method Level percent, closW Remaining amortization pend Erpected future working Ifetime Asset valuation method 5 -year snwofhed market Actuanal assumptions: Investment rate of return 825% Pmjeded salary increases i W Wing inflation at 475% 475% 1267% 59 City of Livonia, Michigan The required mntridIIion 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, 2006, the latest actuarial valuation, follows: &&anal cost retreat Required Supplemental Information Amortization period Postemployment Benefit Plans Schedule of Funding Progress Disability (000s omitted) The follming schedules include both the Postemployment Health Care Benefit Plan and the Retiree Health and Disability Benefits Plan: 825% Pmjected salary increases invludng inflation at 475% Actuarial Medcal care inflation 475% to 6 8896 Value of Actuarial URAL as Assets Accrued Unfunced Fundetl Ratio Covered Percentage of Actuarial (a) uammlty(AAL) AAL(UAAL) (Percent) Payroll Covered Valuation Date (b) (as) (alta) (c) Payroll 11138N8 $ 25,337 $ 71,464 $ 46,127 355 $ 31529 1463 11138N1 11138N2 11138N3 38,475 104,386 73,911 29.2 34,884 2168 1113DN4 37,69D 110,156 72,466 342 33,355 2173 11138N5 41987 122,819 88,832 344 33,312 2483 Valued using the fite-}ear"snwothedfumxfinQ' market value " Information not available The schedule of employer contributions s as follows: Annual Required Percentage Fiscal Year Enced AVtuarial Valuation Dale Contribution Contributed 11138N1 11138N8 $ 4,318,306 1888 11138N2 11138N1 4,575,881 1888 11138N3 11138N2 4,96 21] 1888 1113DN4 11138N3 5,859,287 1888 11138N5 1113DN4 5,534,688 1888 11138N6 11138N5 ]]55 3]9 1888 The required mntridIIion 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, 2006, the latest actuarial valuation, follows: &&anal cost retreat Entry age Amortization period Leel percent, open Remaining amortization period Health 58 years Disability 38 years Asset valuation retiree! Five`year smoothed market &&anal assumptions: Investment rate of return 825% Pmjected salary increases invludng inflation at 475% 475% to 12 67% Medcal care inflation 475% to 6 8896 60 City of Livonia, Michigan Note to Required Supplemental Information Year Ended November 30, 2006 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, except that the General Fund budget was amended after year end. The City follows these procedures in establishing the budgetary data reflected in the financial statements: On or before September 15, the mayor submits to the City Council a proposed operating budget for the fiscal year commencing the following December 1. The operating budget includes proposed expenditures and the means of financing them. Public hearings are conducted to obtain citizen comments. As provided for by the City Charter, not later than November 1, the Council shall adopt the budget through the passage of a budget resolution and transmit the budget to the mayor. Not later than November 15, the mayor shall either approve or disapprove the adopted budget, in whole or in part. 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. The budgetary comparison schedule for the General Fund, Community Recreation Fund, and Municipal Refuse Fund are presented on the same basis of accounting used in preparing the adopted budget. Following is a reconciliation of the budgetary comparison schedule to the General Fund and Community Recreation Fund (statement of revenues, expenditures, and charges in fund balances): Revenue Over Total (Under) Total Revenue Expenditures Expenditures General Fund Amounts per operating statement $ 51,542,265 $ 49,928,451 $ 1,613,814 Operating transfers budgeted as revenues and expenditures 40,080 1,170,796 (1,130,796) Total $ 51,582,265 $ 51,099,247 $ 483,018 City of Livonia, Michigan Note to Required Supplemental Information (Continued) Year Ended November 30, 2006 Community Recreation Fund Amounts per operating statements Operating transfers budgeted as revenues and expenditures Total Revenue Over Total (Under) Total Revenue Expenditures Expenditures $ 7,951,448 $ 5,170,109 $ 2,781,339 2,200,241 (2,200,241) $ 7,951,448 $ 7,370,350 $ 581,098 Excess of Expenditures Over Appropriations in Budgeted Funds - The City did not have significant expenditure budget variances. 62 Other Supplemental Information 63 City of Livonia, Michigan meddRaenuewnxii Grand andAD MayrareNa Loa19reN5 Areet LlgMllg Coal Television Theory Assets Gan anaesn egaralenis s ZM1 .306 s 750.151 s 58,355 s 1.1132$10 s 965.505 Re labs: P;opmntaaerecailbe - - - S,W4 Stal asessmene receilabe - 3,951 - Otherreceirades 6,99E 10W - 65 Due horn other govemlrental units 6E6,308 2`9,911 462,111 - - ReArdecasets Total assets $ 3,132,600 $ 1,010,062 S 525,82A $ 1.181 $ 974,245 Deal and Fund Balance Liabilities H Counlsteyade 8 158.565 8 8,15(1 8 279,331 8 2214 8 90,734 H cored liadlilies and other - - 1i 9,836 83,818 Deterred revenue 23815 6,135 Total liadlilies 158$£ 8,156 320,431 12,050 180718 Fund Balandes Rsemtl For raptal mmtmction - - - - - Unreel reported in: Ded Service Funds Stall Revenue Fund: 2951.042 1,01 201 i'll 793,52] Cardial Pmjees Fund: Tota'Nnd Blames 2951.042 1001.7.6 201 1,170020 793,'27 Tota handles and and bi $ 3,132,600 $ 1,010,062 S 525,82A $ 1.181 $ 974,245 64 Other Supplemental Information Combining Balance Sheet Nonmajor Governmental Funds November 30, 2006 8 2]!0253 8 I.]]6518 8 2,S168E6 8 P,376 8 21,'%8 9j 2,689 - 3,W1 $ 2,M25 $ 1,738,478 $ 2,W,M5 $ 20,065 $ ]5,359 $ $ SWnlRmren na DMS�wna 18163 6,]4] 1902 3,Y _ - 65,519 MunaMl Bullft Wlicb A5 e4 R®6an4 1m She9 5p 11 2035 MBA AIVan � FMe�M 9O Ift InV "I Poe®'rteiti R4 ndM Qner 8 2]!0253 8 I.]]6518 8 2,S168E6 8 P,376 8 21,'%8 9j 2,689 - 3,W1 $ 2,M25 $ 1,738,478 $ 2,W,M5 $ 20,065 $ ]5,359 $ $ 18163 n{ 2]/0253 1,6"T2,9H 1559,761 2]10253 1,6"T2,9H 1559,761 18163 6,]4] 1902 3,Y _ - 65,519 M6 1902 3,Y 18163 n{ 2]/0253 1,6"T2,9H 1559,761 2]10253 1,6"T2,9H 1559,761 18163 n{ $ 2,M25 $ 1,738478 $ 2806385 $ 20,065 $ ]5,359 $ $ 65 City of Livonia, Michigan 66 good Crzrare Protons 1SU9reet (Sall (Sall Inaaenem cadewlen interval Assets Cash andcase equal 8 - 8 121.012 8 - 8 492209 8 159692 Re rads: epemtaaseceiade - - - - - Sta l asessmene receirade - - - - - Other real - - - - - Dueaemoteersavemmanlwml - - - - ReArdecasel 916,191 Total assets S S 121,012 S 916,194 S 492209 S 1$96,932 Hadlilia and Fund Balnca Liabilities Hccoumsteyade $ - $ - $ 16871 $ 14626 $ 31,914 xcmed lddiesand deer - - - - Deterred revenue Total Beatifies - - 16871 0,426 31,W4 Fund Balandes Reei For fagtal mmtruction - - 099,323 - - Unreeerveg reported in Bed Service Funds - - - - Stall Revenue Funds - - GpllPmjedsFund: 121,012 477,783 1$ eeg Tota'Nnd Blames 121,012 899,TL1 4]7,]83 1$ saes Tota handles and rund bi S S 121,012 S 916,194 S 492209 S 1596,932 66 opal ftp was Sp al Cwd9 dg Td INmmpr n Krems I�mraremm: coVam�reml w�a 8 YS 691 8 8TI311 8 t5Sb291 289W ' 40 2 - 5 19W 8, 61 160833] 916,194 $ 9911 09 $ 8)1}01 $ 18, 2 ,089 8 Ti0.020 8 - 8 1,313,1 1109PV 0]5,106 5169tt R9,iF5 - 1,9016W 899M 003 Y2102,632 361083 811W 3j ,JW 361083 811W 16.478.489 $ 9911 09 $ 8)1}01 $ 18, 2 ,089 Other Supplemental Information Combining Balance Sheet (Continued) Nonmajor Governmental Funds November 30, 2006 67 City of Livonia, Michigan Revenue Fonds 68 crandandW shunt Slreeld Loca Slreeld Street Li9Mn9 Cade Television Gbary Revenue Properly taxes 8 - 8 - 8 8 - 8 3,787,370 Fedi grants 1;135,061 Slate and load revenue 0,5]1635 1]31,]62 371y1 - Otberehargmbrsenie¢ - - Kill - 2,13,311 Other fines and breitures ri Investrmm income 121;103 31'w 4606 dh Q51 83,]J3 Other revenue: Stever asassments - - %98% - Cadshamhiseks - - .x52,158 - Othermisellaneoslmoes 215,479 2,069 Tota'revenue 4,®2,738 1763,2013 2,]42,]30 6Pt,618 4,187,309 ExpendituresCurrent Fund safetyFund World 2r8i 'mutio1 905,]w - - Commumtyandec omc �velnp.mm - - 815,352 Recreation andcdture - - 126,1,360 511 4,026,'799 Capital Outlry Debt Service Ordinal interest on longterm dela Tota expenditures 2r8i i'mu601 3,1 (i 511 4,026,549 Excess; d Revenue Over (Under) Expenditures 1809.191 (iZ3,393) (71757/) 'L,362 160,720 Other Financing Source (than) Proceed from issuance of deal - ]26912 - Transkrsln 1692,509 - 0.50,600 Transkrs out (18929093 (1861,704) (,10000) (696,915) Total other financing sources (uses) (18929093 (11 726,912 (40000) ("915) Net Change in Fund Balance (83j183 (312,188) 9,335 5,362 115,&15 FUNBalances-Beenniigof3ear 3,01],]60 1,3'N,V36 196,05) 11U,Q58 6T,,m Fuel BesidesEndofyear $ 2966.0,12 $ 1,001,906 $ 205.9 $ 1,170,820 $ ]9341 68 Other Supplemental Information Combining Statement of Revenue, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds Year Ended November 30, 2006 Revenue Fund; Dart Service Funds - - - 1.11,888 - 25,000 1;131,176 Buildng Pudi<Sakly PQudated R®dand 1990S17eel SPCIA M05 MM PNM1wily and Commmialon FwkiWla Sid ab Imyovemenl Rerunning Other 18,905 (173016) (2801,110) 4,161,853 8 1.173,366- - 173,476 2,121,M - 382,30`1 - - - - - w,3E6 2123! 338,129 96j56 (2,321 128,1617 78,902 10.5942 112,734 4,317855 1,113695 18,%5 - 6£ 2,1]1 51,328 5,K5016 - - - 1.11,888 - 25,000 1;131,176 W,356 148616 1,614,2b0 2,1]1 51,328 5,K5,0]fi 1.173,356 173,476 2808,436 $ 2,1)4253 $ 1,677,929 $ 1,559,161 $ 18,161 $ 10.3111 26!,42(3 (1}482D) (I,F51) 18,905 (173016) (2801,110) - - 1900,0W - - 173,476 2,121,M 69 1908,8W 173,476 2,121,M 143,171 2 W 1,882 2(a1,426 1 d5,503 5511@1 1,001,981 (I,F51) 19,824 18,905 3,M - (12,%5) 12,%5 $ 2,1)4253 $ 1,677,929 $ 1,559,161 $ 18,161 $ 11,194 $ $ 69 City of Livonia, Michigan 01 Final cmfcoi Street Projects 199oarreet Carl Cup1al 1�rnce.mm Comvnc0on Improvement lmrsovemem Revenue Property taxesFell grants Slate and load revenue Other charges br services 114j60 - Otherfinesandbreitures Investrmmincome 2,851 0,r D2 must ffi289 09,063 Other revenue: Speaal asassmen6 - - - - - Cadshamesekes - - - - Other miscellaneous; Imwne P6,060 Tota'revenue 2,851 0,r D2 66jM 132E69 mifir3 ExpendituresCurrent Fund safety - - - - Fund World - - - - - commumryanae< om< un Gael - - - - - ge<r®0unandsm<twre - - - - - Capital Ourlry T26,Yb Sfjdd 336,m Fund Service Principal interest on longterm debt Tota expenditures 726,ro 54533 mm e:<esh d Revenue Over (trader) Expenditures 2,ss9 4,862 (fish" s) ]6,336 (993,11111 Other Financing Sources (than) Proceeds from issuance of debt Transkrs In - 113,400 - 470191 Transkrs our (113,40 Total other firl sources (uses) (111 113,460 479191 Net charge in Fund Balances (110549, 4,602 (579765) T6,33s 35,415 Fumaesnces-eeennis 110549 116,210 1,470,103 393,447 1201 Fred Besides End ofyear $ $ 121,012 $ 899323 $ 4711 $ 15(4,956 01 Other Supplemental Information Combining Statement of Revenue, Expenditures, and Changes in Fund Balances (Continued) Nonmajor Governmental Funds Year Ended November 30, 2006 Capbl Pmpcb Fund Tdal Nw�jw swial Cwn Buidng Gwemmenb r mmenb iwwe"gs Fwd 8 - 8 - 8 9,122589 - 6,610,6E6 - 235,81 1496,189 189b 32.89! 24352 ]5]6S T18712 - 1; IEG,68 552,18 B0200 5z3,7aB mi8 1D,853 2 jw8 9Y29B3 ii b198 81538 581628 671381 - 15930ffi 227O,1 f 1883,92 671381 20,697285 (129515) M'(25M856) Y 'qv 181,704 - ],]M,065 (0022924) ffi I.]M - 6818009 52,189 M,ffi3 1,415,493 386890 N1,088 15,862,996 $ 361,803 $ 8)1,MI $ 16,078,89 71 City of Livonia, Michigan Other Supplemental Information Combining Statement of Net Assets Pension and Other Employee Benefit Trust Funds November 30, 2006 Assets Cash and man egiivalents Investments: US. government securdias Forego corporate stocks Mutual funds Stocks Bonds Real estate Securities lending Receivables Total assets LiaNlities Accounts payable Oblgatons under securRias lendng agreements Total liabilities Net Assets Held in Trust for Pension and other Employee Benefits 72 Employees' Retirement System VEBA Total $ 929,943 $ 172,719 $ 1102,662 34696,235 8,419,186 43,115,421 4,357,160 872,015 5,229,175 11179,036 13,817,336 24,996372 113,41 270 15,M,593 129,153 863 39,16 038 9,069,248 48,229,286 16,873874 - 16,873874 18,315,740 - 18,315,740 686446 2489060 3175506 239,608,742 50,583,157 290,191899 2,636,670 1283,452 3,920,122 18,315,740 18,315,740 20,952,410 1,283,0.52 22,235,862 $219,656,332 $ 49,299,705 $267,956,037 City of Livonia, Michigan Other Supplemental Information Combining Statement of Changes in Fiduciary Net Assets Pension and Other Employee Benefit Trust Funds Year Ended November 30, 2006 Additions Investment marine: InterestaiddH@ids Net increase in fair value of investments Investmentrelated!expenses Net investment morme Securities lending inxnme: InterestaiddH@ids Investmentrelatedexpenses Net securities lending icoome Contributions: Employer contributions Employee contributions Netoodnbutions Total adititions Deductions Benefit payments Refunds of contributions Medical benefit payments Administrative expenses Total deductions Net Increase in Net Assets Held in Trust Net Assets Had in Trust for Pension and Other Employee Benefits- Beginning of year Net Assets Held in Trust for Pension and Other Employee Benefits- End or year 73 Employees' Retirement System VEBA Total $ 7,389,314 $ 1586838 $ 8,898,152 20,239,819 3,644221 23,884040 (602,601) V4,023) (676624) 27,026,532 5,079,036 32,105568 1 oss,942 - 19W,942 (1850,561) - (1850,561) 49,381 - 49,381 - 7,756379 7,756379 547,936 - 547,936 547,936 7,756379 8,303,315 27,623849 12,834,415 46458,264 11,218,444 15,447 11233 891 340,474 - 340,474 3,086,468 2,692,799 5,781267 131,511 14,962 146,473 14,778,897 2,723,208 17,502,105 12,844,952 10,111,207 22,956,159 205,811,388 39,186498 244,999,878 $218,656,332 $ 49,299,705 $267,956,037 District Court Funds of District No. 16 City of Livonia, Michigan Financial Report with Additional Information November 30, 2006 District Court Funds of District No. 16 City of Livonia, Michigan Contents Report Letter Financial Statement Statement of Net Assets - Fiduciary Funds 2 Notes to Financial Statement 34 Other Supplemental Information Schedule of Cash Receipts and Disbursements plante "°°""°m ,PL .0 000mmmuon. moran TO M, "W . �M1 mm Independent Auditors Report To the District Judges of the 16th District Court Honorable Kathleen McCann and Honorable Robert Brzezinski Livonia, Michigan We have audited the financial statement of District Court Funds of District No. 16, City of Livonia, Michigan (the "Court") as of November 30, 2006. This financial statement is the responsibility of the Court's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statement referred to above presents fairly, in all material respects, the financial position of District Court Funds of District No. 16, City of Livonia, Michigan at November 30, 2006, in conformity with accounting principles generally accepted in the United States of America The accompanying financial statement does not present a management's discussion and analysis, which would be an analysis of the financial performance for the year. The Governmental Accounting Standards Board has determined that this analysis is necessary to supplement, although not required to be a part of, the basic financial statement Our audit was conducted for the purpose of forming an opinion on District Court Funds of District No. 16, City of Livonia's basic financial statement. The accompanying other supplemental information, as identified in the table of contents, is presented for the purpose of additional analysis and is not a required part of the basic financial statement. The other supplemental information has been subjected to the auditing procedures applied in the audit of the basic financial statement and, in our opinion, is fairly stated in all material respects in relation to the basic financial statement taken as a whole. %'�itilfi. j v PLLC January 17, 2007 District Court Funds of District No. 16 City of Livonia, Michigan Statement of Net Assets Fiduciary Funds November 30, 2006 Assets Cash and investments (Note 2) Due from bond account Total assets Liabilities Due to: Depository account City of Livonia State of Michigan Wayne County Bond deposits, voluntarywork program, civil drug fund, and other Total liabilities See Notes to Fir ancial Statement. 2 Agency Funds Depository Bond Account Account Total $ 425,312 $ 349,499 $ 774,811 1,511 1,511 $ 426,823 $ 349,499 $ 776,322 $ - $ 1,511 $ 1,511 302,925 - 302,925 114,117 - 114,117 9,781 - 9,781 $ 426,823 $ 349,499 $ 776,322 District Court Funds of District No. 16 City of Livonia, Michigan Notes to Financial Statement November 30, 2006 Note 1 - Significant Accounting Policies The accounting policies of District Court Funds of Distinct No. 16, City of Livonia, Michigan (the "District Court") conform to accounting principles generally accepted in the United States of America (GAAP) as applicable to governmental units. The District Court is governed by two elected judges. There are no component units. The following is a summary of the significant accounting policies used by District Court Funds of District No. 16: The funds of the Distinct Court are Agency Funds. The financial activities of the funds are limited to collections of amounts that are subsequently returned or paid to third parties. The funds are custodial in nature (assets equal liabilities) and do not involve the measurement of results of operations. The District Court is responsible for traffic and moving violations, certain civil matters, and misdemeanors within the city limits. Note 2 - Cash and Cash Equivalents Michigan Compiled Laws, Section 129.91, 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 Distinct Court is allowed to invest in bonds, securities, and other direct obligations of the United States or any agency or instrumentality of the United States; repurchase agreements; bankers' acceptance of United States banks; commercial paper rated within the two highest classifications which matures not more than 270 days after the date of purchase; obligations of the State of Michigan or its political subdivisions, which are rated as investment grade; and mutual funds cor posed of investment vehicles that are legal for direct investment by local units ofgovemment in Michigan. The District Court has designated three banks for the deposit of Distinct Court funds. The investment policy adopted by the city council in accordance with Public Act 196 of 1997 has authorized investment in bonds and securities of the United States government, bank accounts and CDs, and such obligations, bonds, and securities as penritted by the statutes of the State of Michigan. District Court Funds of District No. 16 City of Livonia, Michigan Notes to Financial Statement November 30, 2006 Note 2 - Cash and Cash Equivalents (Continued) Custodial Credit Risk of Bank Deposits - Custodial credit risk is the risk that in the event of bank failure, the District Court's deposits may not be returned to it. The District Court does not have a deposit policy for custodial credit dsk. At year end, the District Court had $438,226 of bank deposits (checking accounts) that were uninsured and uncollatealized. The District Court believes that due to the dollar amounts of cash deposits and the limits of FDIC insurance, it is impractical to insure all deposits. As a result, the District Court evaluates each financial institution with which it deposits funds and assesses the level of risk of each institution; only those institutions with an acceptable estimated dsk level are used as depositories. Note 3 - Court Operations The costs relating to the operation of the District Court (including risk management) are a budgeted item of the City of Livonia, Michigan General Fund and, accordingly, such costs are paid by the General Fund. The District Court is exposed to various risks of loss related to property loss, torts, errors and omissions, and employee injuries (workers' cor pensation), as well as medical benefits provided to employees. General Liability - The District Court participates in the Michigan Municipal Risk Management Authority for claims relating to general and auto liability, auto physical damage, and property loss claim. The Michigan Municipal Risk Management Authority (the "Authority") dsk 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 claim up to the retention limits, the ultimate liability for those claims remains with the City of Livonia. In addition to the Imes retained, the City of Livonia is responsiblefor certain defense costs. Workers' Compensation - The District Court employees are covered under the City of Livonia's self-insured workers' compensation program. However, the workers assigned to the court voluntary work program in lieu of jail are not covered. The District Court does have a policy that covers up to the first $1,000 per occurrence and the City of Livonia's self-insured plan covers claim in excess of $1,000. Medical Claims - The District Court participates in the City of Livonia's health care coverage plan in the same manner as the City of Livonia employees. District Court Funds of District No. 16 City of Livonia, Michigan Other Supplemental Information Schedule of Cash Receipts and Disbursements Year Ended November 30, 2006 Depository Bond Account Account Cash and Cash Equivalents - December 1, 2005 $ 455,340 $ 275,364 Receipts Fines and fees collected 5,468,878 - Bond receipts - 1,023,533 Wayne County penal fines 124,752 - Work program - 151,720 Gamishments - 106 Restitution, judgments, civil drug fund, and other 11,743 193,416 Interest income 17,305 10,025 Total receipts 5,622,678 1,378,800 Disbursements Transfers: City of Livonia 3,601,464 - Court Building Fund- City of Livonia 296,041 - State of Michigan 1,588,864 - Wayne County 123,731 - Bond transfers and refunds - 904,480 Bond forfeitures - 106,151 Work program - 160,508 Gamishments - 106 Restitution, judgments, civil drug fund, and other 42,606 133,420 Total disbursements 5,652,706 1,304,665 Cash and Cash Equivalents - November 30, 2006 $ 425,312 $ 349,499 5 City of Livonia, Michigan Federal Awards Supplemental Information November 30, 2006 City of Livonia, Michigan Contents Independent Auditors Report 1 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with GovemmentAuditing Standard's 2-3 Report on Compliance with Requirements Applicable to Each Major Program and on Internal Control Over Compliance in Accordance with OMB Circular A-133 4-5 Schedule of Expenditures of Federal Awards 6 Reconciliation of Basic Financial Statements Federal Revenue with Schedule of Expenditures of Federal Awards 7 Notes to Schedule of Expenditures of Federal Awards Schedule of Findings and Questioned Costs 9-10 LLC plante m " „�� O o�w moran M °M' a=��„ MMM18 Independent Auditors Report To the Honorable Mayor and Members of 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, 2006, which collectively comprise the City's basic financial statements, and have issued our report thereon dated February 16, 2007. Those basic financial statements are the responsibility of the management of the City of Livonia Our responsibility was to express an opinion on those basic financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the basic financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable bass for our opinion. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Livonia's basic financial statements. The accompanying schedule of expenditures of federal awards and reconciliation of basic financial statements federal revenue with schedule of expenditures of federal awards are presented for the purpose of additional analysis and are not required parts of the basic financial statements. The information in these schedules has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. February 16, 2007 LLC plante m " „�� O o�w moran TM14M7 uz��„ MMM18 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 To the Honorable Mayor and Members of 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, 2006, which collectively comprise the City's basic financial statements, and have issued our report thereon dated February 16, 2007. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City of Livonia's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively lox level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of Livonias financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. To the Honorable Mayor and Members of the City Council City of Livonia, Michigan This report is intended solely for the information of the City Council, management, federal awarding agencies, and other pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. r{ W&O /K t4+t PLLC February 16, 2007 LLC plante m " „�� O o�w moran M °M' a=��„ MMM18 Report on Compliance with Requirements Applicable to Each Major Program and on Internal Control Over Compliance in Accordance with OMB Circular A-133 To the Honorable Mayor and Members of the City Council City of Livonia, Michigan Compliance We have audited the compliance of the City of Livonia with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each of its major federal programs for the year ended November 30, 2006. The major federal programs of the City of Livonia are identified in the summary of auditors results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of the City of Livonia's management. Our responsibility is to express an opinion on the City of Livonia's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular 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's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the City of Livonia's compliance with those requirements. In our opinion, the City of Livonia complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended November 30, 2006. To the Honorable Mayor and Members of the City Council City of Livonia, Michigan Internal Control Over Compliance The management of the City of Livonia is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered the City of Livonia's internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133. Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulations, contracts, and grants caused by error or fraud that would be material in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. This report is intended solely for the information and use of the City Council, management, federal awarding agencies, and other pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. February 16, 2067 City of Livonia, Michigan Schedule of Expenditures of Federal Awards Year Ended November 30, 2006 (1) Currentyear espendlura Ircluce use of program Ircane turn Nursing raladllUaon ndCly-cwnedhana. See Notes to Schedule of Expenditures 6 of Federal Awards. CFM Pasthrmgh Awxd Fee l FaOe'al Agency/Poschrmgh Ages/Program True School Entity Froom &(a161ua usUepa anent of Housing and Urdan Development Comnumry Development Block G rant Program year 20M -ED MC2F8W8 16218 N/A $ 605,691 $ 162,298 (I) Program year 2806 -BW hL268W8 16218 N/A 656298 666,78 (I) TNrI Communfiy Ue/eloprrenl Block Grant 806938 Paced through de Michigan Slate Housing DrvelopnaN ANM1rTy- HOME Investment Partnership- Program year 2003 16239 M 202 277200 2,030 TrialUS. Depnmmtof Housngand UrV Nevdo eat See 990 US Depammt of Heald and Hurmn Sevres -Pasted through Slate of Michigan DepadmeN ofCwrmmTy HeLN- 13 (35 Projecim0PS5 6,916 1,166 Senior Center Staling 13 (35 Proyvt9/30/06 7,976 /,068 That US. DelooNmeN of Heath and Hutton Savers 8,112 US DepsdmeN ofTramperalon-Pa¢edthrmgh the Michigan Office of Highway Safety Planning -Drive Michigan Safely Tar Face 20(00 Pri 281,151 21,826 U S DefrNmeN ofHotreland Security -Passed through the Michigan Uepa nnenl of State Pdke Assl9aae to firefighters 97D66 FG 21W 117,684 1$540 2006 SHSGP InlercpaadeCammnly E4lpnet 97006 None 2$000 21,216 2006 HomelndSecuhy Grant 97006 None 566895 306,069 Emagenry Management Perratrence Grant 97D42 None 4536 32060 TNeI U S. DelooNmet of HanelandSavrTy Ti US DeprNmeot of 2oo6 Local aw Enforcetrent Body Gach Program 16592 Nen 15,181 lam Federal EWltadle Sharing Prefer 16 Full N/A 604,180 606180 2005 Byrne MemoNl La0.re A¢I9ans GMt 16738 N/A 15,181 15,71 Drug Enforcement AdmnsVatlon Task Fors 16 unterl N/A N260 13,156 Passed through he Michigan Slate voice - Internet shares aganslchlltren 16563 Naz 36000 15060 Thal US. Department of Justice 661819 US DepnmmtofAgdculure-PSSedthrwgh NeMteofMNlga'I 10(66 EA38593 211,000 20W0 Total f Vera ward: $ 11693100a (1) Currentyear espendlura Ircluce use of program Ircane turn Nursing raladllUaon ndCly-cwnedhana. See Notes to Schedule of Expenditures 6 of Federal Awards. City of Livonia, Michigan Reconciliation of Basic Financial Statements Federal Revenue with Schedule of Expenditures of Federal Awards Year Ended November 30, 2006 Revenue from federal sources - As reported on financial statements (includes all funds) $ 1,678,357 Less other nonfederal reimbursements recorded as grants (127,627) Add federal expenditures in excess of revenues 142,278 Federal expenditures per the schedule of expenditures of federal awards $ 1,693,9118 City of Livonia, Michigan Notes to Schedule of Expenditures of Federal Awards Year Ended November 30, 2006 Note 1 - Significant Accounting Policies The accompanying schedule of expenditures of federal awards includes the federal grant activity of the City of Livonia and is presented on the same basis of accounting as the basic financial statements. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non -Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. Note 2 - Noncash Assistance 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, 2006 that is not included on the schedule of expenditures of federal awards: CFDA Federal Program Number Description Amount U.S. Department of Agriculture - Passed through the Wayne Metropolitan Community Services Agency 10.569 USDA Food $ 26,376 Distribution Note 3 - Subrecipient Awards Of the federal expenditures presented in the schedule, federal awards were provided to subrecipients as follows: 91 Amount CFDA Provided to Cluster/Program Title Number Subrecipients Community Development Block Grant 14.218 $ 54,216 91 City of Livonia, Michigan Schedule of Findings and Questioned Costs Year Ended November 30, 2006 Section I - Summary of Auditor's Results Financial Statements Type of auditors report issued: Unqualified Internal control over financial reporting: 0 Material weakness identified? Ya X No 0 Reportable conditions identified that are not considered to be anterial weaknesses? Ya X None reported Noncompliance material to financial statements noted? Ya X No Federal Awards Internal control over major programs: 0 Material weakness identified? Yes X No 0 Reportable conditions identified that are not considered to be anterial weaknesses? Yes X None reported Type of auditors report issued on compliance for major programs: Unqualified Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of Circular A-133? Yes X No Identification of major programs: CFDA Numbers Name of Federal Program or Cluster 14.218 Community Development Block Grant 16.000 Federal Equitable Sharing Program Dollar threshold used to distinguish between type A and type B programs: $300,000 Auditee qualified as low-risk auditee? Yes X No 9 City of Livonia, Michigan Schedule of Findings and Questioned Costs (Continued) Year Ended November 30, 2006 Section II -Financial Statement Audit Findings None Section III - Federal Program Audit Findings None 10 play n moran February 16, 2007 The Honorable Mayor and Merrbers of the City Council City of Livonia 33000 Civic Center Drive Livonia, MI 48154-3097 Dear Mayor and Council Members: P,00M a Monn, nue narow�nw..mm M§m..y POns m S�uEMtlLLMIaOD]- z We recently completed our audit of the basic financial statements of the City of Livonia for the year ended November 30, 2006. As a result of our audit, we have the following comments and recommendations for your review and consideration. State -shared Revenue The future of the State's revenue-sharing program may be directly tied to the condition of the State's budget. Reductions to statutory revenue sharing started in 2001 as shortfalls began occurring in the State's budget. The State's budget shortfalls continue to be significant. The magnitude of the State's deficit has become even more pronounced after the State's January 2007 revenue estimating conference. According to economists, Michigan's budget is $3 billion short of the revenue needed to cover basic services this year and next (State fiscal years 2006/2007 and 2007/2008). The outcome of other matters will also impact revenue sharing and those matters include: Future of County Participation in Statutory Revenue Sharing - In 2004, the State terminated payment of statutory revenue sharing to counties (which was approximately $182 Trillion) but allowed the counties to move their operating tax levy to July from December. Counties are required to deposit the additional monies from the earlier levy into a "reserve fund" which is to be used by the counties to replace lost statutory revenue sharing in future years. The question that remains is when the reserve funds established by counties are depleted, will counties come back into the "revenue-sharing formula" and to what extent? Will the size of the statutory pot grow to accommodate counties or will there be a shift of the same monies from cities, villages, and townships tothe counties? 0 Statutory Revenue Sharing Formula Expires in 2007 - Legislative action is required on this Act for appropriations to continue into2008 and beyond. The Honorable Mayor and Members 2 February 16, 2007 of the City Council Changing Michigan Business Tax Structure -The Michigan Single Business Tax has been eliminated effective December 31, 2007, which will result in the loss of $1.9 billion from the State's budget in 2008. The governor's fiscal year 2007/20008 budget recommends replacing a majority of the repealed single business tax revenue with a new Michigan Business Tax and the enactment of a new excise tax on service providers. The new Michigan Business Tax (MBT) is projected to generate approximately $480 million less annually in revenue than currently generated by the single business tax but the new 2 percent excise tax on most services is projected (if effective on June 1, 2007) to ase about $576 million in the remainder of the fiscal 2006/2007 to help with State's budget deficit for that year and to raise $1.47 billion in the State's fiscal year 2007/2008. The governor's budget also includes several other tax increases and changes. Much debate will occur prior to the enactment of a final tax structure plan. As introduced, the governor's budget for fiscal year 20072008 includes a revenue-sharing increase of $27 million to be distributed using the three-part formula currently contained in the revenue-sharing act (taxable value per capita, population/unit type, and yield equalization) with an additional $14.5 million for public safety funding. While specific details have not been announced yet, communities would only be eligible for the increase if they can demonstrate service sharing with other local governments. While the debate has begun, there still remain considerably more questions than answers regarding long-term funding of statutory revenue sharing. Additionally, there are several practical short-term concerns including: 0 If revenue-sharing cuts are enacted for the State's fiscal year 2006/2007, then these unplanned revenue-sharing payment reductions could impact the City's year ending November 30, 2007. However, the amounts may not be known until spring or summer, providing the City with little or no time to react. 0 Final decisions on revenue-sharing funding levels for the State's fiscal year 2007/2008 will likely not be complete before the administration submits the City's 2008 budget to Council. The table below details state -shared revenue for the City since 2000 broken out by statutory and constitutional portions. State Fiscal Year Statutory Constitutional Total Decrease from 2000 2000 $4,375,886 $6,836,339 $11,212,225 $- 2001 $4,667,824 $6,534,585 $11,202,409 $9,816 2002 $4,257,760 $6,591,046 $1Q848,806 $363,419 2003 $3,665,960 $6,702,630 $10,368,590 $843,635 2004 $2,668,973 $6,649,826 $9,318,799 $1,893,426 The Honorable Mayor and Members 3 February 16, 2007 of the City Council State Fiscal year Statutory $2,429,180 Constitutional $6,788,044 Total $9,217,224 Decrease from 2000 $1,995,001 2005 2006 $2,148,302 $6,882,399 $9,030,701 $2,181,524 2007 est. $2,010,279 $7,128,246 $9,138,525 $2,073,700 If the State were to eliminate the statutory portion of revenue sharing (as the constitutional portion cannot be modified without a change to the State's constitution), the City has approximately $2,010,279 at risk in its General Fund budget based on 2007 funding levels. In light of the current environment, we strongly encourage the City to be conservative when budgeting or projecting the revenue-sharing line item. Transportation Matters Current legislation modified Act 51 to allow local governments to transfer monies from the Major Street Fund to the Local Street Fund at a level of 50 percent of annual major street funding received. In addition, greater than 50 percent can be transferred. However, the amended law requires that certain conditions be met to allow for a transfer in excess of 50 percent including the adoption of an asset management process for the major and local street systems as well as a detailed resolution passed by the City. It is important to note that Major Street Fund monies transferred for use on local streets cannot be used for construction but may be used for preservation, and these provisions sunset December 31, 2008. Without an extension of this provision, a transfer from the Major Street Fund to the Local Street Fund can only be done to the extent that local revenues exist in the Major Street Fund. Current legislation also includes a pilot program that would allow for the combination of the Major Street Fund and the Local Street Fund if certain conditions are met. Personal Property Tax Over the last six years, the State's personal property tax laws and regulations have changed substantially. In 2000, the State Tax Commission updated the general business depreciation tables that are used to calculate personal property taxes, resulting in an approximately 10 percent drop in property tax revenue. In addition, the State Tax Commission also approved new personal property tax tables for utilities which made drastic changes to transmission and distribution property of utilities (resulting in an approximately 30 percent revenue loss to local units of government). Also, the Michigan Supreme Court in WPW Acquisition Co. v. City of Troy ruled that the Proposal A cap prevents assessors from increasing the taxable value of commercial rental property above the rate of inflation using the occupancy methodology even when reductions in taxable value were previously granted due to a decrease in occupancy. The Honorable Mayor and Members 4 February 16, 2007 of the City Council Further reductions to personal property tax remain part of the State's tax structure discussions. Personal property taxes are a significant revenue source to many local governments. For the City, personal property tax represents 12 percent of its tax base. Ifthe State's new business tax structure provides personal property tax relief, the question is, will local governments be held harmless by the State and to what extent? The governor's tax plan as introduced proposes to change the property tax system to mitigate the impact of the WPW case. A similar attempt to make this correction occurred in 2005 and 2006 with nosuomss. New Cable Franchise Legislation The governor signed cable franchise legislation (House Bill 6456) into law effective January 1, 2007. The new law (Public Act 480 of 2006) creates the "Uniform Video Services Local Franchise Act;' (the "Act") which provides a statewide framework for franchising agreements instead of individual community agreements. This Act requires video service providers to obtain a local franchise, good for 10 years, from the franchising entity (the local unit of government). As part of the local franchise, the provider is required to pay an annual video service provider fee, not to exceed 5 percent of gross revenue, as well as an annual fee for the costs of the PEG access facilities, not to exceed 2 percent of gross revenue. The Act allows providers to terminate the current franchise contracts before their expiration date, in order to enter into this new local franchise agreement under the statewide framework. Local units of government will be impacted in the following ways: 0 Under the Act, no additional fees or charges other than those stipulated under the Act may be written into the local franchise agreements. 0 To the extent existing cable franchise agreements provided more funding than provided for under the new Act, municipalities will see reduced fees from these new local franchise agreements. 0 A credit, based on annual maintenance fees paid for use of public rights of way, to video service providers is allowed under the Act. This credit could eliminate or significantly reduce any revenue the local unit might receive under the bill's franchise fee. 0 Audits of the video service providers' calculation of gross revenue are limited to once every two years. It is expected that local governments will receive their first payment under the new Act beginning in May 2007. We strongly encourage you to review this payment compared to payments previously received and follow up with your provider as required. The Honorable Mayor and Members 5 February 16, 2007 of the City Council Property Tax Legislation (Updated March 2007) A series of House bills were introduced in 2007 dealing with the treatment of the uncapping of value on sale or transfer of property. With the passage of Proposal A in 1994, changes to the taxable value of an individual property are limited to the lesser of the rate of inflation or 5 percent - until the property is sold or transferred. The difference between the capped taxable value amount and state equalized value at the time of transfer is referred as the "uncapped" value or the "pop-up" value. As several published studies and reports have demonstrated, the treatment of "uncapped" values or the "pop up" amount when a property is transferred or sold as growth on existing property subject to the Headlee rollback calculation has resulted in continued downward pressure on millage rates. This treatment is due to definitional changes made to the General Property Tax Act in 1994. The three bilis in the package are House Bills 4440, 4441, and 4442 and would propose to do the follmirg: 0 House Bill 4440 - This bill establishes an 18 -month moratorium on the "pop-up" or "uncapping" of taxable value to state equalized value at the time of sale or transfer of a property. Property sales or transfers occurring in the timeframe of the moratorium would continue to pay property taxes at the previous taxable value amount. The "pop-up" or "uncapping" of taxable value would be delayed until the property was sold or transferred in lateryears. 0 House Bill 4441 -This bill increases the real estate transfer tax by.10 percent and earmarks the money to be returned to local government for potential loss in revenue occurring from House Bill 4440. 0 House Bil14442 -This bill would change the General Property Tax Act to exempt the "pop- up" or "uncapped" value from the Headlee rollback calculation. If this legislation were enacted, increases in taxable value resulting from property sales or transfers would be treated as' additions" to taxable value or new growth versus growth on existing property. House Bills 4440 and 4441 passed the House on March 14 (HB 4440 has been assigned to the Senate Finance Committee). House Bill 4442 has not been voted on yet in the House. The bills are not tie barred. The Honorable Mayor and Members 6 February 16, 2007 of the City Council Postyvnplovment Benefits Pension Based on recommendations by the City's actuary, the City has not been required to make any contributions to its defined benefit pension plan since 2003. It is critical that the City be aware that a contribution could be required at some point in the future based on future investment performance, actual versus projected life expectancy, level of benefits, etc., which would impact the City's budget We caution the City and users of the City's financial statements not to be misled by the current funding status of the plan. Instead, the City should assume that future contributions to the system will be required again when performing multi-year budget analysis and as part of any benefits analysis. Health Care As anticipated, the Postemployment Healthcare Benefit Plan finally extinguished the remaining health care reserve during 2006. Going forward, all benefit payments will be made out of the City's VEBA. The City will be required to implement GASB 43 and GASB 45 in fiscal years ending November 30, 2007 and November 30, 2008, respectively. GASB 43 and 45 require a governmental unit to measure its retiree health care liability through actuarial valuations that are to be performed at least biennially. These valuations compute an annual required contribution (ARC). The annual required contribution is the amount the actuary believes is necessary to fund the benefit over a period of 30 years or less. While the City is already having actuarial valuations prepared and making an annual contribution, the VEBA plan is currently using a 50 -year amortization period. Using this longer period will likely result in the City's contribution being less than the annual required contribution. A contribution less than the ARC would require the City to record a liability for the difference on the government -wide financial statements. The VEBA fund currently has approximately $49 million set aside for these costs. The following table shows the actuarial calculated funding progress: Actuarial Valuation Date Actuarial Value of Assets Actuarial Accrued Liability Unfunded Actuarial Accrued Liability Funded Ratio 11/30/98 $ 23,250,000 $ 51,118,000 $ 27,868,000 45.5% 11/30/99 24,360,000 61,357,000 36,997,000 39.7% 11/30/00 11/30/01 25,337,000 71,464,000 46,127,000 35.5% ` 11/30/02 ` 11/30/03 11/30/04 30,475,000 37,690,000 104,386,000 110,156,000 73,911,000 72,466,000 29.2% 34.2% 11/30/05 41,987,000 122,019,000 80,032,000 34.4% ` Not provided by actuary The Honorable Mayor and Members 7 February 16, 2007 of the City Council As noted above, the actuarial calculated liability for retiree health care has more than doubled from $51 million in 1998 to $122 million in 2005. As a result, the City's contribution to fund these costs has increased from $3 million in 1998 to $7.8 million in 2006. We would like to thank the mayor and the City Council for the opportunity to serve as auditors for the City. We would also like to express our appreciation for the courtesy and cooperation extended to us by the administration during the audit. If there are any questions about your financial report or the above comments and recommendations, we would be happy to discuss them at your convenience. Very truly yours, Plante & Moran, PLLC .L� c 6J. OL� Frank W. Audia 0�/4k Brian.. Camiller