Few things beyond ledger entries can make an accountant’s heart pound, but the Tuesday, Nov. 19, presentation of the municipal audit at the Grosse Pointe Shores council meeting had CPA and Mayor Ted Kedzierski pumped up.
“This is always the highlight of the year,” he said.
The routine audit showed, for the fiscal year ending June 30, 2013, a continued, gradual rise in general fund balance.
Any increase is significant compared with the Shores’ financial situation in 2009, when expenditures exceeded revenues.
“Since then, you’ve managed to increase your fund balance over the four-year period from 2010 to 2013,” Aaron Stevens, a CPA with Abraham & Gaffney auditors in Auburn Hills, told the council. “That’s fantastic.”
Current fund balance is $990,902.
The figure is a $116,274 increase over the prior year.
Of fund balance, $791,600 is unrestricted, serving as a rainy day fund that represents 15 percent of operating costs, up from 11 percent last year.
“We generally recommend a 20 percent fund balance, but it’s improved over the last four or five years,” Stevens said.
Property tax revenue declined $248,128, yet accounted for 78 percent of municipal revenue, down from 82 percent in 2012.
“The largest use of public funds is public safety, at 43 percent,” Stevens said. “It was 42 percent in 2012.
The water and sewer fund had a 9 percent decline in reserves to 38 percent of operating costs.
The main reason for the change is a one-time $400,000 payment to the Grosse Pointe Yacht Club for overbilling on municipal water purchases from 1997 to 2008.
“Without that settlement cost, you’d be about 50 percent (reserves),” Stevens told the council.
“The trend is good,” Kedzierski said about the overall audit.
City officials met last week with Standard & Poors to discuss the city’s bond rating, currently AA.
“We have a good chance of going back to our AA+ rating,” said Mark Wollenweber, city manager.
The rating won’t be revised, if at all, for a few weeks, he added.
The city’s financial turnaround is fueled in large part by cost cutting.
Overall expenses dropped $172,979 last year, mainly in the operations of general government (-$105,401) and public safety (-$46,585).
The city saved overhead costs by transforming four principal administrative posts, including city manager, public safety chief and public works director, into contractual positions, according to Councilman Bruce Bisballe, chairman of the finance committee, and a CPA.
Also, companies doing business with the Shores had to rebid their contracts against fresh competition.
“We went through every contract and bid them all,” Bisballe said. “We saved $20,000 on legal fees. We rebid all purchase components.”
“At this point, the attention has been on expenditures,” Kedzierski said. “We think we’ve hit bottom in terms of revenue from property taxes. I think the news is going to get better in the future.”
A turnaround in the real estate market could yield higher property tax receipts.
As of last week, there were 27 houses for sale in the Shores, according to D.J. Boehm, chairwoman of the Ambassador Committee.
“That represents a six- to eight-month supply of homes on the market,” Boehm said. “That’s considered healthy. Home values across all the Pointes have increased by 10 to 15 percent in 2013 compared to 2012.”
Members of the volunteer committee, including Realtors, work by mayoral appointment to boost the Shores as a premier residential community.
Listed real estate prices in the Shores are on the rise, Boehm said.
“One-third of those homes are million dollar homes and more,” she said. “That’s a big change from what we’ve seen over the past couple of years.”
The sale of a house uncaps its property tax value, as regulated by the Headlee Amendment, which may generate more property tax revenue.
Shores property tax revenue for fiscal year 2013-2014 will be less than for fiscal year 2012-2013 due to a reduced tax rate, according to Rhonda Ricketts, finance director.
In 2012-2013, the council passed a one-year, 1.5 mil tax rate increase to fund road improvements, she explained.
“That millage has been reduced for the current year,” Ricketts said. “However, the council voted to levy just under 1 additional mill for staffing our public safety desk 24/7 on a one-year trial basis.”