During the City Council meeting of December 2, 2008, Plante Moran, the firm retained by the City to conduct the annual audit required by law, affirmed the City’s fiscal prudence and sound accounting practices. One of the purposes of the annual audit is to test the City’s internal control mechanisms – our system of “checks and balances.” The Plante Moran representatives proposed only minimal changes to our current accounting methods and I am pleased to report that they offered strong praise for finance director Mary Haskell and her very able staff – a sentiment with which I wholeheartedly agree.

Highlights of the Audit

As you may know, the City’s fiscal year runs from July 1 to June 30^th and so the current audit is a review of FY 2008. This audit report shows a $550,000 increase over last fiscal year in the undesignated, unreserved fund balance of the General Fund. Revenue appears to have decreased but this is merely a reflection of a change in accounting method. We now account for debt service millage and special assessment revenue directly in the Debt Service Fund rather than in the General Fund where it was in FY 2007. Expenditures increased by a mere 1% from FY 2007. According to Plante Moran, this is a very positive indicator that City staff has done well in terms of managing and containing costs. It was also noted that the City’s Fund Balance still remains well within the parameters set by City Council. At 10.4%, the “Rainy Day Fund” is actually at its highest level in ten years.

Legislative Concerns

While bright spots have emerged from this process, the overall picture is far from rosy. In fact, we face significant legislative challenges, one of which is Other Post Employment Benefits (OPEB) funding. This mandate requires, at a minimum that we measure the impact of future legacy costs on current budgets. For the sake of practicality, we have actually begun to set aside a portion of these funds.

There is also talk in Lansing of legislating a moratorium on the “pop-up” tax or even a property tax super cap in order to spur the housing market. This, however, would unequivocally have a deleterious impact on all municipal budgets including ours.

There remains uncertainty about statutory revenue sharing. Revenue sharing is the mechanism by which the State returns sales tax monies to local units in exchange for limitations on our taxing capabilities. Plante Moran cautiously predicted a .75% increase in revenue sharing funds which would represent the first increase in this decade. The fact is that the decline in revenue sharing over the past eight or nine years has cost East Lansing some $24 million in lost revenues – funds that the State promised to return to the City and indirectly, to all of you.

So again I would congratulate the Finance Department for a job well done, as well as every City employee who strives to achieve efficiencies for the community we serve. No doubt, we’ve got a tough road ahead of us but I have confidence in this organization. Perhaps the mayor said it best when he stated that “We are not approving cream puff budgets, rather, these are lean budgets for lean times.” To be continued……….