Berkley 'Squeaked By' in 2012 Fiscal Year
Attention to expenditures, increased fees, limits on legacy costs and efforts to capture state-shared revenue helped the city increase its general fund balance by approximately $400,000, according to its annual audit.
Berkley "squeaked by" during the past fiscal year, largely due to keeping a close eye on expenditures, according to a recent review by auditors from Plante & Moran.
The city received a clean audit opinion – the highest level of assurance – for the fiscal year ended June 30, 2012, according to Plante & Moran partner Beth Bialy, who also noted that the city's general fund balance was up slightly during a presentation to the City Council on Nov. 19.
Bialy praised Berkley for completing its first Comprehensive Annual Financial Report – a more in-depth accounting of the city's finances than has been delivered in the past – and carefully controlling its expenditures.
"The general fund, the fund balance, which is your discretionary money in the general fund, was up slightly this year," Bialy said. "However, the major streets, local streets and solid waste funds were all down and I'd consider the four of those really to be your main operating accounts that you need to look at in total. Those, in total, you just squeaked by and that's the good news that you did just squeak by, especially in this economy."
The city's general fund increased by approximately $400,000 during the 2012 fiscal year, according to the report.
The city's total revenue was $12.9 million, the same as last year, and its total expenditures were $12.9 million, a decline from $13.3 million last year, according to the report.
That was the good news.
The bad news was that Berkley has continued to experience declining property tax revenues, a trend that is likely to continue.
"What we're anticipating is that the taxable value is going to continue to decrease slightly," Bialy said. "It's definitely decreased again for this current year that you're in. We're hopeful that there's maybe just one more year. But there could be a couple more years where you see some slight decreases, hopefully not to the extent that we've seen in the last few years."
Auditor Justin Bowman said revenue from property taxes makes up 60 percent of the general fund.
"There's about a $900,000 difference from what was expected or what there would have been assuming property tax values had gone up with inflation as it would have been expected historically," from 2009 to 2012, Bowman explained. "Looking out to 2014, which is projected right now, there will be a $1.3 million difference from what was projected to what there actually, likely, will be."
Bialy said the millage Berkley residents passed in August should help to offset the decline.
"The revenues ... are fairly flat, so the way that you got through the year and added slightly to your fund balance really was because of the attention that you paid to the expenses," Bialy said. "And we just encourage you to continue with that going forward."
Other key points included the following.
- Bialy urged the city to investigate water loss, which she said could be caused by water main breaks, old lines that have small leaks and old meters that are running slower. "Seven percent of what you purchased was lost 4 years ago, it went to 7.5 and then to 10 and then to about 12.7. That's still a reasonable and normal level of water loss. We usually see somewhere between 10, 15 percent. We just wanted to point it out because it was increasing," she said.
- Bowman said the city's efforts to qualify for all available state-shared revenue helped it maintain revenue. "The state sources of $1.2 million stayed really consistent with last year because of the work that was done on that," he said.
- The report noted that increased license and permit fees also bolstered revenue.
- Berkley paid $1.1 million toward retiree health care costs this year, with $134,000 made in prefunding contributions, which was less than the recommended amount, Bowman said. He said that as of the last actuarial evaluation in 2009, the city's obligation of $17.6 million was underfunded by $16 million.
"I think the city has done a really admirable job of keeping an eye on expenditures and also doing what you can to impact your legacy costs," Bialy said. "Your legacy costs have increased over time, but they've been reasonable increases. You haven't seen any huge upticks in that. And, I think that you're doing what you can to positively impact those liabilities by making some of the changes in the benefit structures and so forth."
Following the auditors' presentation, Mayor Phil O'Dwyer reflected on the city's finances and thanked residents for passing the millage increase this summer.
"The one phrase that you used, Beth, that struck a chord for me up here was your summary statement 'we squeaked by,' " he said, to chuckles of agreement. "Let me tell you how we squeaked by. You have the numbers, but we had to make the decisions to make the numbers what they were. A lot of cutting of programs and services and cutting things that we really didn't want to cut but the numbers forced those kinds of cuts.
"On the other side of that, we're enormously grateful to the residents of this community for passing a millage in August so that it gives a little room to correct some of the items that we had to defer," O'Dwyer said. "We just simply didn't have the money. So when you see next year's budget, you will see some back fill for items that have been put on the back burner. You can only put it off for so long. So we squeaked by."