Mount Clemens receives unmodified audit opinion; charter amendment improves fiscal outlook

The City of Mount Clemens received an unmodified (clean) opinion on its fiscal year 2015 audit, the city heard at its Nov. 16 commission meeting.

Dave Harrington, audit partner at Plante Moran, told commissioners the audit shows the financial reports fairly present the city's position as of June 30, 2015. "The city this year... received the best opinion you can get from your auditors — it’s called unmodified," Harrington said.

Harrington reviewed three years of general fund activity. He said the city had roughly $8,780,000 in general fund revenue for 2015, with about half derived from property taxes. State-shared revenue and federal grants accounted for roughly $2,000,000, and fees tied to county building projects added about $1.6 million, together producing an approximate $400,000 increase in general fund revenue for 2015.

On expenditures, Harrington said public safety was the largest general fund cost at about $4,500,000 in 2015; insurance and pension costs rose toward $2,100,000. Total general fund expenditures were reported at about $9,500,000 for 2015.

Harrington described a long-term decline in the general fund balance, noting the fund balance was $4.1 million in 2012 and $2.4 million at 6/30/2015. He attributed the decline mainly to reductions in property tax revenue and rising legacy costs. A figure for the 2014 fund balance in the transcript was unclear.

Harrington emphasized the positive budgetary effect of a recently passed charter amendment. He said without the amendment, projections showed the city's main operating fund slipping into deficit by 2017 and growing to nearly $4.0 million by 2019; with the amendment, the city is projected to hold more than $3.0 million in fund balance across the projection period, which will allow the city to meet pension obligations and begin addressing delayed capital needs.

The auditors also reviewed the water and sewer enterprise funds. Harrington said the water fund, after recent rate increases, generated sufficient cash to cover debt service in 2015 and for the first time in several years had a small positive cash balance. The sewer fund showed an increase in unrestricted cash of approximately $460,000–$470,000, which Harrington said is a favorable trend as debt service declines later this decade. He cautioned the city still faces aging infrastructure and should continue building reserves to avoid extensive bonding.

Commissioners thanked the auditors and city staff for their work; one commissioner called the report "the most optimistic financial report we've had in a decade." The full audit will be posted on the state site in the coming days, Harrington said.

The commission did not take formal action on the audit at the meeting; the presentation concluded with a question-and-answer period and public acknowledgments of finance staff and the auditors.