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Topic: Flint administration keeps residents in the dark on finance

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El Supremo

January 31, 2017
TO: Mr. Eric Cline,
Department Manager Michigan
Department of Treasury
Local Government Financial Services Division
Fiscal Responsibility Section
David L. Sabuda,
interim Finance Director
Budget/ Actual Revenue & Expenditure Report

December 31, 2016

Attached, please find the City of Flint’s Budget to Actual Revenue and Expenditure
Report and Cash and Investment Summary for the period ending December 31,
2016 for your review and submission to the RTAB

This financial information is provided in accordance with City of Flint Emergency Manager Order 20 Ambrose. Please note that the reporting includes the City's fiscal year end June 30, 2016 along with the December 30 2016 financial information.

The City shown in the attached reports is audited and has been filed with the State. The Single Audit is still being worked by our auditors. The Single Audit
will be submitted to the federal government on time within the month of February
2017. All 6/30/2016 operating fund balances during audit and during final posting
are in compliance with PA 2 of 1968 as amended as well as operating fund cash balances with the exception of the City's grant fund (274) The City is in the process of requesting reimbursement from the federal and state government for expenses incurred but not reimbursed within this operating fund. The City has spent advance dollars on grant projects in December 2016. This drives down the
cash reserves in the 274 Grant Fund. The 274 Grand fund reserve at 12/1/2016 was at a -$60859 and at 12/1/2016 the 274 Grant Fund cash reserve went to
-$1,02,465 or a $42,926 decrease in the 274 Grant Fund cash balance. Attachment 2

As stated earlier, the reporting also highlights the December 2016 activity for the new fiscal year. As you review the information , please know that revenues are seasonal and in some funds are ahead of monthly projections due to early fiscal year collection activities. Revenues in the General Fund and the major and local Street Fund are lagging slightly. I would expect the revenues in these funds to be 50% in the General Fund (currently 48% collected) In the Major and Local Street Funds I would expect a 40% collected rate (currently 29% collected in the Major Street Fund and 19% collected in the Local Street Fund) Collections are lagging due to revenue accruals made to fiscal year 2015/16 and receiving gas tax revenues from the State through November 2016. Expense appropriation line items at this time of year should be approximately 50% spent. Almost all operating funds have spent between 11% and 47% of appropriation for the fiscal year to date.

Water Collection

PA 268 & PA 40 of 2016:
Public Act 268 of 2016 requires that the City demonstrate a water/ sewer collection rate of 70%. Public Act 340 of 2016, extended water credits to Flint water customers through 3/31/2017. However the City must apply for credits each month from January 2017 through March 2017 in order to obtain said water credits. As of 1/25/2017 the City has a 46% overall customer collection rate. This is an overall % decrease in overall water collection looking at collections from a month to month perspective.

This 46% collection rate,
Commercial class customers have an 82% collection rate and residential class class of customers have a 46% collection rate for the month of December 2016. Please know that this is gross revenue billed to gross revenue actually collected and does not include the State credits being paid by the State. Based on current work product the State has granted a waiver to allow the credits to continue to City of Flint water customers through 1/31/2017 As stated earlier. water credits end on 3/31/2017 for water usage for all Flint water customers unless the State treasurer says otherwise and terminates credits early.

It's still the City's intent to continue to follow the current balance plus 10%program for all water customers. Water customers lose credits and get penalty and interest charged if they fail to pay or set up a payment plan. Further, we have posted businesses in regards to water shut-offs. The City will roll eligible water balances due to the July 2017 tax bill and will work with the County Treasurer to insure collection on all delinquent water turned into the County effective for the 3/2018 delinquent tax roll.

Employer Defined Benefit Pension Contributions

.7/1/2017: As a reminder, in my October 2016 report to the RTAB I stated the following:

On 10/5/2016, the City’s actuary and pension system administrator presented the
annual 12/31/2015 actuarial report to the City Council. The system administrator is the Municipal Employees Retirement System or MERS. In summary, the report discloses that three major actuarial assumptions have changed for all MERS Plan participants.

Those three changes are:
1. investment return assumption is dropping from 8% to 7.75%.

2. Mortality tables have been adjusted to reflect retirees living longer.

3. Amortization of the unfunded accrued liability was moved to a fixed period.

Under the new assumptions The City of flint's funding ratio at 12/1/2015 is 43% or $242 million in assets. Overall, the City is spending $50 million in annual benefit payments yet is only contributing $29 million annually to costs including investment earned. These factors have driven the anticipated employer contribution to $42 million per year for fiscal year July 1, 2017- June 30 2018, in lieu of a $19 million dollar contribution being made for the 2015/16 fiscal year. This is a major expenditure issue which will push the
General Fund, Rubbish Collection Fund, and the Grant Funds into a deficit position if other revenue sources or expenses cannot be adjusted for the 2017/18 fiscal year.

Current Pension Activity:
City staff has worked to move the $42 million requested contribution to approximately $36 million dollar contribution by placing retirees who were in a retiree group with no assets to their proper retiree group with assets. However, after this exercise, the City is still faced with a cash flow issue to come up with the $35 million annually.

The City has worked with MERS and the MERS Actuarial team and have come up with six actuarial funding scenarios for the defined benefit pension system. hose funding scenarios will be presented to the State Treasurer on 2/1/2017. The city will be requesting state funding assistance at this meeting on one of the six funding scenarios presented. Failure to obtain State assistance will require either drastic City operational cuts to meet the requested employer contribution or the city's defined system will run out of assets in an estimated (9) to (12) years depending on financial and retiree actions. That is all that is remarkable for this report .
Post Thu Mar 16, 2017 2:14 pm 
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