Flint, Michigan – January 26, 2015 – The City of Flint has received its annual financial audit from the firm Yeo and Yeo for Fiscal Year 2014. The audit will be presented by David Youngstrom and Jamie Rivette of Yeo and Yeo to City Council during tonight’s monthly meeting. The audit points out two main areas of progress made in addressing the financials challenges faced by the City. Those areas are containing legacy costs and following a deficit elimination plan. It also points out that this progress must be weighed against the significant challenges the City faces in the coming fiscal years as revenues are projected to decline and costs projected to increase.
The audit points out that the City has taken significant steps since 2012 to contain legacy costs through restructuring of retiree health care benefits and pension. These steps have reduced the long term liability of these cost from $850 million to $320 million in FY 13 and to $240 million in FY14. In addition, the administration of the pension system has been transferred to the Municipal Employees Retirement System, a state-wide multiple employer system.
The audit highlights the Deficit Elimination Plan, approved by the State Treasurer in 2014. This plan will eliminate the remaining budget deficit and will then establish an accumulating a reserve equal to 15% of General Fund revenues. The plan also calls for $800,000 in Public Improvement Funds for Utility Capital Improvements to be dedicated toward eliminating the deficit and achieving the desired level of financial reserves. It is projected that the deficit will be eliminated in five years following this plan and that accumulation of reserves will begin thereafter. The audited financial statements confirm that the accumulated General Fund deficit has been reduced to $9 million, a reduction from the $12.9 million the previous year and $19.1 million in FY12.
While much progress has been made, according to Emergency Manager Jerry Ambrose, this progress has not been without pain. Taxes and costs to retirees for health care have increased, while City services and employee compensation have been reduced. “The City is approaching financial stability, yet services are very low and the City faces significant challenges, as emphasized by the recent CPSM study of police and fire along with the current challenges with utilities,” said Ambrose. “The five year financial projections done last year and the adopted budgets for FY15 and FY16 showed financial stability for those two years, but project a very significant gap between revenues and expenses for FY17.”
Regardless of whether or not the City remains under the control of an Emergency Manager, Mr. Ambrose points out that balancing the FY17 budget in a financially responsible manner will be a challenging task. “If decisions become necessary to further reduce the workforce and service levels, they will be very difficult, as there are no easy answers,” Ambrose said. “Likewise, responding to demands for higher levels of service and lower costs in the form of water rates or taxes will also be difficult.”