Boyne audit shows city financially stable, growing

boyne-audit-chart-1

Boyne City’s annual audit report reveals the city’s financial picture as stable and its fiscal management as capable.

The report, prepared by audit firm Gabridge & Company PLC of Grand Rapids, was presented to the Boyne City Commission at the commission’s Tuesday Oct. 11 meeting.

“Management believes, based in part on the information presented in this audit, that the economic condition and outlook for the City of Boyne City is stable and will remain so for the foreseeable future minus some significant negative external factors,” stated Boyne City officials in their narrative on this year’s audit report. “This change comes from the fact that the city continues to invest heavily in its future.”

The city’s assets exceeded its liabilities at the close of the most recent fiscal year by $23,162,160 (net position).

At the close of the current fiscal year, the city’s governmental funds reported combined fund balances of $9,484,567, an increase of $5,214,158 in comparison with the prior year. Approximately 15% of this amount, $1,430,448 is available for spending at the government’s discretion (unassigned fund balance).

At the end of the current fiscal year, unassigned fund balance for the general fund was $1,430,448, or approximately 27% of total general fund expenditures and transfers out.

“In our opinion, based on our audit and the reports of other auditors, the financial statements … present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Boyne City, as of April 30, 2016, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America,” says Gabridge & Company.

As noted earlier, net position over time may serve as a useful indicator of a government’s financial position. In the case of the City, assets exceeded liabilities by $23,162,160, at the close of the most recent fiscal year.

By far, the largest portion of the City’s net position of $18,974,433 (82%) reflects its investment in capital assets (e.g., land, buildings, machinery, equipment, vehicles, and infrastructure), less any related outstanding debt that was used to acquire those assets. The City uses these capital assets to provide a variety of services to its citizens.

Accordingly, these assets are not available for future spending. Although the City’s investment in capital assets is reported net of related debt, it should be noted that the resources used to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

An additional portion of the City’s net position, $7,456,518, represents resources that are subject to external restrictions on how they may be used.

The remaining balance of ($3,268,791) is a negative unrestricted net position.

Cash and cash equivalents increased significantly during the year, from $6,995,045 as of April 30, 2015 to $12,200,976 as of April 30, 2016. The primary reason for this is the issuance of a seven million dollar bond during the year, whereas only a portion ($509,565) of this was spent during the year.

Largest capital projects were paid for during the year, reducing the increase of cash by a lesser amount. See the long term debt and capital asset footnotes for more information.

During the year the City also booked its net pension liability, which recognizes the unfunded portion of its liability for retirement pension benefits provided to employees. This booked a $3,324,752 liability on the financial statements and restated the April 30, 2015 statements. This change is discussed further at note 7 and 14 in the footnotes to the financial statements.

The City’s overall net position increased $1,014,178 from the prior fiscal year.

Governmental activities
Governmental activities increased the city’s net position by $529,388.

The total increase was the result of total revenues of $6,744,721 less total expenses of $6,215,333.

Total revenues were comparable to the prior year, with similar makeups of program and general revenues as sources of funding.

Total expenses increased from $4,970,526 in 2015 to $6,215,333 in 2016.

The recognition of $444,655 of pension expense due to the recording of the net pension liability was one of the major reasons for this increase in expenses.

Depreciation expenses recognized also increased by $186,511 in comparison to the prior year because of the additions that began to depreciation during 2016. These increases were recognized across all functions of government. Most other expenses were comparable to the prior year.

Business-type Activities
Business-type activities increased the City’s net position by $484,790. The total increase was a larger increase than in the prior year.

The biggest change in the business-type funds was an increase of revenue. This was mostly due to an increase in the amount of revenue from charges for services recognized, which increased from $1,856,841 in 2015 to $2,014,510 in 2016.

Total expenses were consistent with the prior year, leading to a larger change in net position during 2016 in comparison to 2015.

Gen. Fund Budgetary Highlights
During the year there was a need to adjust expenditures in the final budget to $4,620,456 from the originally budgeted expenditures of $6,031,604.

The biggest changes were large decreases in the budgeted expenses for parks and recreation and sidewalk construction, due to changes in the planning for related projects.

All other budget amendments during the year were relatively minor.

Final budget to actual results
During the current fiscal year the City had the following expenditures in excess of the appropriated amounts in the general fund.

Variance Final Budget Actual Final to Actual General Fund Assessment / Taxes 70,357 72,826 (2,469) Planning 168,196 169,997 (1,801) Housing – 230,865 (230,865) Transfers Out 837,353 863,944 (26,591)

Note that the majority of the housing expenses were fully reimbursed by a federal grant.

According to Boyne City officials, some major, long planned for and much needed projects, significantly drew down the city’s unassigned fund balance from 82% to 27% of total general fund expenditures over the past fiscal year.

“This means that the city will be operating with a lot less flexibility or maneuvering room than it has had in the past,” the city says. “Our ability to take advantage of opportunities that may present themselves will be reduced. One such opportunity, the acquisition of the Open Space on North Lake Street, across from Family Fare, is both an exciting opportunity and a significant challenge. The city has applied for significant grants to help purchase this much desired waterfront property which would otherwise more than consume the city’s available fund balances.”

However, even with the grants, the required local matches will probably require a further significant draw down of the city’s fund balances.

“And, there are other such opportunities as well,” says the city. “Expanding the City Marina, upgrading the Veterans Park pavilion, creating new trails, further developing our parks. These are all exciting opportunities that when moved forward will require significant resources. When these projects are undertaken and how they will be funded are matters to be considered carefully to protect the progress Boyne City has made over the years and keep us on the path for future successes.”

Long-term Debt
The City had $12,504,452 long-term debt at the end of the fiscal year. The City issued a new $7 million dollar bond to finance the construction of new City hall facilities.

The City is well under its legal debt limit as of year-end.

According to city officials, the results of this audit look significantly different than the one from last year or before because of the new requirements that further pension liabilities be shown directly on the city’s books.

“The good news is that Boyne City has taken actions to help address this matter well over a decade ago and our 79 percent funded rate is one of the strongest of local governments in the region,” says the city. “That doesn’t mean that we can ignore or let up on our efforts to control costs in this or other areas of the organization. Quite the opposite. Given our reduced unassigned fund balance reserves we will have to step up our efforts even further to make sure we are using every dollar of available resources as wisely as possible.”

According to city officials, both the national and state economies seemed to have stabilized with steady growth, and there has been continued development and investment occurring over both the commercial and residential portions of the local community.

“[I]t is management’s opinion that the City of Boyne City continues to make great progress, remains strong and is poised for future successes and growth if it continues to nurture its resources wisely,” city officials said.

boyne-audit-chart-1 boyne-audit-chart-2