City of Dearborn Heights, MI Dearborn Heights Study Sessions, 13 Jan 2022

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From YouTube: Dearborn Heights Study Session - 1/13/22

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The Dearborn Heights Study Session regarding the Fiscal Year 2021 Audit Report presented by Plante Moran taking place Thursday, January 13th 2022 at Riverside Middle School and over Zoom.

A

B

Good afternoon, ladies and gentlemen, uh it's right now 5 p.m. On thursday, we have a study session for fiscal year. 2021 audit report presented by plant moran with martin olynyk martin.

C

Glenn, thank you so much. uh Thank you for having me uh this evening. I.

B

Don't think hear you can guys no you're just getting your microphone closer to you. Okay,.

C

Yeah, it sounds like it's on there, okay, so thank you for having me uh once again. um My plan was gonna: go through the financial statements at a relatively high level, things that, in my mind, would be important to highlight things that are significant changes from last year, as well as just overall significant items within the city and things that, to be honest, either look really good or things that might give me a little heartburn. So I just want to make sure I communicate those things to you feel free to pause.

C

You know, stop me at any time if you do have any questions or anything like that, I am happy to address any concerns or anything like that. Throughout the presentation, my plan was going to go through, go through the financial statements and, like I said in pretty good detail, and it is a 84 page document, I'm not planning on spending. uh You know go through every single page, but again I'm going to highlight the main items.

C

So, as a user of the financial statements, uh whether I'm you know if I was a part of the council or resident of dearborn heights, a couple of things to highlight a couple things that I would focus on, uh one is the opinion letter, which is on pages one and two of the financial statements, and I am projecting that on online right now. So you can uh some so the residents and people on online can see it so page. One and two is the opinion letter. This is the only item that belongs to plant moran.

C

uh In the letter it says that it's an unmodified opinion. uh What in the accounting lingo? What it means is that the numbers and the items that are presented within the financial statements based on our testing, you can rely on. So when you're doing your budgeting. When you're looking at historical numbers for june 30 2021, you can rely on those numbers.

C

It does not mean that we didn't find any findings as a result of our process, and our audit does not mean that there's no deficiencies or improvements that we suggest and, as we talked about a couple days ago, there are various items that we noted that the city needs to focus on in order to make improvements within overall financial reporting process.

C

Another item that I would focus on is the management discussion analysis which is actually written by the city by the city management, and that describes what main items happen over the last fiscal year and items that could be happening in the near future. So things that are the management felt is very important for the residents and the council to know about.

C

So those are that's on page three, all the way through page seven, and it shows the financial highlights and again shows uh various items that happened over the last year with that starting on page 8 are the financial statements themselves, the numbers etc. The first couple pages are uh related to the whole city.

C

So it's not broken up by fund it's actually all the governmental funds are grouped in one column, then you have. The enterprise fund, which is the water and sewer fund, is grouped in another column and then furthest to the right is the component unit, which primarily tiffany.

C

I was not going to focus on this statement. It is a full accrual statement, so includes fixed assets, long-term debt. Things like that. I was not going to focus on this statement. uh In my mind, the most important pages relate to the corporate fund or the general fund, as some communities know that by and then also the water and sewer fund, but again feel free. If you have any questions, feel free to stop me, and I can go back to these statements.

C

So with that I was gonna, go page, twelve.

C

D

C

And the thickness of actions correct, so I am working off of the clean copy that does not have draft on it. um It is available as well, but if the page numbers are going to be almost identical, it should be the same on this one.

D

E

The numbers different from the.

C

Draft the numbers are identical. Okay, the only thing is that what ends up happening from the draft is our processing department proofread, because they don't trust the accountants on vocabulary and spelling, which is rightfully so and then also just overall like spacing things like that, just to make sure everything looks pretty okay. Thank you.

C

So page 12 is the balance sheet. I was going to focus on the corporate fund and it does have some significant changes from last year: cash and cash equivalents. The very first row is 19.3 million.

C

It's a significant jump from last year. Last year's numbers uh were about 12 million less, and the reason that 12 million dollar increase this year is because of arpa money that came in uh during the year, so it's money related to covet and the grants that came in from the government.

C

However, you have not utilized those funds, yet you haven't spent. You haven't designated a way to spend those yet, and I realized that the government was coming up with a lot of different criteria on how you can spend it. So a lot of communities were just kind of frozen until they found out more details and therefore that dollar amount. The 12 million dollars that came in is also sitting in liabilities under unearned revenue, because technically you haven't earned it because you haven't spent it on the designated. uh Can you repeat items correct okay,.

B

So if I couldn't run for just a second, so what I might do for the council members the way I prefer to do this, I'm gonna allow for questions during the presentation and martin was okay with that. So what you guys don't.

F

G

B

Until the end to be able to ask whatever questions that you have, you can ask him right on the spot, he's! Okay with that. So if you.

H

Have a question just.

B

Raise your hand I'll see you or get my attention.

D

B

Make sure you're able to ask the question right now.

I

Maybe you can talk real loud, real, slow, we'll go ahead.

C

So you have 19 million dollars in cash sitting as an asset 12 million of it is you basically can't use it for anything other than a certain purpose? So it's also sitting as a liability and accounting terminology is called unearned revenue because you haven't earned it because you haven't spent it on that purpose. So what that means is, as you go down the balance sheet and your fund balance is left over. There's no impact on fund balance, because, technically that money is not spendable right now, so it's not restricted for any purpose.

C

It's not used for any future expenses other than those certain criteria they have to fulfill under the grant.

B

No just go, you know, you know what, for.

C

B

Particular session just go ahead and ask your question directly: no.

J

C

You have 12.1 million in your bank account, but you can't spend it except for those specific purposes. Okay,.

I

Under the american recovery act, correct, okay,.

C

Thank you. No, no problem! So that's a significant change from last year. Clearly, 12 million dollars will stand out. If you go down the page, your overall fund balance, it is broken up. So your overall fund balance for a corporate fund is the second number from the bottom. Is it 10 million 278 000 423?

C

That's your overall fund balance in the corporate fund. However, a good portion of it is not spendable as well as restricted for certain purposes. Non-Spendable means that money is sitting aside somewhere that it's already been spent in your case mmrma. So it is deposited for insurance claims, mine.

B

Yes, um the unassigned balance. I know we had a talk with you. You mentioned that you were a little concerned and that's the thing in the presentation. If you do me a favor continue if there's anything, that's of concern to you say it on the spot. If you don't mind, I don't want to wait till the absolute all. The concerns will be much easier to be able to digest it, but I don't want things that you were concerned about is unassigned.

B

Balance was at 5 million 970 229 and you were a little concerned that it was on the low end. What was the amount that you you? You know what how much higher percentage or what would the dollar amount you prefer to be at so.

C

The policy that currently the city has you're supposed to have two months worth of expenditures in your unassigned fund balance in the corporate fund. In order to so the 5 million 972 000 is actually approximately 11 or 12, so it is lower than your policy.

C

So our concern is that your policy is, you should revisit the policy and see if it's appropriate or not, I'm not saying it's not appropriate or anything like that. A lot of uh folks when they look at fund balance, historical historically, would be anywhere from 10 to 20 or even 30 would be something like a target fund balance you are in that range.

C

However, you are below two months worth of expenditures and the reason a lot of communities look at two months, especially those with a june year end- is that your property taxes start coming in after your end and they're, not due until september 14th so september, and a lot of individuals pay right on the deadline early in september, so you technically have july and august to live without any revenue coming in. Essentially, so that's why you need fund balance to keep the lights on. Keep the payroll going and everything.

C

So that's why the two-month two-month period is very important.

C

I apologize okay, so technically you have a little bit more uh flexibility constitution, no just go ahead.

E

Mark here's, the problem that I have uh and correct me if I'm wrong, please, because I'm not an accountant and I'm kind of the guy who kind of blew this open wanting another study session here and I apologize to everybody for taking up some time and I asked him help and I asked help from uh from hassan jamal the only person I knew that kind of knew the city as well as anyone, but I'm looking at this. This total fund balance and I'm.

D

Looking at, of course,.

E

June 30 20 21 when I go back to june 30 2020 and I look at our fund balances.

D

And in our fund balances.

E

Okay, we put in two million dollars of the health care and I don't see that in here. So where did the two million dollars go to? Because the.

C

E

That don't don't jive so.

C

During last year, during the fiscal year 21, the council approved on the signing that signed two million dollars of fund balance, so that becomes part of the unassigned amount, which is the five million nine hundred seventy two thousand. That two million becomes part of that. It's still part of fundamentals the whole. So you have to look at the fund balance in total and if you have an assignment, the assignments are done by the council, so the council can assign it for certain purposes and you can also unassign it.

C

So all it is is flipping between the two rows. Your total fund balance is still unchanged.

E

But I don't, I actually don't see.

C

E

Itemized, like it was.

C

The year before, because it became part of the unassigned amount, the two million dollars was moved to the unassigned by the council by a resolution during the.

E

So so the yearbook so the year before uh 2020 we had an unassigned balance, including the two million dollars of five of 10 million 510 000 904 correct. Now the new total balance is 10 278 423, so we actually received more money this year than we did last year.

C

Your overall fund balance, so let me.

E

Actually, we have a little bit less.

C

I believe I believe the fund balance decreased in total by about 200 thousand dollars. My memory services.

E

It was, it was 230. I can tell you exactly what.

C

It's in the budget to actually state.

E

232 000 right.

C

So technically to use terminology is maybe not governmental. You did have a net loss of.

E

C

200 000., so your revenues were about 230, 000, less or less than your expenses did. Yours.

E

So your expenses, but I guess what triggered this is. I don't see the two million dollars and right away, I'm saying well, if we we overspent 232 481 and we're not showing the 2 million and we've overspent 2 by 2 million 2.2 2.2 two.

C

No so on the next page, which is uh page uh 14, is that I call it the income statement. Governmental lingo has a whole name for this statement. It's basically the income statement.

C

The very first column shows your corporate fund, your overall revenues of 47.6 million dollars, your total expenditures of 47.9 million dollars, and you had a net loss of 232 000.. Your beginning fund balance was 10 million, 510 000 and your ending fund balance is 10 million in 278 000, so that ties back to that balance sheet. The balance, that's on page 14 right here, so your overall loss for the year is 200 000 230.

E

C

So going back to the balance sheet, the balance sheet breaks out your fund balance by category, so your fund balance overall did change from that 10 million 510 000 to 10 million 278 000.. You will not see that decrease on the balance sheet, because balance sheet is just a static picture at june 30 2021.. So.

E

The two million dollars that we assigned for that was or still should be healthcare because.

C

D

C

Did well, you did start funding the healthcare.

E

Well, what I'm saying is we started that funding the healthcare would have two million dollars is what we did correct, correct.

C

That's my that was three.

E

Or four years ago, correct, we did that, so the two million dollars showed up all the time except now. So where did it get added in on page 12 to.

C

The unassigned.

D

C

If it wasn't for you, otherwise, if you had not made the motion during the year of unassigning, it you'd still have an assigned balance of two million dollars for health care. So we didn't, then your unassigned amount would be 3.9 million. So.

E

We could have, we had to have spent.

C

That money there.

E

You just undecided okay, but what I'm saying is is it is here we show it in 2020 and inside general government, retired healthcare unassigned is two million dollars correct and that total came out to five million fifty thousand dollars of 131 dollars. Okay,.

C

So let me let me.

E

So in 2021 that same money was only 5 million 972. So there's 972 000 difference between the two years.

C

I understand that, but you also have to look at the other restricted components. The other restricted components have changed as well. During the year you have to look at fund balance and totality, and I see what you're saying like yeah is some other amounts could have shipped. You know up five hundred thousand dollars so on so on.

C

So your overall unassigned fund balance end up technically actually increasing, because you made an assignment change during the year, so you unassigned a two million dollars and it didn't it did, but then there's other fluctuations throughout the other categories. Downside didn't raise this year from.

E

Last year, yeah so, like I said it's just a snapshot.

C

At one time june, 30 2021 this one here. The item that I would there's two items that give me a little concern. Looking at the fund balance restrictions, one is, and I realize it's, I'm going to open up a can of worms, but.

I

Speaking of this, but so so that two million was what was originally put in the account to fund the opec and then taken back out by the councils. That was that that 2 million that is correct, okay,.

C

Go ahead, I'm sorry, and it's purely so. When you make the on assignment you, you put it into unassigned funds. You can spend it on any purpose. At that point you want, but the city did start funding your open other post-employment benefit trusts. So I didn't want to hide like that and we're going to talk about that a little bit later, because there's some charts in the footnotes that speak to that in detail and then we.

I

Originally originally put it in for the opec liability. At the suggestion of our interim treasurer, mr abdul-hawk, we then took it back out for a variety of reasons, one of which was the recommendation of our former treasurer john riley. Is that correct.

C

That is my understanding. Yes, okay, thank you. No, no problem! So the couple things that give me a little heartburn uh one is bigger than the next and some hit. What page you are it's still on page 12., so looking at the restricted fund balance the cable, peg fees, the restricted amount of 1.2 million.

C

So I do understand that there's some improvements that are being done currently by the city, so there's some capital outline, which is great, so you're going to be using some of that fund balance out historically before about a year and a half ago, the city obtained an opinion from an attorney. That said, you can utilize peg fees to for capital as well as operating expenses related to cable, so that balance hovered around the same dollar amount.

C

Sometimes it decreased a little bit, but you didn't keep growing that balance within the last year and a half the city took a stance that you're only able to use the money for capital outlay expenditures for cable, so equipment. Things like that with that that balance will likely start increasing pretty substantially over the years, and you cannot spend it on anything other than capital for cable. What.

J

Is the amount of law.

C

It's so a lot of communities, look at it that you can spend it on cable, related expenses. It can be for salaries associated with running the equipment. It can be related to a lot of different things.

C

There are some communities that take the stance, that's purely capital, so my only concern is that you will be utilizing this fund balance in the next six months, 12 months for the improvements that the city is making currently, so that balance is going to drop to 600 000, roughly, because my understanding is that there's about 600 000 spoken for. However, every year I know the last year your total peg fees came in about 140 000. So unless you spend 140 000 every year in capital, that balance is going to.

D

Start skyrocketing.

C

Pretty quickly so I.

D

C

Make sure that you're, aware of it, and in case you wanted to revisit that, I would recommend speaking with an attorney and having maybe a second.

E

You we're gonna we're. You know, we we hatched that over uh a lot of times. I think if we go through that now, we can be here forever.

C

No and I'm not saying that this is like this is probably for another day, but the reason I say that this is like a thing that, in my mind, would be important is that if those salaries are not being paid for by tech fees, those are getting paid for by property taxes.

C

So it's not like there's money that just comes from somewhere else. It's just now, you're stuck with paying through property taxes.

K

Okay, okay, so I gave an opinion very well. You may want to get the microphone.

B

Closer yeah, I ended.

K

Up giving an opinion on this point, it was very well researched and there was actually a very interesting.

J

K

Ruling by the fcc, which is subject to challenge that came down prior to me, giving that opinion about a year before my opinion was that prior to that ruling or that rule making order by the fcc, the money could be used for salaries pursuant to state law.

K

But after that point it's very questionable, even though the decision, the rulemaking order by the fcc, is subject to challenge. So I had discussions with then-mayor paleto and said to be safe. It would be prudent and not to end up using the money in the future until the fcc decision is either thrown out or upheld, and I don't know what the status is. With respect to that fcc decision.

K

I know that when they ended up having the decision before it was a decision that was challenged and thrown out, and then they had another decision that they came up with that was upheld in part, so you're taking a risk. If you end up using this money, potentially pretty significant risk. You know like.

D

Million dollar risk.

K

If it turns out that the fcc is upheld and if the fcc is not upheld, then you will end up basically being in a position where you can use it for salaries and other such things, which again my opinion was yeah. You could use it up until the fcc came out with this latest order through the rulemaking process.

K

So this is not a matter of getting a second opinion even.

D

If you want, you could get a second opinion, but.

K

I feel very strong about that opinion. It's like 15 pages. I shared it with the council. It's very very clear that the current state of law is not what what it had been and even the cable attorney for the city. Neil lato and I basically discussed some things that he was not aware of the more recent developments because he basically retired after he gave his opinion and his opinion had been given before the change by the fcc.

K

So it's very important that we recognize that there could be a very significant risk, but we should be revisiting this if there is a change or if the sixth circuit court appeals says fcc you're wrong, which they did the last time, but they didn't do the first time so. Council chair, okay, thank.

G

B

G

Not spending this on salaries right now are we that's correct, you're, not.

K

Yeah we're we're good.

G

Yes, we're good we're going right, we're not.

I

Yeah, just so just to dovetail on what uh council miaki said, we all remember the findings of riemann robinson regarding some of our past uh cable franchise money, but so the the cable franchise fees to be all over the place kept going up and then andy dillon when he was a state rep pushed through the they call it.

I

The att bill, which made it uniform and reduce what cities can get well, then, on top of that, the cable industry has become went from being big to being huge and the there's a state group uh pro pac uh run one through one of the law firms downtown, but the the poster child or the the biggest advent of using the cable television money for cable television is city of dearborn, the attorney who I think, just retired, from dearborn, and it's, I think it's a fair statement to say yeah. You can use it for cable expenses.

I

You can't use it for like newsletter or whatever else we used it for, but so, but the law is like everything on the client. Okay, thank.

B

You so martin, if you don't mind to get back on this, because I think we've veered off into the peg fees, and I don't want to make this whole thing about pet feed. So.

C

That's what I said I I hated to open this. You.

B

Opened up a can of worms.

C

But uh I felt like it's needed. I do agree uh that, based on the fcc rule, um basically capital outlay only, but if that rule changes- or maybe it already did again- I'm not an attorney. I just want to make sure that the city revisits that, because likely that balance will start growing pretty quickly, it's a hundred forty thousand dollars, and normally, I believe you have capital expenditures that are probably ten thousand dollars or less, except for the big renovations going on right now.

C

Thank you. The next page that I wanted to uh go to is on page 16, which is water and sewer.

C

So it's the water and sewer balance sheet and the big item that really changed this past year is under uh not current assets or restricted assets. You have 27 million dollars, that's about six seven lines down: it's 27 million 842 887.

C

So that number includes the bond issuance proceeds that came in for the capital improvement bonds for 2021.. That's about 25 out of the total amount. What that means is, basically you can only utilize those proceeds on the capital outlay. That's related to that was noted in the bond issuance. So it's the cso improvements as well as the meters, so that money is sitting separately. It's not sitting on the balance sheet in the cash and cash equivalents line item.

E

What are the capital assets seek note for, so we don't have to go hunting for note 4., so.

C

Capitalizes, those are just your overall water and sewer lines, capital equipment, things like that that the water sewer fund owns it's all the equipment, less depreciation. So that means trucks.

E

Everything yes and those are uh our non-current assets. We can't touch them.

C

Not current because they're, so what that means is non-current is uh basic terminology that, like they're going to last you a very long time, so it's not like you can just convert them to cash today.

I

C

Thank you, yeah the current assets up top that are noted, so cash cash equivalents. Clearly it's current because it's liquid cash receivables are current because you're going to collect them within a few months. The current versus long term, it's uh based on 12 month period,.

B

What were the other receivables under assets? There, 815 000.

C

I have to double check. I don't recall okay, I can follow up on that, though. Please.

E

And a doof do do from other funds. Note 5. and I can go back and look at them, but.

C

So what happens that, due from other funds, that happens, it's regular for every municipality? So if someone's paying an invoice and the invoice may be, uh some of it is broken out. You know most of it belongs maybe to general fund, but there's also an invoice that portion of it belongs to water and sewer, and therefore it's just recorded as a receivable in the corporate fund that they're going to get reimbursed for modernism, and then it balances out. Yes, so, on the flip side, you'll see a payable on uh from another fund or vice versa.

C

It just depends on how it ends up on june 30th.

B

Martin, while you go through the different things that you're concerned about, I I also I'm big on action steps. What are the action steps that you're recommending per not necessarily item per item, but the things are a major concern, because when, when you tell us, you know, there's a problem on x, y or z, that's usually not enough. What are the action steps that you believe the city needs to make in order to to make this thing whole as you go through this field? Absolutely.

C

So the other item that I did want to point out as a result of your issuing the bonds for water and sewer um you'll, see that there's an increase in overall, your long-term liabilities this bad year. So the line item, that's only about 10 rows from the bottom.

C

It says long term debt, 30 million 295 113 increased drastically because of the bond issues, so that is recorded here that you're going to end up owing money, and I can show you the detail in the footnote. So the one item that I would say and we're going to cover this study session on the 25th of january- is the water and sewer analysis and the rates etc to make sure that those bonds are being paid for. So there's going to be a discussion in almost two weeks.

C

From that point on, I did want to look in general, um I'm gonna. I apologize for anyone viewing this online because they're gonna get motion sickness right now, because I'm gonna scroll down.

L

What page is that? I'm.

C

Gonna fast forward to.

C

C

And this is the long-term debt schedule and this is business type activities which is your water and sewer fund, so you'll see in the column that says additions towards the middle of the page, the addition of almost 24 million dollars of the debt. So I just want to highlight that.

C

I'm sorry is that our bond, that is the bond.

C

With 4.5 million dollars due the first year and then after that, the payments go down to about one and a half million principal and interest. Roughly.

I

And martin, the money we had left over from the other project being paid off. When is the down payment on these bonds? Correct that.

C

Is correct so it's not necessarily a down payment but that 4.5 million that's due within the first year that three million dollars you know could be consumed by that. So the technique was.

D

C

J

For not a down payment correctly correct, that's.

C

B

Overlapping, yes, okay, and can you describe to especially to the audience what that bond is specifically for.

C

So that bond came out for the cso projects that you're required to do by the state, as well as the new water meters they're supposed to be purchased and installed within the next couple years.

B

And please describe again for the sake of the audience cso projects, what's not specifically, but in general terms,.

C

So the cso projects, it's a specific area of the city where you have essentially my understanding- is flooding issues, I'm not an engineer but essentially flooding issues, just overall issues with environmental hazards as a result and the city or the state is mandating that you make improvements. My understanding is.

E

Combined overflow, correct they're, trying to separate the.

C

E

C

From storm water.

E

To help you know alleviate that problem.

C

Correctly, you've had some, and so in order to avoid environmental issues. I know that the city has been trying to delay those uh projects for a few years, and now it's basically like it's time to start working on those. So that's why the issuance of the balance in order to pay for those yeah.

E

That that that that can was kicked down the road for about 10 years.

C

Yeah, I couldn't remember exactly how.

E

Why we didn't do it when we could have probably saved five million dollars uh ten years ago or seven million dollars with the you know the financial cost of labor and material? But uh you come upon us and we got to do it now so.

C

So with that, I was going to scroll down to footnotes, 8 and 9, and essentially focus on page 46 first and there's the pension system and your overall liability, as well as the assets that you have within the plan. So you have two different pension plans. One is for the general government employees as well, and then the second one is the police and fire retirement system. So the first chart on this page shows your general government, the first column.

C

The total pension liability is the actuarially determined liability that you have at the end of the year, and that is, if you look at the bottom of that, chart it's 54 million dollars. That's your total liability, as determined by the actuary for the general government employees, retirement system, the second column over. What's called plan net position.

C

Basically, it's your assets, your investments, cash, etc to pay for those liabilities in the first column, so the second column shows 47 million in your overall assets to cover that 54 million liability, which that means you're left over with 7 million.

C

If you look at the net investment income during the year, which is three or four rows up from that 47 million dollar total asset, you had 11 million dollars of investment gains during the year, given the rebound from kovit. So the snapshots, if you look at last year at june, 30 2020 the market still didn't come back.

C

It was depressed from the covet situation when it first started in march now, over the last 12 months going through june 32 2021, it did rebound plus some so you'll see huge gains and that's why your overall net position uh your net pension liabilities. You still have a seven million dollar shortfall, but it's decreased drastically from the 18 million shortfall. Last year. The.

B

11 million in net investment income is is from what what amount exact amount is it from the 54.

D

C

So it came so the 11 million is your overall investment gains on the 37th. Your total investment balance at the beginning of the year was 37 million six hundred thousand. So that's at the very top.

B

So you made 11 million.

C

On 37 million, that's pretty good.

B

Return, it's not.

J

A bad return, though, and that's what the cobra is and everything.

C

So things rebounded quite a bit starting uh like after july 1st of 2020 things started really rebounding in the market.

C

I don't know for sure the snapshot. If you had looked at- and I know- there's- I don't believe, there's a report. But if you look that at the end of march of uh 2020 it'd probably be really really bad. So luckily it started rebounding by a time uh june. 30Th 2012.

E

When we keep looking at that one number that was always on our the blackboard of 168 million dollars in a deficit for our open. Oh.

C

That's uh on the next couple pages I'll show you that.

E

And we're going to go for it. That's.

C

Going to be my other heartburn, okay, so.

E

C

I'll wait till we get yeah. This is the item that I feel really good about right here. Okay, so I'll, let you continue and we'll get.

E

That when we get there, so the state.

C

G

D

G

411, that's is that a profit or is that what we invested.

C

It's a gain. It's an unreal. It's a it's! A gain on your investments.

M

Not counting the initial investment correct.

C

I mean you might have significant losses, so your initial investment could have been higher than the 37 million. I don't know I'm just saying that technically it's just a gain over that 12-month period.

L

Do you anticipate you will be making the seven million this year to make it worse.

C

Yeah it's hard to say where you're at right now I know the market's still been up a little bit. So in theory there should be some investment earnings still uh so far this year,.

I

Martin, so under.

D

I

There are some numbers in parentheses, so one way of reading. That is, if.

A

I

These numbers are a liability we owe the ones in parentheses, are a plus or that's not the way to.

C

Read it it's actually correct, so the very far column is the net pension liability. So it's what's left over how much you still have to fund uh once you kind of apply your assets that you have so any negative means your liability is decreasing so that 11 million dollar gain decreases your liability by 11 million. So that's why you have that in parentheses, so.

I

That bottom number, that 7007 is a liability.

C

It's your overall liability. What's left to fund at june, 30 2021.

I

Okay, it could have a minus sign before it, I guess, or.

C

It's a liability yeah, it's just a presentation but you're, absolutely correct. It's a liability and.

I

So the 11 million 483 online, the net- that's.

C

That's a gain that is a gain.

I

That's a reduction in the liability.

C

It's a reduction reliability, so the gain shows in the plan that position the second column or the middle column as a plus, because it's adding to your assets because that column is your overall assets. But it's subtracting the next compass a lot. The liabilities reducing.

I

D

C

Mirror image for your police and fire retirement system down below it starts out with the total pension liability at the beginning year was 224 million. It increased a little bit based on actuarial analysis to 229 million, roughly 230 million. The second column shows the beginning assets at 169 or 170 million.

C

In this one you had a 59 million dollar investment income. Basically percentage-wise is very similar to the general employees. It's just bigger numbers. So that's why and your overall assets at the end of the year were 221 million roughly. So your overall liability for your police and fire retirement system is about 9.1 million out of a total of 230 million dollar liability. So it's very well funded right now, you're, not 100 funded, but you're, pretty darn close now.

E

That's part of that 345 correct.

C

Your contributions go in the through, so 345 can pays for some of these.

E

Contributions. Yes, so it's a part so 45 goes into this.

C

Correct so that's the upward chart because the upper chart is general government. The x345 goes into police and fire. Yes,.

E

So, where does that? Where does act? 345 show in this contributions.

C

Where it shows contributions employer in the middle of that chart, 5.2 million.

E

C

Would be that was that was act 345, that's x345! That's.

D

E

For pension city, just pension.

C

Just pension and discharge.

E

E

Okay, that's what we had to put in the taxpayers had to put.

B

E

For the police and fire that's correct.

B

Now this is the one with the five percent situation: yeah good product.

J

I

On a tuesday.

C

So the pension plans are well funded, not 100, but well funded. Now I did want to highlight uh on the next page that.

C

If it's on that last page, no two pages down.

L

I'm sorry mark before you move on where it says: interest at 17 million. Is that something that we're making on it or something that there's somebody charging us for.

C

So the interest is just purely based on the extraordinary analysis like time value of money and having the liability, and so there it's just a calculation from- I guess the actuary that comes in and so no one's really charging interest on it. But it's um and I'm far from an actuary. So I'm not going to pretend to be one. My understanding is this is purely based on the fact that the liability is not represent funded. You haven't paid it for it.

C

Yet so there's going to be increases every year to the liability based on the calculation of what the future pension.

D

Payments are going to.

C

Be so it's like a time value of money calculation, so your liability keeps going up every year as a result until all the employees or all the retirees are paid for- and I realize I'm not explaining 100 but.

L

Again, I'm not.

M

An actuary so last time you said this is over 30 years or this is to cover the third year period or.

C

So the pension system, so this covers all your retirees, basically until all the retirees are paid for um there's an act for the state that says that if you're underfunded, you have so many years to make up for the underfunding, the pension system is over that minimum that you're required to be which is 60.

C

So there's no under funding. You don't have to worry about 30 years or anything like that.

J

And people are looking along.

C

So that's one of the reasons why the liability keeps going up.

G

Martin um on the contribution, the employer and employee, obviously the city is the employer. um Now we pay that much. I mean how the employee contributions is that taken out of their pay.

C

That's correct, that's my understanding, correct! So it's actually, it's employer.

G

C

So it's employee comes.

G

Out of the paychecks.

C

It's based on the union contract all right.

C

And I did want to point- and it's just one of those things on page 49 at the very bottom.

C

We talk about in the very middle of the columns as current discovery, so the x-ray uses various discount rates to calculate the liability, the assets you know um overall position of the pension system.

C

So, as we talked about general government, employees have seven million dollar net liability, but if that discount rate changed just by one percent, that number could increase to 12.9 million or if it changed the other way, it could actually decrease to about 2 million. So basically, what this shows is there's a lot of assumptions in the actuarial analysis.

C

It's the best estimate that they have based on history, based on historical returns, on investments based on projections for future benefits and inflation rates, etc. But if that changes just by one percent, you can see what happens to that liability: the police on fire, it's at 9.1 million that liability, if that discount rate increases by one percent you're actually in a net asset position of 8.5, because that liability drops now if that percent decreases, that 9 million becomes 30 million. So it just shows you that, like small change can mean a lot of dollars.

C

So again, it's just a it's an estimate and it does have a significant impact over time, but nobody really knows what that true percentage is. Until you know you pass forward 10 20 30 years.

C

And then the next item is the other post employment benefits. So these are the health care benefits that are going to be paid to the retirees that is on page 53 of the financial statements.

J

E

Before we go through, all of that did you do anything and look at the drop program. We.

C

Did not test in particular the drop program. We did have a discussion.

C

I want to say this is back in may and june of doing some extra procedures and we provided some steps that we were suggesting, maybe doing that to alleviate any questions or answer any questions. However, nothing materialized in the long run, so we haven't done any particular steps, because.

E

My concern with is is I'm under the assumption. I could be wrong that the drop program, the the the way everything is stated that police and fire are guaranteed five percent on their return.

E

Now I want to know if that five percent is given automatically or if, if the market doesn't gain anything, for instance, myself, I have an account with merrill lynch and they guarantee me five percent. Okay, I can't lose my principle, but no matter if the stock market goes down, I'm gonna get five percent, but if the market goes up, 23 they're not going to give me that five percent correct.

E

I want to know if they're getting the five percent from the taxpayers, along with their gains and how it's collected, and if it's collected from my understanding through act 345.

E

I want to know why, because the two aren't related, one is an active. One is a contractual thing.

C

No, I understand it and.

E

That should be audited to find out how that works.

C

So if you'd like us to test that, we can definitely test that. My understanding is based on the contract that the five percent is guaranteed. But if the gains are higher than five percent, the city is not liable for anything and.

E

That's what I'd like to see, because I don't see it and our taxpayers need to know where their tax dollars are going so.

B

There's there's been, as you are aware, uh one of the residences asked in regards to that particular fact. They said that they could not find it anywhere in the contract, so I don't know if that's necessarily you or maybe kerry can provide.

K

This wrote a letter on it. I I wrote a letter around this and frankly right now without redeeming the letter. I don't remember all the sub, but my recollection was it's: what's required in the current contract.

D

And if you're going to end up addressing.

A

K

You need to address, what's in the current contract,.

E

Correct so the the but these are the you know when I look at a financial statement and we we put in x amount of dollars to a drop program that should be in this book this. This should be public knowledge, and it's not here so if I'm giving five percent okay on top of 10 15 20 25, you know you're acting as a bank at this point in time.

I

We get a separate audit of the pension system, as I recall, there's.

C

No separate order, so it's part of these financial statements in the pension system. We did not see that the city's contributing extra five percent or anything like that. That's.

E

My concern so we're not being transparent to the public that.

F

Said: hey you're, paying.

E

This amount, okay and if you look at the overall amount of money, that's in a drop program, if you throw five percent of there, that could come out to a couple million dollars.

A

E

B

E

B

E

But I want it in the book: it's not being auditioned.

B

And so it's taxpayer money so the best place to find that out. Maybe gary can send us at least that particular excerpt from the contract that shows the five percent, but either way. I don't think it's for martin to determine that.

C

Right now, and then I apologize it's no problem, so the only comment I would have is that we're happy to do extra procedures if you'd like us to test us. I do know that the number of employees that participate in the drop program is relatively small, so it's like 20 or 30 employees, but.

E

Basically, it's a few million. It's a lot of money. That's.

C

A question first gary can I I think it's it's important for the city to get some information and again we're happy to check into that as well, because I mean I.

E

Mean if the taxpayers are putting money into that, they need to see it. It's it.

C

It's like I said my understanding is: there's no money that came in to make up the five percent just because the investment.

B

Earnings have been higher than the five percent over the last. I just like.

E

To see it, but.

B

Just but just to be fair, this is something that's just a part of the contract, part of the negotiation, a which would be more something that an administration to provide to us but b. In addition, that don't forget any type of pension and or incentives like that is a part of the ways, but that's part of the ways that we bring in police officers, uh firemen, where they want to come here instead of other cities, because our pay is not necessarily great.

E

If I was a cpa and I'm not- and I just happen to go on the state website- and I bring this stuff up- and I knew exactly what I was looking for- it's not here- so I'm gonna, I'm gonna, I'm gonna, you know like when I go down to city hall and pay my taxes. I got.

B

A legitimate beef, but when you say it's not here, the only way it should be in here is if there was an actual dollar amount that was paid by the city towards the pension I know, but what you're referencing is. What's in the contract? No there's.

E

Nothing! No! No! No! No! If it's, if it's zero contribution, then it should be set zero contribution, because the the rate of return was higher than five percent. Okay,.

B

K

This would be my recommendation. I did a letter on this. I don't remember all the ramifications of the letter. If there is an issue with respect to where the money is, that's not something that I would address, that would be something that the pension fund or the account.

I

And we tried that, for the pension attorneys can.

B

You can you gary, maybe resend the letter.

K

Maybe I can send the letter.

B

Yes, because we also have newer council members too right.

K

So I'll resend the letter and.

B

I remember that martin.

K

As well with regard to that, and then if there are issues that need to be looked into that require accounting expertise, they can look into.

B

But my point is it's not for martin to determine, I agree with how much we pay, but, but even if it's zero, I I don't know if it's necessarily if there was nothing. The contract says that a minimum they'll get a minimum five percent. If it's five percent we'll be paying it. But if we didn't pay nothing this year, then there's nothing to go.

E

On there yeah, but you could show a zero zero could.

B

E

Item should be a line item.

B

Okay, so let me ask you this per accounting practices. Would there be a line item on there saying zero? It would.

C

Not be normally, though,.

B

C

But you know that's something that it's something that could be definitely uh looked into. It could be put into the mdna the management discussion analysis to show the numbers of how many contributions went in to supplement any drop program. You know shortfalls or anything like that. My understanding is zero and it's been zero, for, I believe since the inception, because I believe your returns have been higher than the five percent over the lifetime, but I think it's something that could be incorporated into the future uh without any issues.

J

L

C

D

Don't know how long have you been.

C

C

You take something, that's correct, so I have not seen it, but I also realized that if you break.

J

It just for just for transparency.

D

C

J

Be just something where a resident.

D

J

I may never have paid for it. I've invested in it, nothing is coming out of my pocket, but if I do lose some type of money I want to you know I want to say you know 000 or 100 the.

M

F

Million is contribution.

F

It's a part of the 500 million dollars, so the cpas are not going into details about the contribution suggested by the actuary report, which is certified by the pension group and you're not going to see it. The.

C

One commentary and.

F

He is not responsible unless you want that one here for you.

C

So the five million dollar contribution goes into the pension system. It's it's not five million dollars that makes up lost earnings or under five percent earnings.

C

So I do want to highlight that that the five million dollar contribution is actually determined contribution that you had to make during the year to keep funding the program, the pension system, the pension system, but not the drop program. The drop program is part of the pension system.

E

But they're separate ones and one's a contractual thing. So how can we tax the people? How can we, how can you tax me as a resident? Okay, as as an act, the act itself supplies them so much money, so the.

C

uh X345 funds, the pension contributions that are to be made by the employer drop program is not funded by the employer, so those are that's the disconnect, so I just want to make unless there's the shortfall- and I don't believe, there's any shortfalls. Okay,.

E

I understand that, but now, but now you're mixing a contribution: okay, but you're mixing a contractual thing with an act: okay,.

B

Great, the only concern that I've got is we're doing contract negotiations here, yeah.

M

And in fairness,.

B

To martin yeah, all he does is look over what we have, what it's actually done for the administration and the police and fire. So it's not fair for us to go after him as far as that's all. No, no, I don't even go after them, I'm sorry, but that's all part of contract negotiations and- and we can't be doing it right now so martin, so I don't mind continuing.

C

With no no the one comment, I do have to say that, like when uh council miyaki forwards the letter and if there's any accounting assistance or anything that we can provide, we'd be happy I'll.

B

I'll be okay with maybe doing a just a small study study session. If the council members needed one okay.

I

That's what everyone.

C

Has lawyers my I'm going through the tunnel? I can't hear you the.

I

Term pro bono is for lawyers.

C

um Page 53 is the other post-employment benefit, so it's the health care system. So, on the flip side, so, as I mentioned, pension system is pretty well funded.

C

These charts show the general government employees, the top, is the trust for the general government employees and at the bottom, is the police and fire the total liability for the general employees. You can see it's 15 million dollars at the end of the year. Your total assets to cover that in the middle car are 1.2 million and your net liability as a result is 49 million. So that shows that your pension plan or your opec general employee plan is funded. 2.38, 2.8 2.38, that's pretty low, it's very low.

C

However, you just started to trust a year earlier. You just started funding the trust.

G

How long did you say it's gonna take.

C

You had a prediction, so you have to get to uh 40 funding and I believe it's 30 years allowed by the state, but it's only 40 funding. So in order to get to that, you have to have about 20 million dollars in assets at the end of the 40 years.

J

So dave's granddaughter will be. You know, fixing this all up correct.

B

If she becomes a police officer right.

L

Yeah well, no, this is cp.

C

So when I say those assets have to become that, so it doesn't mean that the city has to contribute all 20 million dollars. There's gonna be investment earnings. There's gonna, be you know various things that come in, but I just wanna highlight that you are 2.38 funded. That would be one item that gives me heartburn.

M

This is something that we would just pay it in full. Every year.

C

Correct so you were so. The other thing, too, is very important. To note is that the city was not doing anything. That's not probably. He.

E

Doesn't show that the pension system is required.

C

By the state that you have to fund it, you have to pre-fund it the health care system, the opec system. There's no such requirement, there's never been such a requirement. They have to put in so much money every year. The only requirement is, as the insurance bills come in blue cross or whomever, and you have to pay for the retirees that the city pays as you go pay as you go okay, so the city's always done that and it's never been an issue now you have to pre-fund it based on state rules.

C

So now the city is pre-funding. It and that's why you'll see some of is so. The balance has increased so last year your balance was 466 000, this year's 1.2. So you are making those increases over time. So it's going to take quite a bit of time.

C

Maybe council, chairs, grant great daughter or great great great granddaughter, is going to see it 100 funding. Okay,.

B

So the concern I've got, I know this particular number has been low on almost a regular basis. Almost every time we've had um an audit as long as I've been on council almost eight years.

B

What's the corrective action, I know more had more money to be put into it. What are other best practices? What are other cities doing in order to have better corrective action than this, because the 2.3 a is obviously very low, as you mentioned and you're very concerned about it, what kind of corrective action do you recommend.

C

So the city has filed a corrective action plan with the state the state did accept it and, based on my understanding, is the city is keeping up with that correct election plan. So you have to contribute so much money every year to stay on track. One of the first corrective action plans was actually to create the trust which you did last year and now you're funding it. It's the same exact situation for the police and fire op. You were zero percent funded a couple years ago. You didn't have any money set aside.

C

You started funding that a couple years ago you opened the trust and you started funding the program uh you can see in the bottom chart that the 2.7 million total assets compared to the 119 million liability, gets you about 2.3 funding at this point. But again it's going to be very small numbers that are going to be uh over the next few years. Once you establish a pretty decent balance, you're going to have more investment earnings likely, depending on the market situation, so that percentage funding should start increasing substantially in the future. It's not.

B

It's got it's supposed to be. If you mentioned it 40 correct, is it.

C

The minimum is 40 by the state, no.

B

Quote me, but I believe.

C

It's after 30 years, no.

B

We are 2.38 correct.

C

You're at zero a year and a half right now now.

E

Now we go back to act 345, which is the uh the pension, but we usually collect more money for health care through that act, because we've been collecting 10 12 13 million dollars correct. So.

C

That's sold out so 13 million.

E

Only covers for one year I mean not 13 million dollars. uh Eight million dollars only covers one year. The.

C

Numbers are pretty staggering. Yes, so the city is a very big city. You have a lot of retirees. You have a lot of.

E

Employees, no, so the numbers are pretty huge, so so the act 345 is collecting money for health care for everybody, including the retirees.

C

For police and fire, yes,.

E

Yes, so for the retirees of police and fire and.

I

We're self-insured and it's administrative.

E

Well, I I don't want to get to that point, so I just want to see where that other money is going.

D

E

Not just the current employees so.

C

You'll see the contributions employer here in the police and fire op is 3.6 million, so add that to the 5.2 million or so so.

E

That's it so that's so that's where it's all at okay, that's understandable!.

F

E

I'm understanding that now.

F

Thank you so much.

F

E

That's right, I understand that.

I

Now- and there was a change in the accounting standard, making things stricter a few years ago or more that so we're.

D

Really low on both.

I

Made this more more apparent is that.

C

Actually, on your full accrual statements, which is the very first couple pages of these statements- it actually put them on the balance sheet, so that 116 million at the end of this year is actually sitting on your balance sheet. As a liability.

I

How long was that changes two years ago.

C

I want to say about three or four years ago, thanks.

F

Roughly okay for the record that was warning the city since 2004 about an act of funding for the retirees, both general government and policing fire lack of setting inside one day full day of their game. Since 2003.

H

F

I can prepare to transform for reminding every year the city administration that we need to fund that we did not. We stayed, go ahead, go forward and go until the state come down and require by law.

F

It's act 2027 for.

H

The city to land, important.

F

From the healthcare retirement football, general government and police and fire with at least 44 cents, and if you are not required to have a land, the city didn't put the plan in a the current man was part of that. Forcing the administration, mr brigham, he did put the uh uh the plus 115 plus both of us in place and that's.

E

Where we become mr jamal, mr jamal, we can continue on with martin's presentation and later when you speak, you can tell us all of that. Well, I'm, but I'm just saying you.

C

Thank you yeah, the one I I do want to make sure that everybody knows the city was not doing anything incorrect or illegal by any means. No.

E

Well, we know that, but you.

C

Just did not fund it, some communities did some companies did not. uh There is a relatively small percentage of communities in michigan, that is, that are fully funded again, very small percentage, there's a percentage of municipalities, and I want to say probably about a third that's under the 40 percent.

C

Don't quote me on that, but I know it's a pretty staggering number and then there's a lot of communities that are somewhere in between so you're, not alone. In this regard, I'm not saying that this makes it any better. I know it's still a big number and it's a number that you have to focus on so that way over time you fund it. So that way, your ancestors don't have to worry about it. They'll have to lose sleep over it, but at the same time it's not something that has to be an overnight.

C

F

C

Our recommendation is to fund it absolutely every year. Our recommendation is to fund it correct, but it's not something. That's mandatory mandatory.

I

We have 30 years to.

B

Okay, let's continue correct guys, we got it. We got to minimize.

I

C

Comments unless.

B

They're important because.

C

They have a lot to go through. To be honest, like those were the main items I was going to cover in that regard,.

B

So so what I'm going to do now? Martin, I'm going to give you a little break so drink a little water or whatever. I did promise hassan jamal that we give him five to seven minutes. He had some things that you want to talk to us about, so give you a little break and it will bring you back up for for the rest of the questions.

B

F

Because you already spoke.

B

Inside of the meeting.

F

All right: well, I didn't ask for it ray.

B

Musket come on up.

E

I'm going to put you on a timer now and when I tell you to stop you stop, I.

C

Can't stop now. I want to sit here anyway, because I haven't been here in about 34 years here.

B

C

I

Now, oh, you go to.

D

J

B

For those in the audience, martin martin went to school here so he's getting a lot of uh good memories. What's.

E

Your locker room combination is.

M

It a high school yeah.

E

You don't know your locker combination. What kind of student were you? I remember mine? You played basketball.

H

One of the council members and with permission of the mayor I am here, I am putting my old hat, which was I was director for the grant and budget compliance for the city during that period. That's why councilman muscat want me to obligate me to do this observation regarding this, since I was the compliance for the budget, so so my observations are not the word of the lord. It's only my observations.

H

The auditors are independent. They can stick to what they wanted to do. They can report this with you approval, not your approval. They are independent. My comments are not an audit or anything. My comment based on observation from the data they based their audit on so their data are correct.

H

There's nothing wrong with the data. It's part of our book, so reported on supplant money reported truthfully accurately on the numbers.

H

My observation only to make you aware of some of the things that I personally based on my institutional knowledge based on little bit of my accounting and the common sense of the kitchen table balancing books, I'm putting this observation in front of you, you can act on it. You can ask for whatever you want, but those are not stone.

H

Those are not the word of the lord, your thoughts, all right. First of all, the you know financial highlight on page three regarding the increase of our property tax, 1.8 million dollars. This is something I I didn't give you a copy of, but this is part of what martin's talk about cpa. Martin, the 1.8 million dollars are actually only very small portion, which is about 300. Something are unrestricted 1.471.

H

They are restricted funds specifically for actually 45. So those are money you can't use. They are restricted for the police and fire retirees, so the 1.8 million dollars a giant number. I don't disagree the way they reported.

H

I prefer to be reported actually based on unrestricted and restricted funds, because you have nothing to do with the restricted funds. You can only deal with unrespected funds or unassigned funds.

H

So, let's move uh to other things. You know like at the at the middle of that it says the it makes. A statement uh will be paid from the first payment for, like, like martin, referred to as what we call a balance or reserve. You know a one-time water in seoul reserve.

H

There was no reserve, there was a cso over taxation of three point, eight or four million dollars, and that started way back in 2004 and they kept piling those taxations and having the balance to grow with the warning, specifically from planned parenthood. Every year, they're saying consider your high balance of the cso and you have to calculate it. In the new year of taxation it kept growing until we end up with over taxation of almost four million dollars. Those were four million dollars.

H

This is how it's supposed to be reported not as reserved they are not reserved for anything so, but martin was accurate. We are going to use them as the first payment. You know for the pound, plus the 450 000 enters on the band. Let's move you know to uh to where it says it will be paid so and then from consumer sewer and water rate for 20 years.

H

Well, I gave you a packet from the security report filed in the state of michigan treasury department web. You can look at it and you stay there under number four limited tax pledge, it never says water, and, and so unless, unless we consider that under the cpa, rules which I am not aware of, or under the cab or under the michigan state of michigan treasury, a chapter of accounting, we consider limited tax glitch pledge that this is. This is what the council approved.

H

Number four is what the council approved. It says it's it. It's just very clear.

L

Sure what packet are you looking at.

H

I gave you a package uh uh councilman councilman. It should be in yours I'll. Give you a copy of the fact that he.

B

Passed it's pacquiao. He passed out today, not from a previous packet.

B

These that he just passed out today.

E

Shows you the bond statement.

J

E

The packet he gave you a packet, it's a letter.

H

Can you share it with? Can you share more, please.

J

What picture you want.

H

I am on page number three of the resolution by the council, which being reported to the state of michigan treasury department under the security report. Thank you all right. So number four, it says bond ensure advanced as a first budget obligation from its general fund available there, therefore, or if necessary, levy taxes up in all taxable property in the city, subject to applicable constitutional stature or whatever, whatever it never says. That's what you approved the concept. This is resolution by the council yeah.

H

Now, if you move to the next page, which is again the where it says where you, when you fill up the form- and this is signed by the treasury by the treasurer by the controller, it says: go ahead, what it says: primary security pledge where it's read, limited taxes go down there, it says, is there is secondary security pledge it says nothing. It says, none why. Why is why, under other you didn't disclose as being a water and sewage fund?

H

You could have done that.

H

So excuse me uh chair. Please look at this paper because it's important you signed off on it. I understand so source source of repayment. Look at it tax, it says others, it never specified water and sewage fund.

H

So if you wanted to use the sewer and the the the the water and sewage fund to me, I have no. I have no comment other than that and encourage you unless the cpa says wait a minute. This is reported to the bondholder like that. Are we gonna change? This? Are we allowed to change this? I leave that to the cpa, to advise you. I don't know. If I am, I won't do it from the water and so much fun. I won't pay for that bond, but that's what it says in the management report.

H

So we what we, what we are saying in the management report that we are paying from the sewage and water fund how's. That- and this is the report's gonna- go to the states.

E

uh uh Mr hassan, let me ask you a quick question here uh and I and I agree with you on that, and I believe I spoke with mr martin yesterday about it, and but I don't think that has really anything to do with our budget at this point in time.

H

What do you mean this is this? Is the audit report?

H

It's in your management statement, okay,.

E

That's fine, that's that's! Fine! I'm not bringing.

H

It up because it's nowhere in the management statement, page number: three: it stairs go ahead, one two: three: four: five: six: seven eight and the ninth paragraph at the end it says and then all the bond payment, then from consumer sewage rate.

H

And even it doesn't, it doesn't say from from the water, it says from consumer civil right. Whoever putting this report out need to correct that to reflect the truth, how we report our financial data to the state, and now I leave the advice.

H

What can be done? I leave that to to the cpa they are. They are one of the best in the world and this is not their fault. It's our management statement. This is what you are going to sign off.

H

They're reporting this, because you can say yes, this is correct, but at the same time you stay to the state into the bondholder. Otherwise,.

H

So this is not grant moran's statement.

H

And I wasn't part of it because by the time this issued the mayor assigned me to another job, I had no more part of the of the compliance.

H

So let's move on now. Martin, do you? Do you wanna? You wanna put something regarding that? It's okay for them to pay. I mean I don't know.

C

I can discuss that for you. Yes,.

H

So- and I agree with what they say, but I need to bring this to your attention.

H

Because if I can see it, there's too many out, there can see that and believe me or not. Councilman musk had seen it before me. Council mascot tell they tell the audience and tell the other part. What what do you remember when you signed.

E

Well, I I remember when we were discussing a bond issue of 25 million dollars, I I really didn't want 25 million dollars. I wanted the water meters and and the cso separated and the bond that we could have issued would have been about 17 million dollars and uh I remember receiving the quotes.

E

It was like a one-page quote, and we really still don't really know how much all of this is going to cost for the water meters. So we bonded an additional, uh I don't know nine and a half uh nine and a half million dollars uh or eight and a half million dollars for water meters and the actual cost per water meter. I really don't even know what it is.

E

Well again, I mean we needed to get it done, and this is the problem when we don't take our time to do things like this. You know this cso thing and it was not from this administration. Let me make that perfectly clear. This can was kicked down the road for 10 years or more.

H

So so what you said also about where we pay this from with the sales from the water and what you see yeah.

E

And I didn't want it to be paid from water and and sewage because it was putting a a a hamper on people paying their water bills and that I'm hoping that everybody pays just a fair share. Because if I've got a household of five people, I'm going to be using x amount of water.

H

So if I've got a household of two people, so so my observation came from a council, a pro-tem.

H

He was a compliance director. It says here from the water, I remember I don't want to pay it from the motor. So that's why I went to the state and looked at the security report, how it's been reported, how the council approved it so.

E

We have to deal so now. We have to deal with that.

H

So, that's how that's how I wasn't digging for it. The councilman here you know, make an attention. uh Look. You took my time you took some. I.

E

Stopped I stopped, I stopped it. We stopped okay.

H

So uh two other very, very small, other okay, other things.

B

To be fair, I gave you 10 minutes with no problem. 15.

H

Seconds I'll give you it's up.

B

To you, I mean I'll, give you another 90 seconds, go ahead! Okay, thank you.

H

Minute and a half, if you look at the page 12, the government government fund balance sheet of the.

D

Of your handout.

H

uh This is this is a news, a new one, okay, so I report.

I

H

Well, it says what it says: unassigned, I'm assigned five million nine hundred. Seventy two four hundred twenty nine dollars correct, see that okay, I gave you a copy of 2020.. That's.

E

What I was looking, okay.

H

So if you add the unassigned fundamentals from last year, when we converted the as the the assigned to non-assigned, the total will be seven million fifty dollars, one hundred thirty one thousand, all right great all right. So now I give you also page 62 on page 62 of this year, which is for part of my package required supplemental information, budgetary comparison schedule corporate fund.

H

Do you have that in front of you? You should well. It says there is 232 481 deficit for this year.

E

H

See it earlier okay, so if this year we only we only wear 234 000 deficit, correct. If we take that money out of the 7 million 51 131, we should have an assigned fund balance of 6 million 817 dollars, not 5 972 dollars.

H

What can I finish? First, you.

E

Got got one minute, yes,.

H

So this is so if we have a balance through balance, as I see it for six eight one seven, then we will be in compliance with the 16 or two months average expenditures that's going to reflect on actually defining.

H

So I don't know. Maybe martin martin can explain if we are saying we have revenue of 51.

E

Your time's up, sir, I can't thank you thank.

I

E

Thank you thank.

I

B

Martin, you want to give just a brief answer to the question and then, after that, we'll continue with other questions from the council members and then, after that, we're going to have public comments from the audience sure.

C

So there's a couple items: one was the capital improvement bonds that were discussed and the other one is the fund balance. The fund balance as discussed earlier is broken up into various components. It's not just unassigned, beginning balance, plus your revenues. Minus expenses equals your unassigned ending balance. It's your total fund balance, so your total fund balance has to be looked at. If you look at the revenues during the year, you had other sources that came in that some of them have to be used for specific purposes.

C

Sanitation levy is one of them, so sanitation levy shows up in your revenue on page 63, as mr hassan is showing. However, the expenditures are slightly smaller, so your restricted amount for sanitation actually increased this year by a pretty substantial number about 500 000, there's other items that restricted fund balance increased as well. So if you look at your cable peg fees, debt balance increased. So you can't just look at unassigned and say: well, we unassigned the 2 million from the assigned portion.

C

Add it to the beginning, balance plus subtract, the net income for the fund and say this should be the ending unassigned balance. You have to look at all the components in total and in total. If you look at last year's ending fund balance for the general fund, you subtract out the 230 000 loss in the general fund for the year. You end up with the total fund balance that shows up on your financial statements, the components you have to look at individually to see what happened over time.

C

So that's question or item number one: the capital improvement funds, I'm so sorry, yes,.

H

Yes, martin, you reported on the.

F

H

Funds and separate items they're all positive, so there was no.

F

Reduction of the unrestricted funds- okay because of the short fall of the restricted, so your statement does not be supported by your numbers. I'm sorry.

C

So if I'm looking at last year's report, the june 30 2020.

B

Okay, just just to be fair, go ahead. Martin.

M

I'm sorry, do you mind tearing your screen apart.

C

uh I'm doing math on the calculator just to see what our total restricted fund balance was last year.

C

So your total fund balance last year, your restricted amount- if you look at your overall roads or not rolls cable pack fees, uh sanitation levy, x345 levy and construction code fees, if we added all those up was about 3.1 million dollars of restricted fund balance in the general fund this year at the end of the year, it actually increased by about a million dollars in total between all the restricted portions.

C

So if you look at last year's unassigned and assigned portion, the 5 million of unassigned, plus the 2 million, comes up to 7 million you unassigned, the 2 million, but a million shifted to restricted amounts because your sanitation levy went up and uh a restricted amount and x345 level, because you haven't spent those money on those purposes yet. So that's why your unassigned fund balance only changed by a million, because a million went into your restricted portion, so the math does work. It's just it's kind of like.

C

If you have multiple savings account at home accounts at home and a good example is. I have a daughter, that's about to go to college. So if I'm putting money into mesp fund, I still have the money, but it's spoken for for a specific purpose, so in total it's my net worth or whatever it is, but it's in a separate fund, that's kind of like your restricted fund balance.

C

It's spoken for for a specific purpose, so you're just shifting it so like I moved it from my savings account the five thousand dollars or, however much I contributed into her mesp account, and now it's spoken for. So that's exactly what's happening here. So it's not like you're short on the money. It's not like you spent it. It's just sitting in us for a specific purpose.

B

Okay, any any other council members have questions.

I

I have general questions not about this issue right and then I can well generally.

C

Let's keep it let's.

B

Go yeah. I just want to make sure we stick with the audit, though, questions about the.

I

Audio okay, go ahead, so number one, the the uh martin and thank you very much. You gave a very thorough good snapshot and looked at an explanation of our strengths and weaknesses. The 95 000, that was a estimated I guess lost from the water fund could is. Is it a fair statement to say that was money written off from on water bills?

I

Could that have been a part or large part of that? uh You know water bills written off or or is that hard to say no.

C

So what ends up happening? So I assume you're referring to the 95 000. That was not posted right, so the 95 000, so not to give away all the trade secrets for our testing, but uh for water and sewer fund. When we look at the receivables, so we test your revenues, we do a sample plus we also look at based on purchase or sales of units to residents. We look at the independent reports. We do a lot of analytics to do that, so we do that on sales. We do it on expenses.

C

We also do it on your receivable balance at the end of the year. So when we compared all the data- and we looked at your at the end of the year- receivable balance- it seemed off by 95 000. It seemed like it could be too high.

C

So we're saying it's a projected amount because we're really not sure if it's off or not, in my opinion, based on all the information and other testing, that we did your accounts, receivable balance in the water sewer fund is completely inaccurately stated it's just our analytics, we're showing that could be up by 95 000 out of the total 8 million or something like that. It's a pretty substantial accounts, receivable balance.

C

So in order to not do extensive additional testing, we talked to the city and said: let's just put on this projected error: we're not sure if it's really an error or not, and then over the coming months, when the city is collecting the receivables you'll see if you collect all the receivables or not and in my mind, that's exactly what's going to happen. You're going to collect all the receivables, there's no issue or anything like that- is that 95.

G

000 include like uh unmetered loss.

C

No, it's just 95 000, just purely your total receivable. So, like all your billings that um you sent out to the residents, it just seemed higher than normal in the years past, and what ends up happening is it's really again? 95 000 of the total amount, it's a very small percentage, but if you think about you know like there could have been slightly higher water use in june because it could have been a drier month than the year before.

C

So that's why your receivables balance went up and out of proportion a little bit, so it's very weather driven it's also economy, driven because when economy is bad, individuals stop watering their lawns because they want to conserve some month. They don't care about the dead grass. The economy is going great. They want to have the greenest grass ever. You know like out of the whole block, so there are some variations and that's why we were not really concerned about it.

I

And my second question, which I'll ask quickly and you'll probably have to get back to us, is so I.

D

I

Some of the past year reports here, uh audit reports, 2017 2019 it if you know- or if you can look up how many past years over the past 10 years, was slowness. What I'll call in the reconciliation of the bank statements mentioned as a finding.

I

It was not in 2017, and I asked the prior treasurer and he says it over the 10 years. It was maybe mentioned one year so that wasn't a successive fighting. The the the.

D

I

You you said, I thought I heard you say that the ideal is to reconcile the bank statements within 30 days, correct. We were closer to three months and and how often that appeared in the past.

C

So, based on what I recollect it never occurred in the past under the old uh treasurer's watch, I guess, but you did have a lot of changes this past year, so this happens very often when you have a lot of changes, so you had the retirement of the treasurer. You had an interim treasurer, then you had a new treasure and as the changes occur, things do tend to get. You know, go fall through the cracks a little bit.

C

You did end up, ultimately reconciling the cash balances, but it did take a lot longer than normal, and one of the biggest issues in any community in any business is really cash right.

C

You have to safeguard cash waiting three months to reconcile a cash account could be a problem because- and I'm not saying anybody did this and clearly nobody did this, because no one's living on the beach somewhere, but in theory somebody could take a lot of money from the city and the city would not know in this case for three months until the cash is reconciled.

C

So that's why cash is so important. That's why we're highlighting this item because cash should be reconciled the following month after month end and, to be honest, you know ideally, would be reconciled within a week or two.

B

But you mentioned in the report was 30 to 45 days, so.

C

30 days is like confidence, we're comfortable with it anything over that not so good. 90 days is a long time. I've seen.

D

It as bad as six.

C

Months to a year, which is really bad, I agree. Thank you.

D

I

C

This, by the way, I've seen it in other communities not here, make sure that you know that well,.

I

I can see this really. I had a question for either yourself or the mayor about. We received a statement from the treasurer saying she requested an efficiency study or something like that. It was it her or was it the administration or both.

A

No, the statement actually came from that the michigan treasury to our previous mayor.

I

No, so we got a one page letter from the treasurer when it came the last time she said in there who.

A

I

I'm sorry the treasurer okay, our our current treasurer. She said I've requested an uh efficiency study or something like that for plant moran, and that was not her request that it.

A

Thank you, okay. I can tell you right now. You know you know, as I mentioned at the meeting we had before midnight.

D

I don't know if you guys need.

A

Another you know, okay, thank you.

D

A

We have okay, we do have um a lot of things in place right now with your approval. Obviously you saw the next thing on the agenda. When we start the meeting, we do have a great plan in place that we are. We are going to go through ev every item in the city, as you know, as mentioned by mr martin, uh when when they did the audit, you know I did mention and again I'm gonna say it again. I don't have at it.

A

You know just go through everything that you can find, because, obviously you know we will make sure that we're not gonna have issues with the state treasuries. We we've gotten two letters since I've been on.

A

There was one letter when I came in and they sent another letter. In fact I talked to them. I mean not talk, but I had an exchange with emails with them like three days ago. They needed more information.

A

So with that we have the item with gaap that we're gonna. Hopefully the council will approve this. That's gonna put us in a great position for next next audit cycle and also, as I mentioned, also that we have a person that is contracted and he's going through everything. This guy is brilliant and I'm sure martin will say the same thing he's helped us to get to this point. You know he was on board for six months, trying to get us to this, uh to where we have right now. Otherwise we have been really bad situation.

A

You know, I think, plan ryan. How many times did you guys come to the city this year three times to do the audit so yeah about two or three times? I got you okay, so we do have a plan. You know we have the findings, but we have an extensive plan that we we we make sure that this is not we're not going to have the findings that we had for the last 10 years.

B

I

B

Thank you. Thank you, councilman martin. I have a question for you. If you were to do right now, a rating in a net order number one number, two number three: what are the top three things that need to be addressed this year, based on your findings and the audit.

C

I would focus on your.

B

And name them in order, I want them ranked.

C

Number one accounting records, I'm.

B

Sorry, the accounting.

C

Records are number one you.

B

Should mean about that, you should not.

C

Wait: seven months to get the audited financial statement correct. So that's number one in my opinion, you should be able to within a month or two. After your end, you should have a clean trial balance financial statement coming from your finance department without any issues, without any adjustments and.

B

What you are referencing there, because this heart is through june 30th 2021 and we are looking at it here mid-january.

B

Typically, as you told me when I spoke with you on the phone, it's typically right around october november, that we're doing this. Okay, that's number one, that's number one! So so with on, because I want to address the top topics and on that one, I have every comfort in the world that this administration is going to be doing everything within their power to make sure that that's addressed.

B

I do know that we have a mayor. That's a former auditor. I do know he's a military man, so I know he crosses the t's and dots the eyes and me and him have had conversation, and he has committed he's committed to making sure this is done so that one hopefully we'll have that resolved this year. Things will be done right next.

C

uh I would look at the arc by money that you have and I would look at ways to spend it over the next few years, make sure that you spend it properly, but you make sure that you make the right investments that would be high priority. I probably make it you know two or three.

B

But on that one we have also criteria from the government specifically telling us what we can and cannot use it for correct. So that'll be a little bit easier to fix. Hopefully- and I do know that the mayor has mentioned to us- that he's going to have a meeting with us as a council body to keep us abreast as far as what his plans are for use and then, of course, we'll be involved with the conversation. Mary had something to say.

A

Yeah, so with the arpa I mean. Obviously you know this is pretty new to all of us. You know we. We have the money uh in our account, as martin mentioned, um and please mention the mock mayor. I'm sorry, the dollar amount so that the residents 12 million dollars so far, 12 million, but we're getting another close to 12 this year about 25. So we.

A

With that money, uh actually we've gotten a lot of kudos from other cities or even us on a state level that we haven't spent any of it because some some cities throughout the united states. They spent a lot of it already, but they had no idea. There's there's certain ways that you can actually obviously spend the money. However, there's lo there's a count county state and federal money that you can use in addition to the arc of money. So this is just to give you an example.

A

You want to you know, let's say, for example, you want to dredge, you know the e-course creek. Let's say it's going to cost you, let's say 10 million dollars. We can say you know we're going to spend, let's say 5 million to dredge it. The county can say you know what okay. In addition, we're going to put, I mean, don't quote me on the numbers.

G

Right right: okay,.

A

We're going to give you, let's say another million or two million dollars, then you go to the on the federal side. They say you know what, if you do that then we'll pitch in some more so instead of spending, you know the 10 million you can actually spend 5 million, then you get funding for the rest of the five years. So with that, that's why we really haven't done anything with it. You know, because we're very cautious you know with how to spend it. You know where to spend it and we need that's another thing.

A

Another council meeting that we have to have to let you know that my plan uh for uh having somebody to track that, because that's every penny has to be accounted for, so you can't spend a dollar without accounting for it, and uh so that's that's. Why we're cautious? We want to make sure that we have somebody or or an entity or a person to be on-site to make sure that stuff is done, so we are working on it and I will present it to the council as soon as we have the plan right.

C

A

Third item: martin.

C

I would look at your op plan. Make sure you stick with your corrective action plan, make sure that you're funded at the 40 level in I believe we've talked about 30 years, so that would be high priority for me as well. Do you have.

G

Any recommendation how to do that, like maybe amount.

C

Wise, so you do have a plan in place and I don't recall exactly how much money is going in every year. I would just make sure you stick with it and you monitor your investment earnings as as well to make sure you're on pace with that percentage to get over that 40 percent market.

F

Is based on actual reports.

B

If you had to rank us as far as this audit, and you had to give us a grade as far as how we're performing where would you grade us we're in a school here.

B

Let me tell you why I'm asking some of these questions, because sometimes you take something very complex such as this and you need to have the residents know where are we standing?

B

This is what gives them a better perspective, because we've been talking here for a few hours, a couple hours in an hour on tuesday and we've thrown around all kinds of numbers, but I want the general the residents to get a bird's bird's-eye view as far as where we stand- and I know I'm putting you on the spot- and this is not necessarily a reflection of him administration, because I know there's been some mistakes that have happened for many many many many years, and I know that the current administration is doing everything they can to make corrective actions, and I like that, but still where we stand today.

B

Where do we stand? Because you know the city needs to know, I want to know, and then the residents need to know. So, if you were grading us riverside school here, it's okay.

B

I know we're not a plus, and I know we're not a so I can that's our goal.

C

So I can't grade you on your financial positions.

C

And things like that, so, given the material weaknesses that you've had over the years, I would say for a number of years, you're probably resting around a seat this year going into the audit. Considering that we started normally, we start the audit at the very end of august or early september.

C

You end up hiring an individual that the mayor was mentioning to help you get through the audit and it was a significant lift by him and others within the city to get to the starting point of november. First for the audit, because before the records were far from close to what it needed to be, I mean like at that point. It was probably like a grade e or an f for g or something.

D

Like that, but.

C

Honestly brought up everything, it cleaned things up quite a bit. uh The city did a an amazing job over the last few months. Getting it to the point for us to audit, and I know I've had internal discussions. I've had, inter discussions with mr cebuda who's, the individual and being able to present to you early in january back in october or september. I would have thought there was no chance. We could get there.

C

The city got there, so I think you're resting at that great sea. Again, you brought it back up and I think that the administration right now has a great plan in place to get you to an a within.

D

A very short period.

C

D

I think that's.

C

What you should exactly expect over the years it was a seesaw, it was if you rewind back 10 years ago. I felt that you know you were always probably like a b b plus a minus something like that. You didn't have many findings. You were doing pretty well then over time, especially when the controller position started changing, and there was quite a few that went in and out when you have fresh sets of eyes coming in it's sometimes it's a good thing to have a fresh set of eyes a lot of times.

C

You really need that institutional knowledge, when you have no idea when you're coming in opening up a computer and you're really not sure where to start it becomes an issue and those material findings started racking up uh over time and you can see in our reports over the years. You had material weaknesses, sometimes higher numbers sometimes lower, but you always had those.

C

My goal, number like my goal would be. As I mentioned, number one would be overall accounting getting rid of those material weaknesses, and that means you can have reliable financial data within a month of your end. Very likely and you can even probably have another monthly basis- that's reliable.

B

Okay, thank you mark, so at this particular point, I'm going to go ahead and move to questions from the audience. First in case somebody has any questions for martin or even for the council and after we do that we'll go ahead and move on to zoom.

B

So that being the case two minutes, any questions come to the chair.

A

Council, chair.

K

B

K

That this is actually treated as public comment.

B

I'm sorry public comments, yeah public comments, absolutely right. Yes, correct! So two minutes. So two minutes each.

J

Thank you, martin. Thank you.

E

Martin, thank you. Thank you. Thank you for the whole team. You cleared up a lot of my issues today and.

B

And I got to give you kudos, martin anytime, we call on you, you always spend the time and quite a bit of time uh explaining things and going over things and and make sure we're in the right direction.

H

That's not gonna a good job. That's not gonna increase his salary.

H

He knows what he's doing he's being a veteran in this area. He's partnered with one of the best cpa, firm.

B

H

Our our goodness to him that's okay, let's start! Okay, again, I need to remind you that I, I still don't agree with the unassigned fondants. I think all the all the funds are reported: segregatedly, they're, segregated they're, restricted from the not respected the total front. Bands, don't mean nothing, because the devil is in the details.

H

That's how accounting works. So when we go into each individual one, we focus on each individual balance, so the individual balance of the assigned should be six million. Eight hundred seventeen six fifty one to my calculation, which is far less professional than the calculation of the cpa firm.

H

But I would encourage you to look further into this, because this is gonna actually relieve us from one of the finding, which is, which is probably most likely, uh the the compliance with the two months and 16, and I encourage uh my friend cpa martin to do and ask his staff, because on page 62 it says the the deficit of this year's only 232 dollars.

H

Okay, now I don't agree with the finding that it says the city lack internal control. The city does not lack internal control.

H

The city have internal control through the compliance with the state law charter of accounting, city charter, ordinance and resolutions we may have. We may have some deficiency in not following our internal control, but we don't lack internal control. We do have internal control and I'm sorry for that. Thank you. Thank.

B

You very much thank you. Thank you. Is there any other public comments from the audience going once twice? Okay, so we're gonna go ahead and move on to zoom. Now now during the zoom. If anybody has any uh public comments, please keep an eye on our city. Clerk, uh lincenia, she'll, put up a card that will say 30 seconds 15 seconds and then stop. So please keep an eye on that, because we're trying to avoid being rude and getting somebody to stop, but at the same time we have to abide by the rules.

B

Thank you, lin. Anybody.

M

On zoom that you want a lot on, we do.

B

Can you hear me yes, vince, go ahead.

L

Okay, it's vince drapkowski columbia, street dear or nice michigan wayne county. um My question one question and that's for martin: um uh first of all go rebels and um because.

D

He's a riverside guy.

L

My question was regarding the peg fees. I can't quite hear his statements, because the sound quality is iffy at times, um did you say or that the bank fees can be used for uh payroll or no.

C

So, based on discussion, to be honest, we're not sure 100 based on fcc's rules uh about a year and a half ago. The answer would have been no and that's the stance that the city's taking and that my recommendation was for the city to re-evaluate that position regularly, just to make sure that you're doing the right thing.

C

If that is the recommended approach by the co by the council, uh I would recommend sticking with that. However, if you're only able to use it on capital outlay, all over time that restricted fund balance for peg fees is going to end up.

D

C

Unless you're just going to keep improving the studio etc, so that's that's my only concern.

L

Yeah and speaking of the studios, anybody uh know when it will be done or is it close to completion.

A

Council chair, thank you, council, chair, so we're actually they got finished almost painting. Today we have pretty much everything in place structurally we're waiting on the furniture, so tomorrow they're going to be putting some lighting and the biggest uh lead item right now is the actual weather, where the council uh will be sitting for some reason: that's taken a long time and, as you know, with kovit there's a long lead now, so even that we were anticipating and getting it done. So we were supposed to be in our council chambers.

A

This week, but unfortunately, with the lead time with the furniture, not so we're hoping that they're telling us now by mid to late february, will be done.

L

Thank you. Thank you very much. Everybody have a good night. Thank you.

B

Thank you, vince uh gary go ahead. Yeah.

K

um Going to be sending a letter or copying my letter regarding the drop, I'm wondering if you want me to circulate the laundry room.

L

Closer to the right, you.

E

Have the microphone closer, I don't think it's.

K

Either time, thank you mayor, um so, given the fact that I'm going to be sending the letter regarding the drop since we have new members of the council, does the council want me to send the letter regarding the peg fees and I could.

D

K

And then I'll also uh shepardize, that is check to see what the status is on. The order that I refer to uh just to provide another show, but.

B

No new research is needed on there, or at least no major research as well.

K

No major research but I need to see correct. I have to do research to end up seeing if what has happened with the order that was entered by the fcc. The fcc is the body that makes these determinations correct and they basically said no. You can't do this anymore and um that's why we had that. If that's been overruled, then we'll be.

B

Able to so you're going to update that particular section, because I know they were pretty thorough. The the emails that you sent on both particular issues, so yeah.

K

B

Yeah, if you don't mind, please send them again to the council members.

K

B

Dude, and just just for full uh for full transparency and disclosure to um and give me your opinion, is it okay? They share those on the website, see I'm all for everything that happens here. Everything that happens that can be shared should be shared to the residents. Is that something that can be shared to the residents? I.

K

Have to review them again to see if they contain any information that I would consider to be something I would not state at a public meeting sure if it looks like they're, they're fine and I think the peg fee one I did. I thought it was supposed to be so that it could be shared in general, then I'll indicate that this can be shared in my email to everyone.

B

And at that particular point, you can send it to the clerk's office to put on the site. Okay, uh councilman tom wants a glenn. You.

M

Know due respect to our corporation council, his letter is really uh kind of invalid until you find out the fcc ruling. Is that correct? I mean no, the.

K

Fcc had made the without getting too much detail, but basically what happened is. As councilman constance said, there was a general federal statute that was passed. That was not necessarily absolutely clear about how peg fees could be used. What portion of them could be used for capital outlay and for general expenses?

K

The state of michigan ended up coming up with its own rules to give certain certainty to providers, but it also ended up saying you can use these fees for not only capital but also for regular ongoing expenses. Like salaries, then the fcc came along and basically because it was influenced by the industry ended up saying: oh no, no, no! You can't, and you can't even do it if your state law says that you can end up doing it.

K

So there's been a pushback from the industry that has translated into policy over all these years and that's what the latest rule is by the fcc. Their order was basically saying: well, no, you can't use these, and we've always meant that even we've been doing it for like as long as we've had cable up to this point, and even though the state statute said that you could specifically said that you could so now.

K

The question is whether or not the fcc's order, preempted even the state statutes, and now you can't use them for any of these purposes, and the last we were added was that was what the fcc's position was now. The question is whether or not that has been upheld. Like I said, the fcc was upheld most of the way, the first time it went up the first time they came up with the rule, the second time they were basically told. No, this doesn't work.

K

The third time is this time and now they're trying to take another position and it's quite possible that the u.s court of appeals will say no you lose, but if that's not what happens- and I tell you- you can use this 1.2 million dollars. However, you want to then we're going to potentially end up having legal actions against us by that's.

M

What I mean your letter is strictly an opinion letter, correct yeah, but it's a.

D

Good opinion, but we have to wait on what the.

M

Fcc ruling is before we spend the money on anything other than capital improvements. We.

K

Should what we should do is follow, along with what the fcc order basically ended up saying until we have some certainty about whether or not they're going to be upheld. That's what my opinion was: that's why it changed. It changed because the fcc came up with their new order and because they came up with their new order.

K

We wanted to make sure that we're not going to end up getting the city sued uh about using those funds improperly. It was a five six.

I

Page letter that was correct when written and it's just good for background all.

B

Right councilman, broad subject, so let's get back on track uh any other uh public comments from the audience on zoom. I don't see anyone. Nobody else, one last chance, just in case public comment here. Let me just make sure it's nobody in the audience go ahead. Councilman. I.

J

Just want to thank the mayor, good job. This is awesome. I'm excited to be making these next goals I mean, except for this being on council. We've had some good things, new job trash. Thank you so much. uh I know I drove you crazy, I'm sure everybody else here has been driving crazy, but I want you to know. I really enjoy how patient you are and thank you for the exclusive information. No.

C

I I appreciate the questions and you know so. Nobody drives me crazy with questions I actually don't like when I don't get any questions. That means no one's, probably listening so.

G

D

Appreciate the questions.

C

And as I'm typing along I'm going to send everybody, I'm going to send the council chair reconciliation to the fund balance. I know that was a big topic of the unassigned balance, so you can see the beginning and ending exactly where the money went or how it's shifted.

C

So that way it should alleviate any questions. But if you do have any questions on that email, just please let me know- and I'm happy to uh to address. Martin.

E

Thank you for you, thank you and your team yep. Thank you hassan jamal, for helping me and pointing things out to me. I do appreciate your time. Thank you very much. Thank you. Martin go ahead. Councilman.

J

And uh just just to confirm the pro bono that you're going to be working.

B

J

D

B

You thank you. Everyone.

D

And we'll go ahead and take a five minutes.