City Operating in the Black; Enterprise Bond Reserve Underfunded
By Karen Gould

For the fiscal year ending March 31, 2006, the City of Mackinac Island was in the black and increased its surplus $30,752 to $140,483.

Auditors noted, however, that the Enterprise Fund bond reserve for the Department of Public Works (DPW) is underfunded by approximately $298,000, although recent water and sewer rate increases and a one-mill tax levy could correct the deficit by March 2007.

The DPW bond issue requires the department to hold $300,000 in reserve in a separate account to back the bonds and repair the system.

Annette Eustice of Rehmann Robson of Cheboygan explained the audit during the Wednesday, August 30, city council meeting.

In June, Council increased the general fund tax from 7.51 mills to 7.60 mills, and levied one mill for solid waste to raise $174,262. The millage was requested by the Board of Public Works last fall, along with rate increases for the next six years. The rate increases and millage are expected to help get the department out of a Three million dollar shortfall.

The DPW is expected to present to Council next month a report tracking the impact of the first round of rate increases and the latest use date through September, said Ms. Eustice. Rates are planned to increase again in May 2007.

Also affecting the coming year's budget will be costs of approximately $375,000 for the repair and maintenance to the membranes at the water treatment facility and a 50 percent increase in landfill debris tag fees.

Ms. Eustice also reported to Council six accounting comments and recommendations. In addition to noting the underfunded bond, auditors suggested that the city pre-number its zoning permits, building permits, bicycle licenses, and business licenses.

Without the numbered forms, a "weakness in the system resulted," reported auditors.

Permits could not be accounted for in order, which would ensure that all qualifying parcels were assessed or billed in a timely manner. The matter relates to a city ordinance that states an impact fee will be assessed to any user of water and sewer when services are first provided, and when a user increases usage by property expansion or a change in the type of usage.

Auditors also recommend that local and major street funds have a separate account, which would be used to account for gas and weight taxes used for street and highway repair and maintenance. Currently, theses funds are in pooled cash. The Michigan Department of Treasury requires the separate account.

Auditors say the city needs to make annual disclosures on its municipal securities or if the city's outstanding aggregate debt exceeds $10 million. This is a Security and Exchange Commission requirement.

The city must submit a Michigan Finance Qualifying Statement to the Michigan

Department of Treasury. The filing allows governmental units to be eligible to apply for financing during the fiscal year.

An electronically filed financial statement must be submitted by September 29 to

the Michigan Department of Treasury. The auditors will provide the document to enable the city to comply with the filing requirement.