City Council 2/11/08: lead and audit presentations

Majewski and Ahmed were absent. Shulgon was late. Klein served as the chair. There was a technical problem with the video on our end, and none of the sound was recorded.
Klein congratulated Ahmed and his wife Lisa on the birth of their son, Zevon.
Algazali moved to have public comments before presentations. Gordon seconded it. When the vote was taken, Algazali and Gordon voted for it, and Klein and Stackpoole didn’t vote. Klein said the resolution failed. People in the audience questioned the vote. A roll call vote was taken. Gordon and Algazali voted to have comments, Klein voted against it. After a long pause, Stackpoole voted “yes”.
Algazali asked to remove contracts with department heads from the consent agenda. Shulgon arrived.
No one from the public wanted to comment.

Presentation on lead health hazards
Mary Morrow of the Wayne County Prosecutors office thanked the council for inviting her to comment and was glad to hear that Hamtramck is considering this. The proposed lead ordinance would require checks for lead compliance before properties could receive certificates of occupancy. A new state law makes child lead poisoning by landlords it a criminal offense. Most landlords are concerned for their tenants. The law is good for educating property owners and requires remediation. Children are being used as lead detectors like canaries in a mine. By passing this ordinance, Hamtramck would be on the cutting edge of where the rest of the county and state will be going. There is an EPA grant that landlords will be eligible for, and 8-hour training sessions on lead safe remodeling will be available. Otherwise, landlords will have to hire certified contractors.
Vanessa Parker is a civil litigator who represents lead poisoned children. Children with lead poisoning go from speaking and hearing to loosing these abilities. In one case, 4 children under age 8 were poisoned, and the defendants were 70-year-old people who owned two properties to supplement their retirement income. They didn’t know about the danger.
There are many myths about lead poisoning. Children can be poisoned by dust, especially around high-friction areas like windows. An amount of lead paint dust equivalent to the contents of a Sweet&Low packet is enough to poison a child. Parents can not get at the money paid to children who are lead poisoned. Giving tenants a pamphlet warning them that there may be lead paint does not protect a landlord from civil litigation under Michigan laws on reasonable repair. She trains landlords on risk management and loss prevention. A participant in one of her classes wished he had taken the course sooner because he had to pay a $375,000 settlement for lead poisoning.
The presentation on Safe Routes to Schools was postponed for two weeks due to weather.
Audit Presentation
Nevrus Nazarko, controller and finance director, explained that the audit was completed and sent to the state as required. He introduced the auditors from Alan C. Young & Associates.
An auditor said there were many of the same issues as last year. He was told that the city will have GASBY 34 requirements in place before the next audit. Total revenue last year was $18,422,294, down from $19,089,341, and up from $14,950,737 in 2005. There was a decline in property tax revenue from $10,440,951 in 2006 to $9,575,856 in 2007. State revenue decreased by $300,000.
Expenses for 2007 were $16,627,396, up from $16,241,115 in 2006 and $15,266,238 in 2005. Spending on Public Safety was slightly less in 2007 than in 2006. There was an increase in spending on Public Works of around $230,000. In 2004 and 2005, expenditures were higher than revenues.
The undesignated general fund balance in 2007 was $409,183, up from $264,285 in 2006. The fund balance in 2005 was negative $360,490.
The Water and Sewer fund operated at a $478,796 loss last year. Expenses were up almost $900,000. There was a $280,000 increase in maintenance costs, and personnel costs were up $100,000. The fund had a balance of $5,744,688 at the end of 2006, and has a balance of $5,378,965 for 2007.
Shulgon asked where the letter of audit findings and deficiencies was. The auditor said it is not done. Shulgon asked if funds had been co-mingled because the report says that the city doesn’t conform to accounting practices in the United States. The accountant said age 120 explains that some things required under GASBY 34 are not done. Assets have to be put on the books and properly depreciated. He was told that this will be done. Debts have to be properly classified as short term and long term. Assets purchased prior to 1986 have to be accounted for. Pension obligations have not been calculated. The findings are required for federal reports and are being worked on. He will present them in two weeks when they are finished.
Algazali said they didn’t want to repeat the financial problems of 2005, and we have high taxes with low services. Algazali wanted information about ways to improve services. The auditor pointed out that the city had a $1 million decline in property tax revenue, and income tax collections only rose $30,000.
Klein asked how much a financially healthy city has in the rainy day fund. The auditor said that was a tough question because because he does books for Pontiac, Detroit, and Inkster, which are all in trouble. Shulgon said a rainy day fund is supposed to be 6 months expenses. The auditor said we don’t have near that. Nazarko explained that 25% is a good size rainy day fund. The rainy day fund in 2006 was the first in city history, and we were able to add a little bit to that this year. Building a rainy day fund takes not dipping into it.
Nazarko sent a letter to the auditors that the records he provided are free of misstatements. Previously, the city was written up for not having insured funds in the bank. Between all the various funds, including the R-31 housing fund, the city has $8-12,000,000 in the bank at all times. Prior to 2007, the money in the bank was not insured for more than $100,000. It was insured this year free of charge by Peoples State Bank. The city was also cited for not having separation of duties. New policies have been put in place to ensure the proper checks and balances. New accounting software has been implemented. Funds have not been co-mingled. Money has been transferred from the water fund, but it is not good for funds to owe other funds money at the end of the year.
Algazali asked about a rumor that there is a $2 million surplus. Nazarko was not sure that surplus was the right term to use. Revenue exceeded expenses this year and last year, and balances accrue annually. A fund balance is not cash in the bank. On paper, the city has $3.6 million dollars, but does not have the money in cash. Shulgon said Algazali shouldn’t go on rumor because councilpeople are supposed to know.
Shulgon asked if sweep accounts are in use. Nazarko said they had been closed down recently, but are being used to earn interest. He explained that a sweep account is a brother to the city checking account. When funds are deposited, they are swept to a higher interest account.
Gordon asked about “contingent receivables”. A $2 million dollar payment from the Wayne County Jail PILOT was put on the books and then deferred. Nazarko said that once revenue is probable, the standard is to put it on the books. The back payments for the Jail PILOT were put on the books because the city is expecting payment in 2008 and 2009. Gordon asked if the $2 million deferred payment was included in the graph. Nazarko confirmed that it was.
The auditor continued to talk about the requirements of GASBY 34. Stackpoole asked what impact the new practices would have. The auditor said the city would continue to get control deficiency letters for insufficient risk assessment until it is fixed.