HomeMy WebLinkAboutCity of Lansing Tax Increment Finance Authority 2022 Audit TAX INCREMENT FINANCE AUTHORITY
OF THE CITY OF LANSING
REPORT ON FINANCIAL STATEMENTS
(with required supplementary information)
YEAR ENDED JUNE 30, 2022
Ma n e r
Costerisan
TABLE OF CONTENTS
Pa,e
INDEPENDENT AUDITOR'S REPORT.........................................................................................................................................1-3
MANAGEMENT'S DISCUSSION AND ANALYSIS....................................................................................................................4-6
BASICFINANCIAL STATEMENTS...................................................................................................................................................7
Government-wide Financial Statements
Statementof Net Position..........................................................................................................................................................8
Statementof Activities................................................................................................................................................................9
Governmental Fund Financial Statements
BalanceSheet................................................................................................................................................................................10
Reconciliation of the Governmental Fund Balance Sheet to the Statement of Net Position.......................11
Statement of Revenues,Expenditures,and Changes in Fund Balance.................................................................12
Reconciliation of the Statement of Revenues,Expenditures,and Changes in Fund Balance
of the Governmental Fund to the Statement of Activities......................................................................................13
Notesto Financial Statements................................................................................................................................................14-23
REQUIRED SUPPLEMENTARY INFORMATION......................................................................................................................24
BudgetaryComparison Schedule.............................................................................................................................................2S
Note to Required Supplementary Information..................................................................................................................26
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN
AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE
WITH GOVERNMENTAUDITING STANDARDS.....................................................................................................................27-29
2425 E.Grand River Ave.,
(00*M a n e r Suite 1,Lansing,MI 48912
2 517.323.7500
CosterisanED 517.323.6346
INDEPENDENT AUDITORS' REPORT
The Honorable Mayor,Members of the City Council
of the City of Lansing,and Members of the Board of
Directors of the Tax Increment Finance Authority
of the City of Lansing,Michigan
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities and the major fund of
the Tax Increment Finance Authority of the City of Lansing (the Authority), a discretely presented component
unit of the City of Lansing, Michigan, as of and for the year ended June 30, 2022, and the related notes to the
financial statements,which collectively comprise the Authority's basic financial statements as listed in the table
of contents.
In our opinion,the financial statements referred to above present fairly,in all material respects,the respective
financial position of the governmental activities and the major fund of the Tax Increment Finance Authority of
the City of Lansing as of June 30,2022,and the respective changes in financial position for the year then ended
in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Govern men tAuditing Standards,issued by
the Comptroller General of the United States.Our responsibilities under those standards are further described
in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required
to be independent of Tax Increment Finance Authority of the City of Lansing and to meet our other ethical
responsibilities,in accordance with the relevant ethical requirements relating to our audit. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Emphasis of Matter
Exclusive Presentation
As discussed in Note 1, the financial statements present only the Authority and do not purport to, and do not
present fairly the financial position of the City of Lansing, Michigan,as of June 30, 2022, and the changes in its
financial position for the years then ended, in conformity with accounting principles generally accepted in the
United States of America.Our opinion is not modified with respect to this matter.
1
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance
with accounting principles generally accepted in the United States of America; this includes the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of
financial statements that are free from material misstatement,whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or
events, considered in the aggregate, that raise substantial doubt about the Authority's ability to continue as a
going concern for twelve months beyond the financial statement date, including any currently known
information that may raise substantial doubt shortly thereafter.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our
opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a
guarantee that an audit conducted in accordance with generally accepted auditing standards and Government
Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are
considered material if there is a substantial likelihood that,individually or in the aggregate,they would influence
the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards and Government Auditing
Standards,we:
➢ Exercise professional judgment and maintain professional skepticism throughout the audit.
➢ Identify and assess the risks of material misstatement of the financial statements,whether due to fraud
or error,and design and perform audit procedures responsive to those risks. Such procedures include
examining,on a test basis,evidence regarding the amounts and disclosures in the financial statements.
➢ Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Authority's internal control. Accordingly,no such opinion is expressed.
➢ Evaluate the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management,as well as evaluate the overall presentation of the financial
statements.
➢ Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that
raise substantial doubt about the Authority's ability to continue as a going concern for a reasonable
period of time.
We are required to communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit, significant audit findings, and certain internal control-related matters
that we identified during the audit.
2
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management's
discussion and analysis and the budgetary comparison schedule, as identified in the table of contents, be
presented to supplement the basic financial statements. Such information, although not a part of the basic
financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an
essential part of financial reporting for placing the basic financial statements in an appropriate operational,
economic, or historical context. We have applied certain limited procedures to the required supplementary
information in accordance with auditing standards generally accepted in the United States of America, which
consisted of inquiries of management about the methods of preparing the information and comparing the
information for consistency with management's responses to our inquiries,the basic financial statements,and
other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion
or provide any assurance on the information because the limited procedures do not provide us with sufficient
evidence to express an opinion or provide any assurance.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards,we have also issued our report dated December 20, 2022,
on our consideration of the Tax Increment Finance Authority of the City of Lansing's internal control over
financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts,
grant agreements,and other matters. The purpose of that report is to describe the scope of our testing of internal
control over financial reporting and compliance and the results of that testing,and not to provide an opinion on
internal control over financial reporting or on compliance. That report is an integral part of an audit performed
in accordance with Government Auditing Standards in considering the Authority's internal control over financial
reporting and compliance.
December 20,2022
3
TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Tax Increment Finance Authority of the City of Lansing (the "Authority") was established by the City of
Lansing (the "City") on May 26, 1981, under the authority contained in Act 450, Michigan Public Acts of 1980
(the "Act"). The Authority presents this management's discussion and analysis of its financial performance as
an overview of financial activities for the fiscal year ended June 30,2022.
Using this Annual Report
The discussion and analysis is intended to serve as an introduction to the Authority's basic financial statements.
The basic financial statements are comprised of the following:
➢ The statement of net position presents information on all of the Authority's assets, deferred outflows of
resources and liabilities,with the difference reported as net position. Over time,increases or decreases
in net position may serve as a useful indicator of whether the financial position of the Authority is
improving or deteriorating.
➢ The statement of activities presents information showing how the Authority's net position changed
during the most recent fiscal year.
➢ The governmental fund balance sheet presents information on the Authority's assets and liabilities,with
the difference between the two reported as fund balance.
➢ The statement of revenues,expenditures and change in fund balance-general fund presents information
showing the Authority's actual revenues and expenditures for the most recent fiscal year on the fund
level perspective.
➢ The notes to financial statements provide additional information that is essential to a full understanding
of the data provided in the basic financial statements.
Government-wide Financial Statements. The net position of the Authority is summarized for the purpose of
determining the overall financial position. The Authority's liabilities exceeded assets and deferred outflows of
resources by$35,153,738 at the end of the fiscal year. This is the result of recognizing the entire amount of
outstanding debt(full accrual accounting),without a corresponding receivable for taxes to be captured in future
periods (which cannot be accrued in accordance with generally accepted accounting principles). The long-term
liabilities are anticipated to be paid by the Authority in annual debt service payments over the next 20 years and
the City has also pledged its limited full faith and credit for the repayment of the long-term obligations. The
revenue source for these payments will be from annual property tax increments captured by the Authority from
the TIFA District. The Authority s current and future yearly tax capture increments are projected by the
Authority to be sufficient to make the future scheduled annual debt service payments.
4
A comparative analysis of the data is presented below:
Governmental
Activities
2022 2021
Assets
Current and other assets $ 8,702,615 $ 7,102,298
Liabilities
Current liabilities 2,357,775 2,301,145
Noncurrent liabilities 40,367,222 45,536,318
Total liabilities 42,724,997 47,837,463
Deferred Inflows 1,131,356 1,236,606
Net Position
Restricted for debt service 1,135,498 1,880,224
Unrestricted (deficit) (36,289,236) (43,851,995)
Total net position $ (35,153,738) $ (41,971,771)
When comparing the current fiscal year to the previous fiscal year, net position increased by $6,818,033, as
compared to the prior year decrease in net position of$1,322,967. The main cause for this change is a decrease
in interest and fees expense related to long-term debt due to a correction of an estimate.
Governmental
Activities
2022 2021
Revenues
General revenues $ 4,560,424 $ 3,696,496
Expenses (2,257,609) 5,019,463
Change in net position 6,818,033 (1,322,967)
Net position,beginning of year (41,971,771) (40,648,804)
Net position,end of year $ (35,153,738) $ (41,971,771)
General Fund Financial Analysis
At the end of the current fiscal year, the Authority's governmental fund (the general fund) reported an ending
fund balance of$8,473,155 an increase of$1,563,657 in comparison to the prior year. The primary reason for
this increase is an increase in property tax revenue and decrease in debt service related expenditures.
5
General Fund Budgetary Highlights
In accordance with State statute,the Authority adopts a budget annually prior to the commencement of the fiscal
year. The budget may be amended during the year by formal resolution of the Board of Directors.
Property tax revenue was$1,403,190 over budget. Tax revenues came in higher than expected primarily due to
personal property values being greater than the preliminary projections.
Capital Assets. The Authority has no capital assets at this time.
Long-term Obligations Administration
At the end of the current fiscal year,the Tax Increment Finance Authority of the City of Lansing had total long-
term obligations outstanding of$42,390,461. General obligation bonds are direct obligations and pledge the full
faith and credit of the City of Lansing,Michigan. These bonds are outstanding with varying amounts of principal
maturing until 2040.
Outstanding Debt
2022 2021
General obligation bonds $ 28,265,000 $ 28,315,000
Contract Payable
Principal 10,009,580 11,029,889
Accreted interest 4,115,881 8,255,052
Unamortized discount on bonds - (60,384)
Total outstanding debt $ 42,390,461 $ 47,539,557
Additional information on the Authority's long-term obligations can be found in Note 5 of the financial
statements.
Economic Factors
The Tax Increment Finance Authority of the City of Lansing's expenses are governed by the laws of the State of
Michigan and bond indenture covenants. These laws and covenants determine how bond proceeds are spent
and how and when debt retirement payments are made.
Requests for Information
This financial report is designed to provide a general overview of the Tax Increment Finance Authority of the
City of Lansing finances and to show accountability for the money it receives and expends. Additional
information on the Authority can be found on the City of Lansing's website at www.lansingmi.gov. Questions
concerning any of the information provided in this report or requests for additional financial information should
be addressed to: Finance Department-8th Floor, 124 W. Michigan Avenue,Lansing,Michigan 48910.
6
BASIC FINANCIAL STATEMENTS
TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
STATEMENT OF NET POSITION
JUNE 30,2022
Governmental
Activities
ASSETS
Current assets
Cash and cash equivalents $ 7,462,041
Restricted cash,cash equivalents,and investments 1,225,747
Total current assets 8,687,788
Noncurrent assets
Restricted investments 14,827
TOTAL ASSETS 8,702,615
LIABILITIES
Current liabilities
Accounts payable 229,460
Current portion of accrued interest payable 9,178
Current portion of long-term obligations 2,119,137
Total current liabilities 2,357,775
Noncurrent liabilities
Accrued interest payable,net of current portion 95,898
Long-term obligations,net of current portion 40,271,324
Total noncurrent liabilities 40,367,222
TOTAL LIABILITIES 42,724,997
DEFERRED INFLOWS OF RESOURCES
Deferred gain on bond refunding 1,131,356
NET POSITION
Restricted for debt service 1,135,498
Unrestricted (deficit) (36,289,236)
TOTAL NET POSITION $ (35,153,738)
See accompanying notes to financial statements.
8
TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
STATEMENT OF ACTIVITIES
YEAR ENDED JUNE 30,2022
Governmental
Activities
Expenses
Development expenses $ 240,935
Interest and fees on long-term debt (2,498,544)
Total expenses (2,257,609)
General revenues
Property taxes 4,570,190
Investment earnings (9,766)
Total general revenues 4,560,424
Change in net position 6,818,033
Net position,beginning of the year (41,971,771)
Net position,end of the year $ (35,153,738)
See accompanying notes to financial statements.
9
TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
GOVERNMENTAL FUND
BALANCESHEET
JUNE 30,2022
General
ASSETS
Cash and cash equivalents $ 7,462,041
Restricted cash,cash equivalents,and investments 1,240,574
TOTAL ASSETS $ 8,702,615
LIABILITIES
Accounts payable $ 229,460
FUND BALANCE
Restricted for debt service 1,240,574
Unassigned 7,232,581
TOTAL FUND BALANCE 8,473,155
TOTAL LIABILITIES AND FUND BALANCE $ 8,702,615
See accompanying notes to financial statements.
10
TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE
SHEET TO THE STATEMENT OF NET POSITION
JUNE 30,2022
Total fund balance-governmental fund $ 8,473,155
Amounts reported for the governmental activities in the statement of net position are
different because:
Long-term liabilities are not due and payable in the current period and therefore are
not reported in the governmental funds balance sheet. Long-term liabilities and
related items at year-end consist of:
Long-term obligations $ (38,274,580)
Deferred gain on bond refunding (1,131,356)
Accrued and accreted interest on long-term obligations (4,220,957)
(43,626,893)
Net position of governmental activities $ (35,153,738)
See accompanying notes to financial statements.
11
TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
GOVERNMENTAL FUND
STATEMENT OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCE
YEAR ENDED JUNE 30,2022
General
REVENUES
Property taxes $ 4,570,190
Loss on investments (9,766)
TOTAL REVENUES 4,560,424
EXPENDITURES
Current
General government
Operating 240,935
Debt service
Principal,interest,fiscal,and other charges 2,755,832
TOTAL EXPENDITURES 2,996,767
NET CHANGE IN FUND BALANCE 1,563,657
Fund balance,beginning of year 6,909,498
Fund balance,end of year $ 8,473,155
See accompanying notes to financial statements.
12
TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
RECONCILIATION OF THE STATEMENT OF REVENUES,EXPENDITURES,AND CHANGES IN
FUND BALANCE OF THE GOVERNMENTAL FUND TO THE STATEMENT OF ACTIVITIES
YEAR ENDED JUNE 30,2022
Net change in fund balance-governmental fund $ 1,563,657
Amounts reported for governmental activities in the statement of activities are different
because:
Repayment of long-term obligations and borrowings of long-term obligations are
reported as expenditures and other financing sources in governmental funds, but the
repayment reduces long-term liabilities and the borrowings increase long-term
liabilities in the statement of net position. In the current year,these amounts consist
Principal payments on long-term obligations 1,070,309
Some items reported in the statement of activities do not require the use of current
financial resources and therefore are not reported as expenditures in governmental
funds. These activities consist of:
Amortization of deferred issuance discounts and changes
in deferred gain/charge on bond refunding $ 44,866
Change in accreted interest on contract payable
and accrued interest payable 4,139,201
4,184,067
Change in net position of governmental activities $ 6,818,033
See accompanying notes to financial statements.
13
TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Tax Increment Finance Authority of the City of Lansing (the "Authority"), a component unit of the City of
Lansing,was established by the City of Lansing (the "City") on May 26, 1981,under the authority contained in
Act 450, Michigan Public Acts of 1980 (the "Act"). The Act authorizes the City to designate specific districts
within its corporate limits as Tax Increment Finance Authority Districts (the "Districts"). The Authority is
appointed to preside over such Districts, and it is authorized to formulate plans for public improvements,
economic development, neighborhood revitalization and historic preservation within the Districts. The Act
allows the Authority to participate in a broad range of improvement activities intended to contribute to
economic growth and prevent property value deterioration. Tax increment financing plans must be approved
by the City.
The Authority is a component unit of the City because the City appoints the Authority's Board of Directors,it has
the ability to significantly influence the Authority's operations,and it is financially accountable for the Authority
as defined under GASB Statement No. 61, The Financial Reporting Entity: Omnibus -An Amendment of GASB
Statements No. 14 and No.34. Accordingly,the Authority is presented as a discrete component unit in the City's
financial statements and is an integral part of that reporting entity.
Government-wide and Fund Financial Statements
The government-wide financial statements (i.e., the statement of net position and the statement of activities)
report information on all of the non-fiduciary activities of the Authority.
The statement of activities demonstrates the degree to which the direct expenses of a given function or
identifiable activity are offset by program revenues. Direct expenses are those that are clearly identifiable
activities with a specific function or identifiable activity. Program revenues include 1) charges to customers or
applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a function or
identifiable activity and 2)grants and contributions that are restricted to meeting the operational requirement
of a particular function or identifiable activity. Property taxes are reported as general revenues.
Measurement Focus.Basis of Accounting.and Financial Statement Presentation
The government-wide financial information is reported using the economic resources measurement focus and
the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability
is incurred,regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year
for which they are levied.
Governmental fund financial information is reported using the current financial resources measurement focus
and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and
available. Revenues are considered to be available when they are collectible within the current period or soon
enough thereafter to pay liabilities of the current period. For this purpose,the Authority considers revenues to
be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally
are recorded when a liability is incurred,as under accrual accounting. However,debt service expenditures are
recorded only when payment is due.
Property taxes and interest associated with the current fiscal period are all considered to be susceptible to
accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are
considered to be measurable and available only when cash is received by the government.
14
TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Measurement Focus,Basis of Accounting,and Financial Statement Presentation(continued)
The Authority reports a single major governmental fund-the general fund. The general fund is the Authority's
primary operating fund. It accounts for all financial resources of the Authority, except those accounted for and
reported in another fund,if any.
Budgets and Budgetary Accounting
The Authority has established the following procedures for determining the budgetary data presented in the
accompanying financial statements:
a. The secretary of the Authority's Board of Directors submits to the City Council of the City of Lansing a
proposed operating budget for the fiscal year commencing the following July 1. The budget includes
proposed expenditures and the means of financing them.
b. A public hearing is conducted to obtain taxpayer comments.
c. Prior to July 1, the budget is legally adopted by City Council resolution, pursuant to the Uniform
Budgeting and Accounting Act (P.A. 2 of 1968, as amended). This act requires that the budget be
amended prior to the end of the fiscal year when necessary to adjust appropriations if it appears that
revenues and other financing sources will be less than anticipated or to allow expenditures in excess of
original estimates. Expenditures shall not be made or incurred unless authorized in the budget and shall
not exceed the amount appropriated.
d. Formal budgetary integration is employed as a management control device during the year for the funds.
e. Budgets are adopted on a basis consistent with generally accepted accounting principles.
f. Expenditures may not exceed budget at the activity level.
Assets,Liabilities,Deferred Inflows of Resources,and Equity
Deposits and Investments
The Authority's cash and cash equivalents are considered to be cash on hand and demand deposits and amounts
held by the City of Lansing,Michigan for the benefit of the Authority.
Restricted cash, cash equivalents,and investments consist of amounts required to be maintained separately in
accordance with bond covenants.
Investments are stated at fair value. Securities traded on a national or international exchange are valued at the
last reported sales price at current exchange rates. Investments that do not have established market values are
reported at estimated fair value. Cash deposits are reported at carrying amounts, which reasonably
approximates fair value.
15
TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Assets,Liabilities,Deferred Inflows of Resources,and Equity(continued
Deposits and Investments(continued)
In accordance with Michigan Compiled Laws,the Authority is authorized to invest in the following investment
vehicles:
a. Bonds,securities,and other obligations of the United States or an agency or instrumentality of the United
States.
b. Certificates of deposit,savings accounts,deposit accounts,or depository receipts of a State or nationally
chartered bank or a State or Federally chartered savings and loan association, savings bank, or credit
union whose deposits are insured by an agency of the United States government and which maintains a
principal office or branch office located in this State under laws of this State or the United States, but
only if the bank,savings and loan association,savings bank or credit union is eligible to be a depository
of surplus funds belonging to the State under Section 6 of 1855 PA 105,MCL 21.146.
c. Commercial paper rated at the time of purchase within the two highest classifications established by not
less than two standard rating services and that matures not more than 270 days after the date of
purchase.
d. Bankers'acceptances of United States banks.
e. The United States government or Federal agency obligations repurchase agreements.
f. Mutual funds composed of investment vehicles, which are legal for direct investment by local units of
government in Michigan.
The Authority follows the investment policy of the City of Lansing.
Due From Other Governmental Units
Due from other governmental units consists of amounts due from the City of Lansing for general revenues and
services.
Deferred Inflows of Resources
In addition to liabilities,the statement of financial position will sometimes report a separate section for deferred
inflows of resources. This separate financial statement element, deferred inflows of resources, represents an
acquisition of net position that applies to one or more future periods and so will not be recognized as an inflow
of resources (revenue) until that time. The Authority only has one item that qualifies for reporting in this
category, which is the deferred gain on bond refunding. A deferred gain on bond refunding results from the
difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and
amortized over the shorter of the life of the refunded or refunding debt.
16
TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)
Assets.Liabilities,Deferred Inflows of Resources.and Equity_(continued).
Long-term Obligations
In the government-wide financial statements,long-term obligations are reported as a liability. Bond discounts,
if any,are deferred and amortized over the life of the bonds using the straight-line method. Bonds payable are
reported net of the applicable bond discount. Bond issuance costs are expensed as incurred.
In the fund financial statements, governmental fund types recognize bond discounts, as well as bond issuance
costs, during the period in which new debt is issued. The face amount of obligations issued are reported as an
other financing source. Discounts on debt issuances are reported as other financing uses. Issuance costs,
whether or not withheld from the actual debt proceeds received,are reported as debt service expenditures.
Fund Equity
Governmental funds report nonspendable fund balance for amounts that cannot be spent because they are either
(a) not in spendable form or (b) legally or contractually required to be maintained intact. Restricted fund
balance is reported when externally imposed constraints are placed on the use of resources by grantors,
contributors, or laws or regulations of other governments. Committed fund balance, if any, is reported for
amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the
government's highest level of decision-making authority, the Board of Directors. A formal resolution of the
Board of Directors is required to establish,modify,or rescind a fund balance commitment. The Authority reports
assigned fund balance for amounts that are constrained by the government's intent to be used for specific
purposes but are neither restricted nor committed. The Authority currently has no assigned or committed fund
balance,as the Board of Directors has not yet given the authority for the making of such constraints. Unassigned
fund balance is the residual classification for the general fund.
When the Authority incurs an expenditure for purposes for which various fund balance classifications can be
used, it is the Authority's policy to use restricted fund balance first, then committed, assigned, and finally
unassigned fund balance.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results may differ from those estimates.
NOTE 2 -NET POSITION/FUND BALANCE
The statement of net position shows an unrestricted deficit of$(36,289,236), which is due to the full accrual
accounting of all long-term obligations, without reflecting a corresponding receivable for tax captures to be
received in future periods (which cannot be accrued in accordance with generally accepted accounting
principles). Total fund balance amounts to a positive balance of $8,473,155 and unassigned fund balance
amounts to$7,233,581.
17
TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
NOTES TO FINANCIAL STATEMENTS
NOTE 3 -DEPOSITS AND INVESTMENTS
Following is a reconciliation of deposit balances as of June 30,2022:
Statement of net position
Cash and cash equivalents $ 7,462,041
Restricted cash,cash equivalents,and investments-current 1,225,747
Restricted investments-noncurrent 14,827
Total $ 8,702,615
Deposits and investments
Cash and cash equivalents in money market accounts
and pooled cash at the City of Lansing $ 8,047,044
Investments 655,571
$ 8,702,615
Custodial Credit Risk-Deposits
Custodial credit risk is the risk that in the event of a bank failure,the Authority's deposits may not be returned.
State law does not require,and the Authority does not have a policy for deposit custodial credit risk. As of year-
end, $130,009 of the Authority's bank balance of$585,003 was exposed to custodial credit risk because it was
uninsured and uncollateralized for the accounts that were specifically held in the Authority's name.
A portion of the above deposits and investments are held by the City of Lansing,Michigan. Those specific deposit
and investment accounts are not held in the name of the Authority. The amount of federal depositary insurance
and custodial credit risk of investments is determined for the City of Lansing, Michigan as a whole, and cannot
be separately identified for the Authority related to these accounts.
The Authority's investment policy does not specifically address this risk, although the Authority believes that
due to the dollar amounts of cash deposits and the limits of FDIC insurance,it is impractical to insure all bank
deposits. As a result,the Authority evaluates each financial institution with which it deposits Authority funds
and assesses the level of risk of each institution; only those institutions with an acceptable estimated risk level
are used as depositories.
Custodial Credit Risk-Investments
As of June 30,2022,the Authority's investments consisted of U.S.government debt securities totaling$655,571.
For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the
Authority will not be able to recover the value of its investments or collateral securities that are in the possession
of an outside party. State law does not require,and the Authority does not have a policy for investment custodial
credit risk. On the investments listed above, there is no custodial credit risk, as these investments are
uncategorized as to credit risk.
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TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
NOTES TO FINANCIAL STATEMENTS
NOTE 3 -DEPOSITS AND INVESTMENTS (continued)
Credit Risk
State law limits investments to specific government securities, certificates of deposit and bank accounts with
qualified financial institutions, commercial paper with specific maximum maturities and ratings when
purchased,bankers acceptances of specific financial institutions, qualified mutual funds and qualified external
investment pools as identified in the list of authorized investments in the summary of significant accounting
policies. The Authority's investment policy does not have specific limits in excess of state law on investment
credit risk. Credit risk ratings,where applicable,are summarized as follows:
Unrated $ 655,571
Interest Rate Risk
State law limits the allowable investments and the maturities of some of the allowable investments as identified
in the summary of significant accounting policies. The Authority's investment policy does not have specific limits
in excess of state law on investment maturities as a means of managing its exposure to fair value losses arising
from increasing interest rates. For investments held at year-end maturities are as follows:
Due within 1 year $ 640,744
Due in 1 - 5 years 14,827
Total $ 655,571
Concentration of Credit Risk
Concentration of credit risk is the risk of loss attributed to the magnitude of the Authority's investment in a
single issuer. State law limits allowable investments but does not limit concentration of credit risk as identified
in the list of authorized investments in the summary of significant accounting policies. The Authority's
investment policy does not have specific limits in excess of state law on concentration of credit risk. All
investments held at year-end are reported above.
Fair Value Measurements
The Authority categorizes its fair value measurements within the fair value hierarchy established by generally
accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of
the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant
other observable inputs; Level 3 inputs are significant unobservable inputs. As of June 30, 2022, all of the
Authority's investments were classified as Level 2 fair value.
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TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
NOTES TO FINANCIAL STATEMENTS
NOTE 4-CONTRACT PAYABLE
The Authority entered into a 20-year contract with the City of Lansing to assist in the financing of various
automobile parking structures and lots. Upon termination of the contract,the City shall convey the project and
the sites to the Authority without consideration if permissible under the City Charter and applicable State law.
The amortization is disclosed in Note S.
The Authority has entered into a payment agreement with the City to use excess tax increment revenues to make
payments pursuant to an agreement between the City and the City of Lansing and County of Ingham Joint
Building Authority (the "Joint Authority") related to the City's use of a building constructed by the Joint
Authority. The total of such payments amounted to$50,000 for the year ended June 30,2022.
NOTE 5 -LONG-TERM OBLIGATIONS
The following is a summary of long-term obligations of the Authority for the year ended June 30,2022:
Amounts
Balance Balance Due Within
July 1,2021 Additions Deletions June 30,2022 One Year
General obligation bonds $ 28,315,000 $ $ (50,000) $ 28,265,000 $ 50,000
Direct borrowings and direct
placements contract payable 11,029,889 (1,020,309) 10,009,580 -
Total 39,344,889 (1,070,309) 38,274,580 50,000
Add accreted interest on contract payable 8,255,052 (4,139,171) 4,115,881 2,069,137
Less unamortized discount on
general obligation bonds (60,384) 60,384 - -
$ 47,539,557 $ $ (5,149,096) $ 42,390,461 $ 2,119,137
General Obligation Bonds
$16,150,000 2017 refunding bonds due in amounts ranging from $435,000
through $1,640,000, plus interest ranging from 3.305% to 4.075% through
2040 (limited tax,general obligation). $ 16,150,000
$7,730,000 2019 refunding bonds due in amounts ranging from $865,000
through $1,335,000, plus interest ranging from 3.050% to 3.680% through
2031 (limited tax,general obligation). 7,730,000
$4,485,000 2020 refunding bonds due in amounts ranging from $50,000
through $540,000, plus interest ranging from 0.841% to 2.793%through 2039
(limited tax,general obligation). 4,385,000
Total general obligation bonds $ 28,265,000
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TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
NOTES TO FINANCIAL STATEMENTS
NOTE 5 -LONG-TERM OBLIGATIONS(continued)
Direct Borrowings and Direct Placements
$49,660,000 1994 contract payable due in annual installments ranging from
$134,245 to $2,265,220 through 2035. Interest is charged semi-annually at
3.35%. Any unpaid interest in a given year is accreted. $ 10,009,580
Annual debt service requirements to maturity for the Authority's long-term obligations is as follows:
Governmental Activities
General Direct Borrowings
Year Ending Obligation Bonds and Direct Placements
June 30, Principal Interest Principal Interest
2023 $ 50,000 $ 1,000,472 $ - $ 2,069,137
2024 50,000 1,000,050 - 1,508,137
2025 915,000 999,528 - 767,510
2026 1,615,000 972,574 - 1,242,510
2027 1,940,000 921,526 617,501 484,311
2028-2032 8,965,000 3,665,842 4,802,346 1,314,300
2033-2037 9,000,000 2,098,918 4,589,733 214,883
2038-2040 5,730,000 398,129 - -
$ 28,265,000 $ 11,057,039 $ 10,009,580 $ 7,600,788
Prior Year Defeasance of Debt
As of June 30,2022,defeased bonds related to the prior year refunding of the 2014 TIFA Refunding Bonds were
still outstanding in the amount of$3,720,000. The defeased bond is scheduled to be paid by the escrow agent
on June 1,2024.
NOTE 6-PROPERTY TAXES
Property tax revenue is derived pursuant to a tax increment financing agreement between the Authority and
various applicable taxing districts. Real and personal property taxes are levied and attach as an enforceable lien
on properties located within the boundaries of the tax increment financing district. The City of Lansing bills and
collects the taxes on behalf of the Authority. Delinquent taxes on ad valorem real property are purchased by the
County of Ingham. Property tax revenue is recognized when levied in the government-wide financial statements
and in the fund financial statements to the extent that it results in current receivables.
Except for property taxes captured from local schools that exceed contractual obligations, the Authority is
entitled to all taxes levied on property within the Tax Increment Finance Authority of the City of Lansing for local
school levies to the extent that the current taxable value exceeds the base year taxable value.
21
TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
NOTES TO FINANCIAL STATEMENTS
NOTE 7-RELATED PARTY TRANSACTIONS
The Economic Development Corporation of the City of Lansing (EDC) provides administrative services to the
Authority;the Authority and the EDC share a common board of directors.
Administrative fees, consisting of operating costs charged to the Authority by EDC, were $228,423. The
Authority has no liability for compensated absences or pension benefits.
NOTE 8-RISK MANAGEMENT
The Authority,as a discretely presented component unit of the City of Lansing,is exposed to various risks of loss
that are covered by the City's policies, including losses related to issues of cyber security, liability, errors and
omissions,flood,boiler and machinery,property, employee bonding,crime,and workers' compensation which
is covered through the Authority's insurance policies. The Authority carries commercial insurance to cover
these risks. Settled claims relating to the commercial insurance have not exceeded the amount of insurance
coverage during the past three years.
NOTE 9-UPCOMING ACCOUNTING PRONOUNCEMENTS
In May 2019,the GASB issued Statement No.91,Conduit Debt Obligations. This Statement will improve financial
reporting by eliminating the existing option for issuers to report conduit debt obligations as their own liabilities,
thereby ending significant diversity in practice. The clarified definition will resolve stakeholders'uncertainty as
to whether a given financing is, in fact, a conduit debt obligation. Requiring issuers to recognize liabilities
associated with additional commitments extended by issuers and to recognize assets and deferred inflows of
resources related to certain arrangements associated with conduit debt obligations also will eliminate diversity,
thereby improving comparability in reporting by issuers. Revised disclosure requirements will provide financial
statement users with better information regarding the commitments issuers extend and the likelihood that they
will fulfill those commitments. That information will inform users of the potential impact of such commitments
on the financial resources of issuers and help users assess issuers' roles in conduit debt obligations. The
Authority is currently evaluating the impact this standard will have on the financial statements when adopted
during the 2022-2023 fiscal year.
In May 2020,the GASB issued Statement No.96,Subscription-based Information Technology Arrangements. This
Statement provides guidance on the accounting and financial reporting for subscription-based information
technology arrangements (SBITAs) for government end users (governments). This Statement (1) defines a
SBITA; (2) establishes that a SBITA results in a right-to-use subscription asset - an intangible asset - and a
corresponding subscription liability; (3) provides the capitalization criteria for outlays other than subscription
payments,including implementation costs of a SBITA; and (4) requires note disclosures regarding a SBITA. To
the extent relevant,the standards for SBITAs are based on the standards established in Statement No.87,Leases,
as amended. The Authority is currently evaluating the impact this standard will have on the financial statements
when adopted during the 2022-2023 fiscal year.
22
TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
NOTES TO FINANCIAL STATEMENTS
NOTE 10-CHANGE IN ACCOUNTING PRINCIPLE
For the year ended June 30, 2022, the Authority implemented the following new pronouncement: GASB
Statement No. 87,Leases.
Summary:
Governmental Accounting Standards Board(GASB)Statement No.87,Leases,was issued by the GASB in June 2017.
The objective of this Statement is to increase the usefulness of governments' financial statements by requiring
recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and
recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. It
establishes a single model for lease accounting based on the foundational principle that leases are financing of the
right to use the underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an
intangible right-to-use lease asset,and a lessor is required to recognize a lease receivable and a deferred inflow of
resources,thereby enhancing the relevance and consistency of information about governments'leasing activities.
There was no material impact on the Authority's financial statement after the adoption of GASB Statement No.87.
23
REQUIRED SUPPLEMENTARY INFORMATION
24
TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
GENERAL FUND
BUDGETARY COMPARISON SCHEDULE
YEAR ENDED JUNE 30,2022
Variance with
Final Final Budget
Original Amended Positive
Budget Budget Actual (Negative)
REVENUES
Property taxes $ 3,167,000 $ 3,167,000 $ 4,570,190 $ 1,403,190
Loss on investments 77,000 77,000 (9,766) (86,766)
TOTAL REVENUES 3,244,000 3,244,000 4,560,424 1,316,424
EXPENDITURES
Current
General government
Operating 150,000 150,000 240,935 (90,935)
Debt service
Principal,interest,fiscal,and other charges 2,440,785 2,440,785 2,755,832 (315,047)
TOTAL EXPENDITURES 2,590,785 2,590,785 2,996,767 (405,982)
NET CHANGE IN FUND BALANCE 653,215 653,215 1,563,657 910,442
Fund balance,beginning of year 6,909,498 6,909,498 6,909,498 -
Fund balance,end of year $ 7,562,713 $ 7,562,713 $ 8,473,155 $ 910,442
25
TAX INCREMENT FINANCE AUTHORITY OF THE CITY OF LANSING
NOTE TO REQUIRED SUPPLEMENTARY INFORMATION
YEAR ENDED JUNE 30,2022
NOTE 1 -EXCESS OF EXPENDITURES OVER APPROPRIATIONS
The approved budgets of the Tax Increment Finance Authority have been adopted at the activity level for the
General Fund.
During the year ended June 30, 2022,the Tax Increment Finance Authority incurred expenditures in excess of
the amounts appropriated as follows:
Amounts Amounts
Appropriated Expended Variance
EXPENDITURES
General government
Operating $ 150,000 $ 240,935 $ (90,935)
Debt Service
Principal,interest,fiscal,and other charges 2,440,785 2,755,832 (315,047)
26
2425 E.Grand River Ave.,
(00*M a n e r Suite 1,Lansing,MI 48912
2 517.323.7500
CosterisanED 517.323.6346
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND
ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS
PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
The Honorable Mayor,Members of the City Council
of the City of Lansing,and Members of the Board of
Directors of the Tax Increment Finance Authority
of the City of Lansing,Michigan
We have audited,in accordance with the auditing standards generally accepted in the United States of America
and the standards applicable to financial audits contained in Government Auditing Standards issued by the
Comptroller General of the United States,the financial statements of the governmental activities and the major
fund of the Tax Increment Finance Authority of the City of Lansing (the Authority), a discretely presented
component unit of the City of Lansing,Michigan,as of and for the year ended June 30,2022,and the related notes
to the financial statements, which collectively comprise the Authority's basic financial statements and have
issued our report thereon dated December 20,2022.
Internal Control over Financial Reporting
In planning and performing our audit of the financial statements,we considered the Authority's internal control
over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the
circumstances for the purpose of expressing our opinion on the financial statements,but not for the purpose of
expressing an opinion on the effectiveness of the Authority's internal control. Accordingly,we do not express
an opinion on the effectiveness of the Authority's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent, or detect and correct,
misstatements on a timely basis. A material weakness is a deficiency,or a combination of deficiencies,in internal
control such that there is a reasonable possibility that a material misstatement of the entity's financial
statements will not be prevented or detected and corrected on a timely basis. A significant deficiency is a
deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness,yet
important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section
and was not designed to identify all deficiencies in internal control that might be material weaknesses or
significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not
identified. We identified a certain deficiency in internal control, described below as item 2022-001, that we
consider to be a material weakness.
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2022-001 MATERIAL JOURNAL ENTRIES
Condition: Material journal entries for the proper recognition of various financial statement amounts within the
City's accounting records were recorded after year end, some of which were proposed by the auditors. In
addition,we received several revisions to the City's trial balance (the final version coming in early December
2022), each of which contained material corrections to previous trial balances.A similar issue was noted and
reported last year as 2021-001.
Criteria: Management is responsible for establishing,maintaining,and monitoring internal controls,and for the
fair presentation in the financial statements of financial position,results of operations,and cash flows,including
the recording of all appropriate journal entries to assure the trial balance from which the financial statements
are prepared,reflect amounts that are in conformity with U.S.generally accepted accounting principles.
Cause: Over the past several years, the City's Finance Department, who prepares the reconciliations of all
accounts,has reduced in size due to budget reductions, staffing reductions, and staffing turnover. In addition,
the Finance Department relies significantly on other Departments providing information to them for proper
recording of transactions in the financial statements.A number of these Departments were behind in getting this
information to the Finance Department. These issues have placed a significant burden on the month and year
end close processes and have contributed to journal entries not being completed in a timely manner.We noted
that this process did improve in the current fiscal year,however this was still a systemic issue for the City.
Effect: The accounting records were initially misstated by amounts material to the financial statements. Certain
applicable adjustments were brought to the attention of management and were subsequently recorded in the
general ledger.
Recommendation: We recommend that the City take steps to assure that material journal entries are not
necessary at the time future audit analysis is performed.
Corrective Action Response: The Finance Team will continue the efforts begun this year regarding the
identification and correction of potential errors in the financial statements prior to the beginning of future
audits. The Finance Team will meet to review adjustments made to this year's financial statements and
bottlenecks that were encountered and will develop a plan to address the most significant issues in a more timely
manner going forward. Within budget constraints, Management will look to increase staffing levels and/or
obtain temporary assistance earlier in the fiscal year,both within the Finance Department as well as other key
departments, in order to perform more timely analyses of the various account balances. In FY23, Finance will
also begin working on the implementation of a new General Ledger software package,which ultimately will also
help to resolve this issue.
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Authority's financial statements are free from
material misstatement, we performed tests of its compliance with certain provision of laws, regulations,
contracts, and grant agreements, noncompliance with which could have a direct and material effect on the
financial statements. However,providing an opinion on compliance with those provisions was not an objective
of our audit,and accordingly,we do not express such an opinion. The results of our tests disclosed the following
instance of noncompliance or other matter that is required to be reported under Govern men tAuditing Standards.
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2022-002 UNFAVORABLE BUDGET VARIANCES
Finding Type: Noncompliance material to financial statements
Condition: We noted that expenditures had exceeded the amounts appropriated for the General Fund.
Criteria: The Uniform Budgeting and Accounting Act requires the City to amend the original adopted budget"as
soon as it becomes apparent that a deviation from the original general appropriations act is necessary and the
amount of the deviation can be determined"for all applicable funds. The Act also states that"an administrative
officer of the local unit shall not incur expenditures against an appropriation account in excess of the amount
appropriated by the legislative body".
Cause: The City did not adequately monitor expenditures in relation to budgeted amounts in the areas where
the overages occurred.
Effect: Having unfavorable budget variances as described above, the City is not in compliance with Public Act
621 of 1978,as amended.
Recommendation: We recommend the City monitor expenditures against adopted budgets in all applicable
funds and make appropriate budget amendments as needed.
Corrective Action Response: The City will continue to make improvements in control of revenue and
expenditures and budget conservatively in order to maintain the City's fiscal health. The Finance Department
recently added a new Budget Director and Budget Analyst as part of its team and is working with departments
to be more proactive and responsive to City needs and to identify necessary changes during the fiscal year.
Correcting this issue will be one of their principal tasks. We will continue to work with the various departments
to be more aware of the status of their actual vs budget status throughout the year. A decision was made to
implement a new ERP system,which will also help with this in the future.
Authority's Responses to Findings
The Authority's responses to the findings identified in our audit are described above. The Authority's responses
were not subject to the auditing procedures applied in the audit of the financial statements and,accordingly,we
express no opinion on them.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and
the results of that testing,and not to provide an opinion on the effectiveness of the entity's internal control or
on compliance. This report is an integral part of an audit performed in accordance with Government Auditing
Standards in considering the entity's internal control and compliance. Accordingly,this communication is not
suitable for any other purpose.
December 20,2022
29