Limitaciones del proceso de diseño geométrico actual

The financial condition of the Inkster is keeping steady with current revenues. While the city has dipped in assessed housing valuation as a result of drops in the overall Michigan housing market, the city’s Tax Increment Finance District has shown tremendous resilience and has received steady revenue.

The city may face short- to medium-term financial challenges because of its dependence on intergovernmental transfers; as those governments cut back, Inkster will likely suffer. Inkster has managed to build up its fund balance to recommended levels, which should help to sustain the city as it emerges from the Great Recession. It is the only city in this study with a credit rating (having recently improved its bond rating from BBB to A). This provides Inkster with greater credit market access, which bodes well for the city’s future.

Assessed Value

Inkster is fortunate to have an increase in the assessed value of the property within the city. From 2003 to 2009, the assessed value increased 15 percent, when adjusted for inflation. From 2005 to 2009, the assessed value increased 2.5 percent (fig. D.6). These persistent increases in assessed value have helped buoy the city. The drop in assessed value seen in 2008, according to city officials, did not stem from an actual decrease in the city’s assessed value, but from

problems with the assessment process. This is why the assessed values quickly rose back to 2007 levels in 2009.

Figure D.6. Total Assessed Value of Inkster, 2003–09 (2011 dollars)

Revenue Generation

Inkster has had steady, consistent growth in both local and intergovernmental revenues (fig. D.7). From 2005 to 2009, Inkster’s local-source revenues grew nearly 36 percent, while intergovernmental revenues grew nearly 11 percent. Much of this increase in local-source revenues can be seen in the increase in the city’s millage rate (or property tax rate). From 2005 to 2010, the millage rate increased nearly 18 percent. Inkster relies on intergovernmental transfers for almost 30 percent of its general fund revenues. This reliance makes Inkster very susceptible to decisions made outside it jurisdiction, particularly by Michigan and the federal government. Inkster’s reliance on federal funds is very minimal, at only 0.2 percent of its total general fund budget and 0.7 percent of all intergovernmental revenues. Looking at all

governmental funds, Inkster continues to be much more reliant on state-sourced funds (at 28 percent) than federal funds (2.9 percent). As Michigan’s economy continues to struggle, Inkster will likely need to seek out more local sources of revenue or face service cutbacks.

All Michigan cities, including Inkster, limited in their taxing authority by Proposal A. Proposal A prevents the city from increasing the assessed value of homes by more than the inflation rate or 5 percent, whichever is greater. However, like other state-imposed assessment caps,

Proposal A does allow for the free fall of assessment as prices decline. This style of assessment cap will have long-term consequences for Inkster if assessments fall, though they have held strong through 2009. $0 $130,000,000 $260,000,000 $390,000,000 2003 2004 2005 2006 2007 2008 2009

FigureD.7. Inkster General Fund Revenues by Source, 2005–09 (2011 dollars)

Fund Balance

From 2005 to 2009, Inkster recorded increases over the previous year fund balance (fig. D.8). GFOA recommends that fund balances equal “no less than two months of regular general fund operating revenues or regular general fund operating expenditures.”9 Based on the GFOA recommendations, Inkster has been persistently short of the recommended fund balance level. However, the city is making substantial progress toward establishing a sufficient fund balance.

Figure D.8. Actual versus Recommended Inkster General Fund Balance Level, 2005–09 (2011 dollars)

Debt

Inkster’s credit rating is from Standard and Poor’s for its most recent debt issuance is A/Stable. From 2003 to 2006, Moody’s rated the city at Aa3. These ratings indicate that Inkster has a strong capacity to repay its debts. By being able to access the credit market with a rating that allows it to sell investment-grade bonds, the city is able to save a tremendous amount of money when it comes to financing its capital needs.

From 2005 to 2009, Inkster’s debt ratio (total debt/total assets) ranged from 0.33 in 2005 to 0.46 in 2007 and 0.39 in 2009. The current debt ratio level is well below the recognized level of 0.5, a level at which one might start to be concerned that that government had issued too much debt.

Cash Flow and Liquidity

The current ratio (current assets/current liabilities) helps assess an entity’s ability to pay current obligations. The current ratio is primarily used to provide outsiders an understanding of an organization’s ability to pay its short-term obligations with assets that are readily available (cash, receivables, and other liquid assets). As the current ratio gets larger, the greater the likelihood the organization is to be able to pay off these short-term obligations. A current ratio

that falls below one would indicate that the organization would have a difficult time paying off those obligations. While a ratio of 1 may be sufficient to pay off current obligations, the rule of thumb for the current ratio is twice that at 2 (Finker 2005).

From 2005 to 2009, Inkster’s current ratio for all its governmental funds ranged from 1.68 to 1.80. The city’s ratio is near, but falls short of the safe ratio level of 2. The quick ratio ranged from 1.18 in 2005 to 1.67 in 2007 and 1.21 in 2009. The rule of thumb for the quick ratio is lower than the current ratio, at 1.10 Inkster very clearly meets this test.

Financial and Budget Management

The very small number of actual expenditures exceeding the budgeted amount is evidence of very strong budget controls and budget management.

The city is taking a calculated risks with its deposits by not having the full balance insured. At the end of 2009, Inkster had more than $5 million that was not insured. Not having a sufficient and comprehensive cash management system and policy in place can lead to a problem like this. If the bank(s) were to default, then Inkster would be covered only at the FDIC-imposed limit. This puts the city at risk for a serious loss of funds, though the city notes that this deficiency will be addressed within the next fiscal year.

Other Issues

Like most other city governments, Inkster is only just beginning to transition from a pay-as-you- go system for its other post-employment benefit liabilities. The first actuarial assessment of OPEB liabilities was made in 2009. The current level of the unfunded OPEB liability is $27.8 million. To begin addressing this issue, the City is transitioning from a fairly generous benefit program to a more modest benefit program with retiree co-pays.

Inkster’s pension funds are in excellent condition. Both the General Employees’ Retirement System and the Police & Fire Retirement System are funded at or above 100 percent. The city took a substantial gamble during the housing boom by issuing roughly $10 million in bonds to finance a housing development. While there are still some prospects for these developments in the future, the debt services payments have negatively affected the city’s ability to provide new or expand current operations.