CITY OF ADRIAN, MICHIGANCITIZENS’ GUIDE AND

POPULAR ANNUAL FINANCIAL REPORT

For Fiscal Year Ended June 30, 2012

Explanation of the Governor’s Economic Vitality Incentive Program 3 A Message from the Mayor 4 Mission and values 5 Where the Money Came From (Resources) 6 Where the Money Went (Uses) 7 What We Have and What We Owe (Assets and Liabilities) 8 Major Liabilities: Bond and Loan Debt 9 Debt: General Obligation Bonds Outstanding and Margin 10 Revenue and Expense Trends 11 Taxes: Revenues and Principle Tax Payers 12 Community Profile and Local Economy 13 Demographic and Public Safety Statistics 14 Certificate of Achievement from GFOA for the PAFR 15

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Development and publication of the City of Adrian’s Citizens Guide and Popular Annual Financial Report was prompted by the Governor’s Economic Vitality incentive Program (EVIP), which was included in the FY2011-12 State Omnibus Appropriation Act (Public Act 63 of 2011). Previously, Statutory Revenue Sharing ($300 million statewide and $600,000 for the City of Adrian) was allocated to eligible local units of government based on proportionate population. The EVIP Program reduced this amount by one-third ($100 million statewide and $200,000 for the City of Adrian) and established the following three prerequisites to become eligible for funding distributions: 1) Enhance governmental transparency through creation of a Citizen’s Guide and Performance Dashboard (October 1, 2011); 2) Enhance government collaboration through consolidation or shared services with other local units of government (January 1, 2012); and 3) Reduce costs through adoption of a modified public employee compensation program (May 1, 2012).

This document addresses the first requirement.

The purpose of the Citizens’ Guide is to provide a more transparent understanding of local unit finances by the citizens. The intent is to provide a simple graphical presentation of the most important financial measures, in a manner that can be easily understood by the average citizen. While the local unit has flexibility regarding the contents of the Citizens’ Guide, it must include recognition of its unfunded liabilities. The local unit has the latitude to create the guide in a manner best suited for the local unit.

The Performance Dashboard should include those financial and operating measures that are most important to the government and its citizens. Meeting this criterion will require the local unit to report on measures such as fiscal stability, economic strength, public safety, quality of life and other measures the local unit select that are relevant to the local unit’s strategic goals and objectives.

The Citizen’s Guide has been prepared in conformance with the criteria developed for the Popular Annual Financial Report (PAFR) award program administered by the Government Finance Officers Association of the United States and Canada. The City of Adrian is pleased to have been accorded this award recognition for FY2009-10 and FY2010-11; the Certificate of Achievement for the most recent fiscal year is displayed on the outside of the back cover page.

Both the Citizen’s Guide and the Performance Dashboard, as well as the entire FY2011-12 Comprehensive Annual Financial Report and FY2012-13 Annual Budget and General Appropriations Act, can be accessed on the City’s website: http://www.adrianmi.gov. If you have any questions or need for additional information, please contact the City of Adrian Finance Department.

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We are pleased to present to you the City of Adrian’s Citizen’s Guide and Popular Annual Financial Report (PAFR) for the year ended June 30, 2012. This report is intended to increase awareness throughout the community of the financial operations of the City. As such, this report is written in a manner that will summarize and communicate, in a user friendly manner, the City’s financial condition.

In addition to providing financial information, it is important to demonstrate what makes Adrian, the “Maple City”, the premier rural place to live, work, play, worship and raise a family in Michigan. Serving as the County Seat of Lenawee County with a population over 20,000, Adrian’s economy is supported by a network of for-profit and not-for-profit organizations, including three institutions of higher education and a general hospital. It is important for us to demonstrate the role City government is playing in supporting these activities.

Financial information within this report is derived in large part from the City’s independently audited set of financial statements that are prepared in accordance with generally accepted accounting principles (GAAP). These audited statements are a part of the City’s FY2011-12 Comprehensive Annual Financial Report (CAFR). We are proud to say that the City’s CAFR has been awarded a Certificate of Achievement for Excellence in Financial Reporting by the Government Finance Officers Association for each of the last 25 consecutive years.

Unlike the CAFR, this PAFR is unaudited and not prepared in accordance with GAAP. Only the financial data for the general government is included in this report and all of the City’s discretely presented component units are excluded. Information in this report is condensed and summarized and certain financial statements and note disclosures required by GAAP are not included. A copy of the City’s FY2011-12 CAFR prepared in accordance with GAAP is located on the City’s website at http://www.adrianmi.gov/Services/Finance/CAFR.aspx

We welcome any feedback, comments or concerns regarding the information included in this report.

Sincerely,

Mayor Greg DuMars

Statement of Values

The City of Adrian, Michigan values:

Active citizen involvement in determining the direction of City government and the public services it provides

Respect for the individual voice and service for the common good

A responsive and responsible public service delivery system

Positive change, innovation and creativity

Well-trained employees committed to excellent customer service

Respect for our heritage and cultural diversity

Vision Statement

The City of Adrian aspires to be a hospitable and pleasant community that nurtures its diverse, natural, historical, cultural and social assets in order to foster a safe, clean, prosperous, attractive place in which to live, work, learn, worship and play.

Statement of Mission and Purpose

To provide efficient and effective City services through comprehensive planning based on long-term systematic principles that foster an open, honest, responsive government.

AdministrationCity Administrator Dane Nelson

Assessor Kristen Wetzel

Attorney Sarah Osburn

City Clerk Pat Baker

Community Development & Economic Development Chris Miller

Finance Jeff Pardee

Fire Department Paul Trinka

Human Resources Heather Lasky

Adrian Public Library Carol Souchock

Parks & Recreation Mark Gasche

Public Works/Engineering Kristin Bauer

Police Vince Emrick

Utilities Shane Horn

AdministrationCity Administrator Dane Nelson

Assessor Kristen Wetzel

Attorney Sarah Osburn

City Clerk Pat Baker

Community Development & Economic Development Chris Miller

Finance Jeff Pardee

Fire Department Paul Trinka

Human Resources Heather Lasky

Adrian Public Library Carol Souchock

Parks & Recreation Mark Gasche

Public Works/Engineering Kristin Bauer

Police Vince Emrick

Utilities Shane Horn

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The charts presented here show the sources of financial resources for the governmental funds. They have been expanded from the previous years presentation to include the Prior Year Actual, the Current Year Actual and the Ensuing Year Projection. Governmental funds include the General Fund (the chief operating fund) and Special Revenue Funds (e.g., Major and Local Street Funds), which include most of the basic services of the City.

The three largest sources of resources for the City for the fiscal year ended June 30, 2012 are from property taxes (48.4%), state shared revenue (24.0%) and charges for services (5.1%). In Fiscal Year 2009-10, the City issued $7.0 million Build America Bonds to construct the Downtown Government Complex and consolidate outstanding debt. With an interest rate of 3.71%, the City will save over $6.0 million in debt service over the next 25 years.

Resources (Governmental Funds)

FY2010-11 % of FY2011-12 % of FY2012-13 % of Actual Total Actual Total Budget Total

Revenue: Taxes $7,105,729 48.4% $6,206,800 41.1% $5,742,606 40.3% State 3,530,556 24.0% 4,244,968 28.1% 3,292,837 23.1% Federal 221,619 1.5% 203,165 1.3% 299,759 2.1% Local Charges 749,365 5.1% 1,931,479 12.8% 2,311,810 16.2% Other 1,966,053 13.4% 1,865,433 12.4% 2,524,536 17.7%Total Revenue $13,573,322 92.4% $14,451,845 95.7% $14,171,548 99.30%

Other Sources: Transfers In $1,119,908 7.6% $641,605 4.3% $93,600 0.7% Issuance of Debt 0 0.0% 0 0.0% 0 0.0%Total Other Sources $1,119,908 7.6% $641,605 4.3% $93,600 0.7%

Total Resources $14,693,230 100.0% $15,093,450 100.0% $14,265,148 100.00% 

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Taxes

State

Federal

Local Charges

Other

Transfers In

Issuance of Debt

General Government

Public Safety

Public Works

Culture & Recreation

Community Beautification& ImprovementsCommunity/EconomicDevelopment Highways, Street &Bridges Non-Dept.

Debt Service

Transfers Out

Examining where the money came from and where it went helps us better understand the flow of resources for the most recent fiscal years and expectations for the ensuing fiscal year. The general downward trend in expenditure levels during the past two years is attributable to economies achieved through right-sizing and consolidation of services in order to live within available resources.

General Government expenditures are related to the administration of the City’s affairs. These include the costs of all elected officials, as well as the Administrator’s Office, City Attorney, City Clerk, and Finance and Human Resources Departments, among others.

Public Safety expenditures represent the Police Department and Fire Department.

Public Works expenditures include the City Engineer, administration of refuse collection and disposal, as well as street and sidewalk maintenance.

Culture and Recreation expenditures include the Adrian Public Library and the Department of Parks & Recreation.

Other expenditures include all amounts that are not included in the categories above.

Uses (Governmental Funds)

FY2010-11 % of FY2011-12 % of FY2012-13 % of Actual Total Actual Total Budget Total

Expenditures: General Government $1,822,754 12.7% $1,695,476 11.8% $1,927,289 13.5% Public Safety 5,243,361 36.5% 5,063,025 35.3% 4,649,838 32.6% Public Works 1,054,326 7.3% 448,640 3.1% 944,262 6.6% Culture & Recreation 2,308,503 16.1% 2,228,542 15.5% 2,139,435 15.0% Community Beautification & Improvements 1,205,970 8.4% 826,566 5.8% 1,330,253 9.3%Community/Economic Development 319,360 2.2% 358,026 2.5% 324,747 2.3% Highways, Street & Bridges 1,566,392 10.9% 2,427,024 16.9% 2,268,583 15.9% Non-Dept. 0.0% 92,158 0.6% 82,057 0.6% Debt Service 442,164 3.1% 448,704 3.1% 448,710 3.1%Total Expenditures $13,962,830 97.3% $13,588,161 94.7% $14,115,174 98.9%

Other Uses: Transfers Out $782,767 5.5% $767,943 5.3% $149,974 1.1%Total Other Sources $782,767 5.5% $767,943 5.3% $149,974 1.1%

Total Uses $14,745,597 102.7% $14,356,104 100.0% $14,265,148 100.0%

Net Change in Fund Balance ($52,367) $737,346  

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General Government

Public Safety

Public Works

Culture & Recreation

CommunityBeautification &ImprovementsCommunity/EconomicDevelopment

Highways, Street &Bridges

Non-Dept.

Debt Service

Transfers Out

To look at the overall financial condition of the City as a whole, it is better to use information from the Government-wide financial statements, which use a basis of accounting (full accrual) similar to private sector businesses. Governmental-wide statements include governmental activities, business-type activities, and discretely presented component units.

Governmental activities include general government, public safety, highways and streets, administration of refuse collection and disposal, economic development, and culture (library) and recreation.

Business-type activities include water and sewer operations, storm water utility, public parking lots, and Dial-A-Ride transportation services.

The following schedule lists assets, liabilities, and the difference (net assets) for the total governmental and business-type activities. For brevity, information for discretely presented component units has been excluded.

Capital Assets (building and other assets that cannot be used to pay liabilities)

Current and Other Assets

$0

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

FY2010-11

FY2011-12

Capital Assets (buildingand other assets thatcannot be used to payliabilities)

Current and Other Assets

Long-term Liabilities consist primarily of general obligation bonds, unfunded pension liability, and accumulated sick and vacation leave liabilities.

Capital Assets include land improvements, buildings, machinery, equipment, furnishings and infrastructure assets (e.g., roads, bridges, sidewalks, sewer and water plants, as well as underground utilities) and are the largest asset of the City.

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Long-term Liabilities consist primarily of general obligation bonds, unfunded pension liability, and accumulated sick and vacation leave liabilities.

Capital Assets include land improvements, buildings, machinery, equipment, furnishings and infrastructure assets (e.g., roads, bridges, sidewalks, sewer and water plants, as well as underground utilities) and are the largest asset of the City.

Assets $105,197,481 $104,571,513Less Liabilities (35,542,413) (32,874,259)Net Assets $69,655,068 $71,697,254

FY2010-11 FY2011-12

Current Liabilities (amounts due in one year or less)Long-Term Liabilities (amounts due in more than one year

Debt ObligationsAccrued Sick and VacationUnfunded Actuarial Pension LiabilityOther Long-Term Liabilities

0

5000000

10000000

15000000

20000000

25000000

30000000

35000000

40000000

1 2 3 4 5 6 7

The largest liability is by far the water and sewer system bonds and loans. The general obligation debt issued in 2010 was used mainly for the new Downtown Government Complex, as well as to consolidate debt to take advantage of an interest rebate thereby reducing the cost of funding City projects. Debt increased steadily through FY2009-10 to defray expenses associated with the aforementioned projects. The debt per capita during the past two years has decreased due to a stabilizing population, no additional debt issuance and steady retirement of outstanding debt. In addition, it should be noted that the refinancing will save the taxpayers approximately $6 million over the 25 year life of the bonds.

The largest part of the debt is attributable to water and sewer capital improvements, including the West End Ground Water Well that has given the City an alternative source of potable water, rather than having to rely solely on Lake Adrian. The City’s water and sewer utilities are business-type activities, providing services to customers who in turn pay user fees, with the debt being repaid primarily by these service charges. Due to the debt load and increased operating costs, service charges have steadily increased over the past decade.

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

General Obligation Bonds

Water and Sewer Bonds and Loans

Water and Sewer Bonds and Loans

Population 22,215 22,215 22,215 22,215 22,215 22,215 22,215 21,133 21,133 21,133

General Obligation Bonds

$0.00

$200.00

$400.00

$600.00

$800.00

$1,000.00

$1,200.00

$1,400.00

$1,600.00

Debt Per Capita

Debt Per Capita

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

$8,000,000

$9,000,000

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Wastewater System

Water System

Storm Water Utility

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Note: The statutory debt limit of net bonded indebtedness incurred for all public purposes shall not, at any one time, exceed 10% of the State Taxable Valuation of taxable property in the City, except that this limit may be exceeded by 3/8ths of one percent in the case of fire, flood or other calamity. By law, the general obligation debt subject to the limitation may be offset by amounts set aside for repaying general obligation bonds. This limitation does not include bonds issued in anticipation of the payment of special assessments, nor bonds issued pursuant to court order for sewage or garbage disposal system.

The Michigan State Bond Act provides that the total debt in special assessment bonds for which the credit of the City is pledged shall not exceed 12% of the assessed valuation of taxable property of the City unless voted. Currently, total outstanding General Obligation Bonds represent less than 2.0% of the assessed valuation of taxable property in the City.

Fiscal Year Ending

20082009201020112012

Limited Tax General Obligation Bonds:

Series A, B, C

7,040,0006,840,0006,630,000

General Fund Land Contract Installment

Purchase Contract

653,9001,889,138

Parks & Recreation Installment Purchase

Agreement

1,203,9631,712,768

Total General Obligation Bonds

1,857,8633,601,9067,040,0006,840,0006,630,000

Total Taxable Value of Real & Personal

Property

461,039,614457,273,036442,606,703411,472,868391,348,603

Debt as a Percent of Taxable Value of

Property

0.4%0.8%1.6%1.7%1.7%

Taxable Value $391,348,603 Debt Limit (10% of Taxable Value) 39,134,860 Debt Applicable to Limit: Series A - Municipal Finance Bonds 1,130,000 Series B - Build America Bonds 1,600,000 Series C - Recovery Zone Bonds 3,900,000 Loan From Component Unit 80,000 Total Debt Applicable to Limit 6,710,000Legal Debt Margin $32,424,860

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$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

2008 2009 2010 2011 2012

Capital Grants andcontributions

Operating/Capital Grantsand Contrib

Culture and Recreation

Public Safety

General Government

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

$18,000,000

2008 2009 2010 2011 2012

Highways, Street andBridges

Other Services

Culture and Recreation

Public Safety

General Government

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

$18,000,000

2008 2009 2010 2011 2012

Highways, Street andBridges

Other Services

Culture and Recreation

Public Safety

General Government

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

2008 2009 2010 2011 2012

Capital Grants andcontributions

Operating/Capital Grantsand Contrib

Culture and Recreation

Public Safety

General Government

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Inergy Automotive 1 Manufacturing $15,588,800 4.0%Anderson Development 2 Manufacturing $13,456,396 3.4%Inteva Products, LLC 3 Manufacturing $11,989,700 3.1%Equity Assets Management 4 Retail- Mall $6,357,827 1.6%Meijer, Inc 5 Retail $5,193,300 1.3%Senafar Investments, LLC 6 Retail $4,895,700 1.3%Wyatt Real Estate (Venchurs) 7 Manufacturing $4,756,268 1.2%Consumers Energy 8 Utility $4,104,276 1.0%W2 Fuel Adrian 9 Manufacturing $3,669,800 0.9%Adrian Steel 10 Manufacturing $3,450,500 0.9%Total Top Ten Taxpayers $73,462,567 18.8%Total Taxable Value $391,348,603 Source: City of Adrian Assessing Office

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$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

2008 2009 2010 2011 2012

Other

Motor Vehicle Fuel Tax

Sales Tax - RevenueSharing

Property Taxes

the richest agricultural counties in Michigan. The population of the City of Adrian in 2010 was 21,133. Adrian is located 33 miles northwest of Toledo, Ohio, 37 miles south of Ann Arbor and 59 miles southwest of Detroit, and is served by Michigan highways US-223, M52 and M34. The City of Adrian is empowered to levy a property tax on both real and personal properties located within its boundaries. The City is also empowered by state statute to extend its corporate limits by annexation, which occurs periodically when deemed appropriate by the City Commission, in accordance with the rules and regulations of the State Boundary Commission. In recent years the City boundaries have expanded through annexation by 1.2 square miles, from 6.9 square miles to 8.1 square miles.

The City of Adrian, founded in 1825, incorporated in 1853 and re-chartered in 1957, is the county seat of Lenawee County, one of

The City of Adrian has operated under the commission-administrator form of government since 1957. Policy-making and legislative authority are vested in a governing commission consisting of the mayor and six other members elected at-large on a non-partisan basis. The City Commission is responsible, among other things, for passing ordinances, adopting the budget, appointing committees, and hiring the government’s Administrator, Attorney, and City Clerk. The City Administrator is responsible for carrying out the policies and ordinances of the City Commission, for overseeing the day-to-day operations of the government, and for appointing the heads of the various departments. Commission members serve four-year staggered terms, with three Commission members elected every two years. The mayor is elected to serve a two-year term.

The City of Adrian provides a full range of services, including police and fire protection, sanitation services, construction and maintenance of highways, streets and other infrastructure, Dial-A-Ride transportation and Community Development services, as well as recreational activities and cultural events. In addition to general government activities, the City Commission is financially responsible for the activities of the water and sewer systems, the Downtown Development Authority (DDA-TIF), the Local Development Finance Authority (LDFA) and Brownfield Redevelopment Authority (BRA).

The local economy is certainly impacted by the State and National economies, however, since the City of Adrian is the Seat of Lenawee County and its largest city in a primarily agricultural county, there is some insulation from the current vagaries that are plaguing the state and region. Several of the largest employers include non-profit organizations, such as county and city government, Adrian Public Schools and the Intermediate School District, Adrian College and Siena Heights University, Jackson Community College and ProMedica’s Bixby Hospital. These employers provide a relatively stable number of jobs that are not as volatile as the private sector. Even the private sector is well diversified, with the top ten employers providing less than 20% of all jobs in the local workforce, as well as providing less than 20% of local taxes. Unemployment stands at 10.4%, higher than the national rate of 8.1% but lower than the 10.9% a year ago.

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2003 22,215 515,388,000 23,200 31.6 3,972 8.4%

2004 22,215 550,932,000 24,800 31.6 3,820 7.8%

2005 22,215 550,665,420 24,788 31.6 3,786 6.4%

2006 22,215 492,573,195 22,173 31.6 3,663 6.2%

2007 22,215 477,197,467 21,481 32.0 3,630 8.5%

2008 22,215 463,401,394 20,860 32.3 3,556 11.2%

2009 22,215 444,865,338 20,025 32.4 3,422 15.2%

2010 21,133 402,689,315 19,055 32.4 3,200 13.6%

2011 21,133 401,379,069 18,993 32.5 3,136 10.9%

2012 21,133 402,034,192 19,024 32.6 3,073 10.4%

Physical Arrests 1438 1769 1679 1485 1619 12.6%

Parking Violations 6270 3405 3269 1885 1827 -70.9%

Traffic Violations 1287 1375 1676 476 526 -59.1%

Non-Medical Emergencies 461 459 518 868 459 -0.4%

EMS Rescue Responses 1736 1806 2034 2071 1490 -14.2%

Structure Fires 25 28 26 18 18 -28.0%

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The Government Finance Officers Association of the United States and Canada (GFOA) has given an Award for Outstanding Achievement in Popular Annual Financial

Reporting to the City of Adrian for it Popular Annual Financial Report for the fiscal year ended June 30, 2011. The Award for Outstanding Achievement in Popular Annual

Financial Reporting is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government popular reports.

In order to receive an Award for Outstanding Achievement in Popular Annual Financial Reporting, a government unit must publish a Popular Annual Financial

Report, whose contents conform to program standards of creativity, presentation, understandability and reader appeal.

An Award for Outstanding Achievement in Popular Annual Financial Reporting is valid for a period of one year only. We believe our current report continues to conform to

the Popular Annual Financial Reporting requirements, and we are submitting it to GFOA.

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City of Adrian135 E. Maumee St.Adrian, MI. 49221

(517)263-2161www.adrianmi.gov