Livonia's FY2025 Audit, Explained: What the City's $486.5 Million Balance Sheet Actually Means
LIVONIA — 6/14/2026
The Finance and Budget Committee spent its entire June 8 meeting on one document — a 90-plus page independent audit. Below are the headline numbers, what each one is used for, and how to read whether it's good news, a yellow flag, or just an accounting artifact.
The Livonia City Council's Finance and Budget Committee met for just one agenda item Monday night, but it was a meaty one: the city's annual audit reports for the fiscal year that ended November 30, 2025, prepared by the accounting firm Plante & Moran. The committee's review sets the stage for the full City Council, which is scheduled to receive and file the report at its regular meeting on June 15.
The top-line finding is the one every city wants: Plante & Moran issued an unqualified — or "clean" — opinion on Livonia's financial statements. The firm also reported no disagreements with city management and no significant difficulties completing the audit.
Auditors grade financial statements on a scale. An unqualified (clean) opinion means the statements fairly represent the city's financial position, in all material respects, according to standard government accounting rules — the best grade available. A qualified opinion flags one or more specific exceptions; an adverse opinion means the statements don't fairly represent the city's finances overall; and a disclaimer means the auditor couldn't gather enough evidence to form an opinion at all. A clean opinion doesn't mean every number is perfect or that there's nothing worth discussing — it means the overall picture can be relied on, which is why the rest of this article can take the underlying figures at face value.
The Big Number: $486.5 Million in Net Position
"Net position" is government accounting's version of net worth: everything the city owns (cash, buildings, equipment, infrastructure, money owed to it), plus certain deferred items, minus everything it owes. As of November 30, 2025, that figure was $486.5 million, up from $451.5 million the year before — an increase of about $35.0 million.
It's tempting to read $486.5 million as money the city has sitting around, but most of it isn't spendable — and isn't meant to be. Auditors split net position into three buckets:
Net investment in capital assets ($368.1 million) is the value of the roads, buildings, water lines, vehicles and equipment the city owns, minus whatever debt is still outstanding on them. It's real value, but it's locked into infrastructure the city uses to deliver services — it can't be redirected to, say, cover a budget shortfall. Restricted net position ($51.1 million) is money the city legally must spend on specific things — grant requirements, bond covenants, dedicated millages. Unrestricted net position ($67.3 million citywide) is the only slice that's flexible, and even that is further split between the city's regular operations and its water and sewer utility.
The $35 million increase in total net position was driven largely by a one-time $12.3 million combination of grants from the U.S. Department of Housing and Urban Development and Wayne County that paid for completion of the city's senior center, along with steady growth in property tax revenue (up from $66.2 million to $70.7 million citywide) and state-shared revenue (up from $16.8 million to $17.5 million). Citywide, total revenue reached just over $202 million against $167.5 million in expenses.
The General Fund and the "Rainy Day" Ratio
The general fund is the account that pays for the services most residents interact with day to day — police, fire, parks, general administration. Its fund balance is the accumulated difference between everything the fund has taken in and spent since the city was founded — essentially its savings account. For FY2025, that balance grew by about $2.1 million to $20.2 million.
Expressing fund balance as a percentage of annual expenditures turns a raw dollar figure into a measure of how many months of operations the city could cover from reserves alone if revenue stopped entirely. The Government Finance Officers Association, a widely followed standard-setter for municipal finance, recommends governments maintain unrestricted general fund reserves equal to no less than about two months of operating expenditures — roughly 16.7%. Livonia's 27.6% is comfortably above that benchmark, and it's the highest this ratio has been since at least 2018, when it stood at 22.2%. In plain terms: the city's financial cushion has been getting thicker, not thinner, even as it absorbs rising personnel and material costs.
The year's results beat expectations on both sides of the ledger. Actual general fund revenue came in about $236,000 above the amended budget. Actual spending landed roughly $3.0 million below the amended budget — auditors specifically noted the police department came in significantly under its amended budget, which the city's own financial statements attribute largely to personnel vacancies. Put together, the year finished about $3.2 million better than the amended budget called for, and total general fund revenue reached $75.2 million, a four-year high. Property tax collections flowing into the general fund alone climbed from $36.0 million in 2022 to $42.4 million in 2025 — about an 18% increase over that span.
Spending less than budgeted is usually framed as good news, and a one-time $3.2 million favorable variance is a healthy sign of conservative planning. But when the underspending is concentrated in one department because of staffing vacancies, it's worth asking a second question that a budget document alone won't answer: are those positions hard to fill, or intentionally unfilled? Either answer can be reasonable, but a council or resident might want to know which one it is, since persistent vacancies can eventually affect service levels even while they help fund balance look stronger in the short term.
Pension and Retiree Health: What a "Funded Ratio" Tells You
Two of the city's largest long-term obligations are its defined benefit pension plan and its retiree health care trust, known as a VEBA (Voluntary Employees' Beneficiary Association). Both came back from this audit looking strong — but understanding why requires knowing what a "funded ratio" measures.
A pension or retiree-health plan promises future payments to current and former employees. Actuaries estimate the present-day cost of all of those future promises (the "liability") and compare it to the investments already set aside to pay for them (the "assets"). The funded ratio is assets divided by that liability. A ratio of 100% means the plan currently has enough set aside to cover everything it has promised, based on today's assumptions about investment returns, life expectancy and salary growth. Below 100% means there's a gap that has to be closed with future contributions; above 100% means the plan has more set aside than its liability as currently estimated — sometimes called "overfunded."
Livonia's defined benefit pension plan is 97% funded as of November 30, 2025, based on the most recent actuarial valuation (GASB Statement No. 68). For context, many municipal pension plans nationally sit in the 70%-to-80% range, so 97% represents a comparatively strong position. That didn't happen by accident: the city went without making required contributions to the plan from 2003 through 2011, then resumed required contributions starting in 2012, paying in roughly $22.9 million between 2012 and 2023. In FY2025, the city contributed about $3.2 million — the full actuarially determined amount.
A separate, newer Police and Fire Revised Retirement Plan — first reported starting in 2021, likely covering employees hired under a different benefit structure — had 207 participants and $18.3 million in its trust as of late November 2025, with $2.7 million in required contributions for the year.
On the retiree health care side, Livonia's VEBA trust has built up roughly $151.9 million and is 102% funded — meaning it currently holds slightly more than its estimated liability for promised retiree health benefits. That's notable because retiree health care, known in accounting terms as "Other Postemployment Benefits" or OPEB, has historically been one of the most underfunded obligations for governments nationwide; many municipalities still fund these benefits on a pay-as-you-go basis with little or nothing set aside in advance. The actuarially determined contribution for 2025 was about $1.3 million, but the city voluntarily contributed $2.2 million — part of a long-running strategy that, combined with past changes to reduce benefit costs, has lowered what was once an annual contribution requirement of more than $7 million.
Auditors flagged a "consistent decline" in this fund's balance — from about $861,000 in 2021 to just $70,000 by the end of fiscal 2025. Revenue has slipped from $395,000 to $312,000 over that span, mainly due to falling cable franchise fees, while expenditures rose from $453,000 to $509,000.
Auditors described this as a structural imbalance — a situation where a fund's ongoing revenue is trending down while its ongoing costs trend up, so the gap has to be covered by spending down savings every year. That works only as long as the savings last; once the fund balance hits zero, the city has to either raise revenue, cut costs, or subsidize the fund from elsewhere. The city kept all four full-time positions funded for 2026, but auditors said a future staffing reduction "was identified as a consideration," and recommended the city also review its fee structure. With only about $70,000 left in reserve, this fund has very little runway left to make that adjustment gradually.
The $3.2 Million Sitting in the Forfeiture Fund
Auditors also pointed out that the city's Adjudicated Forfeitures Fund held $3.2 million in fund balance at the close of fiscal 2025.
When police seize cash or property connected to certain crimes and a court rules the seizure was lawful ("adjudicated"), the proceeds typically go into a dedicated fund rather than the general fund, and state and federal law restrict what that money can be spent on — generally law-enforcement-related purposes. Because the spending is restricted, these balances can sit untouched for years even while they grow. Auditors weren't reporting a problem here so much as reminding the city that $3.2 million in already-available, restricted dollars exists and could supplement police department spending — potentially easing pressure on the general fund for eligible purchases.
A $317,108 Asterisk: What "Uncorrected Misstatement" Means
The audit identified exactly one item in this category: a $317,108 invoice paid in fiscal 2025 for services to be received in fiscal 2026, which technically should have been recorded as a prepaid asset rather than an expense in FY2025. City management considers the item immaterial.
Auditing standards require auditors to add up every error they find during the audit and disclose them to the governing body — even ones the auditor agrees are too small to matter. That threshold is called materiality: a dollar amount, generally set as a small percentage of a measure like total revenue or expenditures, below which an error is considered unlikely to change a reasonable reader's overall impression of the financial statements. For a city with roughly $202 million in annual revenue, $317,108 is well under that line — about 0.16% of revenue. The disclosure isn't a finding that something is wrong; it's a transparency requirement so elected officials see everything the auditors found, not just the things that were big enough to require a correction. Auditors did add a caveat that uncorrected items like this one "could potentially cause future period financial statements to be materially misstated" if they recur or accumulate — which is less a warning about this specific $317,108 and more a standard reminder that small errors are worth tracking over time.
Two related, lower-key recommendations rounded out this section of the audit. First, auditors noted the city processes a high volume of manual journal entries — accounting entries typed in by hand rather than generated automatically by a system when, say, a payroll runs or a bill is paid. Manual entries carry more risk of typos, miscoding, or entries that bypass standard system checks, so auditors suggested the city look at strengthening review steps and exploring automation. Second, auditors encouraged continued attention to cybersecurity, noting that the rising cost and frequency of attacks on municipalities nationwide means even a well-run technology program carries residual risk. Neither comment points to a specific incident or known weakness in Livonia's systems — both read as standard-practice reminders that apply to local governments broadly.
Road Funding Is Being Restructured, Not Just Increased
A significant part of the audit's "informational" section dealt with a new state Transportation Funding Package that took effect with Michigan's 2026 fiscal year and runs through at least fiscal year 2030.
Under Michigan's Act 51, the state collects motor fuel taxes and vehicle registration fees into the Michigan Transportation Fund (MTF) and distributes a share to local governments by formula for road maintenance and construction — a major recurring revenue source for Livonia's Roads and Sidewalks Fund. Historically, the state has also redirected a portion of income tax revenue — about $600 million statewide — into the MTF to supplement fuel-tax receipts.
The new package changes several pieces at once: the motor fuel tax rate is set to rise from 31 cents per gallon to at least 51 cents per gallon starting January 1, 2026; the state is creating a brand-new Neighborhood Roads Fund and an Infrastructure Projects Authority Fund; a new excise tax on certain marijuana sales will feed the Neighborhood Roads Fund; and — separately — the state is repealing that $600 million income-tax redirect to the MTF, replacing it with new corporate income tax revenue routed to the Neighborhood Roads Fund instead.
The practical upshot for Livonia, according to the audit: because the $600 million MTF redirect is going away before the new Neighborhood Roads Fund distributions are fully up and running, the city should expect a temporary dip in its monthly MTF checks during the transition, even though the overall package is designed to increase road funding over time. For budgeting purposes, that means treating next year's road revenue as a transition year rather than assuming a smooth, predictable increase.
$746.7 Million in Assets — Gross, Not Net
The audit's capital asset accounting shows Livonia carrying $746.7 million in capital assets before depreciation — land, buildings, infrastructure, public safety equipment, computer equipment, and water and sewer lines.
Governments record capital assets at their original cost, then "depreciate" that cost over the asset's expected useful life to reflect wear and aging — the same concept as a car losing value over time on a company's books. The $746.7 million figure is the gross original investment; the city's balance sheet separately shows roughly $408.8 million in capital assets net of depreciation. The roughly $338 million gap between those two figures represents accumulated wear on aging infrastructure — buildings, roads and pipes that are still in service but have used up a substantial share of their expected useful life on paper.
That gap helps explain why auditors noted the city is shifting toward a renewed emphasis on maintaining, updating and replacing aging infrastructure in the years ahead. FY2025 additions already reflect that direction: $13.5 million for road and infrastructure construction, $8.2 million for equipment and vehicles, and $13.4 million for water and sewer system upgrades, with more than $25.7 million of construction still in progress at year-end.
On the liability side, the city carries relatively modest debt for its asset base: $14.5 million tied to general government capital projects and $24.0 million in water and sewer system debt. Low debt relative to a large asset base is part of why "net investment in capital assets" makes up such a large share (75.7%) of the city's total net position — most of what the city owns, it owns outright.
How Livonia Compares to Its Neighbors
A presentation included with the audit packet benchmarked Livonia against several nearby communities on one specific measure: unrestricted net position, expressed as a share of each city's annual governmental activities expenses.
Earlier, this article noted that Livonia's unrestricted net position for governmental activities was $25.8 million (up from $17.5 million the prior year) — the truly flexible slice of the $486.5 million total. The peer-comparison chart below uses a different figure, $43.4 million, for Livonia. That's not an error: the comparison specifically excludes the impact of net pension and OPEB liabilities and assets from unrestricted net position before comparing cities. Pension and retiree-health funding levels vary widely from city to city and can swing this figure by tens of millions of dollars depending on actuarial assumptions — including without that adjustment would make the comparison more about funding choices for legacy benefits than about general financial flexibility. Dividing that adjusted figure by each city's annual expenses produces a rough answer to: if revenue stopped tomorrow, what share of a year's operations could the city's flexible reserves cover?
By that yardstick, Livonia's 38% ranked lowest among the seven communities compared.
Not necessarily on its own. A higher percentage generally signals more financial flexibility relative to the size of a city's operations, so 38% versus a range of 41%-58% suggests Livonia has comparatively less of that "free" cushion than these particular neighbors. But the figure is also shaped by choices that aren't inherently negative: a city that has paid down debt and owns more of its infrastructure outright will have more of its net position locked into capital assets (which is its own form of financial strength), and a city with more dedicated millages or grant-restricted funds will show more "restricted" net position — both of which mechanically shrink the unrestricted slice without reflecting financial distress. Taken together with this audit's other findings — a clean opinion, a growing and above-benchmark general fund balance, and well-funded pension and retiree health trusts — the most reasonable reading is that this is one metric worth tracking over time and asking follow-up questions about, not a standalone red flag.
What Happens Next
The Finance and Budget Committee's preferred recommendation, as presented in the meeting packet, is for the full City Council to receive and file the audit report. The item is scheduled to come before the Council at its regular meeting on June 15, 2026. Attached to the packet were the full "End of Audit Communications" letter from Plante & Moran, the complete Audit Report and Single Audit for fiscal year 2025 (including the 16th District Court's financial statements), and a slide presentation summarizing the year's results in charts.
Sources
- Agenda & cover letter — "Letter to the Livonia City Council," Agenda Item FB060826/R061526, Finance and Budget Committee Meeting Packet, June 8, 2026 (FB060826_Mtg_Pkt), p. 1 — meeting details, audit firm, "receive and file" recommendation, attachment list.
- Audit opinion — "City of Livonia Audit Report and Single Audit 2025," Independent Auditor's Report, Finance and Budget Committee Meeting Packet, June 8, 2026, p. 1 — unqualified ("clean") opinion, no disagreements with management.
- Net position, its three components, & citywide revenue/expense changes — "City of Livonia Audit Report and Single Audit 2025," Management's Discussion and Analysis, Finance and Budget Committee Meeting Packet, June 8, 2026, pp. 4–5 — $486.5M total net position and its breakdown into net investment in capital assets ($368.1M), restricted ($51.1M) and unrestricted ($67.3M) components; $35.0M increase; $12.3M HUD/Wayne County grants; property tax and state-shared revenue growth; governmental-activities unrestricted net position of $25.8M (up from $17.5M).
- General fund results, combined fund balances, capital assets & debt — "City of Livonia Audit Report and Single Audit 2025," Management's Discussion and Analysis, Finance and Budget Committee Meeting Packet, June 8, 2026, p. 6 — $76.5M combined fund balance, $2.1M general fund increase, $236,000 revenue-over-budget, $3.0M spending-under-budget (police vacancies), $746.7M gross capital assets, $13.5M/$8.2M/$13.4M FY2025 additions, $25.7M construction in progress, $14.5M and $24.0M debt figures.
- Net capital assets (depreciated) & statement of net position detail — "City of Livonia Audit Report and Single Audit 2025," Statement of Net Position, Finance and Budget Committee Meeting Packet, June 8, 2026, p. 8 — $408.8M in capital assets net of depreciation.
- Aging-infrastructure outlook — "City of Livonia Audit Report and Single Audit 2025," Management's Discussion and Analysis, Economic Factors and Next Year's Budgets and Rates, Finance and Budget Committee Meeting Packet, June 8, 2026, p. 7.
- General fund condition, legacy costs, Cable TV Fund, Forfeiture Fund, manual journal entries — "City of Livonia – End of Audit Communications 2025" (Plante & Moran, PLLC), Section II – Other Recommendations and Related Information, Finance and Budget Committee Meeting Packet, June 8, 2026, pp. 4–6 — $3.2M general fund improvement vs. budget, 97% pension funding, $22.9M cumulative pension contributions (2012–2023), Police and Fire Revised Retirement Plan figures, 102% VEBA funding and $151.9M trust balance, Cable Television Fund decline ($861,000 to $70,000) and structural-imbalance language, Adjudicated Forfeitures Fund balance of $3.2M, manual journal entry recommendation.
- Uncorrected misstatement — "City of Livonia – End of Audit Communications 2025," Section I – Required Communications with Those Charged with Governance, Finance and Budget Committee Meeting Packet, June 8, 2026, p. 2 — $317,108 prepaid-expense adjustment, materiality language.
- Cybersecurity and state road funding overhaul — "City of Livonia – End of Audit Communications 2025," Section III – Legislative and Informational Items, Finance and Budget Committee Meeting Packet, June 8, 2026, pp. 6–7 — cybersecurity recommendation, Michigan Transportation Funding Package details (motor fuel tax increase, Neighborhood Roads Fund, MTF redirection repeal).
- General fund revenue trend, fund balance history & peer comparison — "Livonia FY25 Graphs" (Audit Presentation for Year Ended November 30, 2025), Finance and Budget Committee Meeting Packet, June 8, 2026, pp. 1–3 — general fund revenue by category 2022–2025, fund balance as a percentage of expenditures 2018–2025, and unrestricted net position comparison versus Farmington Hills, Southfield, Ann Arbor, Dearborn, Sterling Heights and Troy.