Audit shows studio losses

Sunday Times Newspapers

ALLEN PARK — It was not a rosy outlook for the city when an audit of its last fiscal year was presented Tuesday.

“We are actually in very bad shape,” auditor Randall Darnell, of Darnell and Meyering, P.C. in Taylor, told the City Council, highlighting the failed movie studio property, now just 39 percent rented and not producing enough revenue to pay for the nearly $30 million in bonds the city issued to buy it.

Only 314,000 of the available 800,000 square feet of the property are rented and the city last year subsidized the property by $1.5 million, set to increase to $2 million this year.

Rising retiree health care costs, which last year totaled $3 million, also contributed to the city’s financial struggle, Darnell said.

Darnell said his firm did not issue the city its “Growing Concern” rating, because the firm bases its outlook on 15 months from the date of the audit, and, he said, the city was in a “stabilization phase,” and should “get through September.

“We have a real problem,” Darnell said. “If we can’t sell this property, bundle it together and sell it, or get more renters over there, yeah, we’re going to have a problem. It’s getting close to that.”

Councilman Dennis Hayes asked Darnell for his “best estimate” of the city’s financial situation during the audit and disagreed with Darnell’s description of the “stabilization phase.”

“I hardly think we’re in a stabilization phase,” Hayes said. “I don’t think the state believes it, I don’t think any of us believe it. We may try to convince ourselves of that, but I’d like to know … how bad we are at this moment in time.”

Darnell’s audit also showed mishandling of petty cash records, with only one department, that of the treasurer, having accurate records. It also showed $45 was used for “a personal situation” by one employee in an unnamed department and not paid back.