Comments that appear to have been made at the Feb.

24 Lansing City Council meeting and covered in

the Lansing State Journal article headlined “Lansing faces $7 million general fund shortfall, including
$2.5 million in IRS fines” may have led readers to believe that the circumstances surrounding these
issues resulted from lack of attentiveness and/or errors and were only recently discovered. They were,
in fact, known priorities that were actively being worked on during my tenure as Lansing’s finance
director.

In terms of revenues and transparency, fiscal year 2019 revenues came in significantly lower than
expected due to the Board of Water and Light return on equity and personal property tax
reimbursement by the state. These shortfalls were not known until after the final quarterly report that
was submitted and presented to City Council and after the conclusion of budget hearings. We had
performed due diligence in confirming that the return-on-equity projections were on track during the FY
2020 budget process just a month prior to the payment, so that was an unfortunate surprise. Whether
or not those downgrades were passed on to City Council prior to or after my departure, I do not know
and cannot speak to.

Income tax revenues started to decline from budgetary expectations in the third and fourth quarters of
the fiscal year. This was not because of the East Lansing income tax, which was anticipated in the
budget, but largely due to a reduction in General Motors plant shifts. Employer-based income tax and
employment trends, both historical and expected, are taken into account; however, a lot can happen in
the 18 months between the budget proposal and fiscal year-end.

Quarterly general fund status reports were transmitted and presented to City Council for all the eight
years, without fail, in which I served as finance director and deputy finance director. Thus, I am
disappointed by the assertion of lack of transparency.

The article also referenced “discovery” of vendor selection for the healthcare savings accounts and
incorrectly implied lack of funding and effort. Amounts needed for the accounts, both deductions and
contributions, were funded and reserved in the City’s fringe benefit fund for completion of account
setup. It appears from the FY 2019 financial statements that the amounts are still contained in the fringe
benefit fund. The process involved a lot of hard work by more than just the Finance Department, was
well known, and was coming close to completion at the time I left.

Affordable Care Act IRS reporting was delayed because of an unexpected drop of ACA reporting support
by the city's financial software, requiring an unexpected financial system upgrade before completion of
the filings which was further complicated by changes in administrations and human resource
directors. Unfortunately, due to the city's size, filings are required to be made electronically; they
cannot be made manually.

In terms of IRS W-2 filings, shortly before my departure, the city received a preliminary proposal of
approximately $70,000 in fines for late filings of W-2s for tax years 2016 and 2017. Those late filings
resulted from a 30-day change in IRS deadlines, the aforementioned financial system upgrade, and the
challenge of timing in preparation of a budget during changes in administrations but not because of
neglect. Prior to my departure, I was working with the administration and attorneys on responses to IRS
inquiries to mitigate any, and potentially all, fines. It is my understanding that this work is continuing.

For the sewer lawsuit settlement, my recommendation as finance director was to have the majority paid
by the city's sewer fund rather than the general fund since the major source of claims was backups in
the wastewater system. At the time I resigned that proposal was still in debate by City Council, and it
appears that it was decided that general fund reserves should be used instead.

I was certainly not, and am not, happy these issues occurred and would have preferred to have them
resolved prior to my departure. Those issues were, however, not due to lack of attentiveness nor were
the $60 million in budget restructuring, millions of dollars in near-term and hundreds-of-millions in long-
term pension and retiree healthcare cost reductions, millions of dollars in bond refinancings, the
addition of $12 million to general fund reserves. For these, I am grateful for the work of Finance
Department staff, city departments, department heads, unions, administrations and council members in
the seven years I served as Lansing's finance director, as well as the years and roles I served previously.