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Item 4I CITY OF Item SOUTHLAKE 41 MEMORANDUM March 30, 2016 To: Shana Yelverton, City Manager From: Sharen Jackson, Chief Financial Officer Subject: Approve the 2015 Comprehensive Annual Financial Report Action Requested: Approval of September 30, 2015 Comprehensive Annual Financial Report. Background Information: The purpose of this item is to seek approval of the 2015 Comprehensive Annual Financial Report. • City Charter requires the City at the close of each fiscal year have an independent audit performed by a Certified Public Accountant. Weaver L.L.P., Certified Public Accountants, performed the audit for fiscal year 2015. • City received an unmodified ("clean") opinion on the City's financial statements for the year ended September 30, 2015. • Shawn Parker, Partner, will present the report to the audit committee on Tuesday during the committee meeting scheduled at 5:00 prior to the city council meeting. Financial Considerations: None required Strategic Link: F4 Establish and maintain effective internal controls Citizen Input/ Board Review: None required Legal Review: None required Alternatives: None required Supporting Documents: 2015 CAFR Staff Recommendation: Approval of 2015 Comprehensive Annual Financial Report I SOUTH Al<.,.,E TEXAS i r nF x i V Al Comprehensive Annual Financial Report For the Fiscal Year Ended } a September 30, 2015 av a ,_ _ `-_ _.�......_. ,.....--�.-----»^^-`�„ sem—•—. ,._.....� _ _ "�, _. e � CITY OF SOUTHLAKE, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2015 As Prepared By Sharen Jackson, CPA Chief Financial Officer I CITY OF SOUTHLAKE, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2015 TABLE OF CONTENTS Exhibit Page I. INTRODUCTORY SECTION Letter of Transmittal i Certificate of Achievement viii Organizational Chart ix List of Principal Officials x II. FINANCIAL SECTION Independent Auditor's Report 1 A. MANAGEMENT'S DISCUSSION AND ANALYSIS 4 B. BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Position 1 16 Statement of Activities 2 17 Fund Financial Statements Governmental Funds Financial Statements Balance Sheet 3 18 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 4 20 Statement of Revenues, Expenditures, and Changes in Fund Balance 5 21 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance to the Statement of Activities 6 23 Proprietary Funds Financial Statements Statement of Net Position 7 24 Statement of Revenues, Expenses, and Changes in Net Position 8 25 Statement of Cash Flows 9 26 Fiduciary Fund Financial Statement Statement of Fiduciary Net Position 10 27 Notes to the Basic Financial Statements 28 CITY OF SOUTHLAKE, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2015 TABLE OF CONTENTS Exhibit Page C. REQUIRED SUPPLEMENTARY INFORMATION Budgetary Comparison Schedule-General Fund A-1 60 Budgetary Comparison Schedule -Tax Increment Financing District Special Revenue Fund A-2 61 Notes to Budgetary Comparison Schedules 62 Schedule of Changes in Net Pension Liability and Related Ratios-TMRS A-3 63 Schedule of Contributions-TMRS A-4 64 Notes to Texas Municipal Retirement System Required Supplementary Information 65 Condition Rating of Street System A-5 66 D. COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES Major Governmental Funds Budgetary Comparison Schedule-General Obligation Debt Service Fund B-1 68 Nonmajor Governmental Funds Combining Balance Sheet-Nonmajor Governmental Funds C-1 71 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance- Nonmajor Governmental Funds C-2 74 Budgetary Comparison Schedule- Parks Dedication Special Revenue Fund C-3 77 Budgetary Comparison Schedule-Southlake Parks Development Corporation Special Revenue Fund C-4 78 Budgetary Comparison Schedule-Crime Control District Special Revenue Fund C-5 79 Budgetary Comparison Schedule- Hotel Occupancy Special Revenue Fund C-6 80 Budgetary Comparison Schedule-Storm Water Utility Special Revenue Fund C-7 81 Budgetary Comparison Schedule- Red Light Camera Special Revenue Fund C-8 82 Budgetary Comparison Schedule-Southlake Parks Development Corporation Debt Service Fund C-9 83 Agency Funds Statement of Changes in Assets and Liabilities-Cash Escrow Agency Fund F-1 85 Schedules of Capital Assets Used in the Operation of Governmental Funds Comparative Schedules of Capital Assets by Source G-1 86 Schedule of Changes in Capital Assets by Function and Activity G-2 87 CITY OF SOUTHLAKE, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2015 TABLE OF CONTENTS Exhibit Page III. STATISTICAL SECTION Table Net Position By Component 1 88 Changes in Net Position 2 90 Fund Balances, Governmental Funds 3 92 Changes in Fund Balances, Governmental Funds 4 93 Assessed Value and Estimated Actual Value of Taxable Property 5 94 Direct and Overlapping Property Tax Rates 6 95 Principal Property Tax Payers 7 96 Ad Valorem Tax Levies and Collections 8 97 Ratio of Outstanding Debt By Type 9 98 Ratio of General Bonded Debt Outstanding 10 100 Direct and Overlapping Governmental Activities Debt 11 101 Pledged-Revenue Coverage 12 102 Demographic and Economic Statistics 13 103 Principal Employers 14 104 Full-Time Equivalent City Government Employees By Function/Program 15 105 Operating Indicators By Function/Program 16 106 Capital Asset Statistics By Function/Program 17 107 I INTRODUCTORY SECTION I e CITY OF SOU 1 1 iLAKE Finance Department March 30, 2016 Honorable Mayor Laura Hill and Members of City Council City of Southlake Southlake, Texas Honorable Mayor and Councilmembers: It is with pleasure that we submit to you the Comprehensive Annual Financial Report (CAFR) of the City of Southlake for the fiscal year ended September 30, 2015. This report was prepared by the Finance Department in accordance with the Southlake Charter, Statutes and generally accepted accounting principles for governments. In addition to meeting legal requirements, this report reflects the City's commitment to full financial disclosure. We encourage you to thoroughly read this report and take the opportunity to discuss some of the important items it addresses. In developing and evaluating the City's accounting system, consideration is given to the adequacy of internal accounting controls. These controls are designed to provide reasonable, but not absolute, assurance regarding the safeguarding of assets against loss from unauthorized use or disposition, and the reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that the cost of a control should not exceed the benefits likely to be derived, and the evaluation of costs and benefits requires estimates and judgments by management. We believe that the City's current system of internal controls adequately safeguards assets and provides reasonable assurance of proper recording of financial transactions. The financial statements are presented in accordance with Governmental Accounting Standards Board Statement 34, Basic Financial Statements-and Management's Discussion and Analysis For State and Local Governments. The presentation of the City's financial information includes two financial statements that provide a government- wide perspective using the accrual basis of accounting. The two government-wide statements present governmental activities separately from business-type activities. The inclusion of the government-wide statements in this format enables a more thorough understanding of the financial operations and condition of the City. 1400 Main Street, Suite 440, Southlake, TX 76092 (817) 748-8345 Innovation 0 Integrity 0 Accountability 0 Commitment to Excellence 0 Teamwork i The fund financial statements focus on individual major funds. Each major fund is presented in a separate column in the fund financial statements. Nonmajor funds are aggregated and presented in a combined column. Budget to actual comparisons are presented as required supplementary information and are limited to the general fund and major special revenue funds. The comparisons are more informative, including both the original adopted budget and the final amended budget. We believe the reporting model will assist in making economic, social and political decisions and in assessing accountability to the residents by: • comparing actual financial results with the legal adopted budget, where appropriate; • assessing financial condition and results of operations; • assisting in determining compliance with fiscally-oriented laws, rules and regulations; and • assisting in evaluating the efficiency and effectiveness of City operations. Responsibility for both the accuracy of the presented data and the completeness and fairness of the presentation, including all disclosures, rests with the City. To the best of our knowledge and belief, the data, as presented, is accurate in all material respects and is reported in a manner designed to present fairly the financial position and results of operations. All disclosures necessary to enable the reader to gain an understanding of the City's financial activities have been included. FINANCIAL STATEMENT FORMAT This report has been prepared and organized to meet the requirements of the Government Finance Officers Association (GFOA) Certificate of Achievement for Excellence in Financial Reporting Program. By following the guidelines of this program, the report's format facilitates understanding by the residents and provides information needed by the most sophisticated and interested financial observers. The report is presented in three sections: introductory, financial and statistical. • The introductory section, which is unaudited, includes this transmittal letter, GFOA certificate, the City's organizational chart, and a list of principal officials. This section is designed to provide an overview and general understanding of the report. ii • The financial section provides a detailed presentation of the financial position and results of operations for the fiscal year ended September 30, 2015. The financial section is divided into four main subsections: o Management's Discussion and Analysis o Basic Financial Statements and related notes o Required Supplementary Information o Combining and Individual Fund Financial Statements and Schedules Readers are encouraged to pay particular attention to Management's Discussion and Analysis and to the footnotes to the basic financial statements. These provide valuable analysis and explanation of the financial statements. • The statistical section, which is unaudited, includes a number of multi-year tables and other data designed to present social, economic and financial trends of the City,providing an overall view of the fiscal capacity of the City. The financial reporting entity includes all the funds of the primary government, as well as all of its component units in accordance with GASB Codification of Governmental Accounting and Financial Reporting Standards, Section 2100, "Defining the Reporting Entity." Component units are legally separate entities for which the primary government is financially accountable and for which the nature and significance of their relationship with the primary government are such that exclusion would cause the City's basic financial statements to be misleading or incomplete. The primary government is considered financially accountable if it appoints a voting majority of an organization's governing body and imposes its will on that organization. The primary government may also be financially accountable if an organization is fiscally dependent on the primary government regardless of the authority of the organization's governing board. Blended component units, although legally separate entities, are, in substance, part of the primary government's operations and are included as part of the primary government. Accordingly, the Southlake Parks Development Corporation ("SPDC"), Southlake Crime Control and Prevention District (the "District") and Tax Increment Reinvestment Zone ("TIF") are included in the governmental funds (special revenue) of the primary government as blended component units. SPDC was formed in January 1994 pursuant to a successful election in November 1993 to adopt an additional 1/2 cent sales tax for park and recreation facility development. SPDC is organized exclusively to act on behalf of the City for the financing, development and operation of parks and recreation facilities. Also included in this report is financial information for the District. In November 1997, voters approved an additional '/2 cent sales tax for Crime Control and Prevention initiatives. The District is organized exclusively to act on behalf of the City for the financing, development and crime control throughout the City. Also, included are the financial statements of the TIF which was created in 1997 to encourage quality commercial growth. The TIF was formed to finance and make public improvements, under the authority of the Tax Increment Financing Act. iii PROFILE OF THE GOVERNMENT General Information Although Southlake has been a high-growth community for years, when the first settlers arrived in 1845 they found only a vast area of land and trees where the grand prairie and cross timbers merged. As the site of the first permanent settlement in Tarrant County, a portion of present day Southlake was homesteaded in 1866, which consisted of 360 acres. Keeping with the time, the primary industry was agriculture. Farmers grew peanuts, grains and cotton, and families raised their own livestock. The area that would become Southlake remained a rural farming community for more than 100 years until the U.S. Army Corps of Engineers built Lake Grapevine in 1952. The lake spurred much of the area's early growth and was the beginning of dramatic change. The town officially incorporated on September 25, 1956 by a public vote of 30 in favor and 24 against. The original town contained 1.62 square miles and had a population of just over 100. The residents chose to call this new town Southlake because it was... south of Lake Grapevine! The Southlake Fire Department was launched in 1965 and the first piece of fire equipment was a 1950 Diamond T-Military unit with a tank capacity of 1,000 gallons and an auxiliary pump. The first chief of police was hired in 1966, and the City purchased its first patrol car in 1967. The opening of the Dallas-Fort Worth International Airport in 1974 served as the next catalyst of growth in the area and Southlake residents adopted a home-rule charter in April 1987, which created the current council-manager form of government with six Council Members and a Mayor who are elected at large on a non-partisan basis for staggered three-year terms. But the single most important event in bringing residential subdivision development to Southlake was the completion of water and sewer lines in the southern portion of the city in the early 1990s. Since that time, much like the area's first settlers were attracted to the area with its endless possibilities, Southlake has continued to attract the suburban settler desiring a high quality of life and the small town charm that has been preserved from Southlake's past. Services Provided Services provided by the City under general governmental functions include public events, public safety, planning and development, engineering, street maintenance, parks operation and maintenance, recreation, library services, and general administrative services. The City does not provide educational or welfare services. Water and sewer services and solid waste collection are provided under an Enterprise Fund concept, with user charges set by the City Council to ensure adequate coverage of operating expenses and payments of outstanding debt. iv Economic Condition and Outlook The City of Southlake continues to be one of the major growth areas in Texas. The City is in a prime location in Northeast Tarrant County, 5 minutes west of Dallas/Fort Worth International Airport, and 10 minutes east of the Alliance Airport, a commercial aviation and industrial complex in north Fort Worth. State Highway 114, FM1709, and FM1938, the regional road arterials, serve the City. Single Family Residential Home Permits There were 272 single family residential permits 300 issued in Fiscal Year 2015 250 with an average new home construction value, 200 excluding land value, of 150 more than $724,000. Residential home 100 construction has increased 50 — as evidenced by the chart. 0 2011 2012 2013 2014 2015 Water customers increased Num be r of Water Customers from 9,964 in Fiscal Year 10,400 2014 to 10,189 in 2015, 10,200 while wastewater 10,000 customers increased from 9,800 7,926 to 8,166 during the 9,600 same year. The chart 9,400 shows the five-year trend 9,200 of increasing water customers, the result of the 9,000 bu 2011 2012 2013 2014 2015 ilding permit activity. The City has developed master plans for land use, water, sewer, parks, trails, and thoroughfares, and has implemented regulatory controls that will maintain the anticipated quality growth into the future. Sales Tax Revenue The City of Southlake experienced an increase in 35,000,000 sales tax collections during 30,000,000 the fiscal year as indicated 25,000,000 on the chart. Sales tax 20,000,000 15,000,000 collections totaled 10,000,000 $29,116,146 in fiscal year 5,000,000 2015, a 13.5% increase from the previous year. 2011 2012 2013 2014 2015 O General O SPDC O Crime V Future Development During 2015, approximately 27 new construction commercial permits were issued by the city representing over 988,907 square feet of future retail/office. Residential also experienced an increase in activity; several subdivisions were approved for development with an estimated average home value over$950,000. Financial Management Principles The City has strong financial management principles that provide the framework for the City's financial sustainability. • Tax rate management. The tax rate is allocated properly between maintenance/operations and debt service. • Structural balance. The City's ability to weather potential economic downturns or other financial challenges is critical. The City does not use reserves to balance the operating budget. • Reserve management. The City's fund balance policy requires a minimum 15% and optimum 25% balance. The City uses "excess" reserves as a means to fund one-time, "pay-as-you-go"projects. • Multi-year financial plan. The long-term effect of today's decisions on tomorrow's financial situation is an important consideration during the budget process. • Quality service delivery. The City is committed to meeting the needs of our community through high quality service delivery. • Risk management. The City supports ongoing initiatives to safeguard the public trust by internal audits and other initiatives to maintain a strong control environment. For fiscal year 2015, the property tax rate was held steady at $0.462 per $100 net taxable valuation. OTHER INFORMATION Independent Audit The City Charter requires an annual audit of the financial status of the City by independent Certified Public Accountants selected by the City Council. This requirement has been met and the auditor's report has been included in this report. Awards The Certificate of Achievement is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government financial reports. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized comprehensive annual financial report, whose contents conform to program standards. Vi Such CAFR must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. The City of Southlake received a Certificate of Achievement for the year ended September 30, 2014, and believes our current report conforms to the Certificate of Achievement program requirements, and we are submitting it to GFOA. In addition, the City also received the GFOA's Distinguished Budget Presentation award for its annual budget dated October 1, 2014. In order to qualify for this award, the City's budget document was judged to be proficient in all categories, including as a policy document, a financial plan, and operations guide, and a communications device. The City received the silver member designation for the Texas Comptroller's Leadership Circle for online financial transparency. Acknowledgments The preparation of this report could not be accomplished without the dedication and efficiency of the entire staff and our independent auditor. I would like to express my sincere appreciation to all employees who contributed to its preparation. I would also like to thank the Mayor and members of the City Council for their support in planning and conducting the financial operations of the City in a responsible and efficient manner. Respectfully submitted, Sharen Jackson, CPA Chief Financial Officer Vii a Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Southiake Texas For its Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 2014 Executive Director/CEO Viii CITY OF SOUTHLAKE ORGANIZATIONAL CHART ACUIZZgE7S - - - - - - CITY CITY MUNICIPAL ATTORNEY SECRETARY JUDGE ASSISTANT CITY ASSISTANT CITY MANAGER MANAGER COMMUNITY CITY MANAGER'S INFORMATION SERVICES FIRE SERVICES OFFICE TECHNOLOGY 10 POLICE HUMAN SERVICES RESOURCES FINANCE ECONOMIC DEVELOPMENT & TOURISM PLANNING& PUBLIC WORKS DEVELOPMENT IX LIST OF PRINCIPAL OFFICIALS Laura K. Hill Mayor Randy Williamson Mayor Protem Brandon Bledsoe Deputy Mayor Protem Shahid Shall Council Member Shawn McCaskill Council Member John Huffman Council Member Gary Fawks Council Member Shana K. Yelverton City Manager Benjamin Thatcher Assistant City Manager Alison Ortowski Assistant City Manager Lori Payne City Secretary Sharen Jackson Chief Financial Officer Shannon Hamons Director of Economic Development Robert Cohen Director of Public Works Chris Tribble Director of Community Services Stacey Black Director of Human Resources Ken Baker Director of Planning/Development x FINANCIAL SECTION I weaverAssurance- -Advisory JJJ% INDEPENDENT AUDITOR'S REPORT To Members of the City Council and City Manager City of Southlake, Texas We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Southlake (the City) as of and for the year ended September 30, 2015, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. AN INDEPENDENT MEMBER OF WEAVER AND TIDWELL,L.L.P. 12221 MERIT DRIVE,SUITE 1400,DALLAS,TX 75251 BAKER TILLY INTERNATIONAL CERTIFIED PUBLIC ACCOUNTANTS AND ADVISORS P:972.490.1970 F:972.702.8321 1 City of Southlake Page 2 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City, as of September 30, 2015, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. Change in Accounting Principle As discussed in Note 14 to the financial statements, in 2015 the City adopted new accounting guidance, GASB Statement No. 68, "Accounting and Financial Reporting for Pensions — an amendment of GASB Statement No. 27" and GASB Statement No. 71, "Pension Transition for Contributions Made Subsequent to the Measurement Date". Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis (pages 4 through 15), budgetary comparison information (pages 60 through 62), TMRS pension schedules (pages 63 through 65) and condition rating of street system (page 66) be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The introductory section, combining and individual fund financial statements and schedules, and statistical section, are presented for purposes of additional analysis and are not a required part of the financial statements. 2 City of Southlake Page 3 The combining and individual fund statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund financial statements and schedules are fairly stated in all material respects in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 30, 2016, on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. (),-� VW T;/�� O- 4�:+ WEAVER AND TIDWELL, L.L.P. Dallas, Texas March 30, 2016 3 I MANAGEMENT'S DISCUSSION AND ANALYSIS I MANAGEMENT'S DISCUSSION AND ANALYSIS The City of Southlake's Management's Discussion and Analysis (MD&A) is designed to provide an objective and easy to read analysis of the City's financial activities based on currently known facts, decisions, and conditions. It is intended to provide a broad overview and short-term analysis of the City's activities based on information presented in the financial statements. Specifically, this information is designed to assist the reader in focusing on significant financial issues, provide an overview of the City's financial activity, identify changes in the City's financial position (its ability to address the next and subsequent years' challenges), identify material deviations from the approved budget, and identify individual fund issues. The City presents its financial statements in accordance with the reporting model required by Governmental Accounting Standards Board Statement 34, Basic Financial Statements-and Management's Discussion and Analysis- for State and Local Governments. This reporting model significantly changes not only the presentation of financial data, but also the manner in which the information is recorded. The information contained within this MD&A is only a component of the entire financial statement report. Readers should take time to read and evaluate all sections of the report, including the footnotes and the other Required Supplementary Information that is provided in addition to this MD&A. FINANCIAL HIGHLIGHTS The assets and deferred outflows of resources of the City of Southlake exceeded its liabilities and deferred inflows of resources at September 30, 2015 by $531,672,444 (net position). Of this amount, $73,108,607 (unrestricted net position) may be used to meet the government's ongoing obligations to citizens and creditors. The City's total net position increased by $35,750,449, exclusive of the cumulative effect of a change in accounting principles. This increase can be attributed to increases in sales tax revenue, contributions, and charges for services. At September 30, 2015, the City's governmental funds reported combined ending fund balances of $103,082,008. Approximately 17.7 percent of this amount, $18,230,317, is available for spending at the government's discretion(unassigned fund balance). At the end of the current fiscal year, unassigned fund balance for the General Fund was $18,230,317 or 51.4 percent of total General Fund expenditures. At the end of the current fiscal year, the City of Southlake outstanding debt totals $161,848,257, a net decrease of$10,928,246 from the previous year. 4 OVERVIEW OF THE FINANCIAL STATEMENTS The discussion and analysis is intended to serve as an introduction to the City's basic financial statements. The reporting focus is on the City as a whole and on individual major funds. It is intended to present a more comprehensive view of the City's financial activities. The basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. GOVERNMENT-WIDE FINANCIAL STATEMENTS The government-wide financial statements include the Statement of Net Position and the Statement of Activities. These statements are designed to provide readers with a broad overview of the City's finances in a manner similar to a private-sector business. Both are prepared using the economic resources measurement focus and the accrual basis of accounting; meaning that all the current year's revenues and expenses are included regardless of when cash is received or paid. The Statement of Net Position presents information on all of the City's assets and deferred outflows of resources and liabilities and deferred inflows of resources, including capital assets and long-term obligations. The difference between the two is reported as net position. Over time, the increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. Other indicators of the City's financial position should be taken into consideration, such as the change in the City's property tax base and condition of the City's infrastructure (i.e., roads, drainage systems, water and sewer lines, etc.), in order to more accurately assess the overall financial condition of the City. The Statement of Activities presents information showing how the City's net position changed during the most recent fiscal year. It focuses on both the gross and net costs of the government's various activities and thus summarizes the cost of providing specific government services. This statement includes all current year revenues and expenses. The Statement of Net position and the Statement of Activities divide the City's activities into two types: Governmental activities- Most of the City's basic services are reported here, including general administration, debt services, public safety, public works, parks and community services, public library, public events and facilities, planning and development and finance. Property, sales and franchise taxes provide the majority of the financing for these activities. Business-Type activities- Activities for which the City charges a fee to customers to pay most or all of the costs of a service it provides are reported here. The City's business-type activities include water distribution and wastewater collection and solid waste collection and disposal. The government-wide financial statements are found on pages 16-17 of this report. 5 FUND FINANCIAL STATEMENTS The City of Southlake, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. These statements focus on the most significant funds and may be used to find more detailed information about the City's most significant activities. All of the funds of the City can be divided into two categories: governmental funds and proprietary funds. Governmental Funds- These funds are used to account for the majority of the City's activities, which are essentially the same functions reported as governmental activities in the government- wide statements. However, unlike the government-wide fmancial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as spendable resources available at the end of the fiscal year for future spending. Such information may be useful in evaluating a government's near-term financing requirements. The focus of the governmental funds financial statements is narrower than that of the government-wide financial statements. Therefore, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental funds Balance Sheet and the governmental funds Statement of Revenues, Expenditures and Changes in Fund Balances provided a reconciliation to facilitate this comparison. The reconciliation explains the differences between the government's activities as reported in the government-wide financial statements and the information presented in the governmental funds financial statements. The City maintains 22 individual governmental funds. Information is presented separately in the governmental funds Balance Sheet and in the governmental funds Statement of Revenues, Expenditures and Changes in Fund Balances for the General Fund, General Obligation Debt Service Fund, General Capital Projects Fund, Southlake Parks Development Corporation Capital Projects Fund, and Tax Increment Financing District Fund, all of which are considered to be major funds. Data for the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of the non-major governmental funds is provided in the form of combining statements elsewhere in this report. The basic governmental funds financial statements can be found on pages 18-23 of this report. Proprietary Funds- When the City charges customers for services it provides, the activities are generally reported in proprietary funds. The City of Southlake maintains two different types of proprietary funds: enterprise and internal service funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its water and sewer operations and solid waste. These services are primarily provided to outside or non- governmental customers. 6 Internal service funds are an accounting device used to accumulate and allocate costs internally among the City's various functions. The City uses internal service funds to account for its vehicle fleet. Proprietary funds financial statements provide the same type of information as the government- wide financial statements, only in more detail. The proprietary funds financial statements provide separate information for the water and sewer operations, which is considered to be a major fund of the City, and can be found on pages 24-26 of this report. Fiduciary funds — the City presents one agency fund, the Cash Escrow Agency Fund, which is custodial in nature and does not involve measurement of results of operations. The financial statements for the Cash Escrow Agency Fund, which is prepared on the accrual basis of accounting, can be found on page 27 of this report. NOTES TO THE FINANCIAL STATEMENTS The Notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The Notes to the Financial Statements can be found on pages 28-59 of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS Total assets of the City at September 30, 2015 were $700,934,114 while total liabilities were $174,754,190, and total deferred outflows ($6,815,832) and inflows ($1,323,312) of resources resulting in a net position balance of$531,672,444. The largest portion of the City's net position, $444,939,673, reflects its investment in capital assets (land and improvements, building, infrastructure, machinery and equipment net of accumulated depreciation); less any related debt used to acquire those assets that is still outstanding. The City uses these assets to provide services to its citizens; consequently, these assets are not available for future spending. Although the City reports its capital assets net of related debt, the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Governmental Activities net position increased by $32,701,337, exclusive of the cumulative effect of the change in accounting principle. This increase is primarily attributable to increases in both sales tax and charges for services. Business-type Activities net position increased by $3,049,112, exclusive of the cumulative effect of the change in accounting principle. The majority of this change can be attributed to an increase in charges for service which resulted from increased consumption during the summer months. 7 The following analysis highlights the net position as of September 30, 2015: Governmental Business-Type 2015 Activities Activities Total Current and other assets: $ 116,222,419 $ 34,275,527 $ 150,497,946 Capital assets 441,024,886 109,411,282 550,436,168 Total assets 557,247,305 143,686,809 700,934,114 Deferred outflows of resources 5,846,094 969,738 6,815,832 Other liabilities 9,003,677 3,902,256 12,905,933 Long-term debt outstanding 113,009,618 48,838,639 161,848,257 Total liabilities 122,013,295 52,740,895 174,754,190 Deferred intflows of resources 1,211,912 111,400 1,323,312 Net position: Net investment in capital assets 366,796,228 78,143,445 444,939,673 Restricted-debt service 8,735,479 - 8,735,479 Restricted-other 4,888,685 - 4,888,685 Unrestricted 59,447,800 13,660,807 73,108,607 Total net position $ 439,868,192 $ 91,804,252 $ 531,672,444 The following analysis highlights the net position as of September 30, 2014: Governmental Business-Type 2014 Activities Activities Total Current and other assets: $ 119,160,773 $ 31,831,555 $ 150,992,328 Capital assets 418,439,098 109,144,692 527,583,790 Total assets 537,599,871 140,976,247 678,576,118 Deferred outflows of resources 3,975,876 861,007 4,836,883 Other liabilities 6,767,682 2,529,227 9,296,909 Long-term debt outstanding 122,679,683 50,096,820 172,776,503 Total liabilities 129,447,365 52,626,047 182,073,412 Net position: Net investment in capital assets 338,303,633 73,126,147 411,429,780 Restricted-debt service 9,809,483 - 9,809,483 Restricted-other 5,283,121 - 5,283,121 Unrestricted 58,732,145 16,085,060 74,817,205 Total net position $ 412,128,382 $ 89,211,207 $ 501,339,589 8 The following analysis highlights the changes in net position for the year ended September 30, 2015: Governmental Business-Type 2015 Activities Activities Total Revenues: Program revenues: Charges for services $ 8,402,252 $ 24,792,619 $ 33,194,871 Operating grants and contributions 455,575 - 455,575 Capital grants and contributions 8,967,466 5,776,438 14,743,904 General revenues: Taxes 66,594,638 - 66,594,638 Interest on investments 523,954 112,967 636,921 Gain on sale of capital assets 102,900 23,100 126,000 Miscellaneous 1,066,818 4,521 1,071,339 Total revenues 86,113,603 30,709,645 116,823,248 Expenses: General government 14,602,425 - 14,602,425 Public safety 18,176,698 - 18,176,698 Public works 9,762,184 - 9,762,184 Culture and recreation 9,311,006 - 9,311,006 Interest on long-term debt 2,528,113 - 2,528,113 Water and sewer - 26,692,373 26,692,373 Total expenses 54,380,426 26,692,373 81,072,799 Increase in net position before transfers 31,733,177 4,017,272 35,750,449 Transfers 968,160 (968,160) - Increase in net position 32,701,337 3,049,112 35,750,449 Net position-beginning of year,as previously stated 412,128,382 89,211,207 501,339,589 Cumulative effect of change in accounting principle (4,961,527) (456,067) (5,417,594) Net position-End of Year $ 439,868,192 $ 91,804,252 $ 531,672,444 9 The following analysis highlights the changes in net position for the year ended September 30, 2014: Governmental Business-Type 2014 Activities Activities Total Revenues: Program revenues: Charges for services $ 8,305,138 $ 23,591,438 $ 31,896,576 Operating grants and contributions 443,157 - 443,157 Capital grants and contributions 4,436,346 3,510,936 7,947,282 General revenues: Taxes 62,563,693 - 62,563,693 Interest on investments 482,607 101,469 584,076 Gain on sale of capital assets 99,109 - 99,109 Miscellaneous 639,571 6,963 646,534 Total revenues 76,969,621 27,210,806 104,180,427 Expenses: General government 13,417,904 - 13,417,904 Public safety 18,245,617 - 18,245,617 Public works 8,870,998 - 8,870,998 Culture and recreation 8,948,841 - 8,948,841 Interest on long-term debt 5,097,036 - 5,097,036 Water and sewer - 25,030,426 25,030,426 Total expenses 54,580,396 25,030,426 79,610,822 Increase in net position before transfers 22,389,225 2,180,380 24,569,605 Transfers 915,116 (915,116) - Increase in net position 23,304,341 1,265,264 24,569,605 Net position-beginning of year,as previously stated 390,464,439 88,642,882 479,107,321 Cumulative effect of change in accounting principle (1,640,398) (696,939) (2,337,337) Net position-End of Year $ 412,128,382 $ 89,211,207 $ 501,339,589 10 FINANCIAL ANALYSIS OF THE GOVERNMENTAL FUNDS Governmental Funds- The focus of the City of Southlake's governmental funds is to provide information on near-term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City's governmental funds reported combined fund balances of $103,082,008. Approximately 17.7 percent or $18,230,317 constitutes unassigned fund balance, which is available for spending at the government's discretion. Other portions of the fund balance are either nonspendable,restricted, committed or assigned for specific purposes to pay for debt service ($11,057,196), recycling ($40,612), police expenditures ($7,848,458), parks ($10,720,498), capital projects ($41,949,791), reinvestment zone expenditures ($4,010,195), municipal court expenditures ($878,490), oil and gas expenditures ($53,168), storm water expenditures ($451,371), strategic initiative expenditures ($7,673,680) and other ($168,232). The General Fund is the chief operating fund of the City. At the end of the current fiscal year, unassigned fund balance of the general fund was $18,230,317. As a measure of the General Fund's liquidity, it may be useful to compare both the unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 51.4 percent of total General Fund expenditures, while total fund balance represents 73.7 percent of total General Fund expenditures. The fund balance of the General fund increased $1,575,205 during the current fiscal year. The key factor in the increase is attributable to the revenue increase in municipal sales and mixed beverage taxes of$1,753,346. The General Obligation Debt Service Fund has a fund balance of $9,331,641, all of which is restricted for the payment of debt service. The fund balance decreased during the year by $1,146,246, primarily due to the increased debt service payments. The fund balance in the General Capital Projects Funds ended the year at $35,719,136, a decrease of$4,544,899, due to the construction of roadway and facility projects. FINANCIAL ANALYSIS OF THE PROPRIETARY FUNDS The City's proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Unrestricted net position reported in the Proprietary Funds were: $13,660,807 in the Water and Sewer Fund and $4,110,434 in the Vehicle Replacement Fund. Total net position in the Water and Sewer Fund increased by $3,049,112 while the Vehicle Replacement Fund net position increased by $775,058. The increase in charges for sales and services revenue and capital contributions and transfers from the other funds are the primary reasons for the respective changes in net position. 11 GENERAL FUND BUDGETARY HIGHLIGHTS The City made revisions to the original budget approved by the City Council. Management's estimate of the General Fund's budgeted revenues increased $3,137,643 or 8.0% from original budget based on year-to-date experience. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets- The City's investment in capital assets for its governmental and business-type activities as of September 30, 2015 amount to $550,436,168 (net of accumulated depreciation). This investment in capital assets includes land, buildings, improvements, machinery and equipment, infrastructure and construction in progress. The City has elected to use the modified approach for its street system in lieu of the depreciation method. An up-to-date inventory of these infrastructure assets was performed and the annual costs to maintain and preserve these assets was established and disclosed through administrative policy. The current condition level of the street system meets the target condition level established by the City. There were no significant changes in the condition levels of infrastructure assets, and the differences between the estimated amounts necessary to maintain and preserve the street system at target condition levels and the actual amount of expense incurred for that purpose for 2015 was not material. Major capital projects completed during the current year included the following: • 12"water line along W Bob Jones • Bicentennial Park Phase II • Pavement Management System—various overlays and rehab • Various Sidewalks Governmental Business-Type 2015 Activities Activities Total Land and improvements $ 110,260,206 $ 18,642,568 $ 128,902,774 Buildings and improvements 68,311,869 350,187 68,662,056 Improvements - 87,082,778 87,082,778 Infrastructure 238,420,017 - 238,420,017 Machinery and equipment 8,540,680 1,216,432 9,757,112 Construction in Progress 15,492,114 2,119,317 17,611,431 Total $ 441,024,886 $ 109,411,282 $ 550,436,168 Governmental Business-Type 2014 Activities Activities Total Land and improvements $ 98,522,782 $ 16,789,625 $ 115,312,407 Buildings and improvements 68,008,655 380,505 68,389,160 Improvements - 88,570,613 88,570,613 Infrastructure 221,430,610 - 221,430,610 Machinery and equipment 8,655,433 1,293,725 9,949,158 Construction in Progress 21,821,618 2,110,224 23,931,842 Total $ 418,439,098 $ 109,144,692 $ 527,583,790 12 Additional information on the City's capital assets can be found in Note 4 on pages 44-45 of this report. Long-term Debt- At the end of the current fiscal year, the City of Southlake had $106,252,591 total long-term debt outstanding of bonds issued to finance capital improvements for roadway, parks and recreation, public building and infrastructure. $47,996,324 of Utility System bonds, which financed projects to increase capacity of the Utility system, was also outstanding. An additional $1,186,050 was reported for compensated absences at year-end. Governmental Business-Type 2015 Activities Activities Total Bonds payable $ 106,252,591 $ 47,996,324 $ 154,248,915 Unearned revenue - 239,585 239,585 Net pension liability 5,653,988 519,719 6,173,707 Compensated absences 1,103,039 83,011 1,186,050 Total $ 113,009,618 $ 48,838,639 $ 161,848,257 Governmental Business-Type 2014 Activities Activities Total Bonds payable $ 121,633,943 $ 49,775,833 $ 171,409,776 Unearned revenue - 243,490 243,490 Compensated absences 1,045,740 77,497 1,123,237 Total $ 122,679,683 $ 50,096,820 $ 172,776,503 The City takes it debt obligation very seriously. Several years ago, the City Council working with City staff set goals to reduce the debt as percentage of assessed valuation over the total long term debt. As you can see in the figure below, the City has reduced the percentage from 3.29% in 2002 to 1.12% in 2015, during a time of growth for the City. The line that you see on this chart is a graphic illustration of one of the reasons why two bond rating agencies have rated Southlake's bonds "AAA". The City has been able to effectively manage its debt during a period of growth using cash to partially offset borrowing needs. Additionally, managing debt amortization has been a tool used to reduce borrowing costs. 13 IANC-TERm DEBT -DEBT As%OF ASSESSED VALUATION 3,50% $120,000,000 3.29 3,00% 3.014u $100,000,000 2.7 za 2,50% $80,000,000 2.36 0 2,00% a,0l�a d 2• o $60,000,000 1.50% — 1.47"a 1.99°v 15100 1,54% 1.374v $40.000.000 $20,000,000 0.50% 0,00% $- 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 The City's bonds are rated "AAA" by Standard and Poor's and FitchRatings. The City is permitted by Article XI, Section 5, of the State of Texas Constitution to levy taxes up to $2.50 per $100 of assessed valuation for general governmental services including the payment of principal and interest on general obligation long-term debt. Additional information on the City's long-term debt can be found in Note 6 on pages 46-50 of this report. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES The State of Texas, by constitution, does not have a personal income tax and therefore the State operates primarily using sales and gasoline taxes. Local governments primarily rely on property taxes and fees to fund their government activities. While property taxes are important to the City, they represent 43.2% of total governmental revenue. Sales tax continues to grow as the second largest governmental resource representing 39.0% of total governmental revenue. The City monitors all of its resources and determines the need for program adjustment or fee increases accordingly. 14 The FY 2016 Adopted Budget maintains the City's property tax rate at $0.462 per $100 net taxable valuation, which is unchanged from the FY 2015 rate. The City's property tax roll on net taxable value increased $105,213,477 or 1.8 percent from the 2014 certified roll to the 2015 certified roll. As an element of the City's tax relief initiative the homestead exemption was increased from 10% to 12% and is projected to collect slightly less in FY 2016 than in FY 2015. The estimate of the FY 2016 tax roll is based on the certified roll as provided by the Tarrant Appraisal District(TAD) in July. The assumed collection rate is 100 percent. Requests for Information This financial report is designed to provide a general overview of the City of Southlake's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Office of the Chief Financial Officer, 1400 Main Street, 4`h Floor Finance Department, Southlake, Texas 76092. 15 BASIC FINANCIAL STATEMENTS v GOVERNMENT-WIDE FINANCIAL STATEMENTS CITY OF SOUTHLAKE, TEXAS EXHIBIT 1 STATEMENT OF NET POSITION SEPTEMBER 30, 2015 PRIMARY GOVERNMENT GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES TOTAL ASSETS Cash and cash equivalents $ 58,928,330 $ 3,731,108 $ 62,659,438 Investments 41,659,185 1,052,489 42,711,674 Receivables(net of allowance for uncollectibles) 5,854,796 4,944,162 10,798,958 Prepaid items 3,388 - 3,388 Inventories 24,438 - 24,438 Restricted assets Cash and cash equivalents 2,078,116 15,608,440 17,686,556 Investments 7,266,646 8,939,328 16,205,974 Receivables 42,796 - 42,796 OPEB asset 364,724 - 364,724 Capital assets: Non-depreciable 304,826,807 20,761,885 325,588,692 Depreciable(net of depreciation) 136,198,079 88,649,397 224,847,476 TOTAL ASSETS 557,247,305 143,686,809 700,934,114 DEFERRED OUTFLOWS OF RESOURCES Deferred charge for refunding 3,603,448 763,592 4,367,040 Deferred charge for pensions 2,242,646 206,146 2,448,792 TOTAL DEFERRED OUTFLOWS OF RESOURCES 5,846,094 969,738 6,815,832 LIABILITIES Accounts payable 5,586,308 3,089,417 8,675,725 Accrued liabilities 2,108,853 256,805 2,365,658 Accrued interest payable - 212,144 212,144 Unearned revenue 656,437 - 656,437 Liabilities payable from restricted assets Accrued interest 652,079 - 652,079 Customer meter deposits - 343,890 343,890 Non-current liabilities: Due within one year 13,548,551 5,423,407 18,971,958 Due in more than one year 99,461,067 43,415,232 142,876,299 TOTAL LIABILITIES 122,013,295 52,740,895 174,754,190 DEFERRED INFLOWS OF RESOURCES Unavailable resources-pensions 1,211,912 111,400 1,323,312 TOTAL DEFERRED INFLOWS OF RESOURCES 1,211,912 111,400 1,323,312 NET POSITION Net investment in capital assets 366,796,228 78,143,445 444,939,673 Restricted for debt service 8,735,479 - 8,735,479 Restricted for municipal court 878,490 878,490 Restricted for reinvestment zone 4,010,195 - 4,010,195 Unrestricted 59,447,800 13,660,807 73,108,607 TOTAL NET POSITION $ 439,868,192 $ 91,804,252 $ 531,672,444 The Notes to Financial Statements are an integral part of this statement. 16 N r- WMM M V V rn invrn �Orn 00 0) 0) v v 00 I�� M 00 00 V 00 M N O M 0) V 00 0) V V N (O (O V N(O I, d)O (I ' 00 V N N V m 00 0) 00 00 N M M 00 M O r M M 00 O 0) I: N J N NNN N r r r r0) N M NI� N N M r Q NI� NNN N 00 00 (O OMW O V r, M V W X O N M ��N M M M M M 0 M (MO LO O N M W F i i N N 'a V) ER R O + U) w C 3 o O OD. V V 'IT Ih 0 > O E >• W ' ' ' ' M M M 0)' ' ' OI N- N ON O N a W W ~ wM M (D N M V 00 I- 0) 0 V Z p N 00 00 00 N d) 00 O N V 000 U) W R N a 00 d) w o a O U h V (O M M M M NV m V O 00 O O I- N r N Z M N 00 I� M_ M 00 M LO 0 (O I- M 00 N 0) R V N N(O I� 0)0) 00 V M M LQ 7 C N M M M M N N MOrMNOM (0 M M U) 0 NNNNN N r0) NNO (O(O N O N_ M M E w N I- N N N N LO O M N O 0) N 00 C > NM -ISN M M MOM � 0) N N V 0) 'U M M M M (O M 0 O Q Vy Vy (19 n (WC) (MO M M O O V ' V V V d) ._ I- r M M M l` 3 C G� � � (� 00 00 N N V 'O U) w O R W a U in a U c U) R0 a a) `) C 3O Q w C r r N N Q O C > R .0 N V ' O N N Q C R V LO LO > _ U) N N LO N R R toV E �•C � -O a c R im O O U w w O r v N N 3 F O. O R � � � N O W � '� V O .O O O o a v CL v c N a E 0 F V W X R W w (O M N N (0 d) cq N X yN, O O N U) Z 0 U) O w N 00 V 00 N (O (O 00 7 y N > U) 0)I- N 0) ' N N N V X N .� 0) O U) z F O F O O N (0 0) O 0) 0) d) 0) >.N N N 0) > LO U) M V N M V I� r > r •• 1E O N C W T) 0 N V 00 V V M 2 O N O C N E 0 O R O T o fn N N M O� N N O N 0 Z O. 3 O. O U O X d(n LL 0) F N N ~ 2 W 3 W C 69 69 U Z U Z M N 00 V (0 M (0 M M 0) N M 0� N M M 0) Cm W (00� (0M1N 0 (00 (00 O d) C X V 00 O N N N N 00 cn 69 Qcn W X W W w N N W W ? ? W YUP s QR °' 2LL W W °' �� E °' w > co _ o H O > E E °? E > y O c � Q Q Z '� EE Ix U 0) ` '� w U i.i Q Cl) Lu O1 > •O- O C C O rW� O O C m(6 O N O 0) >. C LL C = a O E -Fa � UU �' � 2 N � w N O _ � � W F O Z O < 0 C (6 F (p U 2 O D d d U Q U � � L3L a U m 0 I FUND FINANCIAL STATEMENTS I GOVERNMENTAL FUNDS FINANCIAL STATEMENTS CITY OF SOUTHLAKE, TEXAS BALANCE SHEET GOVERNMENTAL FUNDS SEPTEMBER 30, 2015 GENERAL OBLIGATION GENERAL DEBT CAPITAL GENERAL SERVICE PROJECTS ASSETS Cash and cash equivalents $ 11,836,027 $ 2,078,116 $ 24,734,861 Investments 14,995,372 7,266,646 14,504,863 Receivables,net of allowances for uncollectibles: Ad valorem taxes 101,338 32,408 - Franchise taxes 472,551 - Sales taxes 2,342,177 - - Interest 39,614 10,388 33,451 Other 111,999 - 91,591 Due from other funds 32,486 - Inventories 24,438 Prepaid items 3,388 - - TOTAL ASSETS $ 29,959,390 $ 9,387,558 $ 39,364,766 LIABILITIES,DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES LIABILITIES Accounts payable $ 1,060,984 $ $ 3,645,630 Accrued liabilities 1,854,518 - Due to other funds - Unearned revenue 647,532 - TOTAL LIABILITIES 3,563,034 3,645,630 DEFERRED INFLOWS OF RESOURCES Unavailable resources 257,738 55,917 - TOTAL DEFERRED INFLOWS OF RESOURCES 257,738 55,917 FUND BALANCES Nonspendable for: Inventories 24,438 - Prepaid expenditures 3,388 - Restricted for: Debt service - 9,331,641 Municipal court expenditures - Reinvestment zone expenditures - Capital projects - 35,719,136 Committed for: Police expenditures 34,609 - Parks and recreation - Oil and gas expenditures Storm water expenditures Library - Assigned for: Teen Court expenditures 19,077 Senior Center expenditures 10,624 Recycling 40,612 Reforestation expenditures 101,873 Strategic initiatives 7,673,680 Unassigned 18,230,317 - - TOTAL FUND BALANCES 26,138,618 9,331,641 35,719,136 TOTAL LIABILITIES,DEFERRED INFLOWS OF RESOURCES,AND FUND BALANCES $ 29,959,390 $ 9,387,558 $ 39,364,766 The Notes to Financial Statements are an integral part of this statement. 18 EXHIBIT 3 SOUTHLAKE PARKS DEVELOPMENT TAX CORPORATION INCREMENT NON-MAJOR TOTAL CAPITAL FINANCING GOVERNMENTAL GOVERNMENTAL PROJECTS DISTRICT FUNDS FUNDS $ - $ 3,703,924 $ 16,978,834 $ 59,331,762 2,660,308 306,248 6,859,477 46,592,914 - - - 133,746 - 472,551 - 2,265,642 4,607,819 14,365 23 5,693 103,534 - 273,519 477,109 - 32,486 24,438 - - - 3,388 $ 2,674,673 $ 4,010,195 $ 26,383,165 $ 111,779,747 $ 696,240 $ - $ 183,454 $ 5,586,308 - 254,335 2,108,853 30,428 2,058 32,486 - 8,905 656,437 726,668 448,752 8,384,084 - 313,655 313,655 24,438 - 3,388 1,725,555 11,057,196 - 878,490 878,490 - 4,010,195 - 4,010,195 1,948,005 - 4,282,650 41,949,791 - 7,813,849 7,848,458 10,720,498 10,720,498 53,168 53,168 451,371 451,371 8,832 8,832 - 19,077 10,624 40,612 101,873 7,673,680 - - - 18,230,317 1,948,005 4,010,195 25,934,413 103,082,008 $ 2,674,673 $ 4,010,195 $ 26,383,165 $ 111,779,747 19 CITY OF SOUTHLAKE, TEXAS EXHIBIT 4 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION AS OF SEPTEMBER 30, 2015 Total fund balances -governmental funds $ 103,082,008 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not current financial resources and, therefore, are not reported in the governmental funds balance sheet (Less $1,885,123 in assets allocated to governmental activities from the internal service fund). 439,139,763 Interest payable on long-term debt does not require current financial resources; therefore, interest payable is not reported as a liability in the governmental funds balance sheet. (652,079) Internal service funds are used by management to charge the cost of certain activities, such as fleet management, to individual funds. This amount represents the assets less the liabilities of the internal service fund allocated to governmental activities. 5,995,557 OPEB asset has not been included in the governmental fund financial statements, as these assets do not represent current financial resources. 364,724 Revenues earned but not available within sixty days of the year end are not recognized as revenue on the fund financial statements. 313,655 For debt refundings, the difference between the acquisition price and net carrying amount of the debt has been deferred and amortized in the government-wide financial statements. 3,603,448 Net deferred outflows of resources related to the City's net pension liability results in an increase in net position in the government-wide financial statements. 1,030,734 Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the fund financial statements. (113,009,618) Net position of governmental activities $ 439,868,192 The Notes to Financial Statements are an integral part of this statement. 20 v CITY OF SOUTHLAKE, TEXAS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2015 GENERAL OBLIGATION GENERAL DEBT CAPITAL GENERAL SERVICE PROJECTS REVENUES Ad valorem taxes,penalties and interest $ 19,149,431 $ 6,819,703 $ Franchise taxes 3,327,739 - Municipal sales and mixed beverage taxes 14,339,915 Licenses,permits and fees 2,781,823 Charges for services 1,849,747 Fines and forfeitures 1,276,453 Grants 90,428 - Capital recovery fees - - 866,782 Interest earned 210,250 112,019 106,348 Contributions - - 40,513 Miscellaneous 430,839 TOTAL REVENUES 43,456,625 6,931,722 1,013,643 EXPENDITURES Current General government City secretary/mayor 446,768 City manager's office 819,737 Human resources 579,616 Support services 3,045,584 Economic development 212,264 Finance 1,161,137 Municipal court 610,111 Teen court 132,335 Information technology 1,948,453 Public safety Police services 5,756,661 Fire services 7,790,701 Public safety support 1,187,229 Building inspection 1,024,493 Public works Public works administration 2,311,442 - Streets and drainage 1,650,008 468,186 Planning 902,766 - Cultural and recreation Community services 1,131,801 Parks and recreation 4,123,229 Library services 626,848 Intergovernmental - - Capital outlay - 13,880,356 Debt service: Principal retirement 12,639,311 - Interest and fiscal charges - 2,909,672 - TOTAL EXPENDITURES 35,461,183 15,548,983 14,348,542 Excess(deficiency)of revenues over(under)expenditures 7,995,442 (8,617,261) (13,334,899) OTHER FINANCING SOURCES(USES) Proceeds from the sale of property - - - Transfers from other funds 1,739,763 7,471,015 8,790,000 Transfers to other funds (8,160,000) - - TOTAL OTHER FINANCING SOURCES(USES) (6,420,237) 7,471,015 8,790,000 NET CHANGE IN FUND BALANCES 1,575,205 (1,146,246) (4,544,899) FUND BALANCES,BEGINNING OF YEAR 24,563,413 10,477,887 40,264,035 FUND BALANCES,END OF YEAR $ 26,138,618 $ 9,331,641 $ 35,719,136 The Notes to Financial Statements are an integral part of this statement. 21 EXHIBIT 5 SOUTHLAKE PARKS DEVELOPMENT TAX CORPORATION INCREMENT NON-MAJOR TOTAL CAPITAL FINANCING GOVERNMENTAL GOVERNMENTAL PROJECTS DISTRICT FUNDS FUNDS $ $ 7,324,928 $ $ 33,294,062 - 3,327,739 15,750,699 30,090,614 1,603,177 4,385,000 - 1,849,747 666,953 1,943,406 - 90,428 - - 866,782 23,177 (318) 39,075 490,551 - - 71,896 112,409 75,662 - 165,832 672,333 98,839 7,324,610 18,297,632 77,123,071 - - - 446,768 819,737 579,616 3,045,584 212,264 1,161,137 610,111 - 132,335 18,053 1,966,506 1,209,855 6,966,516 - 7,790,701 1,187,229 1,024,493 2,311,442 2,118,194 902,766 - 1,131,801 1,548,345 5,671,574 - 11,143 637,991 - 4,478,312 - 4,478,312 6,884,877 - 584,091 21,349,324 - 1,850,000 14,489,311 - - 984,863 3,894,535 6,884,877 4,478,312 6,206,350 82,928,247 (6,786,038) 2,846,298 12,091,282 (5,805,176) - - 3,271 3,271 1,000,000 2,924,289 21,925,067 - (3,258,668) (10,738,239) (22,156,907) 1,000,000 (3,258,668) (7,810,679) (228,569) (5,786,038) (412,370) 4,280,603 (6,033,745) 7,734,043 4,422,565 21,653,810 109,115,753 $ 1,948,005 $ 4,010,195 $ 25,934,413 $ 103,082,008 22 CITY OF SOUTHLAKE, TEXAS EXHIBIT 6 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2015 Net change in fund balances-total governmental funds $ (6,033,745) Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount of capital assets recorded in the current period. (Does not include$559,952 allocated from internal service fund). 19,707,542 Depreciation expense on capital assets is reported in the statement of activities but does not require the use of current financial resources. Therefore,depreciation expense is not reported as expenditures in the governmental funds. (Does not include$539,150 allocated from internal service fund). (6,109,092) The issuance of long-term debt(e.g.bonds)provides current financial resources to governmental funds,while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction,however,has any effect on net position.Also,governmental funds report the effect of premiums,discounts,and similar items when debt is first issued,whereas the amounts are deferred and amortized in the statement of activities.This amount is the net effect of the following items: o Repayments 14,489,311 o Amortization of premiums 892,041 o Amortization of deferred loss on refunding (372,430) 15,008,922 Implementation of GASB 68 requires certain expenditures to be de-expended and recorded as deferred. The following is the net effect of the current year pension expense($1,852,918)and contributions made after the measurement date$2,191,191. 338,273 Current year changes in the long-term liability for compensated absences do not require the use of current financial resources;and therefore,are not reported as expenditures in governmental funds. (57,299) Changes in the other post employment benefit assets and liabilities are not reported at the fund level;however they are reported at the government-wide level. 88,408 Current year changes in accrued interest payable do not require the use of current financial resources;and therefore,are not reported as expenditures in governmental funds. 101,958 Internal service funds are used by management to charge the costs of certain activities,such as fleet management,to individual funds. The net income of the internal service fund is allocated entirely to governmental activities. 775,058 Governmental funds do not recognize assets contributed by developers. However, in the statement of activities the fair market value of those assets are recognized as revenue,then allocated over their estimated useful lives and reported as depreciation expense. 8,967,466 Loss on disposal of capital assets results in a decrease in net position,but the net effect is not reported in governmental funds. (928) Certain revenues in the government-wide statement of activities that do not provide current financial resources are not reported as revenue in the governmental funds. (85,226) Change in net position of governmental activities $ 32,701,337 The Notes to Financial Statements are an integral part of this statement. 23 PROPRIETARY FUNDS FINANCIAL STATEMENTS I CITY OF SOUTHLAKE, TEXAS EXHIBIT 7 STATEMENT OF NET POSITION PROPRIETARY FUNDS SEPTEMBER 30, 2015 BUSINESS-TYPE GOVERNMENTAL ACTIVITIES ACTIVITIES WATER AND SEWER VEHICLE REPLACEMENT ENTERPRISE INTERNAL SERVICE FUND FUND ASSETS CURRENT ASSETS Cash and cash equivalents $ 3,731,108 $ 1,674,684 Investments 1,052,489 2,332,917 Receivables,net of allowance for uncollectibles: Trade accounts 2,751,194 - Unbilled trade accounts 2,176,123 - Interest 16,845 102,833 Restricted assets Cash restricted for capital 15,608,440 - Investments restricted for customer meter deposits 343,890 Investments restricted for capital 8,595,438 Total current assets 34,275,527 4,110,434 NON-CURRENT ASSETS Capital assets Land and improvements 18,642,568 - Buildings and improvements 935,501 Distribution system 137,181,469 Equipment 2,583,458 - Vehicles 572,041 4,913,393 Capacity rights 9,190,988 - Construction in progress 2,119,317 Total capital assets 171,225,342 4,913,393 Less:accumulated depreciation (61,814,060) (3,028,270) Capital assets,net of accumulated depreciation 109,411,282 1,885,123 Total non-current assets 109,411,282 1,885,123 TOTAL ASSETS $ 143,686,809 $ 5,995,557 DEFERRED OUTFLOW OF RESOURCES Deferred charge for refunding $ 763,592 $ - Deferred charge for pensions 206,146 Total deferred outflows of resources 969,738 LIABILITIES AND NET POSITION CURRENT LIABILITIES Accounts payable 3,089,417 Accrued liabilities 256,805 Accrued interest 212,144 Current portion of general obligation debt 4,970,396 Current portion of contract obligation debt 365,000 Current portion of compensated absences 83,011 Current portion of unearned revenue 5,000 Payable from restricted assets: Customer meter deposits 343,890 Total current liabilities 9,325,663 NON-CURRENT LIABILITIES Unearned revenue 234,585 Contract revenue obligations 385,000 General obligation debt 42,275,928 Net pension liability 519,719 Total noncurrent liabilities 43,415,232 TOTAL LIABILITIES 52,740,895 DEFERRED INFLOW OF RESOURCES Unavailable resources-pensions 111,400 Total deferred inflows of resources 111,400 - NET POSITION Net investment in capital assets 78,143,445 1,885,123 Unrestricted 13,660,807 4,110,434 TOTAL NET POSITION $ 91.804.252 $ 5.995.557 The Notes to Financial Statements are an integral part of this statement. 24 CITY OF SOUTHLAKE, TEXAS EXHIBIT 8 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2015 BUSINESS-TYPE GOVERNMENTAL ACTIVITIES ACTIVITIES WATER AND SEWER VEHICLE REPLACEMENT ENTERPRISE INTERNAL SERVICE FUND FUND OPERATING REVENUES Charges for sales and services: Water,sewer and garbage $ 24,649,099 $ - Service charges 143,520 - Miscellaneous 4,521 - Total operating revenues 24,797,140 - OPERATING EXPENSES: Personnel services 2,344,126 - Contractual services 1,299,889 - Lease payments 491 19,000 Supplies 121,074 - Utilities 10,238,540 - Administrative 175,238 - Maintenance 3,066,693 2,778 Professional benefits 24,250 - Depreciation and amortization 5,258,492 539,150 Total operating expenses 22,528,793 560,928 OPERATING INCOME(LOSS) 2,268,347 (560,928) NON-OPERATING REVENUES(EXPENSES) Gain on sale of capital assets 23,100 102,900 Interest income 112,967 33,086 Interest expense (4,163,580) - Total non-operating revenues (expenses) (4,027,513) 135,986 INCOME(LOSS) BEFORE CAPITAL CONTRIBUTIONS AND TRANSFERS (1,759,166) (424,942) CAPITAL CONTRIBUTIONS AND TRANSFERS Capital contributions-property owners 4,597,117 - Contributions-impact fees 1,179,321 - Transfers from other funds - 1,200,000 Transfers to other funds (968,160) - Total capital contributions and transfers 4,808,278 1,200,000 CHANGE IN NET POSITION 3,049,112 775,058 NET POSITION, BEGINNING OF YEAR 89,211,207 5,220,499 Cumulative effect of change in accounting principle (456,067) - NET POSITION, END OF YEAR $ 91,804,252 $ 5,995,557 The Notes to Financial Statements are an integral part of this statement. 25 CITY OF SOUTHLAKE, TEXAS EXHIBIT 9 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2015 BUSINESS-TYPE GOVERNMENTAL ACTIVITIES ACTIVITIES WATER AND SEWER VEHICLE REPLACEMENT ENTERPRISE INTERNAL SERVICE FUND FUND CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers and users $ 23,882,421 $ Cash payments to suppliers (13,545,369) (21,778) Cash payments to employees (2,369,706) Net cash provided by(used in)operating activities 7,967,346 (21,778) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital expenses (979,262) (559,952) Principal payments on bonds (5,120,685) Proceeds from issuance of bonds 3,489,888 Interest paid (4,188,144) - Proceeds from sale of capital assets 23,100 102,900 Contributions-impact fees 1,179,321 - Net cash used in capital and related financing activities (5,595,782) (457,052) CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES Transfers from other funds 1,200,000 Transfers to other funds (968,160) - Net cash provided by(used in)non-capital financing activities (968,160) 1,200,000 CASH FLOWS FROM INVESTING ACTIVITIES Net(purchases)sales of investments 2,470,005 (14,687) Interest received 121,491 39,930 Net cash provided by investing activities 2,591,496 25,243 NET CHANGE IN CASH AND CASH EQUIVALENTS 3,994,900 746,413 CASH AND CASH EQUIVALENTS,BEGINNING OF YEAR 15,344,648 928,271 CASH AND CASH EQUIVALENTS,END OF YEAR $ 19,339,548 $ 1,674,684 RECONCILIATION TO STATEMENT OF NET POSITION Cash and cash equivalents $ 3,731,108 $ 1,674,684 Cash restricted for capital 15,608,440 - Total cash and cash equivalents $ 19,339,548 $ 1,674,684 RECONCILIATION OF OPERATING INCOME(LOSS)TO NET CASH PROVIDED BY (USED IN)OPERATING ACTIVITIES Operating income(loss) $ 2,268,347 $ (560,928) Adjustments to reconcile operating income(loss) to net cash provided by(used in)operating activities: Pension expense 63,652 - Depreciation and amortization 5,258,492 539,150 Decrease(increase)in assets and deferred outflows of resources Receivables (927,601) - Deferred outflows of resources-pensions (206,146) Increase(decrease)in liabilities and deferred outflows of resources Payables and accruals 1,382,415 Customer deposits 16,787 Deferred inflows of resources-pensions 111,400 Net cash provided by(used in)operating activities $ 7,967,346 $ (21,778) NON-CASH CAPITAL AND RELATED FINANCING: Contributions of capital assets from developers $ 4,597,117 $ The Notes to Financial Statements are an integral part of this statement. 26 I FIDUCIARY FUND FINANCIAL STATEMENTS I CITY OF SOUTHLAKE, TEXAS EXHIBIT 10 CASH ESCROW AGENCY FUND STATEMENT OF FIDUCIARY NET POSITION SEPTEMBER 30, 2015 Agency Fund Cash Escrow ASSETS Cash and cash equivalents $ 57,368 Investments 10,710 TOTAL ASSETS $ 68,078 LIABILITIES Due to builders $ 68,078 TOTAL LIABILITIES $ 68,078 The Notes to Financial Statements are an integral part of this statement. 27 I NOTES TO BASIC FINANCIAL STATEMENTS v CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Statement The City of Southlake (the City) operates under a Home Rule Council – Manager form of government. All powers of the City are vested in an elected council, which enables local legislation, adopts budgets, determines policies and appoints the City Manager. The City Manager is responsible for executing the laws and administering the government of the City. The accounting and reporting policies of the City relating to the funds included in the accompanying basic financial statements conform to accounting principles generally accepted in the United States of America applicable to state and local governments. Generally accepted accounting principles for local governments include those principles prescribed by the Governmental Accounting Standards Board (GASB). The more significant accounting policies of the City are described below. Financial Reporting Entity The City is governed by an elected mayor and a six-member council and has the authority to make decisions, appoint administrators and managers, and significantly influence operations. It also has the primary accountability for fiscal matters. Therefore, the City is a financial reporting entity as defined by the Governmental Accounting Standards Board (GASB) in its Statement No. 14, "The Financial Reporting Entity", as amended by GASB Statement No. 39 "Determining Whether Certain Organizations Are Component Units" and GASB Statement No. 61, "The Financial Reporting Entity: Omnibus—an amendment of GASB Statements No. 14 and No. 34." Under GASB 14 component units are organizations for which the City is financially accountable and all other organizations for which the nature and significance of their relationship with the City are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. Financial accountability exists if the City appoints a voting majority of an organization's governing board and is either able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the City. The City may be financially accountable for governmental organizations with a separately elected governing board, a governing board appointed by another government, or a jointly appointed board that is fiscally dependent on the City. The financial statements of the component units may be discretely presented in a separate column from the primary government or blended with the financial statements of the primary government. GASB 39 added clarification to GASB 14 by including entities which meet all three of the following requirements: 1. The economic resources received or held by the separate organization are entirely for the direct benefit of the primary government, its component units, or its constituents. 2. The primary government, or its component units, is entitled to, or has the ability to otherwise access, a majority of the economic resources received or held by the separate organization. 3. The economic resources received or held by an individual organization that the specific primary government, or its component units, is entitled to, or has the ability to otherwise access, are significant to that primary government. 28 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Financial Reporting Entity—Continued Based on these criteria, the financial information of the following entities has been blended within the reporting entity. Individual financial statements are not available for these component units. Southlake Parks Development Corporation (the Corporation) - The Corporation is a nonprofit industrial development corporation formed in January 1994 under the Development Corporation Act of 1979. The Corporation is organized exclusively to act on behalf of the City for the financing, development and operation of parks and recreation facilities. The affairs of the Corporation are managed by a seven member board of directors, of which four are members of the City Council. The annual corporate budget and issuance of debt must be approved by the City Council. Since the Board of the Corporation is substantively the same as the City Council, the Corporation has been reported as a blended component unit. Southlake Tax Increment Financing District (the TIF) - The TIF was formed to finance and make public improvements, under the authority of the Tax Increment Financing Act. The TIF is governed by a twelve member board of directors consisting of the eight members appointed by the City Council, and one member each appointed by Carroll Independent School District, Tarrant County, Tarrant County Junior College District, and the Tarrant County Hospital District Board of Directors. Since the Board of the TIF is substantively the same as the City Council, the TIF has been reported as a blended component unit. Southlake Crime Control and Prevention District (the District)—The District was formed under Chapter 363 of the Texas Local Government Code, the Crime Control and Prevention Act. The District is organized exclusively to act on behalf of the City for the financing, development and crime control throughout the City. The District is governed by a seven member board appointed by the City Council. The annual budget and issuance of debt must be approved by the City Council. Since the District provides services entirely to the City, it has been reported as a blended component unit. Basis of Presentation The government-wide financial statements (the statement of net position and the statement of activities) report information on all of the activities of the City, except for fiduciary funds. The effect of interfund activity, within the governmental and business-type activities columns, has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given program are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific program. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given program and 2) operating or capital grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Taxes and other items not properly included among program revenues are reported instead as general revenues. 29 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Fund Financial Statements: The City segregates transactions related to certain functions or activities in separate funds in order to aid financial management and to demonstrate legal compliance. Separate statements are presented for governmental funds and proprietary funds. These statements present each major fund as a separate column in the fund financial statements; all non-major funds are aggregated and presented in a single column. Governmental funds are those funds through which most governmental functions typically are financed. The measurement focus of governmental funds is on the sources, uses and balances of current financial resources. Governmental Funds The City reports the following major governmental funds: General Fund- The General Fund is the general operating fund of the City. It is used to account for all financial resources not accounted for in other funds. All general tax revenues and other receipts that are not restricted by law or contractual agreement to some other fund are accounted for in this fund. General operating expenditures, fixed charges and capital improvement costs that are not paid through other funds are paid from the General Fund. General Obligation Debt Service Fund- The General Obligation Debt Service Fund is used to account for the accumulation of financial resources for the payment of principal, interest and related costs on long-term debt paid primarily from taxes levied by the City. The fund balance of the General Obligation Debt Service Fund is restricted to signify the amounts that are restricted exclusively for debt service expenditures. General Capital Projects Fund- The General Capital Projects Fund is used to account for resources used for the acquisition and/or construction of capital facilities by the City, except those financed by proprietary funds and not accounted for by another capital projects fund. Southlake Parks Development Corporation Capital Projects Fund- The Southlake Parks Development Corporation (SPDC) Capital Projects Fund is utilized to fund the acquisition and construction of park recreational facilities as approved by the SPDC board of directors. The fund has been financed through the issuance of general obligation debt. Tax Increment Financing District- The Tax Increment Financing (TIF) District Fund was established to account for the general operations of the TIF, which was formed to finance and make public improvements. The TIF is funded primarily through the assessment of ad valorem taxes. 30 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Basis of Presentation—Continued In addition, the City reports the following non-major governmental funds: Special Revenue Funds — The City's Special Revenue Funds are used to account for revenue sources that are committed or restricted to expenditures for specified purposes, as follows: Police Fund- The Police Fund was established to account for the resources required to be utilized by the police department. Parks and Recreation Fund- The Parks and Recreation Fund was established to account for resources restricted for use by the parks and recreation department. Parks Dedication Fund- The Parks Dedication Fund was established to account for resources restricted for use by the parks department. The primary source of revenue for the Parks Dedication Fund is user charges for the use of City parks. Southlake Parks Development Corporation- The Southlake Parks Development Corporation ("SPDC") Fund was established to account for the general operations of the non-profit corporation established to finance, develop and operate park and recreational facilities. The SPDC is funded primarily through the receipt of municipal sales taxes. Crime Control District- The Crime Control District Special Revenue Fund was established to account for the operations of the Crime Control District, which was established for the financing and development of crime control within the City. The Crime Control Fund is funded primarily through the receipt of municipal sales taxes. Hotel Occupancy- The Hotel Occupancy Tax Fund accounts for all revenues and expenditures relating to the hotel occupancy tax received by the City. Storm Water Utility- The Storm Water Utility Fund is used to account for fees collected for the purpose of improving, upgrading and maintaining the City's drainage system. Court Security Fund- The Court Security Fund is used to account for Municipal Court fees assessed to provide for court security. 31 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Basis of Presentation—Continued Court Technology Fund- The Court Technology Fund is used to account for Municipal Court fees assessed to provide for court technology. Library Fund- The Library Fund was established to account for resources donated for use by City library services. Red Light Camera Fund- The Red Light Camera Fund is used to account for fees assessed for red light violations captured through the City's camera monitoring system. Storm Water Maintenance Fund- The Storm Water Maintenance Fund is used to account for the maintenance on storm water infrastructure. Oil and Gas Fund- The Oil and Gas Fund is used to account for permit fees and the related expenditures for oil and gas drilling. Commercial Vehicle Enforcement Fund- The Commercial Vehicle Enforcement Fund is used to account for the fees assessed for commercial vehicle violations. Southlake Parks Development Corporation Debt Service Fund- The Southlake Parks Development Corporation Debt Service Fund is utilized to account for the accumulation of financial resources, primarily transfers from other funds, for the payment of long- term principal and interest costs associated with the financing of improvements of the Southlake Parks Development Corporation. Capital Projects Funds — The City's Capital Projects Funds are utilized to account for financial resources to be used for the acquisition or construction of specified capital improvements (other than those financed by proprietary funds). Such resources are derived from proceeds of general obligation debt, other sources designated for improvements and interest earned on such proceeds. The City's non-major Capital Projects Funds are as follows: Tax Increment Financing District Capital Projects Fund- The Tax Increment Financing District Capital Projects Fund is utilized to fund the acquisition and construction of public improvements as approved by the TIF board of directors. The fund has been financed through the issuance of general obligation debt. 32 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Basis of Presentation—Continued Crime Control District Capital Projects Fund- The Crime Control District Capital Projects Fund is utilized to account for the acquisition and construction of capital assets as approved by the District's board of directors. The fund has been funded primarily through the issuance of general obligation debt. Proprietary Funds- Proprietary Funds are accounted for using the economic resources measurement focus and the accrual basis of accounting. The accounting objectives are determinations of net income, financial position and cash flow. All assets and liabilities are included in the Statement of Net Position. The City reports the following major proprietary fund: Water and Sewer Enterprise Fund- The Water and Sewer Enterprise Fund is used to account for the acquisition, operation and maintenance of a municipal water and sewer utility, supported primarily by user charges to the public. Additionally, the City reports an Internal Service Fund which is used to account for vehicle replacement provided to departments of the City. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. Operating expenses for the proprietary funds include the cost of personnel and contractual services, supplies and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. The City also presents one agency fund, the Cash Escrow Agency Fund. This fund is custodial in nature and does not involve measurement of results of operations. Financial statements for the Cash Escrow Agency Fund are prepared on the accrual basis of accounting. Measurement Focus and Basis of Accounting Measurement focus refers to what is being measured; basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurement made, regardless of the measurement focus applied. The government-wide statements and fund financial statements for proprietary and fiduciary funds are reported using the accrual basis of accounting. The government-wide and proprietary fund financial statements are prepared using the economic resources measurement focus; however, the fiduciary funds have no measurement focus. The economic resources measurement focus means all assets and liabilities (whether current or non-current) are included in the statement of net position and the operating statements present increases (revenues) and decreases (expenses) in net total position. Under the accrual basis of accounting, revenues are recognized when earned, including unbilled water and sewer services which are accrued. Expenses are recognized at the time the liability is incurred. 33 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Measurement Focus and Basis of Accounting—Continued Governmental fund financial statements are reported using the current financial resources measurement focus and are accounted for using the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual; i.e., when they become both measurable and available. "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The City considers all revenues as available if they are collected within 60 days after year end. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on long-term debt which is recognized when due, and certain compensated absences and claims and judgments which are recognized when the obligations are expected to be liquidated with expendable available financial resources. Property taxes, sales taxes, franchise taxes and interest are susceptible to accrual. Other receipts become measurable and available when cash is received by the City and are recognized as revenue at that time. Cash, Cash Equivalents and Investments In accordance with GASB Statement No. 31, the City's general policy is to report money market investments and short-term participating interest-earning investment contracts at amortized cost and to report nonparticipating interest-earning investment contracts using a cost-based measure. However, if the fair value of an investment is significantly affected by the impairment of the credit standing of the issuer or by other factors, it is reported at fair value. All other investments are reported at fair value unless a legal contract exists which guarantees a higher value. The term "short-term" refers to investments, which have a remaining term of one year or less at the time of purchase. The term "nonparticipating" means that the investment's value does not vary with market interest rate changes. The City's cash and cash equivalents are defined as cash on hand, demand deposits, and short- term investments with original maturities of three months or less from the date of acquisition for classification in the statement of cash flows for proprietary fund types. The City pools idle cash from all funds for the purpose of increasing income through coordinated investment activities. As of September 30, 2015, the investments held by the City had a remaining maturity of greater than one year from purchase and accordingly are carried at fair value. Interest earnings are allocated to the respective funds based upon each fund's relative balance in the pool. Cash and cash equivalents and investments reported as restricted are restricted for the acquisition and construction of capital assets, and for utility deposits held by the City. Property Taxes The City's property tax is levied each October 1 on the assessed value listed as of the prior January 1 for all real and certain personal property located within the City. Appraised values are established by the Central Appraisal District of Tarrant County at 100% of estimated market value and certified by the Appraisal Review Board. The assessed value upon which the 2015 levy was based on was $6,199,833,416. Taxes are due on October 1 and are delinquent after the following January 31. 34 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Property Taxes—Continued The City is permitted by Article XI, Section 5 of the State of Texas Constitution to levy taxes up to $2.50 per $100 of assessed valuation for general governmental services, including the payment of principal and interest on general obligation long-term debt. The combined tax rate to finance general governmental services including the payment of principal and interest on long-term debt for the year ended September 30, 2015 was $0.462 per$100 of assessed valuation. In Texas, countywide central appraisal districts are required to assess all property within the appraisal district on the basis of 100% of its appraised value and are prohibited from applying any assessment ratios. The value of property within the appraisal district must be reviewed every five years; however, the City may, at its own expense, require annual reviews of appraised values. The City may challenge appraised values established by the appraisal district through various appeals and, if necessary, legal action. Under this legislation, the City continues to set tax rates on City property. However, if the effective tax rate, excluding tax rates for bonds and other contractual obligations, adjusted for new improvements, exceeds the rate for the previous year by more than 8%, qualified voters of the City may petition for an election to determine whether to limit the tax rate to no more than 8% above the tax rate of the previous year. Interfund Receivables and Payables Activities between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as "due to/from other funds." Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances". Transactions Between Funds Interfund services provided and used are accounted for as revenues, expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from it that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as a reduction of expenditures/expenses in the fund reimbursed. All other interfund transactions, except interfund services provided and used and reimbursements, are recorded as transfers. Restricted Resources When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted first, then unrestricted resources as required. Inventories Inventories are stated at cost (first-in, first-out) and are determined annually by taking a physical inventory. Inventory in the general fund consists of gasoline and supplies held for consumption and is reported on the consumption method. Under the consumption method the cost is recorded as an expenditure at the time individual inventory items are utilized. Prepaid Items Certain payments reflect costs applicable to future periods and are recorded as prepaid items in the government-wide and fund financial statements. These items consist principally of postage and building deposits and are reported on the consumption method. 35 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements and in the fund financial statements for proprietary funds. All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Donated assets are valued at fair market value on the date donated. The costs of normal repairs and maintenance that do not add to the value of the asset or materially extend the asset lives are not capitalized. Renewals and betterments are capitalized. Interest has not been capitalized during the construction period on property, plant and equipment. Assets capitalized have an original cost of $5,000 or more and over one year of useful life. Depreciation has been calculated on each class of depreciable property using the straight-line method. Estimated useful lives are as follows: Buildings 20 -50 Years Water and Sewer distribution system 35 -50 Years Water hydrants 10-15 Years Water tanks 35 Years Computer equipment 5 Years Heavy equipment and vehicles 10 - 20 Years Light vehicles 2 - 10 Years Vehicles 5 Years Improvements 25 Years Infrastructure 10 Years The street network is not depreciated. The City has elected to use the modified approach in accounting for its street infrastructure. The modified approach allows governments to report as expenses in lieu of depreciation, infrastructure expenditures which maintain the asset but do not add to or improve the asset. Additions and improvements to the street network are capitalized. The City uses an asset management system to rate street condition and quantify the results of maintenance efforts. The City has established the Vehicle Replacement Internal Service Fund to account for all City- owned vehicles. Charges for use of the vehicle in the form of lease payments are made by the City departments to the Vehicle Replacement Internal Service Fund to provide for future acquisitions and replacement of City-owned vehicles. Vacation and Sick Leave (Compensated Absences) City employees earn vacation and sick leave, which may either be taken or accumulated, up to certain amounts, until paid upon retirement or termination. Upon termination or retirement, an employee is reimbursed up to a maximum number of hours of vacation pay and sick leave based upon the years of service. All vacation and sick pay is accrued in the government-wide and proprietary fund financial statements. A liability for these amounts is reported in the governmental funds only if they have matured. 36 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Long-Term Obligations In the government-wide financial statements and proprietary fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund statement of net position. Bond premiums and discounts, as well as any deferred losses on the refunding of bonds, are amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Issuance costs are recorded as expenses when incurred. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums and discounts received on debt issuances are reported as other financing sources or uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Pensions For purposes of measuring the net pension liability, pension related deferred outflows and inflows of resources and pension expense, City specific information about its Fiduciary Net Position in the Texas Municipal Retirement System (TMRS) and additions to/deductions from the City's Fiduciary Net Position have been determined on the same basis as they are reported by TMRS. For this purpose, plan contributions are recognized in the period that compensation is reported for the employee, which is when contributions are legally due. Benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Information regarding the City's Total Pension Liability is obtained from TMRS through a report prepared for the City by TMRS consulting actuary, Gabriel Roeder Smith & Company, in compliance with Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions. Deferred Outflows of Resources In addition to assets, the statement of financial position and/or balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City has the following items that qualify for reporting in this category: Deferred Loss on Refunding—these deferred outflows result from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. Pensions — these deferred outflows result from pension contributions after the measurement date (deferred and recognized in the following fiscal year) and/or differences in projected and actual earnings on pension assets (deferred and amortized over a closed five year period). Deferred Inflows of Resources In addition to liabilities, the statement of net position and/or balance will sometimes report a separate section for deferred inflows of resources. While deferred inflow items reported in the balance sheet are described in detail in Note 5, those that qualify for reporting in the statement of net position consist of pension items (difference in expected and actual experience and difference in assumption changes). These differences are deferred and amortized over a closed period equal to the average of the expected remaining service lives of all employees provided pensions through the plan. 37 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Fund Equity The City has adopted the provisions of GASB Statement No. 54, Fund Balance Reporting and Government Fund Type Definitions. The objective of the statement is to enhance the usefulness of fund balance information by providing clearer fund balance classifications that can be more consistently applied and by clarifying the existing government fund type definitions. The statement establishes fund balance classifications that comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds. Fund balance classifications, under GASB 54 are Nonspendable, Restricted, Committed, Assigned, and Unassigned. These classifications reflect not only the nature of funds, but also provide clarity to the level of restriction placed upon fund balance. Fund balance can have different levels of constraint, such as external versus internal compliance requirements. The General Fund should be the only fund that reports a positive unassigned balance. In all other funds, unassigned is limited to negative residual fund balance. In accordance with GASB Statement No. 54, the City classifies governmental fund balances as follows: 1. Nonspendable fund balance — includes amounts that are not in a spendable form or are required to be maintained intact (example— inventory or permanent funds). 2. Restricted fund balance — includes amounts that can be spent only for the specific purposes stipulated by external resource providers either constitutionally or through enabling legislation (example—court technology and court security funds). 3. Committed fund balance — includes amounts that can only be used for specific purposes determined by City Council (example— reforestation and park dedication). 4. Assigned fund balance — comprises amounts intended to be used by the City for specific purposes. Intent can be expressed by the City Council or their designee (Chief Financial Officer). In governmental funds other than the general fund, assigned fund balance represents the amount that is not restricted or committed. This indicates that resources in other governmental funds are, at a minimum, intended to be used for the purpose of that fund (example— Facility Maintenance and Strategic Initiative Fund). 5. Unassigned fund balance — is the residual classification of the general fund and includes all amounts not contained in other classifications. In accordance with GASB 54, the City has also adopted the following policies: Committed Fund Balance - The City Council is the City's highest level of decision-making authority and approval by resolution is required to establish, modify, or rescind a fund balance commitment. The resolution must either be approved or rescinded, as applicable, prior to the last day of the fiscal year. The amount subject to the constraint may be determined in the subsequent period. Assigned Fund Balance - The City Council has authorized the City's Chief Financial Officer as the official authorized to assign fund balance to a specific purpose as approved by this fund balance policy. Unassigned Fund Balance - It is the goal of the City to maintain a fund balance in the General Fund, equal to a minimum of 15% of General Fund budgeted operating expenditures, with the optimum goal of 25%. The City considers a balance of less than 15% to be cause for concern, barring unusual or deliberate circumstances. It is the goal of the City to maintain 60 days of working capital in the Enterprise Fund, with the optimum goal of 90 days of working capital. 38 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Fund Equity—Continued The City shall also maintain all Reserve funds for all statutorily required reserve funds to guarantee debt service. Order of Expenditure of Funds - When multiple categories of fund balance are available for expenditures, the City will start with the most restricted category and spend those funds first before moving to the next category with available funds (restricted, committed, assigned and unassigned). During fiscal year 2006, the City began designating funds for strategic initiatives. The source of these funds is reserves in excess of 25% of general fund expenditures. The funds will be used for one-time high impact projects involving infrastructure maintenance, community enhancement and capital acquisition; and are reported as assigned fund balance in the general fund. Net Position Net position represents the difference between assets plus deferred outflows of resources and liabilities plus deferred inflows of resources. Net investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowing used for the acquisition, construction or improvements of those assets, and adding back unspent proceeds. Net position is reported as restricted when there are limitations imposed on their use either through the enabling legislations adopted by the City or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses/expenditures during the reporting period. Actual results could differ from those estimates. Subsequent Events The City has evaluated all events or transactions that occurred after September 30, 2015 up through March 30, 2016, the date the financial statements were available to be issued. During this period, there were no subsequent events requiring disclosure. NOTE 2. CASH AND INVESTMENTS The funds of the City must be deposited and invested under the terms of a contract, contents of which are set out in the Depository Contract Law. The depository bank places approved pledged securities for safekeeping and trust with the City's agent bank in an amount sufficient to protect City funds on a day-to-day basis during the period of the contract. The pledge of approved securities is waived only to the extent of the depository bank's dollar amount of Federal Deposit Insurance Corporation (FDIC) insurance. At September 30, 2015 the carrying amount of the City's deposits was $14,464,552 and the bank balance was $16,862,695. As of September 30, 2015, none of the City's deposits were uncollateralized. 39 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 2. CASH AND INVESTMENTS—CONTINUED Legal and contractual provisions governing deposits and investments: The Public Funds Investment Act (Government Code Chapter 2256) contains specific provisions in the areas of investment practices, management reports and establishment of appropriate policies. Among other things, it requires the City to adopt, implement, and publicize an investment policy. That policy must address the following areas: (1) safety of principal and liquidity, (2) portfolio diversification, (3) allowable investments, (4) acceptable risk levels, (5) expected rates of return, (6) maximum allowable stated maturity of portfolio investments, (7) maximum average dollar-weighted maturity allowed based on the stated maturity date for the portfolio, (8) investment staff quality and capabilities, (9) and bid solicitation preferences for certificates of deposit. Statutes and the City's investment policy authorized the City to invest in the following investments as summarized in the table below: Maximum Maximum Authorized Maximum Percentage Investment Investment Type Maturity of Portfolio In One Issuer U.S. Government Securities 5 years 100% None Commercial Paper 270 days 20% None Eligible Investment Pools 365 days 100% None The Act also requires the City to have independent auditors perform test procedures related to investment practices as provided by the Act. The City is in substantial compliance with the requirements of the Act and with local policies. Cash and investments as of September 30, 2015 are classified in the accompanying financial statements as follows: Primary Government: Cash and cash equivalents $ 62,659,438 Investments 42,711,674 Restricted cash and cash equivalents 17,686,556 Restricted investments 16,205,974 Total primary government 139,263,642 Fiduciary Funds: Cash 57,368 Investments 10,710 Total fiduciary funds 68,078 Total cash and investments $ 139,331,720 Cash and investments as of September 30, 2015 consist of the following: Cash on hand $ 3,759 Deposits with financial institutions 14,464,552 Investments 124,863,409 Total cash and investments $ 139,331,720 40 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 2. CASH AND INVESTMENTS—CONTINUED Disclosures relating to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by investing mainly in investment pools which purchase a combination of shorter term investments with an average maturity of less than 60 days, thus reducing the interest rate risk. The City monitors the interest rate risk inherent in its portfolio by measuring the weighted average maturity of its portfolio. The City has no specific limitations with respect to this metric. As of September 30, 2015, the City had the following investments: Weighted Average Investment Type Amount Maturity Government agency securities $ 41,111,693 600 days Mutual funds 12,622,085 31 days TexStar 25,776,998 40 days TexPool 17,527,482 46 days Lonestar Investment Pool 10,008,486 33 days Certificates of Deposit 8,166,665 268 days Commercial Paper 9,650,000 140 days Total $ 124,863,409 As of September 30, 2015 the City did not invest in any securities which are highly sensitive to interest rate fluctuations. Disclosures relating to Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the Public Funds Investment Act, the City's investment policy, or debt agreements, and the actual rating as of year-end for each investment type. Minimum Rating as Legal of Year Investment Type Amount Rating End Government agency securities $ 41,111,693 N/A Not rated Mutual funds 12,622,085 N/A AAAm TexStar 25,776,998 N/A AAAm TexPool 17,527,482 N/A AAAm Lonestar Investment Pool 10,008,486 N/A AAAm Certificates of Deposit 8,166,665 N/A AAAm Commercial Paper 9,650,000 N/A Aa3 Total $ 124,863,409 41 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 2. CASH AND INVESTMENTS—CONTINUED Concentration of Credit Risk The investment policy of the City contains no limitations on the amount that can be invested in any one issuer. As of September 30, 2015, the City had no investments other than external investment pools that represent 5% or more of the City's investments. Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The Public Funds Investment Act and the City's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The Public Funds Investment Act requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least the bank balance less the FDIC insurance at all times. As of September 30, 2015, none of the City's cash deposits were uncollateralized. Investment in State Investment Pools The City is a voluntary participant in three investment pools: TexStar, TexPool, and Lonestar. The State Comptroller of Public Accounts exercises responsibility over TexPool. This oversight includes the ability to significantly influence operations, designation of management, and accountability for fiscal matters. Additionally, the State Comptroller has established an advisory board composed of both participants in TexPool and other persons who do not have a business relationship with TexPool. TexPool operates in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. TexPool uses amortized costs rather than market value to report net position to compute share prices. Accordingly, the fair value of the position in TexPool is the same as the value of TexPool shares. TexStar is administered by First Southwest Asset Management, Inc. and JPMorgan Chase. Together these organizations bring to the TexStar program the powerful partnership of two leaders in financial services with a proven and noted track record in local government investment pool management. TexStar is a local government investment pool created under the Interlocal Cooperation Act specifically tailored to meet Texas state and local government investment objectives of preservation of principal, daily liquidity, and competitive yield. TexStar uses amortized costs rather than market value to report net position to compute share prices. Accordingly, the fair value of the position in TexStar is the same as the value of TexStar shares. The Lone Star Investment Pool (the Pool) is organized in conformity with the Interlocal Cooperation Act, Chapter 791 of the Texas Government Code, and the Public Funds Investment Act, Chapter 2256 of the Texas Government Code. The Pool is governed by an 11 member Board of Trustees, consisting of individuals representing entities participating in the Pool. The fair value of the District's position in the Pool is the same as the value of the Pool shares. 42 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 3. RECEIVABLES Receivables at September 30, 2015, for the government's individual major, non-major, internal service, and fiduciary funds in the aggregate, including the applicable allowances for uncollectible accounts, consist of the following: Southlake General Parks Tax Obligation General Development Corp Increment Debt Capital Capital Financing General Service Projects Projects District Receivables: Property taxes $ 377,458 $ 140,483 $ $ $ Sales taxes 2,342,177 - Franchise taxes 472,551 Accounts - - 91,591 Interest 39,614 10,388 33,451 14,365 23 Other 111,999 - - - Gross receivables 3,343,799 150,871 125,042 14,365 23 Less:allowance 276,120 108,075 - - Net total receivables $ 3,067,679 $ 42,796 $ 125,042 $ 14,365 $ 23 Non- Major Water Govern- and Internal mental Sewer Service Agency Total Receivables: Property taxes $ - $ $ $ $ 517,941 Sales taxes 2,265,642 4,607,819 Franchise taxes - 472,551 Accounts - 5,348,970 5,440,561 Interest 5,693 16,845 102,833 223,212 Other 273,519 - - 385,518 Gross receivables 2,544,854 5,365,815 102,833 11,647,602 Less:allowance - 421,653 - 805,848 Net total receivables $ 2,544,854 $ 4,944,162 $ 102,833 $ $ 10,841,754 The Water and Sewer Fund accounts receivable include unbilled charges for services rendered through September 30, 2015 of$2,176,123 . 43 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 4. CAPITAL ASSETS Capital asset activity for the year ended September 30, 2015, was as follows: Beginning Capital Sales or Adjustments/ Ending Balance Acquisitions Disposals Transfers Balance Governmental Activities: Capital assets not being depreciated: Land $ 85,289,763 $ 3,636,063 $ $ - $ 88,925,825 Street infrastructure 187,112,993 3,376,750 9,919,125 200,408,868 Construction-in-progress 21,821,618 18,463,995 (24,793,499) 15,492,114 Total capital assets not being depreciated 294,224,374 25,476,808 (14,874,374) 304,826,807 Capital assets being depreciated: Land improvements 6,806,154 - 1,172,832 7,978,986 Buildings and building improvements 79,945,269 49,690 2,273,981 82,268,940 Public art 1,027,852 - - 1,027,852 Office equipment 2,436,383 (6,210) 2,430,173 Communications equipment 3,869,251 - 3,869,251 Field equipment 1,675,665 43,464 1,719,129 Heavy equipment 2,084,290 74,769 (47,815) 2,111,244 Computer equipment 1,511,173 63,567 (8,035) 1,566,705 Computer software 3,443,802 - 3,443,802 Vehicles 10,142,792 1,518,468 (343,995) 11,317,265 Drainage 40,903,314 2,008,194 - 42,911,508 Bridges,road signs,and fiber optic lines 3,250,517 - 2,199,081 5,449,598 Park improvements 15,593,483 8,217,662 23,811,145 Pathways 9,808,925 - 1,010,818 10,819,742 Total capital assets being depreciated 182,498,870 3,758,152 (406,055) 14,874,374 200,725,340 Accumulated depreciation: Land improvements (592,437) (802,846) - (1,395,283) Buildings and building improvements (12,682,923) (1,917,672) (14,600,595) Public art (281,543) (102,785) - (384,328) Office equipment (686,561) (154,868) 5,279 (836,150) Communications equipment (3,000,077) (127,403) - (3,127,480) Field equipment (923,911) (201,378) - (1,125,289) Heavy equipment (1,367,384) (144,373) 47,815 (1,463,942) Computer equipment (1,111,090) (138,432) 8,038 (1,241,484) Computer software (3,310,836) (63,202) - (3,374,038) Vehicles (6,108,064) (984,441) 343,995 (6,748,510) Drainage (14,487,140) (1,055,704) - (15,542,844) Bridges,road signs,and fiber optic lines (1,036,512) (24,338) (1,060,850) Park improvements (8,574,181) (486,287) (9,060,468) Pathways (4,121,487) (444,513) - (4,566,000) Total accumulated depreciation (58,284,146) (6,648,242) 405,127 - (64,527,261) Total capital assets being depreciated,net 124,214,724 (2,890,090) (928) 14,874,374 136,198,079 Governmental activities capital assets,net $ 418,439,098 $22,586,718 $ (928) $ - $441,024,886 44 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 4. CAPITAL ASSETS—CONTINUED Beginning Capital Sales or Adjustments/ Ending Balance Acquisitions Disposals Transfers Balance Business Type Activities: Capital assets not being depreciated: Land $ 16,789,625 $ 1,852,943 $ $ - $ 18,642,568 Construction-In-Progress 2,110,224 339,203 (330,110) 2,119,317 Total capital assets not being depreciated 18,899,849 2,192,146 (330,110) 20,761,885 Capital assets being depreciated: Buildings and building improvements 935,501 - 935,501 Equipment 2,415,927 187,531 (20,000) 2,583,458 Vehicles 572,041 - 572,041 Capacity rights 9,190,988 - - 9,190,988 Distribution system 133,654,657 3,196,702 330,110 137,181,469 Total capital assets being depreciated 146,769,114 3,384,233 (20,000) 330,110 150,463,457 Accumulated depreciation: Buildings and building improvements (554,996) (30,318) - - (585,314) Equipment (1,333,526) (232,808) 20,000 (1,546,334) Vehicles (360,717) (32,016) - (392,733) Capacity rights (3,520,218) (183,820) (3,704,038) Distribution system (50,754,814) (4,830,827) - (55,585,641) Total accumulated depreciation (56,524,271) (5,309,789) 20,000 - (61,814,060) Total capital assets being depreciated,net 90,244,843 (1,925,556) - 330,110 88,649,397 Business type activities capital assets,net $109,144,692 $ 266,590 $ - $ - $ 109,411,282 Depreciation expense was charged as a direct expense to functions of the primary government as follows: Governmental activities: General government $ 1,214,420 Public safety 1,261,526 Public works 2,250,741 Culture and recreation 1,921,555 Total depreciation expense- governmental activities $ 6,648,242 Business-type activities: Water and Sewer $ 5,309,789 45 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 5. DEFERRED INFLOWS OF RESOURCES/UNEARNED REVENUE Governmental funds report deferred inflows of resources in connection with receivables for revenue that is not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned (unearned revenue). At the end of the current fiscal year, the various components of unearned revenue and deferred inflows of resources reported in the governmental funds were as follows: General Debt Service Non-major Deferred inflows of resources: Fund Fund Governmental Total Property taxes $ 77,829 $ 55,917 $ - $ 133,746 Other 179,909 - - 179,909 Total deferred inflows of resources $ 257,738 $ 55,917 $ - $ 313,655 Unearned revenue: Franchise taxes $ 643,377 $ - $ - $ 643,377 Other 4,155 - 8,905 13,060 Total unearned revenue $ 647,532 $ - $ 8,905 $ 656,437 NOTE 6. LONG-TERM DEBT The City issues general obligation bonds, combination tax and revenue certificates of obligation and tax notes to provide for the acquisition and construction of major capital facilities and infrastructure. Combination tax and revenue certificates of obligation are issued for both governmental and business-type activities. General obligation bonds, governmental revenue bonds and tax notes pledge the full faith and credit of the City. Combination tax and revenue certificates of obligation are payable from the net revenues of the water and sewer system and general debt service tax. In May 2015, the City issued $3,295,000 of Series 2015, Tax and Waterworks and Sewer System (limited pledge) certificates of obligation. The debt was issued to pay the costs of construction of public works improvements and extensions to the City's combined waterworks and sewer system and improvements to the City's municipal service center. The obligations are payable over the next 20 years. 46 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 6. LONG-TERM DEBT—CONTINUED General obligation bonds, combination certificates of obligation, tax notes and governmental revenue bonds are as follows as of September 30, 2015: Final Interest Business- General Obligation Bonds and Certificates of Obligation Maturity Rates Governmental Type $6,540,000 Series 2007,Combination Tax and Waterworks and Sewer System Revenue Certificates of Obligation 2018 4.0-5.0% $ 2,085,000 $ - $14,015,000 Series 2008,Combination Tax and Waterworks and Sewer System Revenue Certificates of Obligation 2028 3.5-4.625% 5,097,855 5,440,860 $24,835,000 Series 2009,Combination Tax and Waterworks and Sewer System Revenue Certificates of Obligation 2029 2.0-5.0% 8,555,000 5,055,000 $26,730,000 Series 2010,General Obligation Refunding Bonds 2023 3.0-4.0% 6,627,363 2,557,270 $4,480,000 Series 2011A,Tax and Waterworks and Sewer System(Limited Pledge)Certificates of Obligation 2018 2.0-5.0% 2,060,000 - $3,365,000 Series 2011 B,Tax and Waterworks and Sewer System(Limited Pledge)Certificates of Obligation 2031 2.0-4.125% - 2,865,000 $15,745,000 Series 2010,Tax and Waterworks and Sewer System(Limited Pledge)Certificates of Obligation 2030 3.0-4.25% 4,120,000 4,360,000 $11,300,000 Series 2012,Tax and Waterworks and Sewer System(Limited Pledge)Certificates of Obligation 2032 3.0-4.25% 1,145,000 2,445,000 $9,965,000 Series 2012,General Obligation Refunding Bonds 2026 3.0-4.25% 8,350,000 250,000 $14,250,000 Series 2013,Tax and Waterworks and Sewer System(Limited Pledge)Certificates of Obligation 2033 2.0-5.0% 6,545,000 2,320,000 $22,295,000 Series 2013,General Obligation Refunding Bonds 2026 2.0-5.0% 19,820,000 1,230,000 $21,330,000 Series 2014,General Obligation Refunding Bonds 2026 2.0-5.0% 6,050,000 11,385,000 $8,780,000 Series 2014,Tax and Waterworks and Sewer System(Limited Pledge)Certificates of Obligation 2034 2.0-3.5% 3,575,000 4,255,000 $3,295,000 Series 2015,Tax and Waterworks and Sewer System(Limited Pledge)Certificates of Obligation 2035 2.75-4.0% - 3,295,000 $ 74,030,218 $ 45,458,130 Final Interest Business- Governmental Revenue Bonds Maturity Rates Governmental Type $15,745,000 Series 2010,Tax and Waterworks and Sewer System(Limited Pledge)Certificates of Obligation 2030 3.00-4.25% $ 2,670,000 $ $3,285,000 Series 2011 C,Tax and Waterworks and Sewer System(Limited Pledge)Certificates of Obligation 2031 2.00-4.125% 2,800,000 $11,300,000 Series 2012,Tax and Waterworks and Sewer System(Limited Pledge)Certificates of Obligation 2032 3.0-4.25% 5,190,000 $16,000,000 Series 2014,Southlake Parks Development Corporation,Sales Tax Revenue Refunding Bonds 2027 3% 14,880,000 $ 25,540,000 $ 47 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 6. LONG-TERM DEBT—CONTINUED The City has entered into various contractual agreements to unconditionally finance the principal and interest or a fixed percentage of principal and interest of Trinity River Authority (TRA) Contract Revenue Bonds. Under the agreements, the TRA utilized the bond proceeds to administer and construct various sewer and wastewater treatment projects on the City's behalf. Such agreements provide the City title to the assets upon retirement of the debt or capacity rights in the use of constructed assets. The City has included in its financial statements its proportionate share of these obligations and its investment in these assets as capacity rights. Contract revenue obligations at September 30, 2015 consist of the following: Final Business- Contract Revenue Obligations Maturity Governmental Type Series 2001,TRA-Denton Creek Wastewater Pressure Interceptor-Refunding 2017 $ - $ 750,000 The following is a summary of long-term transactions for the year ended September 30, 2015: Amount Beginning Ending Due within Balance Additions Reductions Balance One year Governmental activities: General obligation bonds and certificates of obligation $ 86,909,529 $ $(12,879,311) $ 74,030,218 $11,734,601 Sales tax revenue bonds 27,150,000 (1,610,000) 25,540,000 1,660,000 Bond premiums(discounts) 7,574,414 (892,041) 6,682,373 - Total bonds payable 121,633,943 (15,381,352) 106,252,591 13,394,601 Net pension liability 6,537,120 (883,132) 5,653,988 - Compensated absences 1,045,740 1,103,038 (1,045,739) 1,103,039 153,950 Total governmental activities $ 129,216,803 $ 1,103,038 $(17,310,223) $113,009,618 $13,548,551 The general fund has been used to liquidate capital lease liabilities with respect to acquisitions of governmental capital assets and has also typically been used in prior years to liquidate the liability for compensated absences. Amount Beginning Ending Due within Balance Additions Reductions Balance One year Business-type activities: Revenue bonds and certificates of obligation $ 46,933,815 $ 3,295,000 $ (4,770,685) $ 45,458,130 $ 4,970,396 Contract revenue obligations 1,100,000 - (350,000) 750,000 365,000 Bond premiums 1,742,018 194,888 (148,712) 1,788,194 - Total bonds payable 49,775,833 3,489,888 (5,269,397) 47,996,324 5,335,396 Unearned revenue 243,490 - (3,905) 239,585 5,000 Net pension liability 600,897 - (81,178) 519,719 - Compensated absences 77,497 83,011 (77,497) 83,011 83,011 Total business-type activities $ 50,697,717 $ 3,572,899 $ (5,431,977) $ 48,838,639 $ 5,423,407 48 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 6. LONG-TERM DEBT—CONTINUED The annual aggregate maturities for each bond type are as follows: General Obligation Bonds and Certificates of Obligation Governmental Activities Fiscal Year Ending September 30, Principal Interest Total 2016 $ 11,734,601 $ 2,594,249 $ 14,328,850 2017 11,543,185 2,184,568 13,727,753 2018 9,271,424 1,798,946 11,070,370 2019 5,314,835 1,521,689 6,836,524 2020 4,451,590 1,341,671 5,793,261 2021-2025 22,838,329 3,930,905 26,769,234 2026-2030 8,876,254 574,127 9,450,381 Total $ 74,030,218 $ 13,946,155 $ 87,976,373 Sales Tax Revenue Bonds Governmental Activities Fiscal Year Ending September 30, Principal Interest Total 2016 $ 1,660,000 $ 782,445 $ 2,442,445 2017 1,715,000 731,144 2,446,144 2018 1,765,000 678,944 2,443,944 2019 1,815,000 624,868 2,439,868 2020 1,875,000 568,755 2,443,755 2021-2025 10,105,000 1,926,367 12,031,367 2026-2030 5,615,000 568,177 6,183,177 2031-2035 990,000 28,416 1,018,416 Total $ 25,540,000 $ 5,909,116 $ 31,449,116 Revenue Bonds and Certificates of Obligation Business-Type Activities Fiscal Year Ending September 30, Principal Interest Total 2016 $ 4,970,396 $ 1,552,683 $ 6,523,079 2017 5,081,814 1,330,297 6,412,111 2018 4,768,576 1,154,167 5,922,743 2019 3,545,165 1,026,662 4,571,827 2020 2,858,410 925,617 3,784,027 2021-2025 11,236,309 3,400,458 14,636,767 2026-2030 9,797,460 1,369,287 11,166,747 2031-2035 3,200,000 200,437 3,400,437 Total $ 45,458,130 $ 10,959,608 $ 56,417,738 49 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 6. LONG-TERM DEBT—CONTINUED Contract Revenue Obligations Business-Type Activities Fiscal Year Ending September 30, Principal Interest Total 2016 $ 365,000 $ 28,375 $ 393,375 2017 385,000 9,625 394,625 Total $ 750,000 $ 38,000 $ 788,000 In previous years, the City has legally defeased certain outstanding general obligation and revenue debt by placing funds into irrevocable trusts pledged to pay all future debt service payments of the refunded debt. Accordingly, a liability for the defeased debt issues is not included in the City's financial statements. As of September 30, 2015, the City had no outstanding bonds that were legally defeased. NOTE 7. TRANSFERS AND INTERFUND RECEIVABLES AND PAYABLES All interfund transfers between the various funds are approved supplements to the operations of those funds. Individual fund transfers for fiscal year 2015 were as follows: Transfer In Transfer Out Amount Purpose Internal service fund General fund $ 1,200,000 To replace aging vehicles Non major governmental funds General fund 40,000 To fund operators of new fund General capital project funds General fund 6,920,000 To fund future infrastructure and wayfinding/event signage General fund Non major govemmental funds 38,325 To fund indirect charges General fund Non major govemmental funds 143,713 Pre-development funds for the Visitor Information Center General capital project funds Non major governmental funds 200,000 Pre-development funds for the Visitor Information Center General fund Non major governmental funds 55,732 To fund indirect charges General capital project funds Non major governmental funds 1,235,000 To fund various drainage projects General obligation debt service fund Non major governmental funds 194,447 To pay the debt service for bonds issued on the Districts'behalf General obligation debt service fund Tax increment financing district fund 3,258,668 To fund the debt repayment for bonds issued for tax increment financing district projects General fund Non major governmental funds 270,133 To fund indirect charges Southlake parks development Non major governmental funds 1,000,000 To assist with the funding of large park projects corporation capital projects fund Non major governmental funds Non major governmental funds 2,884,289 To pay the principal and interest on debt incurred General fund Non major governmental funds 263,700 To fund indirect charges General capital project funds Non major governmental funds 235,000 To fund drainage improvements General obligation debt service fund Non major governmental funds 4,017,900 To pay the debt service for bonds issued on the Districts'behalf General capital project funds Non major governmental funds 200,000 To fund construction of traffic signal General fund Water and sewer enterprise fund 968,160 To fund indirect charges $ 23,125,067 Interfund balances, recorded as "due to/from other funds" represent short-term financing of deficit cash and consist of the following as of September 30, 2015: Interfund Receivables: General Interfund Payables: Fund Southlake Parks Development Corporation $ 30,428 Capital Projects Funds Non-Major Governmental Funds 2,058 $ 32,486 50 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 8. RETIREMENT PLAN A. Plan Description The City participates as one of 860 plans in the nontraditional, joint contributory, hybrid defined benefit pension plan administered by the Texas Municipal Retirement System (TMRS). TMRS is an agency created by the State of Texas and administered in accordance with the TMRS Act, Subtitle G, Title 8, Texas Government Code (the TMRS Act) as an agent multiple-employer retirement system for municipal employees in the State of Texas. The TMRS Act places the general administration and management of the System with a six-member Board of Trustees. Although the Governor, with the advice and consent of the Senate, appoints the Board, TMRS is not fiscally dependent on the State of Texas. TMRS' defined benefit pension plan is a tax- qualified plan under Section 401(a) of the Internal Revenue Code. TMRS issues a publicly available comprehensive annual financial report (CAFR)that can be obtained at www.tmrs.com. All eligible employees of the City are required to participate in TMRS. B. Benefits Provided TMRS provides retirement, disability, and death benefits. Benefit provisions are adopted by the governing body of the City, within the options available in the state statutes governing TMRS. At retirement, the benefit is calculated as if the sum of the employee's contributions, with interest, and the city-financed monetary credits with interest were used to purchase an annuity. Members may choose to receive their retirement benefit in one of seven payments options. Members may also choose to receive a portion of their benefit as a Partial Lump Sum Distribution in an amount equal to 12, 24, or 36 monthly payments, which cannot exceed 75% of the member's deposits and interest. At the date the plan began, the City granted monetary credits for service rendered before the plan began of a theoretical amount at least equal to two times what would have been contributed by the employee, with interest, prior to establishment of the plan. Monetary credits for service since the plan began are a percent (100%, 150%, or 200%) of the employee's accumulated contributions. In addition, the City can grant, as often as annually, another type of monetary credit referred to as an updated service credit which is a theoretical amount which, when added to the employee's accumulated contributions and the monetary credits for service since the plan began, would be the total monetary credits and employee contributions accumulated with interest if the current employee contribution rate and city matching percent had always been in existence and if the employee's salary had always been the average of his salary in the last three years that are one year before the effective date. At retirement, the benefit is calculated as if the sum of the employee's accumulated contributions with interest and the employer-financed monetary credits with interest were used to purchase an annuity. Members can retire at ages 60 and above with 5 or more years of service or with 20 years of service. A member is vested after 5 years. The plan provisions are adopted by the governing body of the City, within the options available in the state statutes governing TMRS and within the actuarial constraints also in the statutes. 51 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 8. RETIREMENT PLAN —CONTINUED B. Benefits Provided—Continued At the December 31, 2014 valuation and measurement date, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 89 Inactive employees entitled to but not yet receiving benefits 143 Active employees 315 547 C. Contributions The contribution rates for employees in TMRS are either 5%, 6%, or 7% of employee gross earnings, and the city matching percentages are either 100%, 150%, or 200%, both as adopted by the governing body of the city. Under the state law governing TMRS, the contribution rate for each city is determined annually by the actuary, using the Entry Age Normal (EAN) actuarial cost method. The actuarially determined rate is the estimated amount necessary to finance the cost of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees for the City were required to contribute 7% of their annual gross earnings during the fiscal year. The contribution rates for the City were 12.05% and 12.17% in calendar years 2014 and 2015, respectively. The City's contributions to TMRS for the year ended September 30, 2015 were $2,392,607 , and were equal to the required contributions. D. Net Pension Liability The City's Net Pension Liability (NPL) was measured as of December 31, 2014 and the Total Pension Liability (TPL) used to calculate the NPL was determined by an actuarial valuation as of that date. Actuarial Assumptions: The Total Pension Liability in the December 31, 2014 actuarial valuation was determined using the following actuarial assumptions: Inflation 3.0% per year Overall payroll growth 3.0% per year Investment Rate of Return 7.0%, net of pension plan investment expense, including inflation Salary increases were based on a service-related table. Mortality rates for active members, retirees, and beneficiaries were based on the gender distinct RP2000 Combined Healthy Mortality Table, which male rates multiplied by 109% and female rates multiplied by 103%. The rates are projected on a fully generational basis by scale BB to account for future mortality improvements. For disabled annuitants, the gender-distinct RP2000 Disabled Retiree Mortality Table is used, with slight adjustments. 52 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 8. RETIREMENT PLAN —CONTINUED D. Net Pension Liability—Continued Actuarial Assumptions—Continued: Actuarial assumptions used in the December 31, 2014 valuation were based on the results of actuarial experience studies. This experience study was for the period January 1, 2006 through December 31, 2009, first used in the December 31, 2010 valuation. Healthy post- retirement mortality rates and annuity purchase rates were updated based on a Mortality Experience Investigation Study covering 2009 through 2011, and dated December 31, 2013. These assumptions were first used in the December 31, 2013 valuation, along with a change to the Entry Age Normal (EAN) actuarial cost method. Assumptions are reviewed annually. No additional changes were made for the 2014 valuation. The long-term expected rate of return on pension plan investments is 7.0%. The pension plan's policy in regard to the allocation of invested assets is established and may be amended by the TMRS Board of Trustees. Plan assets are managed on a total return basis with an emphasis on both capital appreciation as well as the production of income, in order to satisfy the short-term and long-term funding needs of TMRS. This rate was determined using a building-block method in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighing the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Long-Term Expected Real Target Rate of Return Asset Class Allocation (Arithmetic) Domestic Equity 17.5% 4.80% International Equity 17.5% 6.05% Core Fixed Income 30.0% 1.50% Non-Core Fixed Income 10.0% 3.50% Real Return 5.0% 1.75% Real Estate 10.0% 5.25% Absolute Return 5.0% 4.25% Private Equity 5.0% 8.50% Total 100.0% 53 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 8. RETIREMENT PLAN —CONTINUED D. Net Pension Liability—Continued Discount Rate The discount rate used to measure the Total Pension Liability was 7.0%. The projection of cash flows used to determine the discount rate assumed that employee and employer contributions will be made at the rates specified in statute. Based on that assumption, the pension plan's Fiduciary Net Position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the Total Pension Liability. Allocations The City's net pension liability, pension expense, and deferred outflows of resources related to TMRS have been allocated between governmental activities and business-type activities using a contribution-based method. Changes in the Net Pension Liability Increase (Decrease) Total Plan Net Pension Fiduciary Pension Liability Net Position Liability (a) (b) (a)-(b) Balance at 12/31/2013 $ 67,664,562 $ 60,526,545 $ 7,138,017 Changes for the year: Service Cost 2,906,949 - 2,906,949 Interest 4,779,462 - 4,779,462 Change of benefit terms - - - Difference between expected and actual experience (1,602,645) - (1,602,645) Changes of assumptions - - - Contributions-employer - 2,283,310 (2,283,310) Contributions-employee - 1,340,870 (1,340,870) Net investment income - 3,463,018 (3,463,018) Benefit payments, including refunds of employee contributions (1,680,030) (1,680,030) - Administrative expense - (36,150) 36,150 Other changes - (2,972) 2,972 Net Changes 4,403,736 5,368,046 (964,310) Balance at 12/31/14 $ 72,068,298 $ 65,894,591 $ 6,173,707 54 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 8. RETIREMENT PLAN —CONTINUED D. Net Pension Liability—Continued Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability of the City, calculated using the discount rate of 7.0%, as well as what the City's net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (6.0%) or 1 percentage-point higher (8.0%) than the current rate: 1% Decrease 1% Increase in Discount Discount in Discount Rate (6.0%) Rate (7.0%) Rate (8.0%) Net pension liability $ 18,149,145 $ 6,173,707 $ (3,503,159) Pension Plan Fiduciary Net Position Detailed information about the pension plan's Fiduciary Net Position is available in a separately-issued TMRS financial report. That report may be obtained at www.tmrs.com. E. Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the year ended September 30, 2015, the City recognized pension expense of$2,023,240. At September 30, 2015, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual economic experience $ - $ 1,323,312 Changes in actuarial assumptions - - Difference between projected and actual investment earnings 619,072 - Contributions subsequent to the measurement date 1,829,720 - Total $ 2,448,792 $ 1,323,312 55 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 8. RETIREMENT PLAN —CONTINUED E. Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions—Continued The $1,829,720 reported as deferred outflows of resources related to pensions result from contributions subsequent to the measurement date. Amounts reported as deferred outflows of resources related to pensions will be recognized in pension expense as follows: Fiscal Year Ended Sept. 30: 2016 $ 1,705,155 2017 (124,565) 2018 (124,565) 2019 (124,565) 2020 (205,980) Thereafter - Total $ 1,125,480 NOTE 9. OTHER POSTEMPLOYMENT BENEFITS Plan Description The City provides other postemployment benefits (OPEB) in the form of health insurance benefits through a single-employer defined benefit medical plan. Regular full-time employees retiring from the City of Southlake have the option to continue medical insurance coverage until the retiree becomes eligible for Medicare or is eligible to be covered under another medical plan. The City contributes $125 per month towards the premium for retiree insurance coverage or$225 towards the premium for retirees and dependents. A third-party administrator is utilized to provide claims administration and payment of claims. Insurance is purchased to provide specific stop loss and aggregate stop loss protection. The Plan does not issue a separate financial report. Funding Policy The City passed a resolution in September 2009, electing to participate in the PARS Public Agencies Post-Retirement Health Care Plan Trust (the Trust) to fund post-employment benefits for its employees as specified in the City's policies and/or applicable collective bargaining agreements. The Trust is a multiple employer trust arrangement established to provide economies of scale and efficiency of administration to public agencies that adopt it to hold the assets used to fund its OPEB obligation. The City has made a determination to fund its annual required contribution. For fiscal year 2015, the City contributed $125,000 to the Trust. 56 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 9. OTHER POSTEMPLOYMENT BENEFITS—CONTINUED Annual OPEB Cost and Net OPEB Obligation The City's annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years on an open basis. The City's annual OPEB cost and net OPEB obligation (asset) for the prior three years is shown below: 2015 2014 2013 Annual required contribution $ 36,592 $ 36,592 $ 36,592 Interest on prior year Net OPEB obligation (16,579) (11,274) (5,970) Adjustment to annual required contribution 16,579 11,274 5,970 Annual OPEB cost 36,592 36,592 36,592 Contributions made 125,000 125,000 125,000 Increase (decrease) in net OPEB obligation (88,408) (88,408) (88,408) Net Obligation (asset)- beginning of year (276,316) (187,908) (99,500) Net Obligation (asset)-end of year $ (364,724) $ (276,316) $ (187,908) Percentage of OPEB costs contributed 342% 342% 342% Funded Status and Funding Progress The funded status of other postemployment benefits as of December 31, 2014, the date of the latest actuarial valuation, was as follows: Actuarial accrued liability $ 913,956 Actuarial value of plan assets (1,042,233) Overfunded actuarial accrued liability $ (128,277) Funded ratio 114% Covered payroll $19,154,225 Overfunded actuarial accrued liability as a percentage of covered payroll 0.67% Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. The unfunded actuarial accrued liability is being amortized assuming 10 level annual payments on an open basis. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revisions as actual results are compared with past expectations and new estimates are made about the future. 57 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 9. OTHER POSTEMPLOYMENT BENEFITS—CONTINUED Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long- term perspective of the calculations. In the December 31, 2014 actuarial valuation, the individual entry-age actuarial cost method was used. Key actuarial assumptions include: (a) level dollar contribution amortization method; (b) a 3.0% net real rate of investment return; (c) a sliding scale of medical inflation from 7.25% in 2015 to 4.5% by 2029 and later; and (d) general inflation assumed to be 3.0%. NOTE 10. DEFERRED COMPENSATION PLAN The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all City employees, permits them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. The laws governing 457 plans were changed to state that plans would not be considered eligible plans unless all assets and income of the plans are held in trust for the exclusive benefit of the participants and their beneficiaries. The City amended the plan documents to comply with these requirements. In accordance with GASB 32, the plans as amended are not included in the City's financial statements. NOTE 11. RISK FINANCING AND INSURANCE The City is exposed to various risks of loss related to torts, theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. During the fiscal year 1990, the City joined the Texas Municipal League Workers Compensation Joint Insurance Fund ("the Pool") for risks related to employees. Premiums are paid to the Pool, which retains a limit of loss. Reinsurance companies insure the risks beyond those limits. The City retains, as a risk, only the deductible amount of each policy. The City continues to carry commercial insurance with Texas Municipal League provided by Mutual of Omaha for other risks including general liability, property, and errors and omissions. There were no significant reductions in coverage in the past year and there were no settlements exceeding insurance coverage in any of the past three years. 58 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 NOTE 12. COMMITMENTS AND CONTINGENCIES The City has entered into various contracts with the Trinity River Authority (TRA) and other cities. Terms of the agreements provide the City will pay an amount equal to its proportional share of maintenance and operations and debt service based upon volumes of wastewater transported, treated, or disposed of. The City's proportional share of future costs under these contracts is indeterminable and has not been recorded. Payments to the TRA under these contracts for the year ended September 30, 2015 were $1,135,458. The City has authorized various contracts obligating future funds of the City as the contracted services are performed. Significant amounts unexpended under such contracts at year end are reflected as reserves for authorized contracts in the applicable funds. The City has certain claims and litigation pending with respect to matters arising in the normal course of operations. City management is of the opinion that the settlement of these matters will not have a material adverse impact on the City's financial statements. NOTE 13. FUTURE REPORTING REQUIREMENTS Statement No. 75, "Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions" — This statement changes the focus of accounting of postemployment benefits other than pensions from whether they are responsibly funding the benefits over time to a point-in time liability that is reflected on the employer's financial statements for any actuarially unfunded portion of benefits earned to date. This statement will become effective for the City in fiscal year 2018. Management is evaluating the impact of the standard on the City's financial statements and will take the necessary steps to implement it. Statement No. 77, "Tax Abatement Disclosures" — This statement requires governments that enter into tax abatement agreements to provide certain disclosures regarding these commitments. This statement will become effective for the City in fiscal year 2017. Management believes this statement will not have a significant impact on the City's financial statements. NOTE 14. CUMULATIVE EFFECT OF ADOPTION OF GASB STATEMENTS As a result of the implementation of GASB Statement No. 68, "Accounting and Financial Reporting for Pension — an amendment of GASB Statement No. 27", and GASB Statement No. 71, "Pension Transition for Contributions Made Subsequent to the Measurement Date", an adjustment has been made to record the City's net pension liability as of October 1, 2014. As a result, beginning net position of the governmental activities has been decreased by $4,961,527 and the beginning net position of business-type activities and the water and sewer enterprise fund has been decreased by $456,067. 59 REQUIRED SUPPLEMENTARY INFORMATION IE BUDGETARY COMPARISON GENERAL FUND CITY OF SOUTHLAKE, TEXAS EXHIBIT A-1 GENERALFUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2015 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET- POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES Ad valorem taxes,penalties and interest $ 19,561,715 $ 19,456,715 $ 19,149,431 $ (307,284) Franchise taxes 2,739,404 3,152,147 3,327,739 175,592 Municipal sales and mixed beverage tax 12,022,000 13,768,000 14,339,915 571,915 License,permits and fees 1,457,800 2,412,800 2,781,823 369,023 Charges for services 1,798,650 1,770,650 1,849,747 79,097 Fines and forfeitures 1,115,000 1,115,000 1,276,453 161,453 Grants - 50,000 90,428 40,428 Interest earned 82,180 91,980 210,250 118,270 Miscellaneous 293,000 390,100 430,839 40,739 TOTAL REVENUES 39,069,749 42,207,392 43,456,625 1,249,233 EXPENDITURES Current: General government City secretary/mayor 491,369 483,195 446,768 36,427 City manager's office 825,144 836,274 819,737 16,537 Human resources 616,307 616,307 579,616 36,691 Support services 3,467,109 3,349,113 3,045,584 303,529 Economic development 230,965 230,965 212,264 18,701 Finance 1,231,600 1,217,113 1,161,137 55,976 Municipal court 673,877 673,877 610,111 63,766 Teen court 148,021 148,021 132,335 15,686 Information technology 2,142,154 2,142,154 1,948,453 193,701 Public safety Police services 5,860,541 5,898,503 5,756,661 141,842 Fire services 7,629,218 7,722,513 7,790,701 (68,188) Public safety support 1,213,217 1,213,217 1,187,229 25,988 Building inspection 1,052,964 1,056,139 1,024,493 31,646 Public works Public works administration 2,636,002 2,608,976 2,311,442 297,534 Streets and drainage 1,682,704 1,684,926 1,650,008 34,918 Planning 966,175 954,375 902,766 51,609 Culture and recreation Community services 1,157,814 1,171,639 1,131,801 39,838 Parks and recreation 4,269,231 4,236,337 4,123,229 113,108 Library services 613,299 637,049 626,848 10,201 TOTAL EXPENDITURES 36,907,711 36,880,693 35,461,183 1,419,510 Excess(deficiency)of revenues over expenditures 2,162,038 5,326,699 7,995,442 2,668,743 OTHER FINANCING SOURCES(USES) Transfers from other funds 1,724,514 1,739,763 1,739,763 - Transfers to other funds (7,260,000) (8,160,000) (8,160,000) TOTAL OTHER FINANCING SOURCES(USES) (5,535,486) (6,420,237) (6,420,237) - NET CHANGE IN FUND BALANCE (3,373,448) (1,093,538) 1,575,205 2,668,743 FUND BALANCES,BEGINNING OF YEAR 24,563,413 24,563,413 24,563,413 - FUND BALANCES, END OF YEAR $ 21,189,965 $ 23,469,875 $ 26,138,618 $ 2,668,743 See Notes to Budgetary Comparison Schedules 60 CITY OF SOUTHLAKE, TEXAS EXHIBIT A-2 TAX INCREMENT FINANCING DISTRICT SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2015 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET- POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES Ad valorem taxes, penalties and interest $6,642,975 $7,324,928 $7,324,928 $ - Interest - 1,000 (318) (1,318) Total revenues 6,642,975 7,325,928 7,324,610 (1,318) EXPENDITURES: Intergovernmental - 4,478,312 4,478,312 - Total expenditures - 4,478,312 4,478,312 - Excess of revenues over expenditures 6,642,975 2,847,616 2,846,298 (1,318) OTHER FINANCING USES Transfers to other funds (3,288,465) (3,258,668) (3,258,668) - Total other financing uses (3,288,465) (3,258,668) (3,258,668) - Net change in fund balance 3,354,510 (411,052) (412,370) (1,318) Fund balance at beginning of year 4,422,565 4,422,565 4,422,565 - Fund balance at end of year $7,777,075 $4,011,513 $4,010,195 $ (1,318) See Notes to Budgetary Comparison Schedules 61 I CITY OF SOUTHLAKE, TEXAS EXHIBIT A-3 SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS TEXAS MUNICIPAL RETIREMENT SYSTEM FOR THE YEAR ENDED SEPTEMBER 30, 2015 Measurement Year 2014 Total pension liability: Service cost $ 2,906,949 Interest 4,779,462 Changes of benefit terms - Difference between expected and actual experience (1,602,645) Change in assumptions - Benefit payments, including refunds of employee contributions (1,680,030) Net change in total pension liability 4,403,736 Total pension liability- beginning 67,664,562 Total pension liability-ending (a) 72,068,298 Plan fiduciary net position: Contributions -employer 2,283,310 Contributions -employee 1,340,870 Net investment income 3,463,018 Benefit payments, including refunds of employee contributions (1,680,030) Administrative expense (36,150) Other (2,972) Net change in plan fiduciary net position 5,368,046 Plan fiduciary net position- beginning 60,526,545 Plan fiduciary net position- ending (b) 65,894,591 Net pension liability- ending (a)- (b) $ 6,173,707 Plan fiduciary net position as a percentage of total pension liability 91.43% Covered employee payroll $ 19,154,225 Net pension liability as a percentage of covered employee payroll 32.23% 63 CITY OF SOUTHLAKE, TEXAS EXHIBIT A-4 SCHEDULE OF CONTRIBUTIONS TEXAS MUNICIPAL RETIREMENT SYSTEM FOR THE YEAR ENDED SEPTEMBER 30, 2015 Fiscal Year 2015 Actuarially determined contribution $ 2,439,627 Contribution in relation of the actuarially determined contribution 2,439,627 Contribution deficiency (excess) $ - Covered employee payroll $ 20,034,712 Contributions as a percentage of covered employee payroll 12.18% 64 CITY OF SOUTHLAKE, TEXAS NOTES TO TEXAS MUNICIPAL RETIREMENT SYSTEM REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED SEPTEMBER 30, 2015 Actuarial Cost Method Entry Age Normal Amortization Method Level Percentage of Payroll, Closed Remaining Amortization Period 29 years Asset Valuation Method 10 Year smoothed market; 15% soft corridor Inflation 3.00% Salary Increases 3.50% to 12.00% including inflation Investment Rate of Return 7.00% Retirement Age Experience-based table of rates that are specific to the City's plan of benefits. Last updated for the 2010 valuation pursuant to an experience study of the period 2005-2009 Mortaility RP2000 Combined Mortality Table with Blue Collar Adjustment with male rates multiplied by 109% and female rates multiplied by 103% and projected on a fully generational basis with scale BB Other Information There were no benefit changes during the year. 65 CITY OF SOUTHLAKE, TEXAS EXHIBIT A-5 CONDITION RATING OF STREET SYSTEM SEPTEMBER 30, 2015 CONDITION OF ROADWAY SYSTEM Index 2015 RCI 8.9 SDI 6.1 PQI 8.2 COMPARISON OF NEEDED-TO-ACTUAL MAINTENANCE/PRESERVATION Needed Actual Difference 2011 1,250,000 1,025,665 (224,335) 2012 1,250,000 1,252,394 2,394 2013 800,000 755,398 (44,602) 2014 800,000 1,050,404 250,404 2015 800,000 830,768 30,768 Total $4,900,000 $4,914,629 14,629 The City hired a consultant to implement a pavement management system (PMS) to cover all public streets within the City. The condition of street pavement is measured using the Asphalt Pavement Rating Form as developed by the Asphalt Institute. The Asphalt Pavement Rating Form is based on a weighted average of thirteen defects found in pavement surfaces. The consultant conducted a pavement condition survey on all City owned streets. This consisted of a ride condition or roughness survey, a surface distress survey and a deflection survey. A present status analysis was conducted using data obtained from the pavement condition survey to determine the Ride Condition Index (RCI) and the Surface Distress Index (SDI). These indices were then combined into the composite Pavement Quality Index (PQI). Values of PQI can range from 0 to 10. Typical values for a newly constructed pavement range from 9.5 to 10.0. The PQI level at which a pavement becomes in need of rehabilitation is typically in the 5.0 to 7.0 range. It was the City's policy to maintain a PQI of 7.3 until 2012 when the City increased the minimum PQI to 7.8. Needed maintenance is calculated based upon inspections and the pavement quality index. In accordance with GASB Statement No. 34, the City is required to report at least one complete condition assessment at transition using the modified approach. The condition assessment was completed by the City and documented that the eligible infrastructure assets are being preserved at or above the condition level established by the City. A third of the City's public streets will be assessed annually to ensure all public streets are assessed every three years. The City calculates needed maintenance of its street system annually. However, the scheduling of these road projects often crosses fiscal years. Therefore, actual maintenance may be less than the calculated needed maintenance in one fiscal year and greater than the calculated needed maintenance in the subsequent fiscal year. 66 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES MAJOR GOVERNMENTAL FUNDS GENERAL OBLIGATION DEBT SERVICE FUND The General Obligation Debt Service Fund is used to account for the accumulation of resources for, and the payment of, general obligation bonds and interest from governmental resources. 67 CITY OF SOUTHLAKE, TEXAS EXHIBIT B-1 GENERAL OBLIGATION DEBT SERVICE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2015 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET- POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Ad valorem taxes $ 6,902,970 $ 6,902,970 $ 6,819,703 $ (83,267) Interest 20,000 20,000 112,019 92,019 Total revenues 6,922,970 6,922,970 6,931,722 8,752 EXPENDITURES: Principal retirement 12,639,311 12,639,311 12,639,311 - Interest and fiscal charges 2,880,050 2,880,050 2,909,672 (29,622) Total expenditures 15,519,361 15,519,361 15,548,983 (29,622) Deficiency of revenues over expenditures (8,596,391) (8,596,391) (8,617,261) (20,870) OTHER FINANCING SOURCES(USES) Transfers from other funds 7,471,015 7,471,015 7,471,015 - Total other financing sources(uses) 7,471,015 7,471,015 7,471,015 - Net change in fund balance (1,125,376) (1,125,376) (1,146,246) (20,870) Fund balance, beginning of year 10,477,887 10,477,887 10,477,887 - Fund balance,end of year $ 9,352,511 $ 9,352,511 $ 9,331,641 $ (20,870) 68 NON-MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS The Special Revenue Funds are used to account for revenue sources that are legally restricted to expenditures for specified purposes. Police Fund-- Established to account for resources required to be utilized by the police department. Parks and Recreation Fund — Established to account for resources restricted for use by the parks and recreation department. Parks Dedication Fund — Established to account for resources restricted for use by the parks department. Southlake Parks Development Corporation Special Revenue Fund — Established to account for the general operations of the non-profit corporation established to finance, develop and operate park and recreational facilities. Crime Control District — The Crime Control District Special Revenue Fund was established to account for the operations of the Crime Control District, which was established for the financing and development of crime control within the City. The Crime Control Fund is funded primarily through the receipt of municipal sales taxes. Hotel Occupancy Fund — The Hotel Occupancy Tax Fund accounts for all revenues and expenditures relating to the hotel occupancy tax received by the City. Storm Water Utility Fund — This fund is used to account for fees collected for the purpose of improving, upgrading and maintaining the City's drainage system. The City is mandated by the Texas Commission on Environmental Quality (TCEQ) to develop and maintain a Storm Water Management Plan in order to address capacity and quality issues and protect its residents and their properties from possible flooding and pollution problems. Drainage fees are collected by residents to fund the activities required to comply with TCEQ regulations. Court Security Fund — Established to account for municipal court fees assessed to provide for court security. Court Technology Fund — Established to account for municipal court fees assessed to provide for court technology. Library Fund— Established to account for resources donated for use by library services. Red Light Camera Fund —The Red Light Camera Fund is used to account for fees assessed for red light violations captured through the City's camera monitoring system. Storm Water Maintenance Fund—The Storm Water Maintenance Fund is used to account for the maintenance on storm water infrastructure. Oil and Gas Fund-The Oil and Gas Fund is used to account for permits fees and the related expenditures for oil and gas drilling. Commercial Vehicle Enforcement Fund —The Commercial Vehicle Enforcement Fund is used to account for the fees assessed for commercial vehicle violations. 69 DEBT SERVICE FUNDS The Debt Service Funds are utilized to account for the accumulation of financial resources for, and the payment of, long-term debt principal, interest, and related costs arising from the issuance of bonds. Southlake Parks Development Corporation Debt Service Fund — Established to accumulate resources to finance the debt service of debt issues of the Southlake Parks Development Corporation. CAPITAL PROJECTS FUNDS The Capital Projects Funds are utilized to account for financial resources to be used for the acquisition or construction of specified capital improvements (other than those financed by proprietary funds). Tax Increment Financing District Capital Projects Fund — The Tax Increment Financing District capital projects fund was established to account for the financing and construction of projects of the Tax Increment Financing District. Crime Control District Capital Projects Fund —The Crime Control District Capital Projects Fund is utilized to account for the acquisition and construction of capital assets as approved by the District's board of directors. The fund has been funded primarily through the issuance of general obligation debt. 70 CITY OF SOUTHLAKE, TEXAS NON-MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET SEPTEMBER 30, 2015 SPECIAL REVENUE Southlake Parks Parks Crime and Parks Development Control Police Recreation Dedication Corporation District ASSETS Cash and cash equivalents $18,259 $ 131,763 $ 534,949 $ 6,095,756 $ 5,172,224 Investments 2,042 6,301 7,097 3,004,800 1,174,716 Accounts receivable - - - 12,819 - Sales tax receivable - - 1,109,811 1,071,510 Interest receivable - 1 3 750 30 TOTAL ASSETS $20,301 $ 138,065 $ 542,049 $ 10,223,936 $ 7,418,480 LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable $ 7,983 $ $ - $ 2,783 $ 4,861 Accrued liabilities - 174,000 6,769 36,450 Due to other funds - - - Unearned revenue - - - - TOTAL LIABILITIES 7,983 174,000 9,552 41,311 FUND BALANCES Restricted for: Municipal court expenditures - - - - Debt service Capital projects - - Committed for: Police expenditures 12,318 - - 7,377,169 Parks and recreation - 138,065 368,049 10,214,384 - Storm water expenditures - - - Oil and gas drilling Library - - - - - TOTAL FUND BALANCES 12,318 138,065 368,049 10,214,384 7,377,169 TOTAL LIABILITIES AND FUND BALANCES $20,301 $ 138,065 $ 542,049 $ 10,223,936 $ 7,418,480 71 EXHIBIT C-1 CONTINUED SPECIAL REVENUE Storm Hotel Water Court Court Red Light Storm Water Occupancy Utility Security Technology Library Camera Maintenance $ 524,244 $1,158,554 $394,929 $ 369,161 $ 7,760 $ 383,236 $ 404,179 678,309 586,566 71,100 47,657 882 92,574 47,189 9,586 216,126 - - 190 34,795 3 84,321 - - - - - - 1,023 3,759 3 2 - - - $1,297,483 $1,965,005 $466,032 $ 416,820 $ 8,832 $ 510,605 $ 451,371 $ 26,914 $ 2,770 $ 2,044 $ $ $ 136,058 $ - 13,656 7,654 2,318 3,000 8,905 - - - 49,475 10,424 4,362 139,058 - - 461,670 416,820 - 1,248,008 1,954,581 - - - 371,547 451,371 - - - - 8,832 - - 1,248,008 1,954,581 461,670 416,820 8,832 371,547 451,371 $1,297,483 $1,965,005 $466,032 $ 416,820 $ 8,832 $ 510,605 $ 451,371 72 CITY OF SOUTHLAKE, TEXAS EXHIBIT C-1 NON-MAJOR GOVERNMENTAL FUNDS CONCLUDED COMBINING BALANCE SHEET SEPTEMBER 30, 2015 DEBT SPECIAL REVENUE SERVICE CAPITAL PROJECTS Southlake Tax TOTAL Commercial Parks Increment Crime NON-MAJOR Oil and Vehicle Development Financing Control GOVERNMENTAL Gas Enforcement Corporation District District FUNDS ASSETS Cash and cash equivalents $ 44,830 $ 63,337 $ 709,437 $ - $ 966,216 $ 16,978,834 Investments 8,338 7 1,016,002 4,366 111,531 6,859,477 Accounts receivable - - - - - 273,519 Sales tax receivable - - 2,265,642 Interest receivable - 116 6 5,693 TOTAL ASSETS $ 53,168 $ 63,344 $ 1,725,555 $ 4,366 $ 1,077,753 $ 26,383,165 LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable $ $ 41 $ $ $ $ 183,454 Accrued liabilities 10,488 254,335 Due to other funds - 2,058 2,058 Unearned revenue - - 8,905 TOTAL LIABILITIES 10,529 2,058 448,752 FUND BALANCES Restricted for: Municipal court expenditures 878,490 Debt service 1,725,555 - 1,725,555 Capital projects - - 2,308 1,077,753 4,282,650 Commited for: Police expenditures 52,815 - - 7,813,849 Parks and recreation - 10,720,498 Storm water expenditures 451,371 Oil and gas drilling 53,168 53,168 Library - 8,832 TOTAL FUND BALANCES 53,168 52,815 1,725,555 2,308 1,077,753 25,934,413 TOTAL LIABILITIES AND FUND BALANCES $ 53,168 $ 63,344 $ 1,725,555 $ 4,366 $ 1,077,753 $ 26,383,165 73 IE CITY OF SOUTH LAKE, TEXAS NON-MAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED SEPTEMBER 30, 2015 SPECIAL REVENUE Southlake Parks Parks Crime and Parks Development Control Police Recreation Dedication Corporation District REVENUES Municipal sales tax $ $ $ - $ 7,440,726 $ 7,335,505 Licenses, permits and fees 215,818 - - Fines and forfeitures - Grants - - Interest (11) 78 22,198 1,417 Contributions 71,896 - - Miscellaneous 153,824 - Total revenues 71,885 215,896 7,616,748 7,336,922 EXPENDITURES Current: Court technology - - - - Public safety Police services - - 646,323 Cultural and recreation Parks and recreation 31,282 783,575 - Library services - - Capital outlay Debt service: Principal retirement Interest and fiscal charges - - - Total expenditures 31,282.00 - 783,575 646,323 Excess(deficiency)of revenues over expenditures - 40,603 215,896 6,833,173 6,690,599 OTHER FINANCING SOURCES(USES) Proceeds from the sale of property 3,271 - - - - Transfers from other funds - Transfers to other funds - (235,000) (4,154,422) (4,281,600) Total other financing sources(uses) 3,271 - (235,000) (4,154,422) (4,281,600) NET CHANGE IN FUND BALANCES 3,271 40,603 (19,104) 2,678,751 2,408,999 FUND BALANCES, BEGINNING OF YEAR 9,047 97,462 387,153 7,535,633 4,968,170 FUND BALANCES, END OF YEAR $ 12,318 $ 138,065 $ 368,049 $ 10,214,384 $ 7,377,169 74 EXHIBIT C-2 CONTINUED SPECIAL REVENUE Storm Hotel Water Court Court Red Light Storm Water Occupancy Utility Security Technology Library Camera Maintenance $ 974,468 $ - $ $ $ $ $ - 1,387,359 - 34,768 46,088 512,291 6,395 4,432 65 14 124 547 - - - - 12,008 - - 980,863 1,391,791 34,833 46,102 12,008 512,415 547 - - - 18,053 - - - - 5,914 445,104 733,488 - - - - - - 11,143 494,183 39,034 - 733,488 494,183 39,034 23,967 11,143 445,104 - 247,375 897,608 (4,201) 22,135 865 67,311 547 (382,038) (1,485,179) (200,000) (382,038) (1,485,179) - (200,000) - (134,663) (587,571) (4,201) 22,135 865 (132,689) 547 1,382,671 2,542,152 465,871 394,685 7,967 504,236 450,824 $ 1,248,008 $ 1,954,581 $ 461,670 $ 416,820 $ 8,832 $ 371,547 $ 451,371 75 CITY OF SOUTHLAKE, TEXAS EXHIBIT C-2 NON-MAJOR GOVERNMENTAL FUNDS CONCLUDED COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED SEPTEMBER 30, 2015 DEBT SPECIAL REVENUE SERVICE CAPITAL PROJECTS Southlake Tax TOTAL Commercial Parks Increment Crime NON-MAJOR Oil and Vehicle Development Financing Control GOVERNMENTAL Gas Enforcement Corporation District District FUNDS REVENUES Municipal sales tax $ $ $ $ $ $ 15,750,699 Licenses,permits and fees 1,603,177 Fines and forfeitures 73,806 666,953 Grants - - Interest 8 (20) 3,832 12 (16) 39,075 Contributions - - - 71,896 Miscellaneous - - 165,832 Total revenues 8 73,786 3,832 12 (16) 18,297,632 EXPENDITURES Current: Court technology - - - 18,053 Public safety Police services 112,514 1,209,855 Cultural and recreation Parks and recreation - 1,548,345 Library services - 11,143 Capital outlay - 1,260 49,614 584,091 Debt service: Principal retirement 1,850,000 - - 1,850,000 Interest and fiscal charges - 984,863 984,863 Total expenditures 112,514 2,834,863 1,260 49,614 6,206,350 Excess(deficiency)of revenues over expenditures 8 (38,728) (2,831,031) (1,248) (49,630) 12,091,282 OTHER FINANCING SOURCES(USES) Proceeds from the sale of property - - 3,271 Transfers from other funds 40,000 2,884,289 2,924,289 Transfers to other funds - - (10,738,239) Total other financing sources(uses) 40,000 2,884,289 (7,810,679) NET CHANGE IN FUND BALANCES 8 1,272 53,258 (1,248) (49,630) 4,280,603 FUND BALANCES, BEGINNING OF YEAR 53,160 51,543 1,672,297 3,556 1,127,383 21,653,810 FUND BALANCES,END OF YEAR $ 53,168 $ 52,815 $ 1,725,555 $ 2,308 $ 1,077,753 $ 25,934,413 76 CITY OF SOUTHLAKE, TEXAS EXHIBIT C-3 PARKS DEDICATION SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2015 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET- POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Park fees $ 30,000 $215,000 $215,818 $ 818 Interest 250 250 78 (172) Total revenues 30,250 215,250 215,896 646 EXPENDITURES: Parks and recreation - - - - Total expenditures - - - - Excess of revenues over expenditures 30,250 215,250 215,896 646 OTHER FINANCING SOURCES (USES): Transfers to other funds (235,000) (235,000) (235,000) - Total other financing sources (uses) (235,000) (235,000) (235,000) - Net change in fund balance (204,750) (19,750) (19,104) 646 Fund balance at beginning of year 387,153 387,153 387,153 - Fund balance at end of year $ 182,403 $367,403 $368,049 $ 646 77 CITY OF SOUTHLAKE, TEXAS EXHIBIT C-4 SOUTHLAKE PARKS DEVELOPMENT CORPORATION SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2015 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET- POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Municipal sales tax $ 5,650,000 $6,400,000 $ 7,440,726 $ 1,040,726 Miscellaneous - 153,816 153,824 8 Interest 14,000 7,500 22,198 14,698 Total revenues 5,664,000 6,561,316 7,616,748 1,055,432 EXPENDITURES Parks and recreation 732,976 979,258 783,575 195,683 Excess of revenues over expenditures 4,931,024 5,582,058 6,833,173 1,251,115 OTHER FINANCING USES: Transfers to other funds (4,154,422) (4,154,422) (4,154,422) - Net change in fund balance 776,602 1,427,636 2,678,751 1,251,115 Fund balance at beginning of year 7,535,633 7,535,633 7,535,633 - Fund balance at end of year $ 8,312,235 $8,963,269 $10,214,384 $ 1,251,115 78 CITY OF SOUTHLAKE, TEXAS EXHIBIT C-5 CRIME CONTROL DISTRICT SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAB BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2015 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET- POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Municipal sales tax $5,650,000 $7,300,000 $7,335,505 $ 35,505 Interest 3,500 500 1,417 917 TOTAL REVENUES 5,653,500 7,300,500 7,336,922 36,422 EXPENDITURES Police services 836,099 676,871 646,323 30,548 Excess of revenues over expenditures 4,817,401 6,623,629 6,690,599 66,970 OTHER FINANCING USES Transfers to other funds (4,281,600) (4,281,600) (4,281,600) - TOTAL OTHER FINANCING USES (4,281,600) (4,281,600) (4,281,600) - Net change in fund balance 535,801 2,342,029 2,408,999 66,970 Fund balance at beginning of year 4,968,170 4,968,170 4,968,170 - Fund balance at end of year $5,503,971 $7,310,199 $7,377,169 $ 66,970 79 CITY OF SOUTHLAKE, TEXAS EXHIBIT C-6 HOTEL OCCUPANCY SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2015 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Municipal sales tax $ 926,065 $ 957,588 $ 974,468 $ 16,880 Interest 500 500 6,395 5,895 Total revenues 926,565 958,088 980,863 22,775 EXPENDITURES: Parks and recreation 846,844 754,462 733,488 20,974 Excess of revenues over expenditures 79,721 203,626 247,375 43,749 OTHER FINANCING USES: Transfers to other funds (376,048) (382,038) (382,038) - Net change in fund balance (296,327) (178,412) (134,663) 43,749 Fund balance at beginning of year 1,382,671 1,382,671 1,382,671 - Fund balance at end of year $1,086,344 $1,204,259 $1,248,008 $ 43,749 80 CITY OF SOUTHLAKE, TEXAS EXHIBIT C-7 STORM WATER UTILITY SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2015 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Interest $ - $ 5,000 $1,387,359 $ 1,382,359 Licenses, permits and fees - 1,388,300 4,432 (1,383,868) Total revenues - 1,393,300 1,391,791 (1,509) EXPENDITURES: Capital outlay 512,426 619,616 494,183 125,433 Excess of revenues over expenditures (512,426) 773,684 897,608 123,924 OTHER FINANCING USES: Transfers to other funds (1,483,405) (1,485,179) (1,485,179) - Net change in fund balance (1,995,831) (711,495) (587,571) 123,924 Fund balance at beginning of year 2,542,152 2,542,152 2,542,152 - Fund balance at end of year $ 546,321 $1,830,657 $1,954,581 $ 123,924 81 CITY OF SOUTHLAKE, TEXAS EXHIBIT C-8 RED LIGHT CAMERA SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2015 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET- POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Fines and forfeitures $ 1,072,838 $ 831,278 $ 512,291 $ (318,987) Interest 1,500 200 124 (76) Total revenues 1,074,338 831,478 512,415 (319,063) EXPENDITURES: Public safety 886,054 679,054 445,104 233,950 Excess of revenues over expenditures 188,284 152,424 67,311 (85,113) OTHER FINANCING USES Transfers to other funds (200,000) (200,000) (200,000) - Total other financing uses (200,000) (200,000) (200,000) - Net change in fund balance (11,716) (47,576) (132,689) (85,113) Fund balance, beginning of year 504,236 504,236 504,236 - Fund balance, end of year $ 492,520 $ 456,660 $ 371,547 $ (85,113) 82 CITY OF SOUTHLAKE, TEXAS EXHIBIT C-9 SOUTHLAKE PARKS DEVELOPMENT CORPORATION DEBT SERVICE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2015 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET- POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Interest $ 10,000 $ 6,000 $ 3,832 $ (2,168) Total revenues 10,000 6,000 3,832 (2,168) EXPENDITURES: Principal retirement 1,730,000 1,850,000 1,850,000 - Interest and fiscal charges 1,357,098 1,357,098 984,863 372,235 Total expenditures 3,087,098 3,207,098 2,834,863 372,235 Deficiency of revenues over expenditures (3,077,098) (3,201,098) (2,831,031) 370,067 OTHER FINANCING SOURCES(USES): Transfers from other funds (2,881,289) 2,884,289 2,884,289 - Total other financing sources (uses) (2,881,289) 2,884,289 2,884,289 - Net change in fund balance (5,958,387) (316,809) 53,258 370,067 Fund balance, beginning of year 1,672,297 1,672,297 1,672,297 - Fund balance,end of year $ (4,286,090) $1,355,488 $ 1,725,555 $ 370,067 83 AGENCYFUNDS The Agency Funds are used to account for resources held for others in a custodial capacity. The City maintains the following Agency Fund: Cash Escrow Agency Fund - accounts for the receipt and subsequent disbursement of deposits paid to the City by builders/developers. 84 CITY OF SOUTHLAKE, TEXAS EXHIBIT F-1 CASH ESCROW AGENCY FUND STATEMENT OF CHANGES IN ASSETS AND LIABILITIES FOR THE YEAR ENDED SEPTEMBER 30, 2015 Balance at Balance at Beginning End of Year Additions Deletions of Year ASSETS Cash and cash equivalents $ 57,380 $ (12) $ - $ 57,368 Investments 10,687 - (23) 10,710 Accrued interest receivable 3 - 3 - TOTAL ASSETS $ 68,070 $ (12) $ (20) $ 68,078 LIABILITIES Due to builders $ 68,070 $ 8 $ - $ 68,078 TOTAL LIABILITIES $ 68,070 $ 8 $ - $ 68,078 85 CITY OF SOUTHLAKE, TEXAS EXHIBIT G-1 COMPARATIVE SCHEDULES OF CAPITAL ASSETS BY SOURCE SEPTEMBER 30, 2015 AND 2014 2015 2014 General capital assets Land and improvements $ 120,715,956 $ 107,689,400 Buildings and improvements 83,296,792 80,973,121 Equipment 26,457,569 25,163,356 Infrastructure 259,589,716 241,075,749 Construction in progress 15,492,114 21,821,618 Total capital assets $ 505,552,147 $ 476,723,244 Investment in general capital assets Capital projects funds $ 368,942,615 $ 350,478,620 General and other fund revenues 81,575,124 80,231,223 Gifts 55,034,408 46,013,401 Total investment in capital assets $ 505,552,147 $ 476,723,244 86 CITY OF SOUTHLAKE, TEXAS EXHIBIT G-2 SCHEDULE OF CHANGES IN CAPITAL ASSETS BY FUNCTION AND ACTIVITY FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2015 Capital Capital Assets Assets October 1, September 30, Function and Activity 2014 Additions Deductions 2015 General government $ 187,472,407 $ 97,178 $ (45,533) $ 187,524,052 Public safety 61,654,653 933,807 (187,445) 62,401,015 Public works 227,596,184 52,997,472 (24,966,576) 255,627,080 Total capital assets $ 476,723,244 $ 54,028,457 $ (25,199,554) $ 505,552,147 General Public Public Government Safety Works Total Land and improvements $ 2,418,798 $ 4,303,925 $ 113,993,233 $ 120,715,956 Buildings and improvements 25,818,684 48,666,203 8,811,905 83,296,792 Equipment 6,217,930 9,316,473 10,923,166 26,457,569 Infrastructure 153,068,640 114,414 106,406,662 259,589,716 Construction in Progress - - 15,492,114 15,492,114 Total $ 187,524,052 $ 62,401,015 $ 255,627,080 $ 505,552,147 87 IE STATISTICAL SECTION STATISTICAL SECTION This part of the City of Southlake's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, notes disclosures, and required supplementary information says about the City's overall financial health. This information has not been audited by the independent auditor. Contents Table #s Financial Trends 1, 2, 3&4 These tables contain trend information to help the reader understand how the City's financial performance and well-being have changed over time. Revenue Capacity 5, 6, 7& 8 These tables contain information to help the reader assess the City's two most significant local revenue sources, the property and sales taxes. Debt Capacity 9, 10, 11 & 12 These tables present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future. Economic and Demographic Information 13 & 14 These tables offer economic and demographic indicators to help the reader understand the environment within which the City's financial activities take place. Operating Information 15, 16& 17 These tables contain service and infrastructure data to help the reader understand how the information in the City's financial report relates to the services the City provides. Source: Unless otherwise noted, the information in these tables is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in fiscal year 2003: tables presenting government-wide information include information beginning in that year. IE CITY OF SOUTH LAKE, TEXAS NET POSITION BY COMPONENT LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) Fiscal Year 2006 2007 2008 2009 Governmental activities Net investment in capital assets $ 190,896,842 $ 209,824,992 $ 222,046,528 $ 246,238,808 Restricted 4,050,884 6,076,676 6,499,447 7,850,231 Unrestricted 52,221,446 59,208,874 75,986,531 69,949,380 Total governmental activities net position $ 247,169,172 $ 275,110,542 $ 304,532,506 $ 324,038,419 Business-type activities Net investment in capital assets $ 42,821,538 $ 50,177,976 $ 47,834,458 $ 60,541,445 Restricted - - - - Unrestricted 23,951,465 23,777,277 29,794,140 21,171,185 Total business-type activities net position $ 66,773,003 $ 73,955,253 $ 77,628,598 $ 81,712,630 Primary government Net investment in capital assets $ 233,718,380 $ 260,002,968 $ 269,880,986 $ 306,780,253 Restricted 4,050,884 6,076,676 6,499,447 7,850,231 Unrestricted 76,172,911 82,986,151 105,780,671 91,120,565 Total primary governmental net position $ 313,942,175 $ 349,065,795 $ 382,161,104 $ 405,751,049 Source: Comprehensive Annual Financial Report 88 TABLE 1 Fiscal Year 2010 2011 2012 2013 2014 2015 $ 277,985,305 $ 298,418,769 $ 291,690,099 $ 324,928,883 $ 338,303,633 $ 366,796,228 8,814,621 9,739,189 67,444,322 15,178,798 15,092,604 13,624,164 58,438,700 53,157,494 16,726,782 50,356,758 58,732,145 59,447,800 $ 345,238,626 $ 361,315,452 $ 375,861,203 $ 390,464,439 $ 412,128,382 $ 439,868,192 $ 65,039,374 $ 68,911,163 $ 67,918,830 $ 70,968,919 $ 73,126,147 $ 78,143,445 18,831,525 17,613,924 18,908,505 17,673,963 16,085,060 13,660,807 $ 83,870,899 $ 86,525,087 $ 86,827,335 $ 88,642,882 $ 89,211,207 $ 91,804,252 $ 343,024,679 $ 367,329,932 $ 359,608,929 $ 395,897,802 $ 411,429,780 $ 444,939,673 8,814,621 9,739,189 67,444,322 15,178,798 15,092,604 13,624,164 77,270,225 70,771,418 35,635,287 68,030,721 74,817,205 73,108,607 $ 429,109,525 $ 447,840,539 $ 462,688,538 $ 479,107,321 $ 501,339,589 $ 531,672,444 89 CITY OF SOUTHLAKE, TEXAS CHANGES IN NET POSITION, LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) Fiscal Year 2006 2007 2008 2009 2010 Expenses Governmental activities: General government $ 8,465,930 $ 9,833,572 $ 4,406,913 $ 11,068,965 $ 11,814,836 Public safety 10,965,357 11,729,107 12,770,012 12,920,263 14,885,499 Public works 3,707,519 4,813,692 8,669,156 5,840,432 5,767,688 Culture and recreation 5,085,976 5,510,247 5,911,730 6,439,100 7,287,434 Interest on long-term debt 5,052,472 5,804,295 5,506,967 5,854,931 6,515,269 Total governmental activities expenses 33,277,254 37,690,913 37,264,778 42,123,691 46,270,726 Business-type activities: Water and sewer 16,168,430 14,729,469 17,689,865 18,066,346 18,948,438 Total business-type activities expenses 16,168,430 14,729,469 17,689,865 18,066,346 18,948,438 Total primary government expenses $ 49,445,684 $ 52,420,382 $ 54,954,643 $ 60,190,037 $ 65,219,164 Program Revenues Governmental activities: Charges for Services: General government $ 1,956,949 $ 1,778,215 $ 1,340,864 $ 1,949,993 $ 2,476,000 Public safety 1,873,524 2,979,947 2,843,923 2,633,437 2,706,847 Public works 411,381 223,329 199,833 68,369 240,916 Culture and recreation 813,837 1,156,965 1,269,571 1,369,725 1,387,558 Operating grants and contributions 459,688 304,246 241,144 239,364 688,803 Capital grants and contributions 3,575,240 11,425,990 5,690,613 1,833,160 5,994,206 Total governmental activities program revenues 9,090,619 17,868,692 11,585,948 8,094,048 13,494,330 Business-type activities: Charges for services: Water and sewer 20,180,636 15,414,131 18,543,025 19,321,095 18,897,356 Capital grants and contributions 3,510,000 5,589,196 3,748,161 2,212,867 2,578,400 Total business-type activities program revenues 23,690,636 21,003,327 22,291,186 21,533,962 21,475,756 Total primary government program revenues $ 32,781,255 $ 38,872,019 $ 33,877,134 $ 29,628,010 $ 34,970,086 Net(Expenses)Revenue Governmental activities $ (24,186,635) $ (19,822,221) $ (25,678,830) $ (34,029,643) $ (32,776,396) Business-type activities 7,522,206 6,273,858 4,601,321 3,467,616 2,527,318 Total primary government net expenses $ (16,664,429) $ (13,548,363) $ (21,077,509) $ (30,562,027) $ (30,249,078) General Revenues and Other Changes in Net Position Governmental activities: Taxes: Property taxes $ 21,439,614 $ 24,509,730 $ 28,950,945 $ 30,911,161 $ 32,298,360 Sales taxes 16,040,418 16,931,180 18,781,043 17,256,272 17,610,781 Franchise taxes 1,983,381 2,435,803 2,654,701 2,816,111 2,606,248 Interest on investments 2,591,520 3,598,458 3,128,226 1,703,418 414,852 Gain(Loss)on sale of capital assets 35,317 - - 167,127 21,465 Transfers - 275,595 229,436 341,957 596,093 Miscellaneous 166,789 8,688 52,023 339,510 428,804 Total governmental activities 42,257,039 47,759,454 53,796,374 53,535,556 53,976,603 Business-type activities: Interest on investments 1,024,603 1,183,987 594,891 953,739 155,173 Gain(Loss)on sale of capital assets 930,138 (3,396) - - - Transfers - (275,595) (229,436) 2,187 (596,093) Miscellaneous - - 10,989 (339,510) 71,871 Total business-type activities 1,954,741 904,996 376,444 616,416 (369,049) Total primary government $ 44,211,780 $ 48,664,450 $ 54,172,818 $ 54,151,972 $ 53,607,554 Change in Net Position Governmental activities $ 18,070,404 $ 27,937,233 $ 28,117,544 $ 19,505,913 $ 21,200,207 Business-type activities 9,476,947 7,178,854 4,977,765 4,084,032 2,158,269 Total primary government $ 27,547,351 $ 35,116,087 $ 33,095,309 $ 23,589,945 $ 23,358,476 Source: Comprehensive Annual Financial Report 90 TABLE 2 Fiscal Year 2011 2012 2013 2014 2015 $ 13,754,529 $ 13,277,006 $ 12,892,140 $ 13,417,904 $ 14,602,425 15,144,173 15,891,911 18,425,878 18,245,617 18,176,698 6,279,687 6,399,819 8,528,331 8,870,998 9,762,184 7,897,173 8,158,291 8,829,394 8,948,841 9,311,006 5,638,272 5,865,798 6,747,628 5,097,036 2,528,113 48,713,834 49,592,825 55,423,371 54,580,396 54,380,426 20,724,651 22,530,688 22,119,518 25,030,426 26,692,373 20,724,651 22,530,688 22,119,518 25,030,426 26,692,373 $ 69,438,485 $ 72,123,513 $ 77,542,889 $ 79,610,822 $ 81,072,799 $ 2,616,321 $ 2,575,773 $ 2,755,038 $ 2,657,883 $ 2,309,861 2,818,913 3,744,708 3,650,079 3,907,068 4,427,137 71,129 179,094 291,926 360,529 265,432 1,384,823 1,400,794 1,422,552 1,379,658 1,399,822 532,100 200,434 639,230 443,157 455,575 2,309,613 518,617 2,244,965 4,436,346 8,967,466 9,732,899 8,619,420 11,003,790 13,184,641 17,825,293 22,571,056 22,451,738 22,806,432 23,591,438 24,792,619 1,433,278 1,214,395 1,981,354 3,510,936 5,776,438 24,004,334 23,666,133 24,787,786 27,102,374 30,569,057 $ 33,737,233 $ 32,285,553 $ 35,791,576 $ 40,287,015 $ 48,394,350 $ (38,980,935) $ (40,973,405) $ (44,419,581) $ (41,395,755) $ (36,555,133) 3,279,683 1,135,445 2,668,268 2,071,948 3,876,684 $ (35,701,252) $ (39,837,960) $ (41,751,313) $ (39,323,807) $ (32,678,449) $ 31,568,583 $ 31,166,847 $ 31,844,930 $ 33,099,007 $ 33,176,285 18,969,870 20,076,478 22,659,917 26,623,661 30,090,614 2,783,279 2,598,074 2,646,394 2,841,025 3,327,739 258,556 232,722 30,110 482,607 523,954 26,741 91,134 89,923 99,109 102,900 791,830 890,220 915,475 915,116 968,160 658,902 463,681 836,068 639,571 1,066,818 55,057,761 55,519,156 59,022,817 64,700,096 69,256,470 123,872 46,212 25,227 101,469 112,967 - 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