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Item 4CM E M O R A N D U M March 13, 2017 To: Shana Yelverton, City Manager From: Sharen Jackson, Chief Financial Officer Subject: Approve the 2016 Comprehensive Annual Financial Report Action Requested: Approval of September 30, 2016 Comprehensive Annual Financial Report. Background Information: The purpose of this item is to seek approval of the 201 6 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 2016.  City received an unmodified (“clean”) opinion on the City’s financial statements for the year ended September 30, 2016.  John DeBurro, 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: 2016 CAFR Staff Recommendation: Approval of 2016 Comprehensive Annual Financial Report Comprehensive Annual Financial Report For the Fiscal Year Ended September 30, 2016 CITY OF SOUTHLAKE, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2016 As Prepared By Sharen Jackson, CPA Chief Financial Officer 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, 2016 TABLE OF CONTENTS Exhibit Page C.REQUIRED SUPPLEMENTARY INFORMATION Budgetary Comparison Schedule - General Fund A-1 62 Budgetary Comparison Schedule - Tax Increment Financing District Special Revenue Fund A-2 63 Notes to Budgetary Comparison Schedules 64 Schedule of Changes in Net Pension Liability and Related Ratios - TMRS A-3 65 Schedule of Contributions - TMRS A-4 66 Notes to Texas Municipal Retirement System Required Supplementary Information 67 Condition Rating of Street System A-5 68 D.COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES Major Governmental Funds Budgetary Comparison Schedule - General Obligation Debt Service Fund B-1 70 Nonmajor Governmental Funds Combining Balance Sheet - Nonmajor Governmental Funds C-1 73 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance - Nonmajor Governmental Funds C-2 76 Budgetary Comparison Schedule - Parks Dedication Special Revenue Fund C-3 79 Budgetary Comparison Schedule - Southlake Parks Development Corporation Special Revenue Fund C-4 80 Budgetary Comparison Schedule - Crime Control District Special Revenue Fund C-5 81 Budgetary Comparison Schedule - Hotel Occupancy Special Revenue Fund C-6 82 Budgetary Comparison Schedule - Storm Water Utility Special Revenue Fund C-7 83 Budgetary Comparison Schedule - Red Light Camera Special Revenue Fund C-8 84 Budgetary Comparison Schedule - Southlake Community Enhancement Development Corporation Special Revenue Fund C-9 85 Budgetary Comparison Schedule - Southlake Parks Development Corporation Debt Service Fund C-10 86 Agency Funds Statement of Changes in Assets and Liabilities - Cash Escrow Agency Fund F-1 88 Schedules of Capital Assets Used in the Operation of Governmental Funds Comparative Schedules of Capital Assets by Source G-1 89 Schedule of Changes in Capital Assets by Function and Activity G-2 90 CITY OF SOUTHLAKE, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2016 TABLE OF CONTENTS Exhibit Page III.STATISTICAL SECTION Table Net Position By Component 1 91 Changes in Net Position 2 93 Fund Balances, Governmental Funds 3 95 Changes in Fund Balances, Governmental Funds 4 96 Assessed Value and Estimated Actual Value of Taxable Property 5 97 Direct and Overlapping Property Tax Rates 6 98 Principal Property Tax Payers 7 99 Ad Valorem Tax Levies and Collections 8 100 Ratio of Outstanding Debt By Type 9 101 Ratio of General Bonded Debt Outstanding 10 103 Direct and Overlapping Governmental Activities Debt 11 104 Pledged-Revenue Coverage 12 105 Demographic and Economic Statistics 13 106 Principal Employers 14 107 Full-Time Equivalent City Government Employees By Function/Program 15 108 Operating Indicators By Function/Program 16 109 Capital Asset Statistics By Function/Program 17 110 CITY OF SOUTHLAKE, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2016 TABLE OF CONTENTS INTRODUCTORY SECTION 1400 Main Street, Suite 440, Southlake, TX 76092 (817) 748-8345 Innovation ◊ Integrity ◊ Accountability ◊ Commitment to Excellence ◊ Teamwork i Finance Department March 14, 2017 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, 2016. 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. ii 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 now 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. • The financial section provides a detailed presentation of the financial position and results of operations for the fiscal year ended September 30, 2016. 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 iii 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”), Southlake Community Enhancement and Development Corporation (CEDC) 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 half-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 half-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. In May 2015, Southlake voters overwhelmingly approved the reallocation of a portion of the District half-cent sales tax for the purpose of constructing and operating a recreation center through CEDC. The District’s half-cent sales tax was reduced to a one-eighth cent tax, and the remaining three-eighths was reallocated to address recreational and economic development needs for the City, as permitted by State law, through CEDC. 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. 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 iv 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. 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. v 0 50 100 150 200 250 300 2012 2013 2014 2015 2016 Single Family Residential Home Permits 9,000 9,200 9,400 9,600 9,800 10,000 10,200 10,400 10,600 2012 2013 2014 2015 2016 Number of Water Customers - 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 35,000,000 2012 2013 2014 2015 2016 Sales Tax Revenue General SPDC Crime CEDC There were 223 single family residential permits issued in Fiscal Year 2016 with an average new home construction value, excluding land value, of nearly $700,000. As noted on the chart the city experienced a slight reduction in residential home construction. Water customers increased from 10,189 in Fiscal Year 2015 to 10,426 in 2016, while wastewater customers increased from 8,166 to 8,367 during the same year. The chart shows the five-year trend of increasing water customers, the result of the building 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. The City of Southlake experienced a reduction in sales tax collections due to a large one time sales tax payment received during the previous fiscal year. Sales tax collections totaled $27,650,799 in fiscal year 2016. Future Development During 2016, approximately 30 new construction commercial permits were issued by the city representing over 1,763,654 square feet of future retail/office. • In April 2016, City Council approved a Site Plan for a TD Ameritrade regional campus consisting of approximately 355,000 square foot three-story office building and five-level parking garage with 2,014 spaces on approximately 78.617 vi acres. The project will be addressed off of Kirkwood Blvd, near SH 114. The TD Ameritrade project is currently under construction. • In June 2015, City Council approved a Site Plan for Granite Place, six-story o ffice building and four-story parking garage structure. The floor area of the office building is approximately 154,000 square feet, and there will be 485 spaces in the parking garage. The phase 1 of the project was completed in December 2016. 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 2016, 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. 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. vii The City of Southlake received a Certificate of Achievement for the year ended September 30, 2015, 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, 2015. 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. 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 viii ix x LIST OF PRINCIPAL OFFICIALS Laura K. Hill Mayor Randy Williamson Mayor Pro Tem Shawn McCaskill Deputy Mayor Pro Tem Shahid Shafi Council Member Chad Patton 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 Alison Ortowski 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 FINANCIAL SECTION AN INDEPENDENT MEMBER OF BAKER TILLY INTERNATIONAL WEAVER AND TIDWELL, L.L.P. CERTIFIED PUBLIC ACCOUNTANTS AND ADVISORS 12221 MERIT DRIVE, SUITE 1400, DALLAS, TX 75251 P: 972.490.1970 F: 972.702.8321 1 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, 2016, 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. City of Southlake Page 2 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, 2016, 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. 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 62 through 64), TMRS pension schedules (pages 65 through 67) and condition rating of street system (page 68) 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. City of Southlake Page 3 3 The combining and individual fund financial 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 14, 2017, 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. WEAVER AND TIDWELL, L.L.P. Dallas, Texas March 14, 2017 MANAGEMENT’S DISCUSSION AND ANALYSIS 4 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, 2016 by $555,103,205 (net position). Of this amount, $100,296,992 (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 $23,430,761. This increase can be attributed to increases in sales tax revenue, and charges for services, and a reduction in capital expenditures. At September 30, 2016, the City’s governmental funds reported combined ending fund balances of $131,038,582. Approximately 15.1 percent of this amount, $19,762,633, 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 $19,762,633 or 54.9 percent of total General Fund expenditures. At the end of the current fiscal year, the City of Southlake outstanding debt totals $174,041,115, a net increase of $12,192,858 from the previous year. 5 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. 6 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 financial 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 24 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, Tax Increment Financing District Fund, and Community Enhancement and Development Corporation Capital Projects 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. 7 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 28-61 of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS Total assets of the City at September 30, 2016 were $731,581,276 while total liabilities were $186,043,073, along with deferred outflows ($10,657,667) and inflows ($1,092,665) of resources resulting in a net position balance of $555,103,205. The largest portion of the City’s net position, $443,216,863, 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 $16,874,962. This increase is primarily attributable to increases in both sales tax and charges for services, and a reduction in capital expenditures. Business-type Activities net position increased by $6,555,799. The majority of this change can be attributed to an increase in transfers from governmental activities. 8 The following analysis highlights the net position as of September 30, 2016: Governmental Business-Type 2016 Activities Activities Total Current and other assets:146,337,188$ 35,786,217$ 182,123,405$ Capital assets 442,308,406 107,149,465 549,457,871 Total assets 588,645,594 142,935,682 731,581,276 Deferred outflows of resources 9,410,017 1,247,650 10,657,667 Other liabilities 10,082,724 1,919,234 12,001,958 Long-term debt outstanding 130,229,051 43,812,064 174,041,115 Total liabilities 140,311,775 45,731,298 186,043,073 Deferred inflows of resources 1,000,682 91,983 1,092,665 Net position: Net investment in capital assets 364,161,725 79,055,138 443,216,863 Restricted-debt service 6,899,109 - 6,899,109 Restricted-other 4,690,241 - 4,690,241 Unrestricted 80,992,079 19,304,913 100,296,992 Total net position 456,743,154$ 98,360,051$ 555,103,205$ 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 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-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$ 9 The following analysis highlights the changes in net position for the year ended September 30, 2016: Governmental Business-Type 2016 Activities Activities Total Revenues: Program revenues: Charges for services 8,744,247$ 25,474,777$ 34,219,024$ Operating grants and contributions 310,636 - 310,636 Capital grants and contributions 2,228,863 1,638,842 3,867,705 General revenues: Taxes 66,504,007 - 66,504,007 Interest on investments 379,342 94,837 474,179 Gain on sale of capital assets 102,960 317,276 420,236 Miscellaneous 136,477 4,095 140,572 Total revenues 78,406,532 27,529,827 105,936,359 Expenses: General government 12,851,787 - 12,851,787 Public safety 19,300,590 - 19,300,590 Public works 11,950,671 - 11,950,671 Culture and recreation 10,655,763 - 10,655,763 Interest on long-term debt 3,005,359 - 3,005,359 Water and sewer - 24,741,428 24,741,428 Total expenses 57,764,170 24,741,428 82,505,598 Increase in net position before transfers 20,642,362 2,788,399 23,430,761 Transfers (3,767,400)3,767,400 - Increase in net position 16,874,962 6,555,799 23,430,761 Net position-beginning of year 439,868,192 91,804,252 531,672,444 Net position-End of Year 456,743,154$ 98,360,051$ 555,103,205$ 10 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 previous 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$ 11 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 $131,038,582. Approximately 15.1 percent or $19,762,633 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 ($9,005,985), recycling ($46,657), police expenditures ($5,027,416), parks ($15,530,430), capital projects ($72,654,652), reinvestment zone expenditures ($3,851,783), municipal court expenditures ($838,458), oil and gas expenditures ($53,227), storm water expenditures ($451,873), strategic initiative expenditures ($3,704,477) and other ($110,991). 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 $19,762,633. 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 54.9 percent of total General Fund expenditures, while total fund balance represents 65.7 percent of total General Fund expenditures. The fund balance of the General fund decreased $2,480,380 during the current fiscal year. The key factor in the decrease is attributable to the increase in transfers out to other funds. The General Obligation Debt Service Fund has a fund balance of $7,247,321, all of which is restricted for the payment of debt service. The fund balance decreased during the year by $2,084,320, primarily due to the increased debt service payments. The fund balance in the General Capital Projects Funds ended the year at $38,217,078, an increase of $2,497,942, due to the transfers from other funds and the decrease in construction expenditures. The Southlake Parks Development Corporation Capital Projects fund balance increased $1,476,881, primarily due to transfers in from other funds. The Community Enhancement and Development Corporation Capital Projects fund balance increased $25,973,047, primarily the result of the issuance of sales tax revenue bonds. 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: $19,304,913 in the Water and Sewer Fund and $4,774,784 in the Vehicle Replacement Fund. Total net position in the Water and Sewer Fund increased by $6,555,799 while the Vehicle Replacement Fund net position increased by $484,671. The increase in transfers from other funds is the primary reason for the respective changes in net position. 12 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 $1,282,355 or 3.1% 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, 2016 amount to $549,457,871 (net of accumulated depreciation). This investment in capital assets includes land, buildings, improvements, machinery and equipment, infrastructure and construction in progress. The City has elected to use the modified approach for its street system in lieu of the depreciation method. An up-to-date inventory of these infrastructure assets was performed and the annual costs to maintain and preserve these assets was established and disclosed through administrative policy. The current condition level of the street system meets the target condition level established by the City. There were no significant changes in the condition levels of infrastructure assets, and the differences between the estimated amounts necessary to maintain and preserve the street system at target condition levels and the actual amount of expense incurred for that purpose for 2016 was not material. Major capital projects completed during the current year included the following: • The Marq Southlake • Love Henry Court drainage • Rucker Road at South Carroll intersection improvements • State Street from Federal to Division • Pavement Management System – various overlays and rehab • Various Sidewalks Governmental Business-Type 2016 Activities Activities Total Land and improvements 109,984,621$ 18,859,842$ 128,844,463$ Buildings and improvements 80,171,073 319,869 80,490,942 Improvements - 84,231,380 84,231,380 Infrastructure 238,401,530 - 238,401,530 Machinery and equipment 7,952,253 966,489 8,918,742 Construction in Progress 5,798,929 2,771,885 8,570,814 Total 442,308,406$ 107,149,465$ 549,457,871$ 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$ 13 Additional information on the City’s capital assets can be found in Note 4 on pages 46-47 of this report. Long-term Debt- At the end of the current fiscal year, the City of Southlake had $118,575,187 total long-term debt outstanding of bonds issued to finance capital improvements for roadway, parks and recreation, public building and infrastructure. $42,502,434 of Utility System bonds, which financed projects to increase capacity of the Utility system, was also outstanding. An additional $1,248,404 was reported for compensated absences at year-end. Governmental Business-Type 2016 Activities Activities Total Bonds payable 118,575,187$ 42,502,434$ 161,077,621$ Unearned revenue - 235,651 235,651 Net pension liability 10,503,321 976,118 11,479,439 Compensated absences 1,150,543 97,861 1,248,404 Total 130,229,051$ 43,812,064$ 174,041,115$ 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$ 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 0.92% in 2016, 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. 14 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 48-52 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 and sales taxes and fees to fund their government activities. While property taxes are important to the City, they represent 44.6% of total governmental revenue. Sales tax continues to grow as the second largest governmental resource representing 37.6% of total governmental revenue. The City monitors all of its resources and determines the need for program adjustment or fee increases accordingly. 15 The FY 2017 Adopted Budget maintains the City’s property tax rate at $0.462 per $100 net taxable valuation, which is unchanged from the FY 2016 rate. The City’s property tax roll on net taxable value increased $583,578,128 or 10.0 percent from the 2015 certified roll to the 2016 certified roll, the largest portion of the increase is attributable to new construction value of $415,426,992. As an element of the City’s tax relief initiative the homestead exemption was increased from 12% to 16%. The estimate of the FY 2017 tax roll is based on the certified roll as provided by the Tarrant Appraisal District (TAD) in July. The assumed collection rate is 100 percent. Requests for Information This financial report is designed to provide a general overview of the City of Southlake’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Office of the Chief Financial Officer, 1400 Main Street, 4th Floor Finance Department, Southlake, Texas 76092. BASIC FINANCIAL STATEMENTS GOVERNMENT-WIDE FINANCIAL STATEMENTS CITY OF SOUTHLAKE, TEXAS EXHIBIT 1 STATEMENT OF NET POSITION SEPTEMBER 30, 2016 The Notes to Financial Statements are an integral part of this statement. 16 GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES TOTAL ASSETS Cash and cash equivalents 104,728,254$ 6,117,814$ 110,846,068$ Investments 27,470,418 565,891 28,036,309 Receivables (net of allowance for uncollectibles)6,429,766 4,444,385 10,874,151 Prepaid items 5,055 - 5,055 Inventories 26,222 - 26,222 Restricted assets Cash and cash equivalents 5,489,733 16,244,658 21,734,391 Investments 1,756,325 8,413,469 10,169,794 Receivables 42,326 - 42,326 OPEB asset 389,089 - 389,089 Capital assets: Non-depreciable 296,281,706 21,631,727 317,913,433 Depreciable (net of depreciation)146,026,700 85,517,738 231,544,438 TOTAL ASSETS 588,645,594 142,935,682 731,581,276 Deferred charge for refunding 3,231,020 670,782 3,901,802 Deferred outflows - TMRS pension 6,178,997 576,868 6,755,865 TOTAL DEFERRED OUTFLOWS OF RESOURCES 9,410,017 1,247,650 10,657,667 Accounts payable 7,464,605 1,153,218 8,617,823 Accrued liabilities 1,446,919 251,455 1,698,374 Accrued interest payable - 189,664 189,664 Unearned revenue 781,981 - 781,981 Liabilities payable from restricted assets Accrued interest 389,219 - 389,219 Customer meter deposits - 324,897 324,897 Non-current liabilities: Due within one year 13,386,184 5,569,675 18,955,859 Due in more than one year 116,842,867 38,242,389 155,085,256 TOTAL LIABILITIES 140,311,775 45,731,298 186,043,073 Deferred inflows - TMRS pension 1,000,682 91,983 1,092,665 TOTAL DEFERRED INFLOWS OF RESOURCES 1,000,682 91,983 1,092,665 NET POSITION Net investment in capital assets 364,161,725 79,055,138 443,216,863 Restricted for debt service 6,899,109 - 6,899,109 Restricted for municipal court 838,458 - 838,458 Restricted for reinvestment zone 3,851,783 - 3,851,783 Unrestricted 80,992,079 19,304,913 100,296,992 TOTAL NET POSITION 456,743,154$ 98,360,051$ 555,103,205$ PRIMARY GOVERNMENT LIABILITIES DEFERRED OUTFLOWS OF RESOURCES DEFERRED INFLOWS OF RESOURCES CITY OF SOUTHLAKE, TEXAS EXHIBIT 2 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2016 The Notes to Financial Statements are an integral part of this statement. 17 Charges for Operating Grants Capital Grants Governmental Business - Type Expenses Services and Contributions and Contributions Activities Activities TOTAL Functions/Program Activities PRIMARY GOVERNMENT: Governmental Activities: General government 12,851,787$ 2,363,499$ 82,326$ -$ (10,405,962)$ -$ (10,405,962)$ Public safety 19,300,590 4,620,030 33,458 - (14,647,102) - (14,647,102) Public works 11,950,671 223,533 - 2,228,863 (9,498,275) - (9,498,275) Culture and recreation 10,655,763 1,537,185 194,852 - (8,923,726) - (8,923,726) Interest on long-term debt 3,005,359 - - - (3,005,359) - (3,005,359) Total governmental activities 57,764,170 8,744,247 310,636 2,228,863 (46,480,424) - (46,480,424) Business-type Activities: Water and sewer 24,741,428 25,474,777 - 1,638,842 - 2,372,191 2,372,191 Total business-type activities 24,741,428 25,474,777 - 1,638,842 - 2,372,191 2,372,191 TOTAL PRIMARY GOVERNMENT 82,505,598$ 34,219,024$ 310,636$ 3,867,705$ (46,480,424)$ 2,372,191$ (44,108,233)$ General revenues and transfers: Taxes: Property taxes, levied for general purposes 34,501,608$ -$ 34,501,608$ Sales taxes 29,047,285 - 29,047,285 Franchise taxes 2,955,114 - 2,955,114 Interest on investments 379,342 94,837 474,179 Gain on sale of capital assets 102,960 317,276 420,236 Miscellaneous 136,477 4,095 140,572 Transfers (3,767,400) 3,767,400 - Total general revenues and transfers 63,355,386 4,183,608 67,538,994 CHANGE IN NET POSITION 16,874,962 6,555,799 23,430,761 NET POSITION, beginning of year 439,868,192 91,804,252 531,672,444 NET POSITION, end of year 456,743,154$ 98,360,051$ 555,103,205$ Changes in Net Position Net (Expense) Revenue and Primary Government Program Revenues FUND FINANCIAL STATEMENTS GOVERNMENTAL FUNDS FINANCIAL STATEMENTS CITY OF SOUTHLAKE, TEXAS BALANCE SHEET GOVERNMENTAL FUNDS SEPTEMBER 30, 2016 The Notes to Financial Statements are an integral part of this statement. 18 GENERAL OBLIGATION GENERAL DEBT CAPITAL GENERAL SERVICE PROJECTS ASSETS Cash and cash equivalents 11,498,529$ 5,489,733$ 32,224,243$ Investments 13,000,602 1,756,325 6,487,076 Receivables, net of allowances for uncollectibles: Ad valorem taxes 148,445 41,006 - Franchise taxes 455,979 - - Sales taxes 2,566,366 - - Interest 45,433 1,320 14,024 Other 176,376 - 3,000 Due from other funds 3,317 - - Inventories 26,222 - - Prepaid items 5,055 - - TOTAL ASSETS 27,926,324$ 7,288,384$ 38,728,343$ LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES LIABILITIES Accounts payable 2,038,053$ 56$ 511,265$ Accrued liabilities 1,171,214 - - Due to other funds - - - Unearned revenue 658,598 - - TOTAL LIABILITIES 3,867,865 56 511,265 DEFERRED INFLOWS OF RESOURCES Unavailable resources 400,221 41,007 - TOTAL DEFERRED INFLOWS OF RESOURCES 400,221 41,007 - FUND BALANCES Nonspendable for: Inventories 26,222 - - Prepaid expenditures 5,055 - - Restricted for: Debt service - 7,247,321 - Municipal court expenditures - - - Reinvestment zone expenditures - - - Capital projects - - 38,217,078 Committed for: Police expenditures 40,612 - - Parks and recreation - - - Oil and gas expenditures - - - Storm water expenditures - - - Library - - - Assigned for: Teen Court expenditures 19,479 - - Senior Center expenditures 10,637 - - Recycling 46,657 - - Reforestation expenditures 42,466 - - Strategic initiatives 3,704,477 - - Unassigned 19,762,633 - - TOTAL FUND BALANCES 23,658,238 7,247,321 38,217,078 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES 27,926,324$ 7,288,384$ 38,728,343$ EXHIBIT 3 19 SOUTHLAKE COMMUNITY PARKS ENHANCEMENT DEVELOPMENT TAX DEVELOPMENT CORPORATION INCREMENT CORPORATION NON-MAJOR TOTAL CAPITAL FINANCING CAPITAL GOVERNMENTAL GOVERNMENTAL PROJECTS DISTRICT PROJECTS FUNDS FUNDS 1,941,489$ 8,169,131$ 26,028,920$ 21,020,842$ 106,372,887$ 1,502,245 306,563 - 5,346,201 28,399,012 - - - - 189,451 - - - - 455,979 - - - 2,564,954 5,131,320 5,740 11 - 11,364 77,892 - - - 336,106 515,482 - - - - 3,317 - - - - 26,222 - - - - 5,055 3,449,474$ 8,475,705$ 26,028,920$ 29,279,467$ 141,176,617$ 24,588$ 4,623,922$ 55,873$ 210,833$ 7,464,590$ - - - 275,705 1,446,919 - - - 3,317 3,317 - - - 123,383 781,981 24,588 4,623,922 55,873 613,238 9,696,807 - - - - 441,228 - - - - 441,228 - - - - 26,222 - - - - 5,055 - - - 1,758,664 9,005,985 - - - 838,458 838,458 - 3,851,783 - - 3,851,783 3,424,886 - 25,973,047 5,039,641 72,654,652 - - - 4,986,804 5,027,416 - - - 15,530,430 15,530,430 - - - 53,227 53,227 - - - 451,873 451,873 - - - 7,132 7,132 - - - - 19,479 - - - - 10,637 - - - - 46,657 - - - - 42,466 - - - - 3,704,477 - - - - 19,762,633 3,424,886 3,851,783 25,973,047 28,666,229 131,038,582 3,449,474$ 8,475,705$ 26,028,920$ 29,279,467$ 141,176,617$ CITY OF SOUTHLAKE, TEXAS EXHIBIT 4 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION AS OF SEPTEMBER 30, 2016 The Notes to Financial Statements are an integral part of this statement. 20 Total fund balances - governmental funds 131,038,582$ 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 $1,705,444 in assets allocated to governmental activities from the internal service fund).440,602,962 Interest payable on long-term debt does not require current financial resources; therefore, interest payable is not reported as a liability in the governmental funds balance sheet.(389,219) Internal service funds are used by management to charge the cost of certain activities, such as fleet management, to individual funds. This amount represents the assets less the liabilities of the internal service fund allocated to governmental activities.6,480,228 OPEB asset has not been included in the governmental fund financial statements, as these assets do not represent current financial resources.389,089 Revenues earned but not available within sixty days of the year end are not recognized as revenue on the fund financial statements.441,228 For debt refundings, the difference between the acquisition price and net carrying amount of the debt has been deferred and amortized in the government-wide financial statements.3,231,020 Net deferred outflows of resources related to the City's net pension liability results in an increase in net position in the government-wide financial statements.5,178,315 Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the fund financial statements.(130,229,051) Net position of governmental activities 456,743,154$ CITY OF SOUTHLAKE, TEXAS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2016 The Notes to Financial Statements are an integral part of this statement. 21 GENERAL OBLIGATION GENERAL DEBT CAPITAL GENERAL SERVICE PROJECTS REVENUES Ad valorem taxes, penalties and interest 20,920,809$ 5,880,218$ -$ Franchise taxes 2,955,114 - - Municipal sales and mixed beverage taxes 13,480,025 - - Licenses, permits and fees 2,855,311 - - Charges for services 1,797,676 - - Fines and forfeitures 1,394,122 - - Grants 128,489 - - Capital recovery fees - - 1,237,552 Interest earned 141,303 39,865 95,521 Contributions - - 20,346 Miscellaneous 361,340 - - TOTAL REVENUES 44,034,189 5,920,083 1,353,419 EXPENDITURES Current General government City secretary/mayor 451,240 - - City manager's office 884,859 - - Human resources 648,285 - - Support services 3,018,522 - - Economic development 214,653 - - Finance 1,222,762 - - Municipal court 650,488 - - Teen court 110,944 - - Information technology 2,037,498 - - Public safety Police services 5,930,872 - - Fire services 7,761,424 - - Public safety support 1,244,840 - - Building inspection 1,059,896 - - Public works Public works administration 2,293,902 - - Streets and drainage 1,747,893 - 218,299 Planning 943,461 - - Cultural and recreation Community services 1,294,144 - - Parks and recreation 3,842,370 - - Library services 660,404 - - Intergovernmental - - - Capital outlay - - 6,587,178 Debt service: Principal retirement - 11,479,604 - Interest and fiscal charges - 2,490,002 - TOTAL EXPENDITURES 36,018,457 13,969,606 6,805,477 Excess (deficiency) of revenues over (under) expenditures 8,015,732 (8,049,523)(5,452,058) OTHER FINANCING SOURCES (USES) Issuance of long-term debt - - - Premium on issuance of long-term debt - - - Transfers from other funds 2,243,888 5,965,203 7,950,000 Transfers to other funds (12,740,000) - - TOTAL OTHER FINANCING SOURCES (USES)(10,496,112)5,965,203 7,950,000 NET CHANGE IN FUND BALANCES (2,480,380)(2,084,320)2,497,942 FUND BALANCES, BEGINNING OF YEAR 26,138,618 9,331,641 35,719,136 FUND BALANCES, END OF YEAR 23,658,238$ 7,247,321$ 38,217,078$ EXHIBIT 5 22 SOUTHLAKE COMMUNITY PARKS ENHANCEMENT DEVELOPMENT TAX DEVELOPMENT CORPORATION INCREMENT CORPORATION NON-MAJOR TOTAL CAPITAL FINANCING CAPITAL GOVERNMENTAL GOVERNMENTAL PROJECTS DISTRICT PROJECTS FUNDS FUNDS -$ 7,644,875$ -$ -$ 34,445,902$ - - - - 2,955,114 - - - 15,567,260 29,047,285 - - - 1,735,166 4,590,477 - - - - 1,797,676 - - - 617,015 2,011,137 - - - - 128,489 - - - - 1,237,552 17,486 1,397 - 88,160 383,732 - - - 51,065 71,411 - - - 166,753 528,093 17,486 7,646,272 - 18,225,419 77,196,868 - - - - 451,240 - - - - 884,859 - - - - 648,285 - - - - 3,018,522 - - - - 214,653 - - - - 1,222,762 - - - - 650,488 - - - - 110,944 - - - 62,499 2,099,997 - - - 1,379,278 7,310,150 - - - - 7,761,424 - - - - 1,244,840 - - - - 1,059,896 - - - - 2,293,902 - - 279,576 - 2,245,768 - - - - 943,461 - - - - 1,294,144 - - - 2,647,029 6,489,399 - - - 12,579 672,983 - 4,623,919 - - 4,623,919 1,540,605 - - 530,284 8,658,067 - - - 1,915,000 13,394,604 - - 365,530 941,208 3,796,740 1,540,605 4,623,919 645,106 7,487,877 71,091,047 (1,523,119)3,022,353 (645,106)10,737,542 6,105,821 - - 24,450,000 - 24,450,000 - - 2,168,153 - 2,168,153 3,000,000 - - 4,425,514 23,584,605 - (3,180,765) - (12,431,240) (28,352,005) 3,000,000 (3,180,765)26,618,153 (8,005,726)21,850,753 1,476,881 (158,412)25,973,047 2,731,816 27,956,574 1,948,005 4,010,195 - 25,934,413 103,082,008 3,424,886$ 3,851,783$ 25,973,047$ 28,666,229$ 131,038,582$ 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, 2016 The Notes to Financial Statements are an integral part of this statement. 23 Net change in fund balances - total governmental funds 27,956,574$ 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 $418,901 allocated from internal service fund).7,398,513 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 $598,580 allocated from internal service fund).(6,949,958) 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 Bond proceeds (24,450,000) o Bond premiums (2,168,153) o Repayments 13,394,604 o Amortization of premiums 900,953 o Amortization of deferred loss on refunding (372,311) (12,694,907) 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 ($3,002,923) and contributions made after the measurement date $2,301,054.(701,869) Current year changes in the long-term liability for compensated absences do not require the use of current financial resources; and therefore, are not reported as expenditures in governmental funds.(47,504) Changes in the other post employment benefit assets and liabilities are not reported at the fund level; however they are reported at the government-wide level.24,365 Current year changes in accrued interest payable do not require the use of current financial resources; and therefore, are not reported as expenditures in governmental funds.262,860 Internal service funds are used by management to charge the costs of certain activities, such as fleet management, to individual funds. The net income of the internal service fund is allocated entirely to governmental activities.484,671 Governmental funds do not recognize assets contributed by developers. However, in the statement of activities the fair market value of those assets are recognized as revenue, then allocated over their estimated useful lives and reported as depreciation expense.1,045,965 Loss on disposal of capital assets results in a decrease in net position, but the net effect is not reported in governmental funds. (31,321) Certain revenues in the government-wide statement of activities that do not provide current financial resources are not reported as revenue in the governmental funds.127,573 Change in net position of governmental activities 16,874,962$ PROPRIETARY FUNDS FINANCIAL STATEMENTS CITY OF SOUTHLAKE, TEXAS EXHIBIT 7 STATEMENT OF NET POSITION PROPRIETARY FUNDS SEPTEMBER 30, 2016 The Notes to Financial Statements are an integral part of this statement. 24 BUSINESS-TYPE GOVERNMENTAL ACTIVITIES ACTIVITIES WATER AND SEWER VEHICLE REPLACEMENT ENTERPRISE INTERNAL SERVICE FUND FUND ASSETS CURRENT ASSETS Cash and cash equivalents 6,117,814$ 3,845,100$ Investments 565,891 827,731 Receivables, net of allowance for uncollectibles: Trade accounts 2,585,782 - Unbilled trade accounts 1,850,698 - Interest 7,905 101,968 Restricted assets Cash restricted for capital 16,244,658 - Investments restricted for customer meter deposits 324,897 - Investments restricted for capital 8,088,572 - Total current assets 35,786,217 4,774,799 NON-CURRENT ASSETS Capital assets Land and improvements 18,859,842 - Buildings and improvements 935,501 - Distribution system 134,983,585 - Equipment 2,605,362 - Vehicles 542,123 5,017,635 Capacity rights 9,190,988 - Construction in progress 2,771,885 - Total capital assets 169,889,286 5,017,635 Less: accumulated depreciation (62,739,821) (3,312,191) Capital assets, net of accumulated depreciation 107,149,465 1,705,444 Total non-current assets 107,149,465 1,705,444 TOTAL ASSETS 142,935,682$ 6,480,243$ DEFERRED OUTFLOW OF RESOURCES Deferred charge for refunding 670,782$ -$ Deferred inflows - TMRS pension 576,868 - Total deferred outflows of resources 1,247,650 - LIABILITIES AND NET POSITION CURRENT LIABILITIES Accounts payable 1,153,218 15 Accrued liabilities 251,455 - Accrued interest 189,664 - Current portion of general obligation debt 5,081,814 - Current portion of contract obligation debt 385,000 - Current portion of compensated absences 97,861 - Current portion of unearned revenue 5,000 - Payable from restricted assets: Customer meter deposits 324,897 - Total current liabilities 7,488,909 15 NON-CURRENT LIABILITIES Unearned revenue 230,651 - General obligation debt 37,035,620 - Net pension liability 976,118 - Total non-current liabilities 38,242,389 - TOTAL LIABILITIES 45,731,298 15 DEFERRED INFLOW OF RESOURCES Deferred inflows - TMRS pension 91,983 - Total deferred inflows of resources 91,983 - NET POSITION Net investment in capital assets 79,055,138 1,705,444 Unrestricted 19,304,913 4,774,784 TOTAL NET POSITION 98,360,051$ 6,480,228$ CITY OF SOUTHLAKE, TEXAS EXHIBIT 8 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2016 The Notes to Financial Statements are an integral part of this statement. 25 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 25,362,725$ -$ Service charges 112,052 - Miscellaneous 4,095 - Total operating revenues 25,478,872 - OPERATING EXPENSES: Personnel services 2,686,732 - Contractual services 1,385,236 - Lease payments 3,342 33,580 Supplies 153,274 - Utilities 9,118,776 - Administrative 91,360 - Maintenance 4,713,993 - Professional benefits 39,297 - Depreciation and amortization 5,057,432 598,580 Total operating expenses 23,249,442 632,160 OPERATING INCOME (LOSS)2,229,430 (632,160) NON-OPERATING REVENUES (EXPENSES) Gain on sale of capital assets 317,276 102,960 Interest income 94,837 13,871 Interest expense (1,491,986)- Total non-operating revenues (expenses)(1,079,873)116,831 INCOME (LOSS) BEFORE CAPITAL CONTRIBUTIONS AND TRANSFERS 1,149,557 (515,329) CAPITAL CONTRIBUTIONS AND TRANSFERS Capital contributions - property owners 542,688 - Contributions - impact fees 1,096,154 - Transfers from other funds 5,000,000 1,000,000 Transfers to other funds (1,232,600)- Total capital contributions and transfers 5,406,242 1,000,000 CHANGE IN NET POSITION 6,555,799 484,671 NET POSITION, BEGINNING OF YEAR 91,804,252 5,995,557 NET POSITION, END OF YEAR 98,360,051$ 6,480,228$ CITY OF SOUTHLAKE, TEXAS EXHIBIT 9 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2016 The Notes to Financial Statements are an integral part of this statement. 26 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 25,946,782$ -$ Cash payments to suppliers (17,446,827) (33,565) Cash payments to employees (2,605,622) - Net cash provided by (used in) operating activities 5,894,333 (33,565) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital expenses (4,085,614) (418,901) Principal payments on bonds (5,335,434) - Interest paid (1,514,466) - Proceeds from sale of capital assets 2,084,317 102,960 Contributions - impact fees 1,096,154 - Net cash used in capital and related financing activities (7,755,043) (315,941) CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES Transfers from other funds 5,000,000 1,000,000 Transfers to other funds (1,232,600) - Net cash provided by (used in) non-capital financing activities 3,767,400 1,000,000 CASH FLOWS FROM INVESTING ACTIVITIES Net sales of investments 1,012,457 1,505,186 Interest received 103,777 14,736 Net cash provided by investing activities 1,116,234 1,519,922 NET CHANGE IN CASH AND CASH EQUIVALENTS 3,022,924 2,170,416 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 19,339,548 1,674,684 CASH AND CASH EQUIVALENTS, END OF YEAR 22,362,472$ 3,845,100$ RECONCILIATION TO STATEMENT OF NET POSITION Cash and cash equivalents 6,117,814$ 3,845,100$ Cash restricted for capital 16,244,658 - Total cash and cash equivalents 22,362,472$ 3,845,100$ RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Operating income (loss)2,229,430$ (632,160)$ Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Pension expense 456,399 - Depreciation and amortization 5,057,432 598,580 Decrease (increase) in assets and deferred outflows of resources Receivables 490,837 - Deferred outflows of resources - pensions (370,722) - Increase (decrease) in liabilities and deferred outflows of resources Payables and accruals (1,930,633) 15 Customer deposits (18,993) - Deferred inflows of resources - pensions (19,417) - Net cash provided by (used in) operating activities 5,894,333$ (33,565)$ NON-CASH CAPITAL AND RELATED FINANCING: Contributions of capital assets from developers 542,688$ -$ FIDUCIARY FUND FINANCIAL STATEMENTS CITY OF SOUTHLAKE, TEXAS EXHIBIT 10 CASH ESCROW AGENCY FUND STATEMENT OF FIDUCIARY NET POSITION SEPTEMBER 30, 2016 The Notes to Financial Statements are an integral part of this statement. 27 Agency Fund Cash Escrow ASSETS Cash and cash equivalents 57,428$ Investments 10,725 Accrued interest receivable 1 TOTAL ASSETS 68,154$ LIABILITIES Due to builders 68,154$ TOTAL LIABILITIES 68,154$ NOTES TO BASIC FINANCIAL STATEMENTS CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 28 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. CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 29 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. Southlake Community Enhancement and Development Corporation (CEDC) – The CEDC was formed under the Development Corporation Act of 1979, as amended, Title 12, Subtitle C1 of the Texas Local Government Code. The CEDC is organized to promote economic development within the City, including developing, implementing, providing and financing projects including a community entertainment and recreation center for 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 CEDC 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. CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 30 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Basis of Presentation – Continued 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. 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. CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 31 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Basis of Presentation – Continued 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. Community Enhancement and Development Corporation Capital Projects Fund- The Community Enhancement and Development Corporation (CEDC) Capital Projects Fund is utilized to fund the acquisition and construction of a community entertainment and recreation center as approved by the CEDC board of directors. The fund has been financed through the issuance of sales tax revenue bonds. 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. CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 32 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Basis of Presentation – Continued 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. 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. Community Enhancement and Development Corporation – The Community Enhance and Development Corporation (“CEDC”) Fund was established to account for the general operations of the non-profit corporation established to finance, develop and operate a community entertainment and recreation center. The CEDC is funded primarily through the receipt of municipal sales taxes. 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. CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 33 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Basis of Presentation – Continued 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. 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. CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 34 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED 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. 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, 2016, 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. CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 35 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Cash, Cash Equivalents and Investments – Continued 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 2016 levy was based on was $6,137,789,731. Taxes are due on October 1 and are delinquent after the following January 31. 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, 2016 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. Interfund services provided and used are not eliminated in the process of consolidation. 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. CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 36 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED 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. 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. CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 37 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED 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. 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). CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 38 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED 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. 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. CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 39 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Fund Equity – Continued 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. 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, 2016 up through March 14, 2017, the date the financial statements were available to be issued. During this period, there were no subsequent events requiring disclosure. CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 40 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, 2016 the carrying amount of the City's deposits was $14,034,526 and the bank balance was $14,490,590. As of September 30, 2016, none of the City’s deposits were uncollateralized. Legal and contractual provisions governing deposits and investments: The Public Funds Investment Act (Government Code Chapter 2256) contains specific provisions in the areas of investment practices, management reports and establishment of appropriate policies. Among other things, it requires the City to adopt, implement, and publicize an investment policy. That policy must address the following areas: (1) safety of principal and liquidity, (2) portfolio diversification, (3) allowable investments, (4) acceptable risk levels, (5) expected rates of return, (6) maximum allowable stated maturity of portfolio investments, (7) maximum average dollar-weighted maturity allowed based on the stated maturity date for the portfolio, (8) investment staff quality and capabilities, (9) and bid solicitation preferences for certificates of deposit. Statutes and the City’s investment policy authorized the City to invest in the following investments as summarized in the table below: Maximum Maximum Authorized Maximum Percentage Investment Investment Type Maturity of Portfolio In One Issuer U.S. Government Securities 5 years 100%None Commercial Paper 270 days 20%None Eligible Investment Pools 365 days 100%None The Act also requires the City to have independent auditors perform test procedures related to investment practices as provided by the Act. The City is in substantial compliance with the requirements of the Act and with local policies. CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 41 NOTE 2. CASH AND INVESTMENTS – CONTINUED Cash and investments as of September 30, 2016 are classified in the accompanying financial statements as follows: Primary Government: Cash and cash equivalents 110,846,068$ Investments 28,036,309 Restricted cash and cash equivalents 21,734,391 Restricted investments 10,169,794 Total primary government 170,786,562 Fiduciary Funds: Cash 57,428 Investments 10,725 Total fiduciary funds 68,153 Total cash and investments 170,854,715$ Cash and investments as of September 30, 2016 consist of the following: Cash on hand 4,925$ Deposits with financial institutions 14,034,526 Investments 156,815,264 Total cash and investments 170,854,715$ 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, 2016 the City did not invest in any securities which are highly sensitive to interest rate fluctuations. CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 42 NOTE 2. CASH AND INVESTMENTS – CONTINUED 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 Amount Rating End Government agency securities 30,021,527$ N/A Not rated Mutual funds 31,722,308 N/A AAAm TexStar 32,270,845 N/A AAAm TexPool 39,937,394 N/A AAAm Lonestar Investment Pool 10,043,565 N/A AAAm Certificates of Deposit 8,195,302 N/A AAAm Texas Class 4,624,323 N/A AAAm Total 156,815,264$ Investment Type 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, 2016, the City investments other than external investment pools that represent 5% or more of the City’s investments include mutual funds and U.S. Government Agency securities as described in the table below. 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, 2016, none of the City’s cash deposits were uncollateralized. CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 43 NOTE 2. CASH AND INVESTMENTS – CONTINUED Custodial Credit Risk – Continued The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. GASB Statement No. 72, Fair Value Measurement and Application, provides a framework for measuring fair value which establishes a three-level fair value hierarchy that describes the inputs that are used to measure assets and liabilities. • Level 1 inputs are quoted prices (unadjusted) for identical assets or liabilities in active markets that a government can access at the measurement date. • Level 2 inputs are inputs —other than quoted prices included within Level 1—that are observable for an asset or liability, either directly or indirectly. • Level 3 inputs are unobservable inputs for an asset or liability. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. If a price for an identical asset or liability is not observable, a government should measure fair value using another valuation technique that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs. If the fair value of an asset or a liability is measured using inputs from more than one level of the fair value hierarchy, the measurement is considered to be based on the lowest priority level input that is significant to the entire measurement. The City has recurring fair value measurements as presented in the table below. The City’s investment balances and weighted average maturity of such investments are as follows: Value at 9/30/16 Level 1 Inputs Level 2 Inputs Level 3 Inputs Percent of Total Investments Investments not subject to Fair Value Investment Pools TexPool 39,937,394$ -$ -$ -$ 25%44 TexStar 32,270,845 - - - 21%43 Lone Star 10,043,565 - - - 7%31 Texas CLASS 4,624,323 3%56 Comerica Bank-Certificates of Deposit 8,195,302 5%337 Investments by Fair Value Level Federal Farm Credit Bank 9,017,232 - 9,017,232 - 6%521 Federal Home Loan Bank 5,000,045 - 5,000,045 - 3%941 Federal Home Loan Mortgage Corp.12,996,462 - 12,996,462 - 8%634 Federal National Mortgage Association 3,007,788 - 3,007,788 - 2%122 Mutual Funds - Short-Term Investments Trust 31,722,308 31,722,308 - - 20%44 Total 156,815,264$ 31,722,308$ 30,021,527$ -$ 100% Fair Value Measurements Weighted Average Maturity (Days) U.S. Government Agency Securities classified in Level 2 of the fair value hierarchy are valued using a matrix pricing technique. Matrix pricing is used to value securities based on the securities’ relationship to benchmark quoted prices. Mutual funds reported as level 1 are valued at the net asset value (NAV) of shares held by the City at year end. The NAV is a quoted price in an active market. CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 44 NOTE 2. CASH AND INVESTMENTS – CONTINUED Investment in State Investment Pools The City is a voluntary participant in four investment pools: TexStar, TexPool, Texas Class and Lone Star. 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. Texas CLASS is organized under the Sixth Amended and Restated Trust Agreement in accordance with all the requirements contained in section 2256.016 of the Act. Texas CLASS is administered by Public Trust Advisors, LLC and all funds are held by the custodial agent, Wells Fargo N.A. Texas CLASS may invest in obligations of the U.S. or its agencies and instrumentalities; repurchase agreements; SEC-registered money market funds rated in the highest rating category by at least one NRSRO; and commercial paper rated A-1, P-1 or equivalent by two nationally recognized rating agencies. 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. CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 45 NOTE 3. RECEIVABLES Receivables at September 30, 2016, 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 452,724$ 125,061$ -$ -$ -$ Sales taxes 2,566,366 - - - - Franchise taxes 455,979 - - - - Accounts - - 3,000 - - Interest 45,433 1,320 14,024 5,740 11 Other 176,376 - - - - Gross receivables 3,696,878 126,381 17,024 5,740 11 Less: allowance 304,279 84,055 - - - Net total receivables 3,392,599$ 42,326$ 17,024$ 5,740$ 11$ Non- Major Water Govern-and Internal mental Sewer Service Agency Total Receivables: Property taxes -$ -$ -$ -$ 577,785$ Sales taxes 2,564,954 - - - 5,131,320 Franchise taxes - - - - 455,979 Accounts - 4,858,133 - - 4,861,133 Interest 11,364 7,905 101,968 1 187,766 Other 336,106 - - - 512,482 Gross receivables 2,912,424 4,866,038 101,968 1 11,726,465 Less: allowance - 421,653 - - 809,987 Net total receivables 2,912,424$ 4,444,385$ 101,968$ 1$ 10,916,478$ The Water and Sewer Fund accounts receivable include unbilled charges for services rendered through September 30, 2016 of $1,850,698 . CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 46 NOTE 4. CAPITAL ASSETS Capital asset activity for the year ended September 30, 2016, was as follows: Beginning Capital Sales or Adjustments/Ending Balance Acquisitions Disposals Transfers Balance Governmental Activities: Capital assets not being depreciated: Land 88,925,825$ 418,770$ -$ -$ 89,344,595$ Street infrastructure 200,408,868 308,990 - 420,324 201,138,182 Construction-in-progress 15,492,114 7,006,989 - (16,700,174) 5,798,929 Total capital assets not being depreciated 304,826,807 7,734,749 - (16,279,850) 296,281,706 Capital assets being depreciated: Land improvements 7,978,986 19,895 7,998,881 Buildings and building improvements 82,268,940 89,998 13,763,425 96,122,363 Public art 1,027,852 128,350 1,156,202 Office equipment 2,430,173 561,033 2,991,206 Communications equipment 3,869,251 58,184 3,927,435 Field equipment 1,719,129 195,870 14,003 1,929,002 Heavy equipment 2,111,244 2,111,244 Computer equipment 1,566,705 16,656 (17,290) 1,566,071 Computer software 3,443,802 3,443,802 Vehicles 11,317,265 449,717 (447,785) 17,290 11,336,487 Drainage 42,911,508 318,205 265,862 43,495,575 Bridges, road signs, and fiber optic lines 5,449,598 - - 156,843 5,606,441 Park improvements 23,811,145 - - 1,243,099 25,054,244 Pathways 10,819,742 - - 127,340 10,947,082 Total capital assets being depreciated 200,725,340 1,128,630 (447,785) 16,279,850 217,686,035 Accumulated depreciation: Land improvements (1,395,283) (343,998) - - (1,739,281) Buildings and building improvements (14,600,595) (2,018,714) - - (16,619,309) Public art (384,328) (103,855) - - (488,183) Office equipment (836,150) (156,927) - - (993,077) Communications equipment (3,127,480) (108,974) - - (3,236,454) Field equipment (1,125,289) (215,161) - - (1,340,450) Heavy equipment (1,463,942) (145,620) - - (1,609,562) Computer equipment (1,241,484) (88,133) - - (1,329,617) Computer software (3,374,038) (33,170) - - (3,407,208) Vehicles (6,748,510) (1,104,580) 416,464 - (7,436,626) Drainage (15,542,844) (1,023,830) - - (16,566,674) Bridges, road signs, and fiber optic lines (1,060,850) (85,233) - - (1,146,083) Park improvements (9,060,468) (1,613,350) - - (10,673,818) Pathways (4,566,000) (506,993) - - (5,072,993) Total accumulated depreciation (64,527,261) (7,548,538) 416,464 - (71,659,335) Total capital assets being depreciated, net 136,198,079 (6,419,908) (31,321) 16,279,850 146,026,700 Governmental activities capital assets, net 441,024,886$ 1,314,841$ (31,321)$ -$ 442,308,406$ CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 47 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 18,642,568$ 217,274$ -$ -$ 18,859,842$ Construction-In-Progress 2,119,317 692,152 - (39,584)2,771,885 Total capital assets not being depreciated 20,761,885 909,426 - (39,584) 21,631,727 Capital assets being depreciated: Buildings and building improvements 935,501 - - - 935,501 Equipment 2,583,458 21,904 - - 2,605,362 Vehicles 572,041 - (29,918) - 542,123 Capacity rights 9,190,988 - - - 9,190,988 Distribution system 137,181,469 3,696,972 (5,934,440) 39,584 134,983,585 Total capital assets being depreciated 150,463,457 3,718,876 (5,964,358) 39,584 148,257,559 Accumulated depreciation: Buildings and building improvements (585,314) (30,318)- - (615,632) Equipment (1,546,334) (239,831)- - (1,786,165) Vehicles (392,733) (32,016)29,918.00 - (394,831) Capacity rights (3,704,038) (183,820)- - (3,887,858) Distribution system (55,585,641) (4,340,764)3,871,070 - (56,055,335) Total accumulated depreciation (61,814,060) (4,826,749) 3,900,988 - (62,739,821) Total capital assets being depreciated, net 88,649,397 (1,107,873) (2,063,370) 39,584 85,517,738 Business type activities capital assets, net 109,411,282$ (198,447)$ (2,063,370)$ -$ 107,149,465$ Depreciation expense was charged as a direct expense to functions of the primary government as follows: Governmental activities: General government 1,378,875$ Public safety 1,432,360 Public works 2,555,533 Culture and recreation 2,181,770 Total depreciation expense- governmental activities 7,548,538$ Business-type activities: Water and Sewer 4,826,749$ CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 48 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 148,445$ 41,007$ -$ 189,452$ Other 251,776 - - 251,776 Total deferred inflows of resources 400,221$ 41,007$ -$ 441,228$ Unearned revenue: Franchise taxes 652,725$ -$ -$ 652,725$ Other 5,873 - 123,383 129,256 Total unearned revenue 658,598$ -$ 123,383$ 781,981$ 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 August 2016, the CEDC issued $24,450,000 of Series 2016, Southlake Community Enhancement and Development Corporation Sales Tax Revenue Bonds. The debt was issued to fund a community entertainment and recreation center, including the maintenance and operation costs of such project. CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 49 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, 2016: Final Interest Business- General Obligation Bonds and Certificates of Obligation Maturity Rates Governmental Type $6,540,000 Series 2007, Combination Tax and Waterworks and Sewer System Revenue Certificates of Obligation 2018 4.0 - 5.0%1,425,000$ -$ $14,015,000 Series 2008, Combination Tax and Waterworks and Sewer System Revenue Certificates of Obligation 2028 3.5 - 4.625%4,794,730 5,118,985 $24,835,000 Series 2009, Combination Tax and Waterworks and Sewer System Revenue Certificates of Obligation 2029 2.0 - 5.0%8,090,000 4,780,000 $26,730,000 Series 2010, General Obligation Refunding Bonds 2023 3.0 - 4.0%4,575,884 1,848,749 $4,480,000 Series 2011A, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2018 2.0 - 5.0%1,405,000 - $3,365,000 Series 2011B, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2031 2.0 - 4.125%- 2,725,000 $15,745,000 Series 2010, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2030 3.0 - 4.25%3,405,000 4,135,000 $11,300,000 Series 2012, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2032 3.0 - 4.25%580,000 2,335,000 $9,965,000 Series 2012, General Obligation Refunding Bonds 2026 3.0 - 4.25%7,620,000 225,000 $14,250,000 Series 2013, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2033 2.0 - 5.0%3,770,000 2,225,000 $22,295,000 Series 2013, General Obligation Refunding Bonds 2026 2.0 - 5.0%19,285,000 1,115,000 $21,330,000 Series 2014, General Obligation Refunding Bonds 2026 2.0 - 5.0%4,625,000 8,705,000 $8,780,000 Series 2014, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2034 2.0 - 3.5%2,720,000 4,080,000 $3,295,000 Series 2015, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2035 2.75 - 4.0%- 3,195,000 62,295,614$ 40,487,734$ Final Interest Business- Governmental Revenue Bonds Maturity Rates Governmental Type $15,745,000 Series 2010, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2030 3.00 - 4.25%2,535,000$ -$ $3,285,000 Series 2011C, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2031 2.00 - 4.125%2,665,000 - $11,300,000 Series 2012, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2032 3.0 - 4.25%4,950,000 - $16,000,000 Series 2014, Southlake Parks Development Corporation, Sales Tax Revenue Refunding Bonds 2027 3%13,730,000 - $24,450,000 Series 2016, Southlake Community Enhancement 2036 3.00 - 5.00%24,450,000 - and Development Corporation, Sales Tax Revenue Bonds 48,330,000$ -$ CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 50 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, 2016 consist of the following: Final Business- Contract Revenue Obligations Maturity Governmental Type Series 2001, TRA - Denton Creek Wastewater Pressure Interceptor - Refunding 2017 -$ 385,000$ The following is a summary of long-term transactions for the year ended September 30, 2016: Amount Beginning Ending Due within Balance Additions Reductions Balance One year Governmental activities: General obligation bonds and certificates of obligation 74,030,218$ -$ (11,734,604)$ 62,295,614$ 11,543,185$ Sales tax revenue bonds 25,540,000 24,450,000 (1,660,000) 48,330,000 1,715,000 Bond premiums (discounts)6,682,373 2,168,153 (900,953) 7,949,573 - Total bonds payable 106,252,591 26,618,153 (14,295,557) 118,575,187 13,258,185 Net pension liability 5,653,988 4,849,333 - 10,503,321 - Compensated absences 1,103,039 1,150,543 (1,103,039) 1,150,543 127,999 Total governmental activities 113,009,618$ 32,618,029$ (15,398,596)$ 130,229,051$ 13,386,184$ 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 45,458,130$ -$ (4,970,396)$ 40,487,734$ 5,081,814$ Contract revenue obligations 750,000 - (365,000) 385,000 385,000 Bond premiums 1,788,194 - (158,494) 1,629,700 - Total bonds payable 47,996,324 - (5,493,890) 42,502,434 5,466,814 Unearned revenue 239,585 - (3,934) 235,651 5,000 Net pension liability 519,719 456,399 - 976,118 - Compensated absences 83,011 97,861 (83,011) 97,861 97,861 Total business-type activities 48,838,639$ 554,260$ (5,580,835)$ 43,812,064$ 5,569,675$ CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 51 NOTE 6. LONG-TERM DEBT – CONTINUED The annual aggregate maturities for each bond type are as follows: General Obligation Bonds and Certificates of Obligation Fiscal Year Ending September 30,Principal Interest Total 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 4,541,140 1,154,699 5,695,839 2022-2026 22,762,939 3,050,154 25,813,093 2027-2031 4,410,501 300,179 4,710,680 Total 62,295,614$ 11,351,906$ 73,647,520$ Governmental Activities Sales Tax Revenue Bonds Fiscal Year Ending September 30,Principal Interest Total 2017 1,715,000$ 1,600,893$ 3,315,893$ 2018 2,630,000 1,553,694 4,183,694 2019 2,715,000 1,464,318 4,179,318 2020 2,815,000 1,366,705 4,181,705 2021 2,920,000 1,260,592 4,180,592 2022-2026 15,645,000 4,552,293 20,197,293 2027-2031 11,440,000 2,137,809 13,577,809 2032-2036 8,450,000 625,141 9,075,141 Total 48,330,000$ 14,561,445$ 62,891,445$ Governmental Activities Revenue Bonds and Certificates of Obligation Fiscal Year Ending September 30,Principal Interest Total 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 2,473,860 841,800 3,315,660 2022-2026 10,971,699 2,993,605 13,965,304 2027-2031 8,613,210 1,022,846 9,636,056 2032-2036 2,175,000 111,932 2,286,932 Total 40,487,734$ 9,406,926$ 49,894,660$ Business-Type Activities CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 52 NOTE 6. LONG-TERM DEBT – CONTINUED Contract Revenue Obligations Fiscal Year Ending September 30,Principal Interest Total 2017 385,000 9,625 394,625 Total 385,000$ 9,625$ 394,625$ Business-Type Activities 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 th e refunded debt. Accordingly, a liability for the defeased debt issues is not included in the City’s financial statements. As of September 30, 2016, 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 2016 were as follows: Transfer In Transfer Out Amount Purpose Non major governmental funds General Fund 40,000$ To fund operations of this new fund Internal Service Fund General Fund 1,000,000 To replace aging vehicles Non major governmental funds General Fund 300,000 To assist with funding of large projects General capital project funds General Fund 6,400,000 To fund future infrastructure Water and sewer enterprise fund General Fund 5,000,000 To assist with funding of large projects General Fund Non major governmental funds 40,574 To fund indirect charges General Fund Non major governmental funds 152,374 General Fund Non major governmental funds 200,059 To assist with funding of large projects General Fund Non major governmental funds 56,972 To fund indirect charges General capital project funds Non major governmental funds 1,470,000 To fund drainage projects General obligation debt service Non major governmental funds 194,538 To pay the principal and interest on debt incurred General obligation debt service Tax Increment Financing District fund 3,180,765 To fund the debt repayment for bonds issued for TIF District projects General Fund Non major governmental funds 273,253 To fund indirect charges Non major governmental funds 3,000,000 To assist with the funding of large park projects Non major governmental funds Non major governmental funds 2,885,514 To pay the principal and interest on debt incurred Non major governmental funds Non major governmental funds 1,200,000 To assist with the funding of future projects General Fund Non major governmental funds 66,720 To fund indirect charges General obligation debt service Non major governmental funds 2,589,900 To pay the debt service for bonds issued on behalf of the District General capital project funds Non major governmental funds 80,000 To fund Chesapeake Park drainage project improvements General Fund Non major governmental funds 221,336 To fund indirect charges General Fund Water and sewer enterprise fund 999,470 To reclass bond proceeds General Fund Water and sewer enterprise fund 233,130 To fund indirect charges 29,584,605$ Southlake Parks Development Corporation capital project funds To fund future projects and to establish funds for Visitor Information Center in accordance with the 2030 Economic Development and Tourism Master Plan CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 53 NOTE 7. TRANSFERS AND INTERFUND RECEIVABLES AND PAYABLES – CONTINUED 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, 2016: Interfund Receivables: General Interfund Payables:Fund Non-Major Governmental Funds 3,317$ NOTE 8. RETIREMENT PLAN A. Plan Description The City participates as one of 866 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. CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 54 NOTE 8. RETIREMENT PLAN – CONTINUED B. Benefits Provided – Continued 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. At the December 31, 2015 valuation and measurement date, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 98 Inactive employees entitled to but not yet receiving benefits 149 Active employees 320 567 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 12.17% and 11.62% in calendar years 2015 and 2016, respectively. The City’s contributions to TMRS for the year ended September 30, 2015 were $2,586,531, and were equal to the required contributions. D. Net Pension Liability The City’s Net Pension Liability (NPL) was measured as of December 31, 2015 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, 2015 actuarial valuation was determined using the following actuarial assumptions: Inflation 2.5% per year Overall payroll growth 3.0% per year Investment Rate of Return 6.75%, net of pension plan investment expense, including inflation CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 55 NOTE 8. RETIREMENT PLAN – CONTINUED D. Net Pension Liability – Continued 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 Combined Healthy Mortality Tables with Blue Collar Adjustment are used with males rates multiplied by 109% and female rates multiplied by 103% with a 3-year set-forward for both males and females. In addition, a 3% minimum mortality rate is applied to reflect the impairment for younger members who become disabled. The rates are projected on a fully generational basis by scale BB to account for future mortality improvements subject to the 3% floor. Actuarial assumptions used in the December 31, 2015, valuation were based on the results of actuarial experience studies. The experience study in TMRS was for the period December 31, 2010 through December 31, 2014. 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. After the Asset Allocation Study analysis and experience investigation study, the Board amended the long-term expected rate of return on pension plan investments from 7% to 6.75%. 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. The long-term expected rate of return on pension plan investments 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 weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. In determining their best estimate of a recommended investment return assumption under the various alternative asset allocation portfolios, GRS focused on the area between (1) arithmetic mean (aggressive) without an adjustment for time (conservative) and (2) the geometric mean (conservative) with an adjustment for time (aggressive). At its meeting on July 30, 2015, the TMRS Board approved a new portfolio target allocation. 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%4.55% International Equity 17.5%6.10% Core Fixed Income 10.0%1.00% Non-Core Fixed Income 20.0%3.65% Real Return 10.0%4.03% Real Estate 10.0%5.00% Absolute Return 10.0%4.00% Private Equity 5.0%8.00% Total 100.0% CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 56 NOTE 8. RETIREMENT PLAN – CONTINUED E. Net Pension Liability – Continued Discount Rate The discount rate used to measure the Total Pension Liability was 6.75%. 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 Total Plan Net Pension Fiduciary Pension Liability Net Position Liability (a)(b)(a) - (b) Balance at 12/31/2014 72,068,298$ 65,894,591$ 6,173,707$ Changes for the year: Service Cost 3,222,126 - 3,222,126 Interest 5,090,308 - 5,090,308 Change of benefit terms - - - Difference between expected and actual experience 102,364 - 102,364 Changes of assumptions 760,500 - 760,500 Contributions - employer - 2,425,455 (2,425,455) Contributions - employee - 1,409,008 (1,409,008) Net investment income - 97,252 (97,252) Benefit payments, including refunds of employee contributions (1,921,361) (1,921,361) - Administrative expense - (59,224) 59,224 Other changes - (2,925) 2,925 Net Changes 7,253,937 1,948,205 5,305,732 Balance at 12/31/15 79,322,235$ 67,842,796$ 11,479,439$ Increase (Decrease) CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 57 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 6.75%, 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 (5.75%) or 1 percentage-point higher (7.75%) than the current rate: 1% Decrease 1% Increase in Discount Discount in Discount Rate (5.75%)Rate (6.75%)Rate (7.75%) Net pension liability 24,580,928$ 11,479,439$ 891,470$ 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, 2016, the City recognized pension expense of $3,285,546. At September 30, 2016, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual economic experience 84,085$ 1,092,665$ Changes in actuarial assumptions 624,696 - Difference between projected and actual investment earnings 4,107,553 - Contributions subsequent to the measurement date 1,939,531 - Total 6,755,865$ 1,092,665$ CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 58 NOTE 8. RETIREMENT PLAN – CONTINUED E. Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions – Continued The $1,939,531 reported as deferred outflows of resources related to pensions result from contributions subsequent to the measurement date and will reduce the net pension liability during the fiscal year ended September 30, 2017. The other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Fiscal Year Ended Sept. 30: 2017 932,592$ 2018 932,592 2019 932,592 2020 851,176 2021 74,717 Thereafter - Total 3,723,669$ 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 2016, the City contributed $40,000 to the Trust. CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 59 NOTE 9. OTHER POSTEMPLOYMENT BENEFITS – CONTINUED Annual OPEB Cost and Net OPEB Obligation The City’s annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years on an open basis. The City’s annual OPEB cost and net OPEB obligation (asset) for the prior three years is shown below: 2016 2015 2014 Annual required contribution 15,635$ 36,592$ 36,592$ Interest on prior year Net OPEB obligation (21,883) (16,579) (11,274) Adjustment to annual required contribution 21,883 16,579 11,274 Annual OPEB cost 15,635 36,592 36,592 Contributions made 40,000 125,000 125,000 Increase (decrease) in net OPEB obligation (24,365) (88,408) (88,408) Net Obligation (asset) - beginning of year (364,724) (276,316) (187,908) Net Obligation (asset) - end of year (389,089)$ (364,724)$ (276,316)$ Percentage of OPEB costs contributed 256%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. CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 60 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. CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2016 61 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, 2016 were $3,578,641. The City has authorized various contracts obligating future funds of the City as the contracted services are performed. Significant amounts unexpended under such contracts at year end are reflected as reserves for authorized contracts in the applicable funds. The City has certain claims and litigation pending with respect to matters arising in the normal course of operations. City management is of the opinion that the settlement of these matters will not have a material adverse impact on the City’s financial statements. NOTE 13. FUTURE REPORTING REQUIREMENTS Statement No. 75, “Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions” – This statement changes the focus of accounting of postemployment benefits other than pensions from whether they are responsibly funding the benefits over time to a point-in time liability that is reflected on the employer’s financial statements for any actuarially unfunded portion of benefits earned to date. This statement will become effective for the City in fiscal year 2018. Management is evaluating the impact of the standard on the City’s financial statements and will take the necessary steps to implement it. Statement No. 77, “Tax Abatement Disclosures” – This statement requires governments that enter into tax abatement agreements to provide certain disclosures regarding these commitments. This statement will become effective for the City in fiscal year 2017. Management believes this statement will not have a significant impact on the City’s financial statements. REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON GENERAL FUND CITY OF SOUTHLAKE, TEXAS EXHIBIT A-1 GENERAL FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2016 See Notes to Budgetary Comparison Schedules 62 VARIANCE WITH FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES Ad valorem taxes, penalties and interest 20,283,440$ 20,283,440$ 20,920,809$ 637,369$ Franchise taxes 3,184,914 3,087,969 2,955,114 (132,855) Municipal sales and mixed beverage tax 12,568,000 12,930,000 13,480,025 550,025 License, permits and fees 1,432,800 2,191,400 2,855,311 663,911 Charges for services 1,805,650 1,798,850 1,797,676 (1,174) Fines and forfeitures 1,115,000 1,312,000 1,394,122 82,122 Grants - 30,000 128,489 98,489 Interest earned 81,980 112,980 141,303 28,323 Miscellaneous 311,000 318,500 361,340 42,840 TOTAL REVENUES 40,782,784 42,065,139 44,034,189 1,969,050 EXPENDITURES Current: General government City secretary/mayor 481,386 477,528 451,240 26,288 City manager's office 863,668 902,811 884,859 17,952 Human resources 627,211 656,232 648,285 7,947 Support services 3,112,347 3,141,304 3,018,522 122,782 Economic development 230,656 231,775 214,653 17,122 Finance 1,252,430 1,252,430 1,222,762 29,668 Municipal court 694,448 694,444 650,488 43,956 Teen court 155,758 151,123 110,944 40,179 Information technology 2,161,120 2,176,317 2,037,498 138,819 Public safety Police services 6,029,186 6,000,620 5,930,872 69,748 Fire services 7,785,820 7,792,347 7,761,424 30,923 Public safety support 1,301,711 1,322,556 1,244,840 77,716 Building inspection 1,086,902 1,097,902 1,059,896 38,006 Public works Public works administration 2,555,618 2,396,915 2,293,902 103,013 Streets and drainage 1,806,889 1,765,203 1,747,893 17,310 Planning 985,820 973,295 943,461 29,834 Culture and recreation Community services 1,276,132 1,301,768 1,294,144 7,624 Parks and recreation 4,022,720 4,007,861 3,842,370 165,491 Library services 644,159 657,551 660,404 (2,853) TOTAL EXPENDITURES 37,073,981 36,999,982 36,018,457 981,525 Excess of revenues over expenditures 3,708,803 5,065,157 8,015,732 2,950,575 OTHER FINANCING SOURCES (USES) Transfers from other funds 8,558,104 2,243,888 2,243,888 - Transfers to other funds (14,290,000) (12,740,000) (12,740,000) - TOTAL OTHER FINANCING SOURCES (USES)(5,731,896) (10,496,112) (10,496,112) - NET CHANGE IN FUND BALANCE (2,023,093) (5,430,955) (2,480,380) 2,950,575 FUND BALANCES, BEGINNING OF YEAR 26,138,618 26,138,618 26,138,618 - FUND BALANCES, END OF YEAR 24,115,525$ 20,707,663$ 23,658,238$ 2,950,575$ BUDGETED AMOUNTS 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, 2016 See Notes to Budgetary Comparison Schedules 63 VARIANCE WITH FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES Ad valorem taxes, penalties and interest 7,600,823$ 7,554,767$ 7,644,875$ 90,108$ Interest 1,000 1,000 1,397 397 Total revenues 7,601,823 7,555,767 7,646,272 90,505 EXPENDITURES: Intergovernmental 4,156,435 4,623,919 4,623,919 - Total expenditures 4,156,435 4,623,919 4,623,919 - Excess of revenues over expenditures 3,445,388 2,931,848 3,022,353 90,505 OTHER FINANCING USES Transfers to other funds (3,180,765) (3,180,765) (3,180,765) - Total other financing uses (3,180,765) (3,180,765) (3,180,765) - Net change in fund balance 264,623 (248,917) (158,412) 90,505 Fund balance at beginning of year 4,010,195 4,010,195 4,010,195 - Fund balance at end of year 4,274,818$ 3,761,278$ 3,851,783$ 90,505$ BUDGETED AMOUNTS CITY OF SOUTHLAKE, TEXAS NOTES TO BUDGETARY COMPARISON SCHEDULES YEAR ENDED SEPTEMBER 30, 2016 64 Budgetary Data The City Council adheres to the following procedures in establishing the budgets reflected in the financial statements: 1. Each year the City Manager is required to submit to the City Council, between sixty and ninety days prior to the beginning of each fiscal year, a proposed budget for the fiscal year beginning on the following October 1. The operating budget includes proposed expenditures and the means of financing them. 2. Public hearings are conducted to obtain taxpayers' comments. 3. Prior to October 1, the budget is legally enacted by the City Council through passage of an ordinance. 4. Annual budgets are legally adopted for the General Fund, the Tax Increment Financing District, Crime Control, Parks Dedication, Hotel Occupancy, Storm Water Utility, Red Light Camera, Southlake Community Enhancement and Development Corporation and Southlake Parks Development Corporation Special Revenue Funds and all Debt Service Funds on a basis consistent with accounting principles generally accepted in the United States of America. Formal budgetary integration is not employed for proprietary funds. However, the City does adopt an annual budget for those funds for managerial control. Control over expenditures for the capital projects funds are maintained through general obligation bond indenture agreements, and authorized construction contracts. Accordingly, formal budgetary integration is not employed for the capital projects funds. 5. During the fiscal year, the City Council may transfer funds allocated to a department to another department or re-estimate revenues or expenditures. The City Manager may transfer budgeted funds within a department. Expenditures should not exceed appropriations at the department level. 6. Budgetary data for the Police, Parks and Recreation, Court Security, Court Technology, Library, Storm W ater Maintenance, Oil and Gas and Commercial Vehicle Enforcement Special Revenue Funds, and all Capital Projects Funds are not presented, as such funds are budgeted over the life of the respective grant or project, and not on an annual basis. Budgetary information for the Proprietary Funds have not been presented since reporting on such budgets is not legally required. 7. Expenditures in excess of appropriations for the year ended September 30, 2016 were: General Fund: Library Services ($2,853) CITY OF SOUTHLAKE, TEXAS EXHIBIT A-3 SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS TEXAS MUNICIPAL RETIREMENT SYSTEM LAST TWO MEASUREMENT YEARS 65 Measurement Year Measurement Year 2015 2014 Total pension liability: Service cost 3,222,126$ 2,906,949$ Interest 5,090,308 4,779,462 Changes of benefit terms - Difference between expected and actual experience 102,364 (1,602,645) Change in assumptions 760,500 - Benefit payments, including refunds of employee contributions (1,921,361) (1,680,030) Net change in total pension liability 7,253,937 4,403,736 Total pension liability - beginning 72,068,298 67,664,562 Total pension liability - ending (a)79,322,235 72,068,298 Plan fiduciary net position: Contributions - employer 2,425,455 2,283,310 Contributions - employee 1,409,008 1,340,870 Net investment income 97,252 3,463,018 Benefit payments, including refunds of employee contributions (1,921,361) (1,680,030) Administrative expense (59,224) (36,150) Other (2,925) (2,972) Net change in plan fiduciary net position 1,948,205 5,368,046 Plan fiduciary net position - beginning 65,894,591 60,526,545 Plan fiduciary net position - ending (b)67,842,796 65,894,591 Net pension liability - ending (a) - (b)11,479,439$ 6,173,707$ Plan fiduciary net position as a percentage of total pension liability 85.53%91.43% Covered employee payroll 20,113,150 19,154,225$ Net pension liability as a percentage of covered employee payroll 57.07%32.23% Note: Only two years of data is presented in accordance with GASB #68, paragraph 138. “The information for all period for the 10-year schedules that are required to be presented as required supplementary information may be available initially. In these cases, during the transition period, that information should be presented for as many periods as are available. The schedules should not include information that is not measured in accordance with the requirements of this statement. Additional years’ information will be displayed as it becomes available.” CITY OF SOUTHLAKE, TEXAS EXHIBIT A-4 SCHEDULE OF CONTRIBUTIONS TEXAS MUNICIPAL RETIREMENT SYSTEM LAST TWO FISCAL YEARS 66 Fiscal Year Fiscal Year 2016 2015 Actuarially determined contribution 2,586,531$ 2,439,627$ Contribution in relation of the actuarially determined contribution 2,586,531 2,439,627 Contribution deficiency (excess)-$ -$ Covered employee payroll 21,551,426$ 20,034,712$ Contributions as a percentage of covered employee payroll 12.00%12.18% Note: GASB #68, paragraph 81.2.b requires that the data in this schedule be presented as of the City’s fiscal year as opposed to the time period covered by the measurement date. Note: Only two years of data is presented in accordance with GASB #68, paragraph 138. “The information for all period for the 10-year schedules that are required to be presented as required supplementary information may be available initially. In these cases, during the transition period, that information should be presented for as many periods as are available. The schedules should not include information that is not measured in accordance with the requirements of this statement. Additional years’ information will be displayed as it becomes available.” CITY OF SOUTHLAKE, TEXAS NOTES TO TEXAS MUNICIPAL RETIREMENT SYSTEM REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED SEPTEMBER 30, 2016 67 Actuarial Cost Method Entry Age Normal Amortization Method Level Percentage of Payroll, Closed Remaining Amortization Period 25 years Asset Valuation Method 10 Year smoothed market; 15% soft corridor Inflation 2.50% Salary Increases 3.50% to 10.5% including inflation Investment Rate of Return 6.75% Retirement Age Experience-based table of rates that are specific to the City's plan of benefits. Last updated for the 2015 valuation pursuant to an experience study of the period 2010 - 2014 Mortality 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. CITY OF SOUTHLAKE, TEXAS EXHIBIT A-5 CONDITION RATING OF STREET SYSTEM SEPTEMBER 30, 2016 68 CONDITION OF ROADWAY SYSTEM Index 2016 RCI 6.0 SDI 8.8 PQI 8.2 COMPARISON OF NEEDED-TO-ACTUAL MAINTENANCE/PRESERVATION Needed Actual Difference 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 2016 800,000 726,381 (73,619) Total $4,450,000 $4,615,345 $ 165,345 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. COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES 69 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. CITY OF SOUTHLAKE, TEXAS EXHIBIT B-1 GENERAL OBLIGATION DEBT SERVICE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2016 70 VARIANCE WITH FINAL BUDGET- POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Ad valorem taxes 5,882,470$ 5,800,470$ 5,880,218$ 79,748$ Interest 20,000 45,000 39,865 (5,135) Total revenues 5,902,470 5,845,470 5,920,083 74,613 EXPENDITURES: Principal retirement - 11,479,601 11,479,604 (3) Interest and fiscal charges - 2,424,180 2,490,002 (65,822) Total expenditures - 13,903,781 13,969,606 (65,825) Deficiency of revenues under expenditures 5,902,470 (8,058,311) (8,049,523) 8,788 OTHER FINANCING SOURCES (USES): Transfers from other funds 5,965,203 5,965,203 5,965,203 - Net change in fund balance 11,867,673 (2,093,108) (2,084,320) 8,788 Fund balance, beginning of year 9,331,641 9,331,641 9,331,641 - Fund balance, end of year 21,199,314$ 7,238,533$ 7,247,321$ 8,788$ BUDGETED AMOUNTS 71 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. 72 Community Enhancement and Development Corporation Special Revenue Fund - Established to account for the general operations of the non-profit corporation established to finance, develop and operate a community entertainment and recreation center. 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 acqu isition 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. CITY OF SOUTHLAKE, TEXAS NON-MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET SEPTEMBER 30, 2016 73 Southlake Parks Parks Crime and Parks Development Control Police Recreation Dedication Corporation District ASSETS Cash and cash equivalents 19,944$ 119,243$ 587,329$ 6,310,366$ 4,038,074$ Investments 2,047 6,328 7,232 2,997,024 176,009 Accounts receivable 35 - - 25,638 - Sales tax receivable - - - 1,258,510 289,247 Interest receivable - 2 8 7,667 45 TOTAL ASSETS 22,026$ 125,573$ 594,569$ 10,599,205$ 4,503,375$ LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable 7,984$ -$ 2$ -$ 4,486$ Accrued liabilities - - 174,000 6,559 23,876 Due to other funds - - - - - Unearned revenue - - - 12,819 - TOTAL LIABILITIES 7,984 - 174,002 19,378 28,362 FUND BALANCES Restricted for: Municipal court expenditures - - - - - Debt service - - - - - Capital projects - - - - - Committed for: Police expenditures 14,042 - - - 4,475,013 Parks and recreation - 125,573 420,567 10,579,827 - Storm water expenditures - - - - - Oil and gas drilling - - - - - Library - - - - - TOTAL FUND BALANCES 14,042 125,573 420,567 10,579,827 4,475,013 TOTAL LIABILITIES AND FUND BALANCES 22,026$ 125,573$ 594,569$ 10,599,205$ 4,503,375$ SPECIAL REVENUE EXHIBIT C-1 CONTINUED 74 Community Storm Enhancement Hotel Water Court Court Red Light Storm Water Development Occupancy Utility Security Technology Library Camera Maintenance Corporation 505,054$ 1,061,371$ 368,270$ 351,725$ 5,968$ 436,814$ 404,580$ 2,629,655$ 675,053 83,653 71,201 47,742 884 92,665 47,288 999,089 2,261 227,109 - - 280 60,181 6 20,596 84,968 - - - - - - 932,229 1,028 5 6 5 - - - 2,562 1,268,364$ 1,372,138$ 439,477$ 399,472$ 7,132$ 589,660$ 451,874$ 4,584,131$ 6,389$ 10,933$ 1$ 1$ -$ 124,277$ 1$ 21,361$ 7,960 277 489 - - 1,105 - 50,004 - - - - - - - - 2,261 - - - - - - 108,303 16,610 11,210 490 1 - 125,382 1 179,668 - - 438,987 399,471 - - - - - - - - - - - - 1,251,754 1,360,928 - - - - - - - - - - - 464,278 - - - - - - - - - 4,404,463 - - - - - - 451,873 - - - - - - - - - - - - - 7,132 - - - 1,251,754 1,360,928 438,987 399,471 7,132 464,278 451,873 4,404,463 1,268,364$ 1,372,138$ 439,477$ 399,472$ 7,132$ 589,660$ 451,874$ 4,584,131$ SPECIAL REVENUE CITY OF SOUTHLAKE, TEXAS EXHIBIT C-1 NON-MAJOR GOVERNMENTAL FUNDS CONCLUDED COMBINING BALANCE SHEET SEPTEMBER 30, 2016 75 DEBT SERVICE 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 44,876$ 44,898$ 1,743,449$ -$ 2,349,226$ 21,020,842$ Investments 8,350 22 15,215 4,366 112,033 5,346,201 Accounts receivable - - - - - 336,106 Sales tax receivable - - - - - 2,564,954 Interest receivable 1 1 - - 34 11,364 TOTAL ASSETS 53,227$ 44,921$ 1,758,664$ 4,366$ 2,461,293$ 29,279,467$ LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable -$ 15$ -$ -$ 35,383$ 210,833$ Accrued liabilities - 11,435 - - - 275,705 Due to other funds - - - 3,317 - 3,317 Unearned revenue - - - - - 123,383 TOTAL LIABILITIES - 11,450 - 3,317 35,383 613,238 FUND BALANCES Restricted for: Municipal court expenditures - - - - - 838,458 Debt service - - 1,758,664 - - 1,758,664 Capital projects - - - 1,049 2,425,910 5,039,641 Committed for: Police expenditures - 33,471 - - - 4,986,804 Parks and recreation - - - - - 15,530,430 Storm water expenditures - - - - - 451,873 Oil and gas drilling 53,227 - - - - 53,227 Library - - - - - 7,132 TOTAL FUND BALANCES 53,227 33,471 1,758,664 1,049 2,425,910 28,666,229 TOTAL LIABILITIES AND FUND BALANCES 53,227$ 44,921$ 1,758,664$ 4,366$ 2,461,293$ 29,279,467$ SPECIAL REVENUE CAPITAL PROJECTS CITY OF SOUTHLAKE, TEXAS NON-MAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED SEPTEMBER 30, 2016 76 Southlake Parks Parks Crime and Parks Development Control Police Recreation Dedication Corporation District REVENUES Municipal sales tax -$ -$ -$ 7,318,490$ 1,803,605$ Licenses, permits and fees - - 131,825 - - Fines and forfeitures - - - - - Interest 23 137 693 32,255 25,480 Contributions - 49,815 - - - Miscellaneous 2,057 - - 153,824 - Total revenues 2,080 49,952 132,518 7,504,569 1,829,085 EXPENDITURES Current: Court technology - - - - - Public safety Police services 356 - - - 874,621 Cultural and recreation Parks and recreation - 62,444 - 980,359 - Library services - - - - - Capital outlay - - - - - Debt service: Principal retirement - - - - - Interest and fiscal charges - - - - - Total expenditures 356 62,444 - 980,359 874,621 Excess (deficiency) of revenues over expenditures 1,724 (12,492) 132,518 6,524,210 954,464 OTHER FINANCING SOURCES (USES) Transfers from other funds - - - - - Transfers to other funds - - (80,000) (6,158,767) (3,856,620) Total other financing sources (uses)- - (80,000) (6,158,767) (3,856,620) NET CHANGE IN FUND BALANCES 1,724 (12,492) 52,518 365,443 (2,902,156) FUND BALANCES, BEGINNING OF YEAR 12,318 138,065 368,049 10,214,384 7,377,169 FUND BALANCES, END OF YEAR 14,042$ 125,573$ 420,567$ 10,579,827$ 4,475,013$ SPECIAL REVENUE EXHIBIT C-2 CONTINUED 77 Community Storm Enhancement Hotel Water Court Court Red Light Storm Water Development Occupancy Utility Security Technology Library Camera Maintenance Corporation 1,024,061$ -$ -$ -$ -$ -$ -$ 5,421,104$ - 1,442,714 - - - - - 160,627 - - 35,149 46,802 - 474,845 - - 2,872 1,326 516 433 7 458 502 16,864 - - - - - - - 1,250 - - - - 10,872 - - - 1,026,933 1,444,040 35,665 47,235 10,879 475,303 502 5,599,845 - - - 62,499 - - - - - - - 2,085 - 382,572 - - 630,180 - - - - - - 974,046 - - - - 12,579 - - - - 316,183 58,348 - - - - - - - - - - - - - - - - - - - - - 630,180 316,183 58,348 64,584 12,579 382,572 - 974,046 396,753 1,127,857 (22,683) (17,349) (1,700) 92,731 502 4,625,799 - - - - - - - - (393,007) (1,721,510) - - - - - (221,336) (393,007) (1,721,510) - - - - - (221,336) 3,746 (593,653) (22,683) (17,349) (1,700) 92,731 502 4,404,463 1,248,008 1,954,581 461,670 416,820 8,832 371,547 451,371 - 1,251,754$ 1,360,928$ 438,987$ 399,471$ 7,132$ 464,278$ 451,873$ 4,404,463$ SPECIAL REVENUE 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, 2016 78 DEBT SERVICE 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 -$ -$ -$ -$ -$ 15,567,260$ Licenses, permits and fees - - - - - 1,735,166 Fines and forfeitures - 60,219 - - - 617,015 Interest 59 81 3,803 1 2,650 88,160 Contributions - - - - - 51,065 Miscellaneous - - - - - 166,753 Total revenues 59 60,300 3,803 1 2,650 18,225,419 EXPENDITURES Current: Court technology - - - - - 62,499 Public safety Police services - 119,644 - - - 1,379,278 Cultural and recreation Parks and recreation - - - - - 2,647,029 Library services - - - - - 12,579 Capital outlay - - - 1,260 154,493 530,284 Debt service: Principal retirement - - 1,915,000 - - 1,915,000 Interest and fiscal charges - - 941,208 - - 941,208 Total expenditures - 119,644 2,856,208 1,260 154,493 7,487,877 Excess (deficiency) of revenues over expenditures 59 (59,344) (2,852,405) (1,259) (151,843) 10,737,542 OTHER FINANCING SOURCES (USES) Transfers from other funds - 40,000 2,885,514 - 1,500,000 4,425,514 Transfers to other funds - - - - - (12,431,240) Total other financing sources (uses)- 40,000 2,885,514 - 1,500,000 (8,005,726) NET CHANGE IN FUND BALANCES 59 (19,344) 33,109 (1,259) 1,348,157 2,731,816 FUND BALANCES, BEGINNING OF YEAR 53,168 52,815 1,725,555 2,308 1,077,753 25,934,413 FUND BALANCES, END OF YEAR 53,227$ 33,471$ 1,758,664$ 1,049$ 2,425,910$ 28,666,229$ SPECIAL REVENUE CAPITAL PROJECTS CITY OF SOUTHLAKE, TEXAS EXHIBIT C-3 PARKS DEDICATION SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2016 79 VARIANCE WITH FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Park fees 30,000$ 100,000$ 131,825$ 31,825$ Interest 250 250 693 443 Total revenues 30,250 100,250 132,518 32,268 EXPENDITURES: Parks and recreation 80,000 - - - Total expenditures 80,000 - - - Excess of revenues over expenditures (49,750) 100,250 132,518 32,268 OTHER FINANCING USES: Transfers to other funds - (80,000) (80,000) - Total other financing uses - (80,000) (80,000) - Net change in fund balance (49,750) 20,250 52,518 32,268 Fund balance, beginning of year 368,049 368,049 368,049 - Fund balance, end of year 318,299$ 388,299$ 420,567$ 32,268$ BUDGETED AMOUNTS 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, 2016 80 VARIANCE WITH FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Municipal sales tax 6,670,000$ 7,100,000$ 7,318,490$ 218,490$ Miscellaneous 153,816 153,816 153,824 8 Interest 7,500 7,500 32,255 24,755 Total revenues 6,831,316 7,261,316 7,504,569 243,253 EXPENDITURES: Parks and recreation 1,134,546 1,130,013 980,359 149,654 Excess of revenues over expenditures 5,696,770 6,131,303 6,524,210 392,907 OTHER FINANCING USES: Transfers to other funds (6,158,767) (6,158,767) (6,158,767) - Net change in fund balance (461,997) (27,464) 365,443 392,907 Fund balance, beginning of year 10,214,384 10,214,384 10,214,384 - Fund balance, end of year 9,752,387$ 10,186,920$ 10,579,827$ 392,907$ BUDGETED AMOUNTS CITY OF SOUTHLAKE, TEXAS EXHIBIT C-5 CRIME CONTROL DISTRICT SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAB BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2016 81 VARIANCE WITH FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Municipal sales tax 1,667,500$ 1,800,000$ 1,803,605$ 3,605$ Interest 500 500 25,480 24,980 Total revenues 1,668,000 1,800,500 1,829,085 28,585 EXPENDITURES: Police services 917,060 914,819 874,621 40,198 Excess of revenues over expenditures 750,940 885,681 954,464 68,783 OTHER FINANCING SOURCES USES: Transfers to other funds (3,856,620) (3,856,620) (3,856,620) - Net change in fund balance (3,105,680) (2,970,939) (2,902,156) 68,783 Fund balance, beginning of year 7,377,169 7,377,169 7,377,169 - Fund balance, end of year 4,271,489$ 4,406,230$ 4,475,013$ 68,783$ BUDGETED AMOUNTS CITY OF SOUTHLAKE, TEXAS EXHIBIT C-6 HOTEL OCCUPANCY SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2016 82 VARIANCE WITH FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Municipal sales tax 1,013,824$ 1,013,824$ 1,024,061$ 10,237$ Interest 500 2,000 2,872 872 Total revenues 1,014,324 1,015,824 1,026,933 11,109 EXPENDITURES: Parks and recreation 677,821 677,821 630,180 47,641 Excess of revenues over expenditures 336,503 338,003 396,753 58,750 OTHER FINANCING USES: Transfers to other funds (392,723) (393,007) (393,007) - Net change in fund balance (56,220) (55,004) 3,746 58,750 Fund balance, beginning of year 1,248,008 1,248,008 1,248,008 - Fund balance, end of year 1,191,788$ 1,193,004$ 1,251,754$ 58,750$ BUDGETED AMOUNTS CITY OF SOUTHLAKE, TEXAS EXHIBIT C-7 STORM WATER UTILITY SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2016 83 VARIANCE WITH FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Interest 5,000$ 5,000$ 1,442,714$ 1,437,714$ Licenses, permits and fees 1,419,300 1,419,300 1,326 (1,417,974) Total revenues 1,424,300 1,424,300 1,444,040 19,740 EXPENDITURES: Capital outlay 574,025 407,575 316,183 91,392 Excess of revenues over expenditures 850,275 1,016,725 1,127,857 111,132 OTHER FINANCING USES: Transfers to other funds (1,721,510) (1,721,510) (1,721,510) - Net change in fund balance (871,235) (704,785) (593,653) 111,132 Fund balance, beginning of year 1,954,581 1,954,581 1,954,581 - Fund balance, end of year 1,083,346$ 1,249,796$ 1,360,928$ 111,132$ BUDGETED AMOUNTS CITY OF SOUTHLAKE, TEXAS EXHIBIT C-8 RED LIGHT CAMERA SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2016 84 VARIANCE WITH FINAL BUDGET- POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Fines and forfeitures 367,100$ 432,160$ 474,845$ 42,685$ Interest 200 200 458 258 Total revenues 367,300 432,360 475,303 42,943 EXPENDITURES: Public safety 380,160 380,160 382,572 (2,412) Excess of revenues (12,860) 52,200 92,731 40,531 over expenditures Fund balance, beginning of year 371,547 371,547 371,547 - Fund balance, end of year 358,687$ 423,747$ 464,278$ 40,531$ BUDGETED AMOUNTS CITY OF SOUTHLAKE, TEXAS EXHIBIT C-9 SOUTHLAKE COMMUNITY ENHANCEMENT DEVELOPMENT CORPORATION SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2016 85 VARIANCE WITH FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Municipal sales tax 5,002,500$ 5,300,000$ 5,421,104$ 121,104$ Licenses, permits and fees 408,980 218,954 160,627 (58,327) Interest 1,200 1,200 16,864 15,664 Contributions 13,000 12,750 1,250 (11,500) Total revenues 5,425,680 5,532,904 5,599,845 66,941 EXPENDITURES: Parks and recreation 1,148,402 1,024,575 974,046 50,529 Total expenditures 1,148,402 1,024,575 974,046 50,529 Excess of revenues over expenditures 4,277,278 4,508,329 4,625,799 117,470 OTHER FINANCING USES: Transfers to other funds (218,967) (221,336) (221,336) - Net change in fund balance 4,058,311 4,286,993 4,404,463 117,470 Fund balance, beginning of year - - - - Fund balance, end of year 4,058,311$ 4,286,993$ 4,404,463$ 117,470$ BUDGETED AMOUNTS CITY OF SOUTHLAKE, TEXAS EXHIBIT C-10 SOUTHLAKE PARKS DEVELOPMENT CORPORATION DEBT SERVICE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2016 86 VARIANCE WITH FINAL BUDGET- POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Interest 6,000$ 6,000$ 3,803$ (2,197)$ EXPENDITURES: Principal retirement 1,915,000 1,915,000 1,915,000 - Interest and fiscal charges 973,014 973,014 941,208 31,806 Total expenditures 2,888,014 2,888,014 2,856,208 31,806 Deficiency of revenues under expenditures (2,882,014) (2,882,014) (2,852,405) 29,609 OTHER FINANCING SOURCES: Transfers from other funds 2,885,514 2,885,514 2,885,514 - Net change in fund balance 3,500 3,500 33,109 29,609 Fund balance, beginning of year 1,725,555 1,725,555 1,725,555 - Fund balance, end of year 1,729,055$ 1,729,055$ 1,758,664$ 29,609$ BUDGETED AMOUNTS 87 AGENCY FUNDS 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. CITY OF SOUTHLAKE, TEXAS EXHIBIT F-1 CASH ESCROW AGENCY FUND STATEMENT OF CHANGES IN ASSETS AND LIABILITIES FOR THE YEAR ENDED SEPTEMBER 30, 2016 88 Balance at Balance at Beginning End of Year Additions Deletions of Year ASSETS Cash and cash equivalents 57,368$ 60$ -$ 57,428$ Investments 10,710 15 - 10,725 Accrued interest receivable - 1 - 1 TOTAL ASSETS 68,078$ 76$ -$ 68,154$ LIABILITIES Due to builders 68,078$ 76$ -$ 68,154$ TOTAL LIABILITIES 68,078$ 76$ -$ 68,154$ CITY OF SOUTHLAKE, TEXAS EXHIBIT G-1 COMPARATIVE SCHEDULES OF CAPITAL ASSETS BY SOURCE SEPTEMBER 30, 2016 AND 2015 89 2016 2015 General capital assets Land and improvements 122,397,720$ 120,715,956$ Buildings and improvements 97,278,565 83,296,792 Equipment 27,305,247 26,457,569 Infrastructure 261,187,280 259,589,716 Construction in progress 5,798,929 15,492,114 Total capital assets 513,967,741$ 505,552,147$ Investment in general capital assets Capital projects funds 375,949,594 368,942,615 General and other fund revenues 81,937,774 81,575,124 Gifts 56,080,373 55,034,408 Total investment in capital assets 513,967,741$ 505,552,147$ CITY OF SOUTHLAKE, TEXAS EXHIBIT G-2 SCHEDULE OF CHANGES IN CAPITAL ASSETS BY FUNCTION AND ACTIVITY FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2016 90 Capital Capital Assets Assets October 1,September 30, Function and Activity 2015 Additions Deductions 2016 General government 187,524,052$ 190,013$ -$ 187,714,065$ Public safety 62,401,015 382,611 (303,146) 62,480,480 Public works 255,627,080 24,990,929 (16,844,813) 263,773,196 Total capital assets 505,552,147$ 25,563,553$ (17,147,959)$ 513,967,741$ General Public Public Government Safety Works Total Land and improvements 2,418,799$ 4,303,925$ 115,674,996$ 122,397,720$ Buildings and improvements 25,908,682 48,666,203 22,703,680 97,278,565 Equipment 6,317,944 9,395,938 11,591,365 27,305,247 Infrastructure 153,068,640 114,414 108,004,226 261,187,280 Construction in Progress - - 5,798,929 5,798,929 Total 187,714,065$ 62,480,480$ 263,773,196$ 513,967,741$ STATISTICAL SECTION 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. 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. 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. CITY OF SOUTHLAKE, TEXAS NET POSITION BY COMPONENT LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) 91 2007 2008 2009 2010 Governmental activities Net investment in capital assets 209,824,992$ 222,046,528$ 246,238,808$ 277,985,305$ Restricted 6,076,676 6,499,447 7,850,231 8,814,621 Unrestricted 59,208,874 75,986,531 69,949,380 58,438,700 Total governmental activities net position 275,110,542$ 304,532,506$ 324,038,419$ 345,238,626$ Business-type activities Net investment in capital assets 50,177,976$ 47,834,458$ 60,541,445$ 65,039,374$ Restricted - - - - Unrestricted 23,777,277 29,794,140 21,171,185 18,831,525 Total business-type activities net position 73,955,253$ 77,628,598$ 81,712,630$ 83,870,899$ Primary government Net investment in capital assets 260,002,968$ 269,880,986$ 306,780,253$ 343,024,679$ Restricted 6,076,676 6,499,447 7,850,231 8,814,621 Unrestricted 82,986,151 105,780,671 91,120,565 77,270,225 Total primary governmental net position 349,065,795$ 382,161,104$ 405,751,049$ 429,109,525$ Source:Comprehensive Annual Financial Report Fiscal Year TABLE 1 92 2011 2012 2013 2014 2015 2016 298,418,769$ 291,690,099$ 324,928,883$ 338,303,633$ 366,796,228$ 364,161,725$ 9,739,189 67,444,322 15,178,798 15,092,604 13,624,164 11,589,350 53,157,494 16,726,782 50,356,758 58,732,145 59,447,800 80,992,079$ 361,315,452$ 375,861,203$ 390,464,439$ 412,128,382$ 439,868,192$ 456,743,154$ 68,911,163$ 67,918,830$ 70,968,919$ 73,126,147$ 78,143,445$ 79,055,138$ - - - - - - 17,613,924 18,908,505 17,673,963 16,085,060 13,660,807 19,304,913 86,525,087$ 86,827,335$ 88,642,882$ 89,211,207$ 91,804,252$ 98,360,051$ 367,329,932$ 359,608,929$ 395,897,802$ 411,429,780$ 444,939,673$ 443,216,863$ 9,739,189 67,444,322 15,178,798 15,092,604 13,624,164 11,589,350 70,771,418 35,635,287 68,030,721 74,817,205 73,108,607 100,296,992 447,840,539$ 462,688,538$ 479,107,321$ 501,339,589$ 531,672,444$ 555,103,205$ Fiscal Year CITY OF SOUTHLAKE, TEXAS CHANGES IN NET POSITION, LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) 93 2007 2008 2009 2010 Expenses Governmental activities: General government 9,833,572$ 4,406,913$ 11,068,965$ 11,814,836$ Public safety 11,729,107 12,770,012 12,920,263 14,885,499 Public works 4,813,692 8,669,156 5,840,432 5,767,688 Culture and recreation 5,510,247 5,911,730 6,439,100 7,287,434 Interest on long-term debt 5,804,295 5,506,967 5,854,931 6,515,269 Total governmental activities expenses 37,690,913 37,264,778 42,123,691 46,270,726 Business-type activities: Water and sewer 14,729,469 17,689,865 18,066,346 18,948,438 Total business-type activities expenses 14,729,469 17,689,865 18,066,346 18,948,438 Total primary government expenses 52,420,382$ 54,954,643$ 60,190,037$ 65,219,164$ Program Revenues Governmental activities: Charges for Services: General government 1,778,215$ 1,340,864$ 1,949,993$ 2,476,000$ Public safety 2,979,947 2,843,923 2,633,437 2,706,847 Public works 223,329 199,833 68,369 240,916 Culture and recreation 1,156,965 1,269,571 1,369,725 1,387,558 Operating grants and contributions 304,246 241,144 239,364 688,803 Capital grants and contributions 11,425,990 5,690,613 1,833,160 5,994,206 Total governmental activities program revenues 17,868,692 11,585,948 8,094,048 13,494,330 Business-type activities: Charges for services: Water and sewer 15,414,131 18,543,025 19,321,095 18,897,356 Capital grants and contributions 5,589,196 3,748,161 2,212,867 2,578,400 Total business-type activities program revenues 21,003,327 22,291,186 21,533,962 21,475,756 Total primary government program revenues 38,872,019$ 33,877,134$ 29,628,010$ 34,970,086$ Net (Expenses) Revenue Governmental activities (19,822,221)$ (25,678,830)$ (34,029,643)$ (32,776,396)$ Business-type activities 6,273,858 4,601,321 3,467,616 2,527,318 Total primary government net expenses (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 24,509,730$ 28,950,945$ 30,911,161$ 32,298,360$ Sales taxes 16,931,180 18,781,043 17,256,272 17,610,781 Franchise taxes 2,435,803 2,654,701 2,816,111 2,606,248 Interest on investments 3,598,458 3,128,226 1,703,418 414,852 Gain (Loss) on sale of capital assets - - 167,127 21,465 Transfers 275,595 229,436 341,957 596,093 Miscellaneous 8,688 52,023 339,510 428,804 Total governmental activities 47,759,454 53,796,374 53,535,556 53,976,603 Business-type activities: Interest on investments 1,183,987 594,891 953,739 155,173 Gain (Loss) on sale of capital assets (3,396) - - - Transfers (275,595) (229,436) 2,187 (596,093) Miscellaneous - 10,989 (339,510) 71,871 Total business-type activities 904,996 376,444 616,416 (369,049) Total primary government 48,664,450$ 54,172,818$ 54,151,972$ 53,607,554$ Change in Net Position Governmental activities 27,937,233$ 28,117,544$ 19,505,913$ 21,200,207$ Business-type activities 7,178,854 4,977,765 4,084,032 2,158,269 Total primary government 35,116,087$ 33,095,309$ 23,589,945$ 23,358,476$ Source:Comprehensive Annual Financial Report Fiscal Year TABLE 2 94 2011 2012 2013 2014 2015 2016 13,754,529$ 13,277,006$ 12,892,140$ 13,417,904$ 14,602,425$ 12,851,787$ 15,144,173 15,891,911 18,425,878 18,245,617 18,176,698 19,300,590 6,279,687 6,399,819 8,528,331 8,870,998 9,762,184 11,950,671 7,897,173 8,158,291 8,829,394 8,948,841 9,311,006 10,655,763 5,638,272 5,865,798 6,747,628 5,097,036 2,528,113 3,005,359 48,713,834 49,592,825 55,423,371 54,580,396 54,380,426 57,764,170 20,724,651 22,530,688 22,119,518 25,030,426 26,692,373 24,741,428 20,724,651 22,530,688 22,119,518 25,030,426 26,692,373 24,741,428 69,438,485$ 72,123,513$ 77,542,889$ 79,610,822$ 81,072,799$ 82,505,598$ 2,616,321$ 2,575,773$ 2,755,038$ 2,657,883$ 2,309,861$ 2,363,499$ 2,818,913 3,744,708 3,650,079 3,907,068 4,427,137 4,620,030 71,129 179,094 291,926 360,529 265,432 223,533 1,384,823 1,400,794 1,422,552 1,379,658 1,399,822 1,537,185 532,100 200,434 639,230 443,157 455,575 310,636 2,309,613 518,617 2,244,965 4,436,346 8,967,466 2,228,863 9,732,899 8,619,420 11,003,790 13,184,641 17,825,293 11,283,746 22,571,056 22,451,738 22,806,432 23,591,438 24,792,619 25,474,777 1,433,278 1,214,395 1,981,354 3,510,936 5,776,438 1,638,842 24,004,334 23,666,133 24,787,786 27,102,374 30,569,057 27,113,619 33,737,233$ 32,285,553$ 35,791,576$ 40,287,015$ 48,394,350$ 38,397,365$ (38,980,935)$ (40,973,405)$ (44,419,581)$ (41,395,755)$ (36,555,133)$ (46,480,424)$ 3,279,683 1,135,445 2,668,268 2,071,948 3,876,684 2,372,191 (35,701,252)$ (39,837,960)$ (41,751,313)$ (39,323,807)$ (32,678,449)$ (44,108,233)$ 31,568,583$ 31,166,847$ 31,844,930$ 33,099,007$ 33,176,285$ 34,501,608$ 18,969,870 20,076,478 22,659,917 26,623,661 30,090,614 29,047,285 2,783,279 2,598,074 2,646,394 2,841,025 3,327,739 2,955,114 258,556 232,722 30,110 482,607 523,954 379,342 26,741 91,134 89,923 99,109 102,900 102,960 791,830 890,220 915,475 915,116 968,160 (3,767,400) 658,902 463,681 836,068 639,571 1,066,818 136,477 55,057,761 55,519,156 59,022,817 64,700,096 69,256,470 63,355,386 123,872 46,212 25,227 101,469 112,967 94,837 - - - - 23,100 317,276 (791,830) (890,220) (915,475) (915,116) (968,160) 3,767,400 42,463 10,811 37,527 6,963 4,521 4,095 (625,495) (833,197) (852,721) (806,684) (827,572) 4,183,608 54,432,266$ 54,685,959$ 58,170,096$ 63,893,412$ 68,428,898$ 67,538,994$ 16,076,826$ 14,545,751$ 14,603,236$ 23,304,341$ 32,701,337$ 16,874,962$ 2,654,188 302,248 1,815,547 1,265,264 3,049,112 6,555,799 18,731,014$ 14,847,999$ 16,418,783$ 24,569,605$ 35,750,449$ 23,430,761$ Fiscal Year CITY OF SOUTHLAKE, TEXAS TABLE 3 FUND BALANCES, GOVERNMENTAL FUNDS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) LAST TEN FISCAL YEARS (UNAUDITED) 95 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 General Fund Nonspendable -$ -$ -$ -$ 36,519$ 37,791$ 292,356$ 46,008$ 27,826$ 31,277$ Committed for: Police expenditures - - - - 48,543 33,624 22,643 28,647 34,609 40,612 Assigned for: Police expenditures - - - - 31,979 - - - - Teen Court expenditures - - - - 17,954 18,314 18,606 18,832 19,077 19,479 Senior Center expenditures - - - - 10,391 10,397 10,629 10,623 10,624 10,637 Recycling - - - - 33,624 22,642 28,629 34,609 40,612 46,657 Reforestation expenditures - - - - 165,253 113,907 69,128 44,098 101,873 42,466 Strategic initiatives - - - - 4,303,823 6,517,692 5,988,904 7,980,605 7,673,680 3,704,477 Unassigned - - - - 12,400,379 13,205,240 14,351,627 16,399,991 18,230,317 19,762,633 Reserveda 260,969 259,629 221,617 164,205 - - - - - - Unreserved 19,063,961 16,665,175 15,133,468 17,982,361 - - - - - - Total general fund 19,324,930$ 16,924,804$ 15,355,085$ 18,146,566$ 17,048,465$ 19,959,607$ 20,782,522$ 24,563,413$ 26,138,618$ 23,658,238$ All Other Governmental Funds Restricted for: Debt Service -$ -$ -$ -$ 11,885,706$ 12,657,819$ 12,406,902$ 12,150,184$ 11,057,196$ 9,005,985$ Municipal court expenditures - - - - 738,259 770,071 823,737 860,556 878,490 838,458 Reinvestment zone expenditures - - - - 5,348,592 4,718,865 4,298,510 4,422,565 4,010,195 3,851,783 Capital projects - - - - 43,779,957 51,436,227 55,898,283 53,053,840 41,949,791 72,654,652 Committed for: Police expenditures - - - - 7,409,770 5,969,294 4,951,542 5,532,996 7,813,849 4,986,804 Parks and recreation - - - - 6,411,344 6,381,618 7,692,049 8,020,248 10,720,498 11,125,967 Oil and gas expenditures - - - - 53,185 53,211 53,220 53,160 53,168 53,227 Storm water expenditures - - - - 300,963 451,127 451,164 450,824 451,371 4,856,336 Library expenditures - - - - 3,784 3,422 15,844 7,967 8,832 7,132 Reserved for: Debt service 7,218,441 8,394,778 9,997,763 10,768,763 - - - - - - Police expenditures 6,091,565 3,601,582 1,432,698 4,961,222 - - - - - - Parks 8,868,823 9,190,609 9,793,631 8,136,946 - - - - - - Capital projects 28,314,562 42,958,063 51,037,490 45,433,316 - - - - - - Reinvestment zone expenditures 709,411 2,703,280 3,858,132 5,465,595 - - - - - - Municipal court expenditures 618,001 683,978 746,735 767,464 - - - - - - Storm water expenditures - - - 150,000 - - - - - - Oil and gas expenditures - - - 44,240 - - - - - - Library expenditures - - - - - - - - - - Unreserved, reported in:- Special revenue funds - (547) (106) (11) - - - - - - Total all other governmental funds 51,820,803$ 67,531,743$ 76,866,343$ 75,727,535$ 75,931,560$ 82,441,654$ 86,591,251$ 84,552,340$ 76,943,390$ 107,380,344$ Source:Comprehensive Annual Financial Report Notes:aIncludes encumbrances and prepaid items. The City implemented GASB 54 in 2011 Fiscal Year CITY OF SOUTHLAKE, TEXAS TABLE 4 CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) LAST TEN FISCAL YEARS (UNAUDITED) 96 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 REVENUES Ad valorem taxes, penalties and interest 24,543,401$ 28,908,357$ 30,879,621$ 32,295,959$ 31,564,305$ 31,137,199$ 31,844,934$ 33,174,810$ 33,294,062$ 34,445,902$ Franchise taxes 2,435,803 2,654,701 2,816,111 2,606,248 2,783,279 2,598,074 2,646,394 2,841,025 3,327,739 2,955,114 Municipal sales tax and mixed beverage tax 16,931,180 18,781,043 17,256,272 17,610,781 18,969,870 20,076,478 22,659,917 26,623,661 30,090,614 29,047,285 Licenses, permits and fees 2,148,110 1,717,969 2,547,528 2,854,076 2,620,703 3,431,600 3,517,378 3,925,956 4,385,000 4,590,477 Charges for services 1,434,220 1,616,249 1,498,823 1,535,363 1,660,154 1,805,022 1,876,302 1,778,003 1,849,747 1,797,676 Fines and forfeitures 1,037,697 876,881 1,654,034 2,116,405 2,347,729 2,307,407 2,473,444 2,374,221 1,943,406 2,011,137 Grants 33,167 24,731 43,962 409,498 207,533 117,810 205,846 214,152 90,428 128,489 Capital recovery fees 974,815 317,948 267,036 295,987 645,022 435,406 794,976 474,172 866,782 1,237,552 Contributions 53,227 35,552 73,574 24,479 8,392 26,693 33,316 130,564 112,409 383,732 Interest earned 3,550,768 3,102,683 1,665,060 429,323 280,510 198,601 33,092 457,820 490,551 71,411 Miscellaneous 1,803,015 1,683,758 540,748 676,599 596,885 521,598 735,539 552,544 672,333 528,093 Total revenues 54,945,403 59,719,872 59,242,769 60,854,718 61,684,382 62,655,888 66,821,138 72,546,928 77,123,071 77,196,868 EXPENDITURES General government 6,594,256 6,962,493 7,433,576 7,773,116 8,175,858 7,756,647 8,617,226 8,629,250 8,974,058 9301750 Public safety 11,355,228 12,004,613 13,426,040 13,985,817 14,209,607 14,692,116 17,096,436 16,924,285 16,968,939 17376310 Public works 5,447,092 5,803,027 6,448,961 4,401,924 4,699,931 4,662,449 5,818,028 6,303,749 5,332,402 5483131 Culture and recreation 4,842,734 5,436,700 5,497,492 6,041,352 6,548,072 6,590,252 6,980,508 7,227,628 7,441,366 8456526 Intergovernmental 2,643,192 3,164,973 3,220,906 3,158,243 3,349,211 2,972,849 3,572,221 3,834,118 4,478,312 4,623,919 Capital outlay 6,122,129 15,589,764 23,837,990 21,636,017 17,852,536 11,072,944 17,097,340 14,623,962 21,349,324 8,658,067 Debt service Principal retirement 3,988,949 5,258,628 5,717,773 7,560,738 9,104,921 9,901,754 10,660,527 11,930,280 14,489,311 13,394,604 Interest and fiscal charges 5,255,636 5,355,582 5,505,799 5,987,246 5,607,918 5,659,876 4,839,491 4,982,567 3,894,535 3,796,740 Total expenditures 46,249,216 59,575,780 71,088,537 70,544,453 69,548,054 63,308,887 74,681,777 74,455,839 82,928,247 71,091,047 Excess (deficiency) of revenues over (under) expenditures 8,696,187 144,092 (11,845,768) (9,689,735) (7,863,672) (652,999) (7,860,639) (1,908,911) (5,805,176) 6,105,821 OTHER FINANCING SOURCES (USES) Sale of vehicles - - - - - - - - - - Proceeds from sale of property - 3,277 - - 4,849 - 80 1,521 3,271 - Proceeds from issuance of general obligation bonds - 13,323,260 18,425,000 7,210,000 7,765,000 8,545,000 11,765,000 4,380,000 - - Premium (Discount) on issuance of refunding bonds - 167,758 846,139 - - - - - - - Proceeds from issuance of sales tax revenue bonds - - - 3,245,000 - - - - - 24,450,000 Proceeds from issuance of refunding bonds - - - 19,325,790 - 9,690,000 20,830,000 23,400,000 - - Proceeds from capital lease obligation - - - - - - - - - - Premium (Discount) on issuance of general obligation bonds - - - 1,321,370 407,917 1,737,875 3,753,175 1,301,376 - 2,168,153 Payment to refund bond escrow agent - - - (20,120,845) - (10,788,860) (24,030,579) (25,547,122) - - Transfer from other funds 14,064,446 10,668,337 18,853,859 13,510,915 17,004,152 20,292,866 18,730,003 20,498,983 21,925,067 23,584,605 Transfer to other funds (13,788,851) (12,298,901) (18,514,349) (13,149,822) (18,212,322) (19,402,646) (18,214,528) (20,383,867) (22,156,907) (28,352,005) Total other financing sources (uses)275,595 11,863,731 19,610,649 11,342,408 6,969,596 10,074,235 12,833,151 3,650,891 (228,569) 21,850,753 NET CHANGE IN FUND BALANCES 8,971,782$ 12,007,823$ 7,764,881$ 1,652,673$ (894,076)$ 9,421,236$ 4,972,512$ 1,741,980$ (6,033,745)$ 27,956,574$ Debt service as a percentage of noncapital expenditures 23.0%24.1%26.2%28.3%28.4%29.1%25.9%27.7%29.1%27.0% Source: Comprehensive Annual Financial Report Fiscal Year CITY OF SOUTHLAKE, TEXAS TABLE 5 ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS (UNAUDITED) 97 Fiscal Year Real Property Personal Property Less: Tax- Exempt Property Total Taxable Assessed Value Total Direct Tax Rate 2007 4,738,937,144 313,555,615 458,538,254 4,593,954,505 0.46200 2008 5,215,549,424 373,905,985 665,209,399 4,924,246,010 0.46200 2009 5,469,445,428 419,329,000 563,799,909 5,324,974,519 0.46200 2010 5,705,149,612 434,998,249 579,515,687 5,560,632,174 0.46200 2011 5,597,281,840 422,882,032 585,644,425 5,434,519,447 0.46200 2012 5,640,517,144 449,611,387 581,725,777 5,508,402,754 0.46200 2013 5,841,369,884 438,836,614 631,016,684 5,649,189,814 0.46200 2014 5,935,122,961 588,389,191 638,106,472 5,885,405,680 0.46200 2015 6,341,625,915 614,607,452 756,399,951 6,199,833,416 0.46200 2016 6,635,586,201 542,023,423 1,039,819,893 6,137,789,731 0.46200 Source: Tarrant Appraisal District Estimated Market Value CITY OF SOUTHLAKE, TEXAS TABLE 6 DIRECT AND OVERLAPPING PROPERTY TAX RATES (PER $100 OF ASSESSED VALUE) LAST TEN FISCAL YEARS (UNAUDITED) 98 Fiscal Year Operating/ General Rate General Obligation Debt Service Total Direct Carroll Independent School District Tarrant County Tarrant County Hospital District Tarrant County College District 2007 0.31958 0.14242 0.46200 1.79500 0.271500 0.235397 0.13938 2008 0.31958 0.14242 0.46200 1.46500 0.266500 0.230397 0.13938 2009 0.32200 0.14000 0.46200 1.41500 0.264000 0.227897 0.13796 2010 0.33200 0.13000 0.46200 1.41500 0.264000 0.227897 0.13767 2011 0.33200 0.13000 0.46200 1.41500 0.264000 0.227897 0.13764 2012 0.33200 0.13000 0.46200 1.41500 0.264000 0.227897 0.14897 2013 0.34200 0.12000 0.46200 1.40000 0.264000 0.227897 0.14897 2014 0.34200 0.12000 0.46200 1.40000 0.264000 0.227897 0.14950 2015 0.34200 0.12000 0.46200 1.40000 0.264000 0.227897 0.14950 2016 0.36200 0.10000 0.46200 1.39500 0.264000 0.227897 0.14950 Source: Tarrant Appraisal District City Direct Rates Overlapping Rates CITY OF SOUTHLAKE, TEXAS TABLE 7 PRINCIPAL PROPERTY TAX PAYERS CURRENT YEAR AND FIVE YEARS AGO (UNAUDITED) 99 Taxpayer Taxable Assessed Value Percentage of Total City Taxable Assessed Valuea Taxpayer Taxable Assessed Value Percentage of Total City Taxable Assessed Valueb Verizon Wireless Texas LLC 172,818,555$ 2.79%Verizon Wireless Texas LLC 122,980,368 2.21% Town Square Ventures LP 141,692,722 2.29%Town Square Ventures LP 116,514,665$ 2.10% SLTS Grand Avenue/II LP 80,996,312 1.31%SLTS Grand Avenue LP 63,121,921 1.14% Southlake Land Holdings LP 56,153,054 0.91%Wyndham Properties Ltd 59,025,973 1.06% Wyndham Properties Ltd.54,803,383 0.88%Carroll/1709 Ltd 34,345,770 0.62% Carroll/1709 Ltd 50,236,877 0.81%Hobbs & Curry Family LP 29,920,453 0.54% Sabre Headquarters LLC 45,538,856 0.73%Maguire Partners-Solana LP 27,250,000 0.49% H & C Southlake Hilton LLC 31,208,142 0.50%Inland Western Southlake Corners Ltd 25,509,576 0.46% Forest Park Medical Center 29,435,986 0.47%Oncor Electric Delivery Co LLC 17,421,800 0.31% Inland Western Southlake Corners Ltd 22,492,599 0.36%Southlake Watermark Holding LP 15,941,384 0.29% Total 685,376,486$ 11.05%Total 512,031,910$ 9.21% Total Assessed Valuation 6,199,833,416 100.00%Total Assessed Valuation 5,560,632,174 100.00% Source: Tarrant Appraisal District Notes: aTaxpayers are assessed on January 1, 2015 (2015 tax year) for the 2016 fiscal year. bTaxpayers are assessed on January 1, 2010 (2010 tax year) for the 2011 fiscal year. 2016 2011 CITY OF SOUTHLAKE, TEXAS TABLE 8 AD VALOREM TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS (UNAUDITED) 100 Fiscal Year Taxes Levied for the Fiscal Year Amount Percentage of levy Delinquent Tax Collections Amount Percentage of levy 2007 20,065,968 19,106,661 95.22 292,211 19,398,872 96.68 2008 22,585,066 22,437,563 99.35 115,837 22,553,400 99.86 2009 24,474,501 24,239,946 99.04 107,676 24,347,622 99.48 2010 25,833,584 25,610,983 99.14 123,772 25,734,755 99.62 2011 25,497,367 25,297,255 99.22 168,912 25,466,166 99.88 2012 25,745,889 25,552,394 99.25 191,156 25,743,550 99.99 2013 25,896,127 25,762,457 99.48 413,995 26,176,451 101.08 2014 26,945,723 26,865,897 99.70 424,745 27,290,642 101.28 2015 27,652,417 27,556,790 99.65 102,506 27,659,296 100.02 2016 28,811,728 28,684,131 99.56 86,553 28,770,684 99.86 Source: Tarrant County Tax Office Total Collections Collected within the Fiscal Year of the Levy CITY OF SOUTHLAKE, TEXAS TABLE 9 RATIO OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS (UNAUDITED) 101 Fiscal Year General Obligation Bonds Certificates of Obligation Revenue Bonds Tax Notes Capital Leases 2007 26,698,353 55,109,295 23,860,000 - 142,833 2008 26,090,410 64,856,870 22,785,000 - 61,230 2009 25,468,753 79,315,754 21,655,000 - - 2010 61,889,954 42,928,760 23,720,000 - - 2011 57,467,696 44,043,985 25,690,000 - - 2012 55,747,995 38,971,935 30,360,045 - - 2013 49,975,889 44,402,760 28,910,000 - - 2014 45,355,674 41,553,855 27,150,000 - - 2015 40,847,363 33,182,855 25,540,000 - - 2016 40,733,282 29,511,905 48,330,000 - - Note:Details regarding the City's outstanding debt can be found in the notes to the financial statements. aSee Table 13 for personal income and population data. Governmental Activities CITY OF SOUTHLAKE, TEXAS TABLE 9 (CONT.) RATIO OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS (UNAUDITED) 102 General Obligation Bonds Certificates of Obligation Revenue Bonds Contract Revenue Obligations Total Primary Government Percentage of Personal Incomea Per Capitaa 25,957,462 13,961,204 - 5,194,706 150,923,853 10.76 5,873 25,511,724 19,103,130 - 4,393,444 162,801,808 11.31 6,238 24,644,419 23,516,072 - 3,553,680 178,153,678 12.32 6,685 29,240,686 20,755,540 - 2,665,900 181,200,840 12.40 6,818 26,907,806 23,420,800 - 2,060,000 179,590,287 12.29 6,752 24,692,508 23,126,850 1,790,000 1,755,000 176,444,333 11.44 6,591 23,163,624 24,660,985 - 1,435,000 172,548,258 9.81 6,372 18,923,955 28,009,860 - 1,100,000 162,093,344 10.93 5,910 15,422,270 30,035,860 - 750,000 145,778,348 9.03 5,238 12,974,232 29,143,202 - 385,000 161,077,621 9.30 5,694 Business-Type Activities CITY OF SOUTHLAKE, TEXAS TABLE 10 RATIO OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS (UNAUDITED) 103 Fiscal Year General Obligation Bonds Certificates of Obligation Total Less: Available Debt Service Funds Net General Bonded Debt Percentage of Actual Taxable Value of Propertya Per Capitab 2007 52,655,815 69,070,499 121,726,314 7,218,441 114,507,873 2.65%4,736 2008 51,602,134 83,960,000 135,562,134 8,394,778 127,167,356 2.75%5,194 2009 50,113,172 102,831,826 152,944,998 9,997,763 142,947,235 2.87%5,739 2010 91,130,640 63,684,300 154,814,940 10,768,763 144,046,177 2.78%5,826 2011 84,375,502 67,464,785 151,840,287 11,885,706 139,954,581 2.79%5,708 2012 80,440,503 62,098,785 142,539,288 12,657,819 129,881,469 2.59%5,325 2013 73,139,513 69,063,745 142,203,258 12,406,902 129,796,356 2.52%5,251 2014 64,279,629 69,563,715 133,843,344 9,809,483 124,033,861 2.27%4,880 2015 56,269,633 63,218,715 119,488,348 8,735,479 110,752,869 1.93%4,293 2016 53,707,514 58,655,107 112,362,621 6,899,109 105,463,512 1.83%3,972 Note:Details regarding the city's outstanding debt can be found in the notes to the financial statements. aSee Table 5 for property value data. bSee Table 13 for population data. General Bonded Debt Outstanding CITY OF SOUTHLAKE, TEXAS TABLE 11 DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT AS OF SEPTEMBER 30, 2016 (UNAUDITED) 104 Governmental Unit Gross Bonded Debt Percentage of Debt Applicable to Area Share of Overlapping Debt Debt repaid with property taxes Carroll ISD 203,421,047$ 93.14%189,466,363$ Denton County 608,895,000 0.19%1,156,901$ Grapevine-Colleyville ISD 470,887,687 1.49%7,016,227$ Keller ISD 728,705,387 2.72%19,820,787$ Northwest ISD 733,049,556 0.61%4,471,602$ Tarrant County 344,185,000 4.54%15,625,999$ Tarrant County Hospital District 22,335,000 4.54%1,014,009$ Subtotal, overlapping debt 238,571,887 City of Southlake (direct debt)114,059,529$ 100.00%114,059,529 Total direct and overlapping debt 352,631,416$ Source:Debt outstanding data provided by each school district and county. Percentage of debt provided by the Municipal Advisory Council of Texas. CITY OF SOUTHLAKE, TEXAS TABLE 12 PLEDGED-REVENUE COVERAGE LAST TEN FISCAL YEARS (UNAUDITED) 105 Fiscal Year Total Revenuesa Less: Operating Expensesb Net Available Revenue Annual Requirementc Times Coverage 2007 22,175,755 11,935,143 10,240,612 5,294,702 1.93 2008 22,886,077 11,409,156 11,476,921 5,892,881 1.95 2009 22,545,251 11,637,103 10,908,148 6,403,274 1.70 2010 21,702,800 12,153,476 9,549,324 5,832,842 1.64 2011 24,170,666 14,333,095 9,837,571 5,825,610 1.69 2012 23,723,156 15,869,436 7,853,720 4,394,749 1.79 2013 24,852,430 14,846,831 10,005,599 4,894,720 2.04 2014 24,702,585 17,270,262 7,432,323 5,120,685 1.45 2015 26,112,528 18,238,461 7,874,067 5,335,396 1.48 2016 26,987,100 19,424,610 7,562,490 5,466,814 1.38 Note:aIncludes operating and non-operating revenues. bIncludes operating expenses minus depreciation plus transfers out. cIncludes principal and interest. Water and Sewer System Revenue Bonds CITY OF SOUTHLAKE, TEXAS TABLE 13 DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN CALENDAR YEARS (UNAUDITED) 106 Year Estimated Populationa Personal Income Per Capita Personal Income School Enrollmentc Unemployment Rated 2007 25,700 1,403,205,300 54,599 7,831 3.6% 2008 26,100 1,439,295,522 55,145 7,900 4.5% 2009 26,650 1,446,339,035 54,272 7,852 6.6% 2010 26,575 1,461,343,140 54,989 7,745 6.7% 2011 26,600 1,461,336,252 54,937 7,710 6.8% 2012 26,770 1,542,009,658 57,602 7,692 5.3% 2013 27,080 1,758,105,132 64,923 7,665 5.6% 2014 27,425 1,483,496,607 54,093 7,864 4.4% 2015 27,833 1,613,950,961 57,987 7,884 3.5% 2016 28,290 1,732,874,762 61,254 8,177 3.5% Sources:aNorth Central Texas Council of Governments 2003-2009:2000 census adjusted 2010:2010 census cCarroll Independent School District dTexas Workforce Commission CITY OF SOUTHLAKE, TEXAS TABLE 14 PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO (UNAUDITED) 107 Employera Employeesa Percentage of Total City Employment Employera Employeesa Percentage of Total City Employment Sabre Holdings 3,600 26.73%Sabre Holdings 3,000 25.62% Carroll ISD 1,100 8.17%Carroll ISD 1,037 8.86% Gateway Church 824 6.12%Tri Dal Ltd.450 3.84% Verizon Wireless 750 5.57%Verizon Wireless 450 3.84% Keller Williams 693 5.15%City of Southlake 275 2.35% Cheesecake Factory 200 1.71% Costco Wholesale 180 1.54% Hilton/Southlake Town Square 180 1.54% Tom Thumb 140 1.20% Total 6,967 51.73%Total 5,912 50.49% Total Southlake Daytime Employeesb 13,467 Total Southlake Daytime Employeesb 11,709 Source: aCity of Southlake Economic Development bTexas Workforce Commission 2016 2007 CITY OF SOUTHLAKE, TEXAS TABLE 15 FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS (UNAUDITED) 108 Function/Program 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 General Government and Administration 44.50 47.75 48.75 48.75 50.75 45.75 49.00 55.75 52.00 59.00 Public Safety 104.50 107.50 113.50 113.50 113.50 119.50 138.45 140.45 140.95 140.95 Public Works 25.50 26.50 25.00 24.50 24.50 29.70 29.95 27.25 33.25 28.25 Culture and Recreational 60.50 61.00 61.50 61.50 61.50 62.15 62.15 62.15 65.65 71.40 Water and Sewer 24.80 28.50 30.50 29.50 29.50 29.30 29.30 29.50 29.50 30.25 Community Development 23.30 24.50 24.00 23.00 21.00 21.00 21.00 23.00 23.00 23.00 Economic Development 3.00 3.00 4.00 3.00 3.00 3.50 3.50 4.00 4.00 4.00 Total 286.10 298.75 307.25 303.75 303.75 310.90 333.35 342.10 348.35 356.85 Source:City Budget Fiscal Year CITY OF SOUTHLAKE, TEXAS TABLE 16 OPERATING INDICATORS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS (UNAUDITED) 109 Function/Program 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Public Safety Police Number of Employees 58 58 56 56 54 54 53 68 68 68 Number of Violations (Citations)13,413 12,359 15,091 16,213 17,878 14,062 21,497 32,641 30,451 14,858 Number of Arrests 1,010 1,000 927 1,045 886 1,420 1,079 1,284 1,095 513 Number of Alarm callsa 3,184 3,199 3,666 3,208 3,922 4,267 3,889 3,087 3,497 3,673 Fire Number of Employees 40 40 51 50 50 56 68 72 72 73 Number of Fire runs 974 937 844 896 1,058 990 1,215 1,245 1,220 760 Number of EMS runs 968 927 913 960 1,246 985 1,356 1,492 1,448 1,745 Number of Hazardous materials runs 80 80 71 84 80 44 80 56 43 95 Number of Alarm calls - - 401 450 460 392 448 461 501 608 Development Services Streets maintained (miles)N/A N/A 225 226 228 228 245 268 204 209 Streets crack sealed (blocks)N/A 60 64 78 92 117 121 94 N/A N/A Roadway signage replaced/installed 370 591 312 258 292 255 216 188 N/A 568 Asphalt repairs (tons)3,059 4,767 683 885 1,045 1,833 2,414 2,802 4,849 4,667 Concrete repairs to roads/sidewalks (cu. yds.)563 951 551 366 344 288 294 240 2,421 308 Right-of-way maintenance (miles)12,744 7,335 450 450 456 456 484 484 N/A N/A Building Permits Issuedb 2,975 2,975 2,546 2,772 2,709 2,727 2,917 3,051 2,979 2,703 Planning & Zoning cases heard 193 157 97 78 65 85 121 143 136 190 Cultural and Recreational Parks and Recreation Park maintain & operate per acre 800 800 800 800 800 800 800 1,205 1,200 1,106 Participants in Leisure Service Programs 12,493 13,834 12,471 14,397 13,579 12,259 13,170 6,227 6,200 8,687 Participants in Special Events 26,000 36,950 39,500 40,200 45,150 37,546 46,500 47,000 60,000 66,000 Participants in Senior Center Programs 6,129 8,111 8,201 8,255 8,255 10,401 10,609 4,935 4,900 8,868 Library Volumes in Collection 52,293 54,450 54,950 55,950 52,350 51,790 50,250 46,781 44,971 45,416 Patrons 16,721 16,174 18,559 19,446 18,889 20,902 21,622 16,662 16,838 13,461 Water and Sewer Number of Water Consumers 8,966 9,150 9,207 9,379 9,466 9,543 9,765 9,825 10,183 10,581 Number of Sewer accounts 6,735 6,945 7,075 7,296 7,431 7,522 7,918 7,770 8,167 8,470 Line inspections (feet)23,983 14,025 84,000 240,000 190,000 190,000 190,000 217,000 1,086,624 789,266 Water meters installed/repaired/replaced 327 279 1,158 801 1,158 1,047 565 745 1,284 10,566 Transmitters installed/replaced 4,209 1,000 115 235 77 115 140 610 N/A 10,566 Gallons purchased from Ft. Worth (millions)2,831,889 3,711,816 3,738,063 4,191,077 4,456,921 3,573,648 3,472,212 3,220,075 3,069,971 2,904,048 Gallons distributed (millions)3,055,213 4,195,407 3,698,634 3,850,792 4,112,056 3,241,014 3,125,358 2,964,457 3,069,971 2,935,818 Maximum Storage Capacity (million of gallons)20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 Source:City Departments Notes:N/A Data not available aPolice and Fire alarm calls combined 2002 - 2008. bIncludes residential, commercial, and miscellaneous (e.g. pools, fences) permits. Fiscal Year CITY OF SOUTHLAKE, TEXAS TABLE 17 CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS (UNAUDITED) 110 Function/Program 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Public Safety Police Stations 2 2 2 2 2 2 2 3 3 3 Police Patrol Units 17 19 26 24 24 24 23 26 25 25 Fire Stations 2 2 2 2 2 2 2 3 3 3 Police Motorcycle Units 7 7 6 6 6 6 5 5 5 5 Cultural and Recreational Parks 16 17 18 18 18 18 18 18 18 18 Playgrounds 4 4 4 4 4 3 3 5 7 6 Dog Park 1 1 1 1 1 1 1 1 1 1 Senior Center 1 1 1 1 1 1 1 1 1 1 Tennis Courts 15 15 15 21 21 21 21 21 21 21 In-line hockey rink 1 1 1 1 1 1 1 1 1 1 Ballfields 16 16 13 21 21 21 21 44 32 27 Soccer Fields 17 17 17 17 17 17 17 17 13 12 Nature Center - 1 1 1 1 1 1 1 1 1 Water and Sewer Water Mains (miles)220 220 236 241 255 258 206 294 285 290 Lift Stations 15 15 15 15 15 15 15 14 13 13 Sanitary Sewer Mains (miles 200 200 184 188 193 195 206 209 206 209 Drainage, ditches/creeks (m 150 150 85 85 85 89 91 91 36 36 Fire hydrants 2,400 2,400 2,171 2,227 2,374 2,902 2,395 2,486 2,594 2,643 Water valves - - 5,509 5,680 6,690 7,614 6,388 6,686 N/A 7,154 Source:City Departments aBaseball, softball, soccer and multipurpose fields combined through 2014 Fiscal Year