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Item 4C - MemoCITY OF SOUTHLAKE MEMORANDUM March 11, 2024 To: Alison Ortowski, City Manager From: Sharen Jackson, Chief Financial Officer Item 4C Subject: Approve the 2023 Annual Comprehensive Financial Report Action Requested: Approval of the September 30, 2023, Annual Comprehensive Financial Report Background Information: The purpose of this item is to seek City Council approval of the 2023 Annual Comprehensive Financial Report. • The 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 2023. • The City received an unmodified ("clean") opinion on the City's financial statements for the year ended September 30, 2023. • Jennifer Ripka, Partner, will present the Annual Comprehensive Financial Report along with the Single Audit Report which includes reporting on internal controls to the Audit Committee on Tuesday during the committee meeting scheduled at 5:00 p.m. prior to the City Council meeting. Financial Considerations: None required Strategic Link: F1 — Safeguarding the public trust through a commitment to thoughtful planning and responsible, conservative financial management. Citizen Input/ Board Review: None required. Legal Review: None required. Alternatives: None required. Supporting Documents: 2023 Annual Comprehensive Financial Report Staff Recommendation: Approval of the 2023 Annual Comprehensive Financial Report Will include final FY 2023 ACFR file when received from the auditors. CITY OF S4UTHLAKE TEXAS 19 ANNUAL COMPREHENSIVE FINANCIAL REPORT For the Fiscal Year Ended September 3 , 2 2,� i"- id Pk 4L ti• a .4 ,, � 41 CITYOFSOUTHL AKE.00M City of Southlake, Texas Annual Comprehensive Financial Report For the Fiscal Year Ended September 30, 2023 As Prepared by Sharen Jackson, CPA Chief Financial Officer City of Southlake Annual Comprehensive Financial Report For the Fiscal Year Ended September 30, 2023 Table of Contents Exhibit Page INTRODUCTORY SECTION Letter of Transmittal v Certificate of Achievement xi Organizational Chart A List of Principal Officials xiii FINANCIAL SECTION Independent Auditor's Report Management's Discussion and Analysis Basic Financial Statements Government -Wide Financial Statements Statement of Net Position 1 23 Statement of Activities 2 24 Fund Financial Statements Governmental Funds Financial Statements Balance Sheet 3 28 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 4 30 Statement of Revenues, Expenditures, and Changes in Fund Balance 5 32 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance to the Statement of Activities 6 34 Proprietary Funds Financial Statements Statement of Net Position 7 37 Statement of Revenues, Expenses, and Changes in Net Position 8 38 Statement of Cash Flows 9 39 Fiduciary Fund Financial Statements Statement of Fiduciary Net Position 10 43 Statement of Changes in Fiduciary Net Position 11 44 Notes to the Basic Financial Statements 47 Required Supplementary Information Budgetary Comparison Schedule - General Fund A-1 92 BudgetaryComparison Schedule - Southlake Parks Development Corporation Operating Fund A-2 93 BudgetaryComparison Schedule - Community Enhancement Development Corporation Special Revenue Fund A-3 94 Notes to Budgetary Comparison Schedules 95 Schedule of Changes in Net Pension Liability and Related Ratios - TMRS A-4 98 Schedule of Pension Contributions - TMRS A-5 100 Schedule of Changes in Net OPEB Liability (Asset) and Related Ratios - Southlake Net OPEB (Asset) Liability for Health Insurance A-6 101 Schedule of Contributions - Southlake Net OPEB Liability (Asset) for Health Insurance A-7 102 Schedule of Changes in the Total OPEB Liability and Related Ratios - TMRS - Supplemental Death Benefits A-8 103 Schedule of OPEB Contributions - TMRS - Supplemental Death Benefits A-9 104 Condition Rating of Street System A-10 105 City of Southlake Annual Comprehensive Financial Report For the Fiscal Year Ended September 30, 2023 Table of Contents - Continued Exhibit Page Combining and Individual Fund Financial Statements and Schedules Major Governmental Funds Budgetary Comparison Schedule - General Obligation Debt Service Fund B-1 109 Nonmajor Governmental Funds Combining Balance Sheet - Nonmajor Governmental Funds C-1 112 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance - Nonmajor Governmental Funds C-2 116 Budgetary Comparison Schedule - Police Special Revenue Fund C-3 120 Budgetary Comparison Schedule - Parks and Recreation Special Revenue Fund C-4 121 Budgetary Comparison Schedule - Parks Dedication Special Revenue Fund C-5 122 Budgetary Comparison Schedule - Crime Control District Special Revenue Fund C-6 123 Budgetary Comparison Schedule - Hotel Occupancy Special Revenue Fund C-7 124 Budgetary Comparison Schedule - Storm Water Utility Special Revenue Fund C-8 125 Budgetary Comparison Schedule - Court Security Special Revenue Fund C-9 126 Budgetary Comparison Schedule - Court Technology Special Revenue Fund C-10 127 Budgetary Comparison Schedule - Library Special Revenue Fund C-11 128 Budgetary Comparison Schedule -Red Light Camera Special Revenue Fund C-12 129 Budgetary Comparison Schedule - Commercial Vehicle Enforcement C-13 130 Budgetary Comparison Schedule - Tax Increment Financing District Special Revenue Fu C-14 131 Budgetary Comparison Schedule - Southlake Parks Development Corporation Debt Service Fund C-15 132 Budgetary Comparison Schedule - Community Enhancement Development Corporation Debt Service Fund C-16 133 Table Page Stastical Section Net Position By Component 1 138 Changes in Net Position 2 140 Fund Balances, Governmental Funds 3 142 Changes in Fund Balances, Governmental Funds 4 143 Assessed Value and Estimated Actual Value of Taxable Property 5 144 Direct and Overlapping Property Tax Rates 6 145 Principal Property Tax Payers 7 146 Ad Valorem Tax Levies and Collections 8 147 Ratio of Outstanding Debt By Type 9 148 Ratio of General Bonded Debt Outstanding 10 149 Direct and Overlapping Governmental Activities Debt 11 150 Pledged -Revenue Coverage - Southlake Parks Development Corporation 12 151 Pledged -Revenue Coverage - Southlake Community Enhancement and Development Corporation 13 152 Demographic and Economic Statistics 14 153 Principal Employers 15 154 Full -Time Equivalent City Government Employees By Function/Program 16 155 Operating Indicators By Function/Program 17 156 Capital Asset Statistics By Function/Program 18 157 Introductory Section IVA CITY OF SOUTHLAKE ig Finance Department March 14, 2024 To the Honorable Mayor, Councilmembers and Citizens of the City of Southlake, Texas: It is with pleasure that we submit to you the Annual Comprehensive Financial Report (ACFR) of the City of Southlake for the fiscal year ended September 30, 2023. 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. 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. Weaver & Tidwell, LLP, Certified Public Accountants, has issued an unmodified ("clean") opinion on the City's financial statements for the fiscal year ended September 30, 2023. The Independent Auditor's Report is located at the front of the financial section of this report. Management's discussion and analysis (MD&A) immediately follows the Independent Auditor's Report and provides a narrative introduction, overview, and analysis of the basic financial statements. The MD&A complements this letter of transmittal and the two should be read in conjunction with each other. PROFILE OF THE GOVERNMENT General Information Although Southlake has been a high -growth community for years, when the first settlers arrived in 1845 they found only a vast area of land and trees where the grand prairie and cross timbers merged. As the site of the first permanent settlement in Tarrant County, a portion of present-day Southlake was homesteaded in 1866, which consisted of 360 acres. Keeping with the time, the primary industry was agriculture. Farmers grew peanuts, grains and cotton, and families raised their own livestock. 1400 Main Street, Suite 420, Southlake, TX 76092 (817) 748-8345 Innovation 0 Integrity 0 Accountability 0 Commitment to Excellence 0 Teamwork v 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. By the 2000s, Southlake had become a boom-burb with the population tripling to almost 22,000 and was well known for its picturesque countryside, exemplary school district and luxury neighborhoods. Today, the City's population stands at just under 31,300 and is estimated to reach 34,000 residents by the year 2050. 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 and storm drainage maintenance, parks operation and maintenance, recreation programming and facilities, 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. Component Units The financial reporting entity includes all the funds of the primary government, as well as all 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 City's financial statements include the following blended component units: The Southlake Parks Development Corporation ("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 Southlake Crime Control and Prevention District (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. vi 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 the Southlake Community Enhancement and Development Corporation ("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 in this report is financial information for the Tax Increment Financing District (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. Additional information on these legally separate entities can be found in the notes to the financial statements (see Note 1). ECONOMIC CONDITION AND OUTLOOK 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, FM 1709, and FM 1938, the regional road arterials, serve the City. Over 2,600 businesses, including 77 new businesses for FY 2023, from many industries including professional, scientific, and technical services, healthcare and social services, hospitality, retail, and banking and financial services have come together to make Southlake a full -service business community. Sabre, home of Travelocity.com, is the City's largest employer with approximately 2,000 employees and Verizon Wireless' Network Control Center takes advantage of high-tech infrastructure to manage all wireless communications west of the Mississippi River from its Southlake location. Housina Permits There were 73 single family residential permits issued in fiscal year 2023 with an average new home construction value, excluding land value, of approximately $1,425,000. As noted on the chart below, the City experienced a decrease in residential home construction. Property Taxes Total certified taxable value for commercial and residential property was $9.065 billion, an increase of $844 million and a 10.3 percent increase from the prior year. New construction added $129 million to the tax roll. As the City's economy has grown, it has been possible to implement twelve tax relief measures since 2009. The City has provided for maximum homestead exemption relief for homeowners for many years and is including the maximum allowable 20% exemption for FY 2023. vii In FY 2023, the City incorporated a tax rate of $0.36 per $100 valuation, reducing the rate by three cents from operations. The tax rate of $0.36 is split between General Fund operations and debt service. The allocation for FY 2023 is $0.295 for general operations and $0.065 for debt service. Sales Taxes The City of Southlake experienced an increase in sales tax collections during the fiscal year as indicated on the chart. Sales tax collections totaled $45,369,619 in FY 2023, an 8.36% increase from the previous year. Sales Tax Revenue 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 2019 2020 2021 2022 2023 ■ General ■ SPDC ■ Crime ■ CEDC Future Economic Outlook The City's dedication to quality development, sound fiscal policies, and effective strategic management has made it an exemplary community in the Dallas -Fort Worth region. With impeccably built neighborhoods, a successful downtown, and a diverse business community, the City offers an enhanced quality of life for both residents and visitors. During 2023, 19 new construction commercial permits were issued by the City representing over 462,008 square feet of future retail/office space. The following projects have been approved for development in the City: • The Constellation Southlake development will include four (4) large warehouse buildings totaling approx. 546,330 sq. ft. • The Wheelhouse will include two (2) single -story buildings totaling approx. 19,461 sq. ft. for office showroom with retail sales and automobile and motorcycle sales and/or service uses. Additionally, The Wheelhouse will include three (3) single -story buildings totaling approx. 47,629 sq. ft. The City has the following development projects under construction: • Next Century Health Care Plaza will include six (6) single -story medical office buildings totaling approx. 50,000 sq. ft. • Carillon Parc is a 42-acre mixed -use development featuring a luxury boutique hotel, office spaces, upscale residences, advanced health and wellness offerings, dining, and luxury shopping as well as an expansive park. • Mustang Business Park will include three (3) distribution warehouse buildings totaling approx. 340,180 sq. ft. on approx. 26.27 acres. • Capital Grille plans to open an approx. 9,447 sq. ft. restaurant within an existing building in the development on 7.25 acres. viii During FY 2023, the following significant projects were completed which will have impact the local economy going forward: • Southlake Town Square's second Class -A office building opened in FY 2023. The new five -story, 151,000 square -foot office building was built adjacent to the existing Granite Place One building that opened in 2016. • The XO Marriage Center will include a three-story, approx. 32,190 sq. ft. building with office, assembly, and studio uses. • GMI Southlake will include 3 flex light industrial/corporate office buildings totaling approx. 58,780 sq. ft. • Methodist Southlake Hospital Emergency Department expansion will include a one-story, approximately 6,000 sq. ft. addition to the existing hospital building to provide new nuclear medicine facilities. Financial Management Principles The City has strong financial management principles that provide the framework for 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. 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 annual comprehensive financial report, whose contents conform to program standards. Such Annual Comprehensive Financial Report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. The City of Southlake received a Certificate of Achievement for the year ended September 30, 2022, and believes our current report conforms to the Certificate of Achievement program requirements, and we are submitting it to GFOA. ix In addition, the City also received the GFOA's Distinguished Budget Presentation award for its annual budget dated October 1, 2022. 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 Chief Financial Officer x Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Southlake Texas For its Annual Comprehensive Financial Report For the Fiscal Year Ended September 30, 2022 r M� Lill = Executive Director/CEO xi CITE' OF SOUTH LAKE ORGANIZATIONAL TRUCTURE I mp I City SK li HUMA14 FiF1AMGE RESOUIICu IMFOWATION PWORMANCS Tc7cHwOIGGX i AXAGEA&M kj it I I I III � Ik hL xii City of Southlake, Texas List of Principal Officials September 30, 2023 John Huffman Mayor Shawn McCaskill Mayor Pro Tern Kathy Talley Deputy Mayor Pro Tern Randy Williamson Council Member Randy Robbins Council Member Ronell Smith Council Member Amy Torres-Lepp Council Member Alison Ortowski City Manager Amy Shelley City Secretary Sharen Jackson Chief Financial Officer Daniel Cortez Director of Economic Development/Tourism Robert Cohen Director of Public Works David Miller Director of Community Services Stacey Black Director of Human Resources Dennis Killough Director of Planning/Development Pilar Schank Director of Communications Blair Halbert Director of Information Technology James Brandon Police Chief Michael Starr Fire Chief XIV Financial Section weaver Independent Auditor's Report To the Honorable Mayor and Members of City Council and Management of the City of Southlake, Texas Report on the Audit of the Financial Statements Opinions We have audited the financial statements of the governmental activities, the business -type activities, each major fund and the aggregate remaining fund information of the City of Southlake, Texas (City), as of and for the year ended September 30, 2023, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. In our opinion, the accompanying financial statements 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, 2023, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Emphasis of Matter As discussed in Note 1 to the basic financial statements, during the year ended September 30, 2023, the City implemented Governmental Accounting Standards Board (GASB) Statement No. 96, Subscription - Based Information Technology Arrangements. Our opinions are not modified with respect to this matter. Responsibilities of Management for the Financial Statements The City's management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City's ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Weaver and Tidwell, L.L.P. 2300 North Field Street, Suite 1000 1 Dallas, Texas 75201 Main: 972.490.1970 3 CPAs AND ADVISORS I WEAVER.COM The Honorable Mayor and Members of City Council and Management of the City of Southlake, Texas Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with GAAS and Government Auditing Standards, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit 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 City's internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City's ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control -related matters that we identified during the audit. Required Supplementary Information Accounting principles generally accepted in the United States of America require that management's discussion and analysis and the required supplementary information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information is the responsibility of management and, 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 GAAS, 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. 4 The Honorable Mayor and Members of City Council and Management of the City of Southlake, Texas Supplementary 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 Combining and Individual Nonmajor Fund Financial Statements and Schedules are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Combining and Individual Nonmajor Fund Financial Statements and Schedules are the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic 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 GAAS. In our opinion, the other supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Information Included in the Annual Comprehensive Financial Report (ACFR) Management is responsible for the other information included in the ACFR. The other information comprises the introductory and statistical sections but does not include the basic financial statements and our auditor's report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 14, 2024 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 solely 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 the effectiveness of the City's 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, 2024 5 Management's Discussion and Analysis 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 consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages v-x of this report. 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, 2023 by $784,978,302 (net position). Of this amount, $128,848,839 (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 $45,174,1 16. This increase can be largely attributed to a rise in sales tax revenue and investment income. • As of September 30, 2023, the City's governmental funds reported combined ending fund balances of $200,115,933. Of this amount, $54,317 is reported as nonspendable, $121,781,095 is restricted by an outside source, $1,658,817 is committed for future uses, $59,027,095 is assigned by management for specified purposes, and $17,594,609 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 $17,594,609 or 32.2% of total General Fund expenditures. • At the end of the current fiscal year, the City of Southlake outstanding debt totals $129,081,119 a net increase of $20,195,737 from the previous year. This increase was largely the result of significant differences between projected and actual investment earnings with the City's pension plan and the issuance of tax notes during the year. 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 includes supplementary information intended to furnish additional detail to support the basic financial statements themselves. 0 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, wastewater collection and solid waste collection and disposal. The government -wide financial statements are found on pages 23-24 of this report. 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. IN 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 26 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, and Community Enhancement Development Corporation Special Revenue 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 28-24 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. 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 vehicle and equipment replacement. Because these services predominantly benefit the governmental rather than business -type functions, they have been included within the governmental activities in the government -wide financial statements. Proprietary fund financial statements provide the same type of information as the government -wide financial statements, only in more detail. The proprietary funds financial statements can be found on pages 37-39 of this report. Fiduciary funds - the City presents one trust fund, the Southlake OPEB Liability Trust Fund, which accounts for the funding of post -employment healthcare benefits for retirees of the City and their dependents. The financial statements for the fiduciary funds can be found on pages 43-44 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 47-87 of this report. GOVERNMENT -WIDE FINANCIAL ANALYSIS As noted earlier, net position over time may serve as a useful indicator of the City's financial position. As of September 30, 2023, the City's assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $784,978,302 (net position), at the close of the most recent fiscal year. The largest portion of the City's net position, $525,807,105, reflects its investment in capital assets (land and improvements, building, infrastructure, machinery and equipment, and right -to -use assets net of accumulated depreciation and amortization); less any related debt used to acquire those assets that is still outstanding. The City uses these assets to provide services to its citizens; consequently, these assets are not available for future spending. Although the City reports its capital assets net of related debt, the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Governmental Activities net position increased by $32,727,308. This can be largely attributed to higher levels of sales tax revenues and interest income received by the City which were due to sharp inclines in inflation and higher interest rates. Business -type Activities net position increased by $12,446,808. The majority of this change can be attributed to a continued increase in demand forwater as the region experienced significantly less rainfall than average for FY 2023 and record high temperatures. This change can also be attributed to Interest and investment earnings which increased by over $2.5 million, with rising interest rates. The following analysis highlights the net position as of September 30, 2023 and 2022: Governmental Activities Business -type Activities Totals 2023 2022 2023 2022 2023 2022 Current and other assets $ 228,001,169 $ 190,955,229 $ 79,307,211 $ 69,996,562 $ 307,308,380 $ 260,951,791 Capital assets 516,100,285 508,388,715 98,690,072 97,474,702 614,790,357 605,863,417 Total assets 744,101,454 699,343,944 177,997,283 167,471,264 922,098,737 866,815,208 Deferred outflows of resources 13,228,194 4,961,219 1,081,723 580,775 13,995,534 5,541,994 Long-term liabilities 101,619,386 79,872,374 27,461,733 29,013,008 129,081,119 108,885,382 Other liabilities 14,759,356 9,782,068 5,304,624 4,646,604 20,063,980 14,428,672 Total liabilities 116,378,742 89,654,442 32,766,357 33,659,612 149,145,099 123,314,054 Deferred inflows of resources 1,975,158 8,402,281 310,095 836,681 1,970,870 9,238,962 Net position: Net investment in capital assets 450,639,461 444,246,656 75,167,644 77,774,937 525,807,105 522,021,593 Restricted 121,858,264 99,360,585 8,464,094 9,877,167 130,322,358 109,237,752 Unrestricted 66,478,023 62,641,199 62,370,816 45,903,642 128,848,839 108,544,841 Total net position $ 638,975,748 $ 606,248,440 $ 146,002,554 $ 133,555,746 $ 784,978,302 $ 739,804,186 12 The following analysis highlights the changes in net position for the year ended September 30, 2023 and 2022: Revenues: Program revenues: Charges for services Operating grants and contributions Capital grants and contributions General revenues: Taxes Investment earnings Miscellaneous Gain on sale of capital assets Total revenues Expenses: General government Public safety Public works Culture and recreation Interest on long-term debt Water and sewer Total expenses Increases in net position before transfers Transfers Change in net position Net position, beginning Change in accounting principle Net position, beginning, as restated Net position, ending Governmental Activities Business -type Activities Totals 2023 2022 2023 2022 2023 2022 $ 11,629,939 $ 11,524,968 $ 37,630,965 $ 37,241,976 $ 49,260,904 $ 48,766,944 825,770 8,736,294 - - 825,770 8,736,294 2,382,770 2,653,556 2,064,296 1,376,002 4,447,066 4,029,558 93,889,807 88,105,225 - - 93,889,807 88,105,225 7,934,301 (475,934) 2,594,308 (171,020) 10,528,609 (646,954) 512,725 804,354 - 398,399 804,354 4,156 - - - 4,156 - 117,179,468 111,348,463 42,289,569 38,446,958 159,354,711 149,795,421 19,837,190 20,685,238 - - 19,837,190 20,685,238 26,658,917 24,915,801 26,658,917 24,915,801 12,108,564 10,111,585 12,108,564 10,111,585 25,112,091 16,970,272 24,997,765 16,970,272 2,071,867 1,979,546 - - 2,071,867 1,979,546 - - 28,506,292 28,397,036 28,506,292 28,397,036 85,788,629 74,662,442 28,506,292 28,397,036 114,180,595 103,059,478 31,390,839 36,686,021 13,783,277 10,049,922 45,174,116 46,735,943 1,336,469 1,360,830 (1,336,469) (1,360,830) - - 32,727,308 38,046,851 12,446,808 8,689,092 45,174,116 46,735,943 606,248,440 567,799,031 133,555,746 124,866,654 739,804,186 692,665,685 - 402,558 - - - 402,558 606,248,440 568,201,589 133,555,746 124,866,654 739,804,186 693,068,243 $ 638,975,748 $ 606,248,440 $ 146,002,554 $ 133,555,746 $ 784,978,302 $ 739,804,186 13 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, unassigned 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 $200,115,933. Approximately 8.8% or $17,594,609 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 to indicate that it is (1) not in spendable form, $54,317; (2) restricted for particular purposes, $121,781,095; (3) committed for particular purposes, $1,658,817; or (4) assigned for particular purposes, $59,027,095. 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 $17,594,609. 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 General Fund fund balance represents 32.2% of total General Fund expenditures, while total General Fund fund balance represents 89.7 % of total General Fund expenditures. The fund balance of the General Fund decreased $143,958 during the current fiscal year. This net decrease was the result of several factors including (1) sales tax revenues increased by over $1.7 million due to inflation spikes, and increases in interest rates amplified investment income by over $2.2 million from FY 2022, both of which contributed to an increase in overall revenues of $3,662,306 in the General Fund; (2) police and fire services saw a significant increase in expenditures of over $9.2 million, as over $8 million of public safety related costs were allocated back to the General Fund in FY 2023 after being funded by the ARPA grant in the prior fiscal year; and (3) subscriptions are reported for the first time in FY 2023 as the City implemented GASB Statement No. 96. This in conjunction with the reporting of leases in accordance with GASB Statement No. 87 resulted in a significant increase in principal and interest expenditures being reported in the General Fund. The General Obligation Debt Service Fund has a fund balance of $2,993,263, all of which is restricted for the payment of debt service. The fund balance decreased during the year by $294,133. This decrease was expected as reserves, property tax collections, and future debt service requirements are all considered in the determination of tax rates and the budget of the General Obligation Debt Service Fund. The fund balance in the General Capital Projects Funds ended the year at $62,405,360, an increase of $16,566,936. This increase can be attributed to the issuance of $13,397,000 of tax notes and interfund transfers of $9,545,000. Interest and investment earnings also increased in this fund for FY 2023 by over $2.4 million because of rising interest rates. These inflows of resources were made available to fund various capital projects for the City. The Southlake Parks Development Corporation Special Revenue fund balance increased by $232,387 primarily due to increases in sales tax revenue of $815,180. As previously noted, this sales tax revenue increase was due to higher inflation. Transfers out of the Southlake Parks Development Corporation Special Revenue Fund increased by almost $2.5 million for the current year to fund debt service obligations and planned capital projects. The Community Enhancement Development Corporation Special Revenue Fund balance increased $4,103,574. This increase was due to increased sales taxes and charges for services revenues related to record memberships, program attendance, and event rentals at The Marq, Southlake's state-of-the-art fitness and aquatics facility and event venue. 14 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 included $62,370,816 in the Water and Sewer Fund and $11,708,552 in the Vehicle and Equipment Replacement Fund. Total net position in the Water and Sewer Fund increased by $12,446,808 while the Vehicle and Equipment Replacement Fund net position increased by $2,523,748. Continued increases in demand for water due to significantly lower than average rainfall and record heat is the primary reason for the respective change in the Water and Sewer Fund net position. Transfers to fund vehicle and equipment purchases of $3.2 million, net of depreciation, resulted in the increase in net position in the Vehicle and Equipment Replacement Fund. 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 $1,651,1 16 or 3.0% from original budget based on year- to-date experience. Actual revenues exceeded budget by $4,698,804 primarily due to municipal sales and mixed beverage taxes exceeding budget by $2,882,698. Actual expenditures were $1,273,185 more than budget primarily because of more than $2 million of capital outlays related to subscriptions reported as a result of the implementation of GASB Statement No. 96. 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, 2023 amount to $614,790,357 (net of accumulated depreciation and amortization). This investment in capital assets includes land, buildings, improvements, machinery and equipment, infrastructure, construction in progress, and right -to -use assets. 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 2023 was not material. Major capital projects completed during the current year included the following: • Drainage improvements at North Peytonville and Raven Bend • Gateway Lakes Park drainage improvements • Southlake Park water line improvements 15 Governmental Activities Business -type Activities Totals 2023 2022 2023 2022 2023 2022 Land and improvements $ 111,367,374 $ 112,488,586 $ 21,447,795 $ 21,033,596 $ 132,815,169 $ 133,522,182 Construction in progress 17,195,881 10,045,101 5,519,580 1,414,673 22,715,461 11,459,774 Buildings and improvements 106,641,267 109,721,666 107,643 137,961 106,748,910 109,859,627 Improvements - - 71,571,273 74,823,256 71,571,273 74,823,256 Infrastructure 265,723,506 265,262,406 - - 265,723,506 265,262,406 Machinery and equipment 12,358,011 10,537,317 43,781 65,216 12,401,792 10,602,533 Right -to -use assets: Lease equipment 447,330 333,639 - - 447,330 333,639 Subscriptions 2,366,916 - - - 2,366,916 - Total $ 516, 100,285 $ 508,388,715 $ 98,690,072 $ 97,474,702 $ 614,790,357 $ 605,863,417 Additional information on the City's capital assets can be found in Note 4 on pages 66-67 of this report. Long-term Debt - At the end of the current fiscal year, the governmental activities had $76,946,956 total bonds outstanding which were issued to finance capital improvements for roadway, parks and recreation, public buildings and infrastructure. The business -type activities had $25,805,21 1 of total bonds outstanding which were issued to finance projects to increase capacity of the utility system. Governmental Activities Business -type Activities Totals 2023 2022 2023 2022 2023 2022 Bonds Payable $ 76,946,956 $ 74,015,056 $ 25,805,211 $ 28,512,757 $ 102,752,167 $ 102,527,813 Total OPEB liability 728,306 1,059,723 59,591 82,972 787,897 1,142,695 Net pension liability 18,318,244 1,332,735 1,498,377 300,064 19,816,621 1,632,799 Financed purchases 308,329 405,368 - - 308,329 405,368 Lease liabilities 448,904 338,051 - - 448,904 338,051 Subscription liabilities 2,165,395 - - - 2,165,395 - Compensated absences 2,703,252 2,721,441 98,554 117,215 2,801,806 2,838,656 $ 101,619,386 $ 79,872,374 $ 27,461,733 $ 29,013,008 $ 129,081,119 $ 108,885,382 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 3.01% in 2003 to 0.24% in 2023, 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". In LONG-TERM DEBT —DEBT AS % OF ASSESSED VALUATION 3.50% $120,000,000 3 00% — 5100,000,000 3.01 2. 2 50% `a $90,000,000 2.36 > 2 00% — — — p 2.079fi0o g I H $60,000,000< 5 z 1 50% 1 71 1.4694.49%.515J.49% 0 1.37% $40,000,000 1.00% — - — 1.19'ii.12% 0.92% DIM — 0.72% _ —� $20,000,000 0.58% 0 0.3496.27 1 $- 0 03% _ 2003200420052006200720082009201020112012201320142015201620172018201920202021 FISCAL YEAR 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. The City's bonds are rated "AAA" by Standard and Poor's and Fitch Ratings. 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 5 on pages 67-73 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 36.6% of total governmental revenue. Sales tax has grown to the largest governmental resource representing 41.5% of total governmental revenue. The City monitors all of its resources and determines the need for program adjustment or fee increases accordingly. The FY 2024 adopted budget incorporates a tax rate of $0.319 per $100 valuation, reducing the rate by over four cents. The tax rate of $0.319 is split between General Fund operations and debt service. The allocation for FY 2024 is $0.264 for general operations and $0.055 for debt service. The reduction has been taken from both the operations and debt service part of the rate. The ongoing use of the 20% homestead exemption will complement the current over-65 exemption of $75,000, disabled exemption of $75,000, and the over-65 tax freeze. The continuation of these exemptions offers additional tax relief. A 20% homestead exemption will reduce the taxable value of an average - valued home in Southlake by $201,479. 17 The property owner of an average -valued home will see the equivalent of a tax rate reduction of approximately six cents per $100 valuation with the exemption applied. With the homestead exemption in place, and considering the tax rate reduction, the equivalent residential tax rate on an average -valued home is $0.255. More than 70% of the City's General Fund budgeted expenditures are related to personnel costs. It is the City's goal to continue to provide for a fair compensation and benefits program to ensure a stable and high -performing workforce. The FY 2024 budget recognizes and addresses the competitive labor market and the need to recruit and retain strong talent. Multi -year financial planning is another budget development consideration, one of the most important. Executive leaders evaluate the operational impact of all identified projects and include those costs in future budget projections. Staff monitors trends that depict the long-term financial health of the City and uses these trends to make decisions to reach financial and service goals. The City has taken an additional formal step to understand and plan for the organization's financial future by adopting the Sustainability Master Plan as an element of the Southlake Comprehensive Plan. It contains formal recommendations to ensure positive financial outcomes for the City. 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, Suite 420, Southlake, Texas 76092. In Basic Financial Statements Me 20 Government -wide Financial Statements 21 22 City of Southlake, Texas Statement of Net Position September 30, 2023 Exhibit 1 PRIMARY GOVERNMENT GOVERNMENTAL BUSINESS -TYPE ACTIVITIES ACTIVITIES TOTAL ASSETS Cash and investments $ 211,313,556 $ 56,209,506 $ 267,523,062 Receivables (net of allowance for uncollectibles) 12,137,136 7,445,660 19,582,796 Prepaid items 1,048,510 - 1,048,510 Inventories 47,008 - 47,008 Restricted assets Cash and cash equivalents 2,991,225 15,353,708 18,344,933 Restricted cash for customer deposits - 298,337 298,337 Receivables 11,446 - 11,446 OPEB asset 452,288 - 452,288 Capital assets: Not being depreciated/amortized 347,460,257 26,967,375 374,427,632 Net of depreciation/amortization 168,640,028 71,722,697 240,362,725 Total assets 744,101,454 177,997,283 922,098,737 DEFERRED OUTFLOWS OF RESOURCES Deferred loss on refunding 581,108 219,000 800,108 Deferred outflows - TMRS pension 11,649,044 848,525 12,497,569 Deferred outflows - TMRS OPEB 186,305 14,198 200,503 Deferred outflows - OPEB Health 811,737 - 811,737 Total deferred outflows of resources 13,228,194 1,081,723 14,309,917 LIABILITIES Accounts payable 7,590,687 3,999,563 11,590,250 Accrued liabilities 1,624,789 314,698 1,939,487 Accrued interest payable - 106,845 106,845 Retainage payable 358,321 401,005 759,326 Deposits payable 750,032 - 750,032 Unearned revenue 4,051,000 184,176 4,235,176 Liabilities payable from restricted assets Accrued interest 384,527 - 384,527 Customer meter deposits - 298,337 298,337 Non -current liabilities: Due within one year 11,383,590 2,521,298 13,904,888 Due in more than one year 90,235,796 24,940,435 115,176,231 Total liabilities 116,378,742 32,766,357 149,145,099 DEFERRED INFLOWS OF RESOURCES Deferred gain on refunding 76,633 280,969 357,602 Deferred inflows - leases 944,303 - 944,303 Deferred inflows - TMRS OPEB 407,911 29,126 437,037 Deferred inflows - OPEB Health 546,311 - 546,311 Total deferred inflows of resources 1,975,158 310,095 2,285,253 NET POSITION Net investment in capital assets 450,639,461 75,167,644 525,807,105 Restricted for Debt service 5,256,902 - 5,256,902 OPEB Asset 452,288 452,288 Capital projects 34,698,804 34,698,804 Municipal court 859,689 859,689 Reinvestment zone 8,347,195 8,347,195 Police 8,530,927 8,530,927 Parks and recreation 58,345,188 58,345,188 Library 19,534 19,534 Storm water 2,162,574 2,162,574 Promotion of culture and tourism 3,185,163 - 3,185,163 Impact fees - 8,464,094 8,464,094 Unrestricted 66,478,023 62,370,816 128,848,839 TOTAL NET POSITION $ 638,975,748 $ 146,002,554 $ 784,978,302 The Notes to the Financial Statements are an integral part of this statement. 23 City of Southlake, Texas Statement of Activities For the Fiscal Year Ended September 30, 2023 Exhibit 2 Net(Expense)Revenue and Program Revenues Changes in Net Position Primary Government Charges for Operating Grants Capital Grants Governmental Business - Type Functions/Program Activities Expenses Services and Contributions and Contributions Activities Activities TOTAL PRIMARY GOVERNMENT: Governmental Activities: General government $ 19,837,190 $ 1,712,925 $ 140 $ $ (18,124,125) $ $ (18,124,125) Public safety 26,658,917 774,891 726,998 (25,157,028) (25,157,028) Public works 12,108,564 3,477,348 - 2,382,770 (6,248,446) (6,248,446) Culture and recreation 25,112,091 5,664,775 98,632 - (19,348,684) (19,348,684) Interest on long-term debt 2,071,867 (2,071,867) (2,071,867) Total governmental activities 85,788,629 11,629,939 825,770 2,382,770 (70,950,150) (70,950,150) Business -type Activities: Water and sewer Total business -type activities TOTAL PRIMARY GOVERNMENT 28,506,292 37,630,965 28,506,292 37,630,965 2,064,296 2,064,296 11,188,969 11,188,969 11,188,969 11,188,969 $ 114.294.921 $ 49.260.904 $ 825,770 $ 4.447.066 (70,950150) 11,188,969 (59,761,181) General revenues and transfers: General revenues Property taxes, levied for general purposes Sales taxes Franchise taxes Investment income Gain on disposal of capital assets Miscellaneous Transfers Total general revenues and transfers Change in net position Net position, beginning of year NET POSITION, end of year The Notes to the Financial Statements are an integral part of this statement. 42,315,760 47,917,152 3,656,895 - 7,934,301 2,594,308 4,156 - 512,725 1,336,469 (1,336,4691 42,315,760 47,917,152 3,656,895 10,528,609 4,156 512,725 103,677,458 1,257,839 104,935,297 32,727,308 12,446,808 45,174,116 606,248,440 133,555,746 739,804,186 $ 638.975.748 $ 146,002,554 $ 784,978, 002 24 Fund Financial Statements 25 26 Governmental Funds Financial Statements 27 City of Southlake, Texas Balance Sheet -Governmental Funds September 30, 2023 ASSETS Cash and investments Receivables, net of allowances for uncollectibles: Ad valorem taxes Franchise taxes Sales taxes Interest Leases Other Inventories Prepaid items TOTAL ASSETS LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES LIABILITIES Accounts payable Accrued liabilities Retainage payable Deposits payable Unearned revenue TOTAL LIABILITIES DEFERRED INFLOWS OF RESOURCES Unavailable resources Deferred inflows - leases TOTAL DEFERRED INFLOWS OF RESOURCES FUND BALANCES Nonspendable Restricted Committed Assigned Unassigned TOTAL FUND BALANCES TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES GENERAL OBLIGATION GENERAL DEBT CAPITAL GENERAL SERVICE PROJECTS $ 49,724,073 $ 2,991,225 $ 67,912,481 47,760 10,463 737,965 - 4,679,857 - - 28,258 853 19,363 940,596 - - 45,774 130 47,008 - 7,309 - - $ 56,258,600 $ 3,002,671 $ 67,931,844 $ 3,902,745 $ $ 1,727,606 1,383,661 - - 261,963 41,766 642,816 670,763 2,894,099 5,998,935 5,526,484 383,172 9,408 907,028 - 1,290,200 9,408 54,317 - - - 2,993,263 34,698,804 31,320,539 27,706,556 17,594,609 - - 48,969,465 2,993,263 62,405,360 $ 56,258,600 $ 3,002,671 $ 67,931,844 The Notes to the Financial Statements are an integral part of this statement. 28 Exhibit 3 COMMUNITY SOUTHLAKE ENHANCEMENT PARKS DEVELOPMENT DEVELOPMENT CORPORATION NON -MAJOR TOTAL CORPORATION - SPECIAL GOVERNMENTAL GOVERNMENTAL OPERATING REVENUE FUNDS FUNDS $ 11,951,582 $ 19,619,222 $ 51,441,830 $ 203,640,413 - - - 58,223 - - - 737,965 2,336,558 1,730,784 1,092,731 9,839,930 3,500 5,605 14,671 72,250 38,271 - - 978,867 38,456 157,002 217,002 458,364 - - - 47,008 - - 7,309 $ 14,368,367 $ 21,512,613 $ 52,766,234 $ 215,840,329 $ 53,450 $ 71,765 $ 1,835,126 $ 7,590,692 16,137 117,261 107,730 1,624,789 - - 96,358 358,321 65,450 - 750,032 - 486,138 - 4,051,000 69,587 740,614 2,039,214 14,374,834 12,679 - - 405,259 37,275 - 944,303 49,954 - 1,349,562 - - - 54,317 14,248,826 20,771,999 49,068,203 121,781,095 - - 1,658,817 1,658,817 - 59,027,095 - - 17,594,609 14,248,826 20,771,999 50,727,020 200,115,933 $ 14,368,367 $ 21,512,613 $ 52,766,234 $ 215,840,329 29 City of Southlake, Texas Exhibit 4 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position September 30, 2023 Total fund balances - governmental funds $ 200,115,933 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 $6,311,032 in assets allocated to governmental activities from the internal service fund). 509,789,253 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. (384,527) 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. 18,019,584 OPEB asset has not been included in the governmental fund financial statements, as these assets do not represent current financial resources. 452,288 Revenues earned but not available within sixty days of the year end are not recognized as revenue on the fund financial statements. 405,259 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. This amount is the net of deferred losses, $581,113 and gains ($76,633) on refundings. 504,480 Deferred outflows of resources related to the City's pension and OPEB liabilities result in an increase in net position in the government -wide financial statements. 12,647,086 Deferred inflows of resources related to the City's pension and OPEB liabilities result in a decrease in net position in the government -wide financial statements. (954,222) Long-term liabilities, including bonds payable and net pension and OPEB liabilities, are not due and payable in the current period and therefore are not reported in the fund financial statements. (101,619,386) NET POSITION OF GOVERNMENTAL ACTIVITIES $ 638,975,748 The Notes to the Financial Statements are an integral part of this statement. 30 31 City of Southlake, Texas Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds For the Fiscal Year Ended September 30, 2023 GENERAL OBLIGATION GENERAL DEBT CAPITAL GENERAL SERVICE PROJECTS REVENUES Ad valorem taxes, penalties and interest $ 26,578,947 $ 5,886,605 $ Franchise taxes 3,656,895 - Municipal sales and mixed beverage taxes 22,790,698 Licenses, permits and fees 2,101,778 Charges for services 2,098,618 Fines and forfeitures 795,072 Intergovernmental revenue 496,469 794,189 Capital recovery fees - - 466,928 Investment income (losses) 2,088,292 155,007 2,322,954 Contributions 45,788 - 10,253 Miscellaneous 230,110 136,476 Total revenues 60,882,667 6,041,612 3,730,800 EXPENDITURES Current General government City secretary/mayor 586,176 City manager's office 1,107,936 Human resources 965,103 Support services 4,891,905 Economic development 332,109 Finance 1,847,819 Municipal court 799,731 Teen court 145,254 Information technology 3,635,409 Public safety Police services 8,263,315 Fire services 11,798,804 Public safety support 1,575,064 Public works Public works administration 2,340,428 - Streets and drainage 1,163,500 3,805,906 Planning 1,245,423 - Building inspection 1,209,322 Cultural and recreation Community services 1,415,750 Parks and recreation 4,268,243 Library services 1,139,467 Promotion of tourism - Intergovernmental - - Capital outlay 4,897,087 - 6,204,052 Debt service: Principal retirement 918,815 5,795,832 - Interest and fiscal charges 24,257 942,467 95,906 Total expenditures 54,570,917 6,738,299 10,105,864 Excess (deficiency) of revenues over (under) expenditures 6,311,750 (696,6871 (6,375,0641 OTHER FINANCING SOURCES (USES) Issuance of long-term debt - - 13,397,000 Issuance of financed purchases 53,975 - Issuance of subscriptions 2,608,340 Sale of capital assets 4,156 - - Transfers from other funds 2,844,912 402,554 9,545,000 Transfers to other funds (11,967,091) Total other financing sources (uses) (6,455,708) 402,554 22,942,000 Net change in fund balances (143,958) (294,133) 16,566,936 Fund balances, beginning of year 49,113,423 3,287,396 45,838,424 FUND BALANCES, END OF YEAR $ 48,969,465 $ 2,993,263 $ 62,405,360 The Notes to the Financial Statements are an integral part of this statement. 32 Exhibit 5 COMMUNITY SOUTHLAKE ENHANCEMENT PARKS DEVELOPMENT DEVELOPMENT CORPORATION NON -MAJOR TOTAL CORPORATION SPECIAL GOVERNMENTAL GOVERNMENTAL OPERATING REVENUE FUNDS FUNDS $ $ $ 9,834,043 $ 42,299,595 - 3,656,895 11,426,173 8,463,832 5,236,449 47,917,152 - - 373,299 2,475,077 116,376 4,413,152 1,606,564 8,234,710 - - 108,613 903,685 254,541 1,545,199 - - - 466,928 306,621 632,339 1,980,613 7,485,826 - 6,685 47,341 110,067 9,573 136,566 512,725 11,849,170 13,525,581 19,578,029 115,607,859 - - - 586,176 1,107,936 965,103 1,579,012 6,470,917 - 332,109 - 1,847,819 86,012 885,743 - 145,254 3,635,409 2,429,139 10,692,454 - 11,798,804 1,575,064 - 2,340,428 522,694 5,492,100 - 1,245,423 1,209,322 1,632,063 5,097,866 120,653 8,266,332 - - - 4,268,243 7,929 1,147,396 863,647 863,647 - - 6,454,981 6,454,981 291,744 130,805 3,502,350 15,026,038 - 21,862 4,041,219 10,777,728 1,143 1,373,066 2,436,839 1,923,807 5,251,676 20,980,702 99,571,265 9,925,363 8,273,905 (1,402,673) 16,036,594 - - 13,397,000 - - 53,975 130,805 292,043 3,031,188 - - 4,156 14,336,589 27,129,055 (9,692,976) (4,301,136) (3,031,383) (28,992,586) (9,692,976) (4,170,331) 11,597,249 14,622,788 232,387 4,103,574 10,194,576 30,659,382 14,016,439 16,668,425 40,532,444 169,456,551 $ 14,248,826 $ 20,771,999 $ 50,727,020 $ 200,115,933 33 City of Southlake, Texas Exhibit 6 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of the Governmental Fund to the Statement of Activities For the Fiscal Year Ended September 30, 2023 Net change in fund balances - total governmental funds $ 30,659,382 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 and amortization expense. This is the amount of capital assets additions recorded in the current period (does not include additions of $2,100,595 allocated from internal service fund). 14,810,538 Depreciation and amortization expense on capital assets are reported in the statement of activities but does not require the use of current financial resources. Therefore, depreciation and amortization expenses are not reported as expenditures in the governmental funds. (does not include $1,111,549 allocated from internal service fund). (9,405,509) 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: Issuance of bonds $ (13,397,000) Issuance of financed purchases (53,975) Issuance of SBITAs (3,031,188) Principal payments on debt 9,766,871 Principal payments on financed purchases and other lease liabilities 1,010,857 Amortization of premiums and deferred gains and losses 420,241 (5,284,194) The changes in net pension liability and deferred outflows/inflows from TMRS are not reported in the governmental funds. This is the net effect of the increase in the net pension liability, ($16,985,509), decrease in deferred inflows of resources, $6,976,554, and increase in deferred outflows of resources, $8,370,643. (1,638,312) The changes in total OPEB liability and deferred outflows/inflows from TMRS are not reported in the governmental funds. This is the net effect of the decrease in the total SDBF OPEB liability $331,417, increase in deferred inflows of resources, ($325,733), and decrease in deferred outflows of resources, ($52,701). (47,017) The changes in net OPEB liability and deferred outflows/inflows for healthcare are not reported in the governmental funds. This is the net effect of the decrease in the total healthcare OPEB asset, ($265,119), decrease in deferred inflows of resources, $315,012, and increase in deferred outflows of resources, $23,043. 72,936 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. 18,192 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. (63,525) 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. 2,523,748 Governmental funds do not recognize assets contributed by developers. However, in the statement of activities, the fair value of those assets is recognized as revenue, then allocated over their estimated useful lives and reported as depreciation expense. 1,111,400 Gain on disposal of capital assets results in an increase in net position, but the net effect is not reported in governmental funds. 4,156 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. (34,487) Change in net position of governmental activities $ 32,727,308 The Notes to the Financial Statements are an integral part of this statement. 34 Proprietary Funds Financial Statements 35 36 City of Southlake, Texas Exhibit 7 Statement of Net Position - Proprietary Funds September 30, 2023 BUSINESS -TYPE GOVERNMENTAL ACTIVITIES ACTIVITIES WATER AND SEWER VEHICLE AND EQUIPMENT ENTERPRISE REPLACEMENT INTERNAL FUND SERVICE FUND ASSETS CURRENT ASSETS Cash and investments $ 56,209,506 $ 10,664,368 Receivables, net of allowance for uncollectibles: Billed and unbilled trade accounts 7,425,171 - Interest 20,489 2,983 Prepaid expenses - 1,041,201 Restricted assets: Cash restricted for capital 15,353,708 - Restricted cash for customer deposits 298,337 Total current assets 79,307,211 11,708,552 NON -CURRENT ASSETS Capital assets: Land 21,447,794 - Buildings and improvements 935,501 Distribution system 155,756,543 - Equipment 3,024,292 703,246 Vehicles - 13,243,633 Capacity rights 9,190,988 - Construction in progress 5,519,581 Total capital assets 195,874,699 13,946,879 Less: accumulated depreciation and amortization (97,184,627) (7,635,847) Capital assets, net of accumulated depreciation and amortization 98,690,072 6,311,032 Total non -current assets 98,690,072 6,311,032 TOTAL ASSETS $ 177,997,283 $ 18,019,584 DEFERRED OUTFLOW OF RESOURCES Deferred loss on refunding $ 219,000 $ - Deferred outflows - TMRS pension 848,525 Deferred outflows - TMRS OPEB 14,198 Total deferred outflows of resources 1,081,723 LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION CURRENT LIABILITIES Accounts payable 3,999,563 Accrued liabilities 314,698 Retainage payable 401,005 Accrued interest 106,845 Unearned revenue 184,176 Current portion of general obligation debt 2,488,640 Current portion of compensated absences 32,658 Payable from restricted assets: Customer meter deposits 298,337 Total current liabilities 7,825,922 NON -CURRENT LIABILITIES General obligation debt 23,316,571 Compensated absences 65,896 Net pension liability 1,498,377 Total OPEB liability 59,591 Total non -current liabilities 24,940,435 TOTAL LIABILITIES 32,766,357 DEFERRED INFLOW OF RESOURCES Deferred gain on refunding 280,969 Deferred inflows - TMRS OPEB 29,126 Total deferred inflows of resources 310,095 NET POSITION Net investment in capital assets 75,167,644 6,311,032 Restricted for impact fees 8,464,094 - Unrestricted 62,370,816 11,708,552 TOTAL NET POSITION $ 146,002,554 $ 18,019,584 The Notes to the Financial Statements are an integral part of this statement. 37 City of Southlake, Texas Statement of Revenues, Expenses, and Changes in Net Position - Proprietary Funds For the Fiscal Year Ended September 30, 2023 OPERATING REVENUES Charges for sales and services: Water, sewer and garbage Service charges Total operating revenues OPERATING EXPENSES: Personnel services Contractual services Supplies Utilities Administrative Maintenance Professional benefits Depreciation and amortization Total operating expenses OPERATING INCOME (LOSS) NON -OPERATING REVENUES (EXPENSES) Investment income Interest expense and bond administration expense Total non -operating revenues (expenses) INCOME (LOSS) BEFORE CAPITAL CONTRIBUTIONS AND TRANSFERS CAPITAL CONTRIBUTIONS AND TRANSFERS Capital contributions - property owners Contributions - impact fees Transfers from other funds Transfers to other funds Total capital contributions and transfers Change in net position Net position, beginning of year NET POSITION, END OF YEAR BUSINESS -TYPE ACTIVITIES WATER AND SEWER ENTERPRISE FUND $ 37,504,661 126,304 37,630,965 2,994,673 2,483,268 474,494 11,243,234 38,735 5,435,490 44,492 5,148,187 Exhibit 8 GOVERNMENTAL ACTIVITIES VEHICLE AND EQUIPMENT REPLACEMENT INTERNAL SERVICE FUND 13,178 1,111,549 27,862,573 1,124,727 9,768,392 (1,124,727) 2,594,308 448,475 (643, 719) - 1,950,589 448,475 11,718,981 (676,252) 1,678,920 385,376 - 67,091 3,200,000 (1,403,560) - 727,827 3,200,000 12,446,808 2,523,748 133,555,746 15,495,836 $ 146,002,554 $ 18,019,584 The Notes to the Financial Statements are an integral part of this statement. 38 City of Southlake, Texas Exhibit 9 Statement of Cash Flows - Proprietary Funds For the Fiscal Year Ended September 30, 2023 BUSINESS -TYPE GOVERNMENTAL ACTIVITIES ACTIVITIES WATER AND SEWER VEHICLE AND EQUIPMENT ENTERPRISE REPLACEMENT INTERNAL FUND SERVICE FUND CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers and users $ 36,189,860 $ Cash payments to suppliers (19,018,468) (13,178) Cash payments to employees (2,894,437) Net cash provided by (used in) operating activities 14,276,955 (13,178) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and construction of capital assets (4,684,637) (3,141,794) Principal payments on bonds (2,439,168) Interest paid on capital debt (893,107) Contributions - impact fees 385,376 Net cash used in capital and related financing activities (7,631,536) (3,141,794) CASH FLOWS FROM NON -CAPITAL FINANCING ACTIVITIES Transfers from other funds 67,091 3,200,000 Transfers to other funds (1,403,560) - Net cash provided by (used in) non -capital financing activities (1,336,469) 3,200,000 CASH FLOWS FROM INVESTING ACTIVITIES Net investment gains 2,594,308 448,475 Interest received 39,101 6,204 Net cash provided by investing activities 2,633,409 454,679 Net change in cash and cash equivalents 7,942,359 499,707 CASH AND CASH EQUIVALENTS, beginning of year 63,919,192 10,164,661 CASH AND CASH EQUIVALENTS, end of year $ 71,861,551 $ 10,664,368 RECONCILIATION TO STATEMENT OF NET POSITION Cash and cash equivalents $ 56,209,506 $ 10,664,368 Cash restricted for capital 15,353,708 - Restricted cash for customer deposits 298,337 - Total cash and cash equivalents $ 71,861,551 $ 10,664,368 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Operating income (loss) $ 9,768,392 $ (1,124,727) Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 5,148,187 1,111,549 Decrease (increase) in assets and deferred outflows of resources Receivables (1,407,391) - Deferred outflows of resources - pensions and OPEB (579,642) Increase (decrease) in liabilities and deferred outflows of resources Payables and accruals 682,584 Customer deposits (25,425) Deferred inflows of resources - pensions and OPEB (476,393) Decrease in pension and OPEB liabilities 1,174,932 Unearned revenue (8,289) Net cash provided by (used in) operating activities $ 14,276,955 $ (I3,178) NON -CASH CAPITAL AND RELATED FINANCING: Contributions of capital assets from developers $ 1,678,920 $ The Notes to the Financial Statements are an integral part of this statement. 39 40 Fiduciary Fund Financial Statements 41 42 City of Southlake, Texas OPEB Liability Trust Fund Statement of Fiduciary Net Position December 31, 2022 Exhibit 10 Trust Fund* Southlake OPEB Liability ASSETS Investments $ 2,339,116 TOTAL ASSETS $ 2,339,1 16 NET POSITION Restricted for post employment benefits other than pensions $ 2,339,116 TOTAL NET POSITION $ 2,339,1 16 * The Southlake Other Post Employment Benefit (OPEB) Liability Trust Fund is reported as of December 31, 2022. The Notes to the Financial Statements are an integral part of this statement. 43 City of Southlake, Texas OPEB Liability Trust Fund Statement of Changes in Fiduciary Net Position For the Fiscal Year Ended December 31, 2022 Exhibit 11 Trust Fund Southlake OPEB Liability ADDITIONS Employer contributions $ 225,370 Investment earnings, net of unrealized/realized gain/(loss) (343,355) TOTAL ADDITIONS (117,985) DEDUCTIONS Benefit payments 85,370 Administrative expenses 7,980 TOTAL DEDUCTIONS 93,350 Change in net position (211,335) Net position, beginning of year 2,550,451 NET POSITION - END OF YEAR $ 2,339,116 The Notes to the Financial Statements are an integral part of this statement. 44 Notes to the Financial Statements 45 m City of Southlake, Texas Notes to the Financial Statements 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 six -member council. The accompanying financial statements present the government and its component units, entities for which the government is considered to be financially accountable. The criteria for including legally separate organizations as component units within the City's reporting entity are set forth in Section 2100 of GASB's Codification of Governmental Accounting and Financial Reporting Standards (GASB Codification). Blended component units are, in substance, part of the primary government's operations, even though they are legally separate entities. Thus, blended component units are appropriately presented as funds of the primary government. 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 (SPDQ - The SPDC is a nonprofit industrial development corporation formed in January 1994 under the Development Corporation Act of 1979. The SPDC 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 SPDC 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 SPDC is substantively the same as the City Council, the SPDC 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 CEDC 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. Southlake Tax Increment Financing District (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 nine member board of directors consisting of the eight members appointed by the City Council, and one member appointed by Carroll Independent School District. Since the Board of the TIF is substantively the same as the City Council, the City has operational responsibility for the TIF and the City receives financial benefit from the TIF, the TIF has been reported as a blended component unit. 47 City of Southlake, Texas Notes to the Financial Statements Southlake Crime Control and Prevention District (CCDJ - The CCD was formed under Chapter 363 of the Texas Local Government Code, the Crime Control and Prevention Act. The CCD is organized exclusively to act on behalf of the City for the financing, development and crime control throughout the City. The CCD 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 CCD provides services entirely to the City, it has been reported as a blended component unit. Basis of Presentation The government -wide financial statements (the statement of net position and the statement of activities) report information on all of the activities of the City, except for fiduciary funds. The effect of interfund activity, within the governmental and business -type activities columns, has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given program are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific program. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given program and 2) operating or capital grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Taxes and other items not properly included among program revenues are reported instead as general revenues. 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. m City of Southlake, Texas Notes to the Financial Statements 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 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 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 municipal sales taxes. Community Enhancement and Development Corporation The Community Enhancement 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 municipal sales taxes and user fees. 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, deferred outflows of resources, liabilities, and deferred inflows of resources 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 and equipment 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. 49 City of Southlake, Texas Notes to the Financial Statements Fiduciary Funds The City also presents one trust fund, Southlake OPEB Liability Trust Fund. The City's OPEB Liability Trust Fund accounts for the funding of postemployment healthcare benefits for retirees of the City and their dependents which is presented as of December 31, 2022. 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, proprietary fund, and fiduciary trust fund financial statements are prepared using the economic resources 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 total net 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. 50 City of Southlake, Texas Notes to the Financial Statements 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. As of September 30, 2023, the investments held by the City had a remaining maturity of greater than one year from purchase and accordingly are carried at fair value. The City's cash and cash equivalents are defined as cash on hand, cash and pooled investment demand deposits held with financial institutions, and short-term investments with original maturities of three months or less from the date of acquisition. Cash and cash equivalents also includes long-term investments with maturity of greater than one year. The classification of the City's cash and cash equivalents is reported in Note 2. The City pools idle cash from all funds for the purpose of increasing income through coordinated investment activities. Interest earnings are allocated to the respective funds based upon each fund's relative balance in the pool. Cash and cash equivalents reported as restricted are restricted for debt service, 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 Districts at 100% of estimated market value and certified by the Appraisal Review Board. The assessed value upon which the 2022 levy was based on was $12,376,568,531. 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, 2023 was 0.360 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. 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". 51 City of Southlake, Texas Notes to the Financial Statements 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. 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 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 deposits for purchases and are reported on the consumption method. Leases Effective October 1, 2021, the City implemented GASB Statement No. 87, Leases, which required the recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. Lessee - The City recognizes a lease liability and an intangible right -to -use lease asset (lease asset) in the government -wide and proprietary funds financial statements. At implementation of GASB Statement No. 87, the City initially measured the lease liabilities at the present value of payments expected to be made during the remaining lease term. Subsequently, the lease liability is reduced by the principal portion of lease payments made. The lease right -to -use asset was initially measured as the initial amount of the lease liability, adjusted for lease payments made at or before the lease commencement date, plus certain initial direct costs. Subsequently, the lease right -to use asset is amortized on a straight-line basis over its useful life. Key estimates and judgments related to leases include how the City determines (1) the discount rate it uses to discount the expected lease payments to present value, (2) lease term and (3) lease payments. The City uses the interest rate charged by the lessor as the discount rate. When the interest rate charged by the lessor is not provided, the City generally uses its estimated incremental borrowing rate as the discount rate for leases. The lease term includes the noncancellable period of the lease. Lease payments included in the measurement of the lease liability are composed of fixed payments and purchase option price that the City is reasonably certain to exercise. The City monitors changes in circumstances that would require a re -measurement of its lease and will remeasure the lease asset and liability if certain changes occur that are expected to significantly affect the amount of the lease liability. 52 City of Southlake, Texas Notes to the Financial Statements Lease assets are reported with other capital assets and lease liabilities are reported with long-term debt on the Statement of Net Position. Lessor —The City recognizes a lease receivable and deferred inflow of resources in the government -wide and governmental funds financial statements. At implementation of GASB Statement No. 87, the City measured the lease receivable at the present value of payments expected to be received during the lease term. Subsequently, the lease receivable is reduced by the principal portion of lease payments received. The deferred inflow of resources is initially measured as the initial amount of the lease receivable, adjusted for lease payments received at or before the lease commencement date. Subsequently, the deferred inflow of resources is recognized as revenue over the life of the lease term. Key estimates and judgments include how the City determines (1) the discount rate it uses to discount the expected lease receipts to present value, (2) lease term and (3) lease receipts. • The City uses its estimated incremental borrowing rate as the discount rate for leases. • The lease term includes the non -cancellable period of the lease. Lease receipts included in the measurement of the lease receivable is composed of fixed payments from the lessee. The City monitors changes in circumstances that would require a re -measurement of its lease, and will remeasure the lease receivable and deferred inflows of resources if certain changes occur that are expected to significantly affect the amount of the lease receivable. Subscription -Based Information Technology Arrangements (SBITAs) The City has noncancellable contracts with SBITA vendors for the right -to -use information technology (IT) software, alone or in combination with tangible capital assets (the underlying IT assets). The City recognizes a subscription liability, reported with long-term debt, and a right -to -use subscription asset (an intangible asset), reported with other capital assets, in the government -wide and proprietary fund financial statements. The City recognizes subscription liabilities with an initial, individual value of $5,000 or more. At the commencement of a SBITA, the City initially measures the subscription liability at the present value of payments expected to be made during the subscription term. Subsequently, the subscription liability is reduced by the principal portion of SBITA payments made. The subscription asset is initially measured as the initial amount of the subscription liability, adjusted for SBITA payments made at or before the SBITA commencement date, plus certain initial implementation costs. Subsequently, the subscription asset is amortized on a straight-line basis over the shorter of the subscription term or the useful life of the underlying IT assets. Key estimates and judgments related to SBITAs include how the City determines (1) the discount rate it uses to discount the expected subscription payments to present value, (2) subscription term, and (3) subscription payments. • The City uses the interest rate charged by the SBITA vendor as the discount rate. When the interest rate charged by the SBITA vendor is not provided, the City generally uses its estimated incremental borrowing rate as the discount rate for SBITAs. • The subscription term includes the noncancellable period of the SBITA. 53 City of Southlake, Texas Notes to the Financial Statements • Subscription payments included in the measurement of the subscription liability are composed of fixed payments, variable payments fixed in substance or that depend on an index or a rate, termination penalties if the City is reasonably certain to exercise such options, subscription contract incentives receivable from the SBITA vendor, and any other payments that are reasonably certain of being required based on an assessment of all relevant factors. The City monitors changes in circumstances that would require a remeasurement of its SBITAs and will remeasure the subscription asset and liability if certain changes occur that are expected to significantly affect the amount of the subscription liability. Capital Assets Capital assets, which include property, plant, equipment, right -to -use lease assets, 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 acquisition 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. Assets capitalized have an original cost of $5,000 or more and over one year of useful life. Depreciation/amortization 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 and Equipment Replacement Internal Service Fund to account for City -owned vehicles and equipment. The fund receives transfers from other funds. Right -to -use lease and subscription assets are amortized over the duration of the lease using the straight-line method. 54 City of Southlake, Texas Notes to the Financial Statements 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. Employees with 10 or 20 year tenures of continuous employment with the City are eligible to receive payment of their unused sick leave, within certain limitations. Upon termination or retirement, an employee is reimbursed up to a maximum number of hours of vacation pay based upon the years of service. All vacation 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 and gains 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 and Other Postemployment Benefits (OPEB) For purposes of measuring the net pension and net OPEB liabilities (assets), pension and OPEB related deferred outflows and inflows of resources and pension and OPEB expense, City specific information about its Fiduciary Net Position in the Texas Municipal Retirement System (TMRS) and additions to/deductions from TMRS'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 and Total OPEB Liability is obtained from TMRS through reports 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, and GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. Information regarding the City's Total OPEB Liability of its Retiree Health Care Plan is obtained from Public Agency Retirement Services (PARS) through reports prepared for the City by PARS consulting actuary, Gabriel Roeder Smith & Company, in compliance with Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. 55 City of Southlake, Texas Notes to the Financial Statements 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, represent a consumption of net assets 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/OPEB - these deferred outflows result from pension/OPEB contributions after the measurement date (deferred and recognized as a reduction of the pension/OPEB liability in the following fiscal year); changes in actuarial assumptions and/or differences between expected and actual economic experience (deferred and amortized over the estimated average remaining lives of participants) and/or differences in projected and actual earnings on pension/OPEB assets (deferred and amortized over a closed five year period). Deferred Inflows of Resources In addition to liabilities, the statement of net position and/or balance sheet will sometimes report a separate section for deferred inflows of resources, which represents acquisitions of net assets that apply to future periods. Deferred gain on refunding - these deferred inflows result from the difference in the debt's reacquisition price and its carrying value that was refunded. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. Pensions/OPEB - Differences in expected and actual experience and differences in assumption changes are deferred and amortized over a closed period equal to the estimated average remaining lives of all employees provided pensions through the plan, while investment experience differences are amortized over a closed 5-year period. Deferred Inflows from Leases Collections of lease receivables, are deferred in both the governmental fund and government wide financial statements. These amounts are recognized in a systematic manner over the life of the lease. Deferred Inflows from Unavailable Revenues In addition to liabilities, the governmental funds balance sheet reports deferred inflows from receivables that were not collected within 60 days of year-end. The deferred inflow from receivables balances and changes are reported as a reconciling amount to the statements of net position and activities. Deferred inflows from leases are also reported on the governmental fund balance sheet. 56 City of Southlake, Texas Notes to the Financial Statements Fund Equity 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 - capital projects and police expenditures). 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 economic investments). 5. Unassigned fund balance - is the residual classification of the General Fund and includes all amounts not contained in other classifications. 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 ordinance is required to establish, modify, or rescind a fund balance commitment. The ordinance must either be approved or rescinded, as applicable, prior to the last day of the fiscal year. The amount subject to the constraint may be determined in the subsequent period. Assigned Fund Balance - The City Council has authorized the City's Chief Financial Officer as the official authorized to assign fund balance to a specific purpose as approved by this fund balance policy. Unassigned Fund Balance - It is the goal of the City to maintain a fund balance in the General Fund, equal to a minimum of 15% of General Fund budgeted operating expenditures, with the optimum goal of 25%. The City considers a balance of less than 15% to be cause for concern, barring unusual or deliberate circumstances. It is the goal of the City to maintain 60 days of working capital in the Water and Sewer 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 assigning 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. 57 City of Southlake, Texas Notes to the Financial Statements As of September 30, 2023, the City had the governmental fund balances categorized as follows: COMMUNITY ENHANCEMENT GENERAL SOUTHLAKE DEVELOPMENT OBLIGATION GENERAL PARKS CORPORATION NON -MAJOR TOTAL DEBT CAPITAL DEVELOPMENT SPECIAL GOVERNMENTAL GOVERNMENTAL GENERAL SERVICE PROJECTS CORPORATION REVENUE FUNDS FUNDS FUND BALANCES Nonspendable for: Inventories $ 47,008 $ $ $ $ $ $ 47,008 Prepaid items 7,309 7,309 Restricted for: Debt service - 2,993,263 2,638,758 5,632,021 Capital projects - 34,698,804 - 34,698,804 Municipal court - 859,689 859,689 Reinvestment zone 8,347,195 8,347,195 Parks and recreation 14,248,826 20,771,999 23,324,363 58,345,188 Storm water - - 2,162,574 2,162,574 Police 8,530,927 8,530,927 Library 19,534 19,534 Promotion of tourism 3,185,163 3,185,163 Committed for: Police 1,601,369 1,601,369 Parks and recreation - 57,448 57,448 Assigned for: Teen Court 21,862 - 21,862 Senior Center 11,486 11,486 Recycling 70,977 70,977 Reforestation 153,918 153,918 Public art 610,439 610,439 Facility maintenance 11,843,299 11,843,299 Economic investment 3,225,478 3,225,478 Strategic initiatives 15,383,080 - 15,383,080 Capital projects - 27,706,556 27,706,556 Unassigned 17,594,609 - - 17,594,609 TOTAL FUND BALANCES $ 48,969,465 $ 2,993,263 $ 62,405,360 $ 14,248,826 $ 20,771,999 $ 50,727,020 $ 200,115,933 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/amortization, reduced by the outstanding balances of any borrowing used for the acquisition, construction or improvement 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. Sometimes the City will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted net position and unrestricted net position in the government -wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the City's policy to consider restricted net position to have been depleted before unrestricted net position is applied. 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. Deficit Fund Balance There are no deficit fund balances reported as of September 30, 2023. m City of Southlake, Texas Notes to the Financial Statements New Accounting Pronouncements The GASB pronouncements effective in fiscal year 2023 and beyond are listed as follows: GASB Statement No. 94, Public -Private and Public -Public Partnerships and Availability Payment Arrangements, improves financial reporting by addressing these relationships and availability payment arrangements. The requirements of this Statement are effective for fiscal years beginning after June 15, 2022. The requirements of this Statement have no impact on the City's financial statements. GASB Statement No. 96, Subscription -Based Information Technology Arrangements (SBITA), provides guidance on the accounting and financial reporting for SBITAs for government end users. This statement 1) defines a SBITA; 2) establishes that a SBITA results in a right -to -use subscription asset - an intangible asset - and a corresponding subscription liability, 3) provides the capitalization criteria for outlays other than subscription payments; and 4) requires note disclosures regarding a SBITA. The requirements of this statement are effective for reporting periods beginning after June 15, 2022, with earlier application encouraged. The City has implemented this Statement in fiscal year 2023. GASB Statement No. 99, Omnibus 2022, enhances comparability in accounting and financial reporting and improves the consistency of authoritative literature by addressing (1) practice issues that have been identified during implementation and application of certain GASB Statements and (2) accounting and financial reporting for financial guarantees. The requirements of this Statement related to extension of use of London Interbank Offered Rate (LIBOR), accounting for Supplemental Nutrition Assistance Program (SNAP) distributions, disclosures of nonmonetary transactions, pledges of future revenues by pledging governments, clarification of certain provisions in Statement No. 34, as amended and terminology updates related to Statements No. 53 and 63 were implemented in the prior fiscal year. All other requirements of this Statement have been implemented in fiscal year 2023. GASB Statement No. 100, Accounting Changes and Error Corrections - an amendment of GASB Statement No. 62, enhances the accounting and financial reporting requirements for accounting changes and error corrections to provide more understandable, reliable, relevant, consistent and comparable information for making decisions or assessing accountability. The requirements of this Statement are effective for accounting changes and error corrections made in fiscal years beginning after June 15, 2023, and all reporting periods thereafter. The City is currently evaluating the impact of this Statement. GASB Statement No. 101, Compensated Absences, will better meet the information needs of financial statement users by updating the recognition and measurement guidance for compensated absences. The objective is achieved by aligning the recognition and measurement guidance under a unified model and by amending certain previously required disclosures. The requirements of this Statement are effective for fiscal years beginning after December 15, 2023, and all reporting periods thereafter. The City is currently evaluating the impact of this Statement. Subsequent Events The City has evaluated all events or transactions that occurred after September 30, 2023 through March 14, 2024, the date the financial statements were available to be issued. During this period, there were no subsequent events requiring disclosure. 59 City of Southlake, Texas Notes to the Financial Statements 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, 2023, the carrying amount of the City's on demand deposits was $21,945,957 and the bank balance was $22,474,420. As of September 30, 2023, none of the City's deposits were uncollateralized. The following legal and contractual provisions govern 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, the Public Funds Investment Act (PFIA) 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, and (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: Authorized Maximum Investment Type Maturity Maximum Percentage of Portfolio U.S. Government securities 5 years 100% Municipal obligations 5 years 50% Repurchase agreements 90 days 50% Certificates of deposit 5 years 100% Bankers acceptances 270 days 20% Commercial paper 270 days 20% Money Market Mutual Funds 60 days* 50% Eligible investment pools N/A 100% Insured deposit accounts N/A 20% *dollar weighted average maturity 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. .E City of Southlake, Texas Notes to the Financial Statements Cash and investments as of September 30, 2023, are classified in the accompanying financial statements as follows: Primary Government: Cash and cash equivalents $ 267,523,062 Restricted cash and cash equivalents 18,344,933 Restricted cash for customer deposits 298,337 Total primary government 286,166,332 Trust Fund: Investments at fair value 2,339,116 Total fiduciary funds 2,339,116 Total cash and investments $ 288,505,448 Cash and investments of the primary government as of September 30, 2023 consist of the following: Cash on hand $ 4,350 Deposits with financial institutions 21,945,957 Investments at amortized cost 140,708,888 Investments at fair value 123,507,137 Total cash and investments $ 286,166,332 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, 2023, the City did not invest in any securities which are highly sensitive to interest rate fluctuations. m City of Southlake, Texas Notes to the Financial Statements 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. Investment Type Amount U.S. Government securities $ 19,874,165 Municipal bonds 4,403,687 Mutual funds 99,229,285 TexStar 46,012,214 TexPool 54,581,754 Lonestar Investment Pool 26,236,769 Texas Class 13,878,151 Total $ 264,216,025 Minimum Rating as Legal of Year Rating End N/A AAA A AAA N/A AAAm AAA/AAAm AAAm AAA/AAAm AAAm AAA/AAAm AAAm AAA/AAAm AAAm 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, 2023, the City investments other than external investment pools that represent 5% or more of the City's investments include mutual funds, municipal bonds, commercial paper and U.S. Government securities as described in the table in the following Custodial Credit Risk section. 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, 2023, none of the City's cash deposits were uncollateralized. 62 City of Southlake, Texas Notes to the Financial Statements 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: Fair Value Measurements Weighted Percent of Average Value at Total Maturity 9/30/23 Level 1Inputs Level 2Inputs Level 3Inputs Investments (Days) Investments not subject to Fair Value Investment Pools TexPool $ 54,581,754 $ $ $ 21% 28 TexStar 46,012,214 17% 30 Lone Star 26,236,769 10% 27 Texas CLASS 13,878,151 5% 29 Investments by Fair Value Level U.S. Treasury Notes & Bonds 4,973,913 4,973,913 2% 39 U.S. Government securities 14,900,252 14,900,252 6% 130 Municipal Bonds 4,403,687 4,403,687 2% 225 Mutual Funds Short -Term Investments Trust 99,229,285 99,229,285 - 37% 28 Total $ 264,216,025 $ 99,229,285 $ 24,277,852 $ 100% 70 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. U.S. Government Securities, commercial paper and municipal bonds 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. Investment in State Investment Pools The City is a voluntary participant in four investment pools: TexPool, TexStar, Texas CLASS and Lone Star. 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. 63 City of Southlake, Texas Notes to the Financial Statements TexStar is administered by Hilltop Securities and JPMorgan Chase. 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 Public Funds Investment 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. Texas CLASS is measured at fair value (i.e., net asset value). 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 City's position in the Pool is the same as the value of the Pool shares. Note 3. Receivables Receivables at September 30, 2023, 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: General Obligation General SPDC CEDC Debt Capital Special Rev. Special General Service Projects Fund Revenue Receivables: Property taxes $ 390,450 $ 85,971 $ $ - $ - Sales taxes 4,679,857 - 2,336,558 1,730,784 Franchise taxes 737,965 - - Accounts - - 38,456 - Interest 28,258 853 19,363 3,500 5,605 Leases 940,596 - - 38,271 - Other 45,774 130 - 157,002 Gross receivables 6,822,900 86,954 19,363 2,416,785 1,893,391 Less: allowance 342,690 75,508 - - Net total receivables $ 6,480,210 $ 11,446 $ 19,363 $ 2,416,785 $ 1,893,391 Water Primary Non -Major and Internal Government Governmental Sewer Service Total Receivables: Property taxes $ - $ $ $ 476,421 Sales taxes 1,092,731 9,839,930 Franchise taxes - 737,965 Accounts 217,002 7,486,879 7,742,337 Interest 14,671 20,489 2,983 95,722 Leases - - - 978,867 Other - - 202,906 Gross receivables 1,324,404 7,507,368 2,983 20,074,148 Less: allowance - 61,708 - 479,906 Net total receivables $ 1,324,404 $ 7,445,660 $ 2,983 $ 19,594,242 64 City of Southlake, Texas Notes to the Financial Statements The Water and Sewer Fund and the Storm Water Utility Fund accounts receivable include unbilled charges for services rendered through September 30, 2023, of $3,245,182. Lease Receivables The City is a lessor for non -cancelable leases of the right -to -use of land, buildings, and infrastructure for which the City recognizes a lease receivable and a deferred inflow of resources in the government -wide and governmental fund financial statements. The interest rates for the leases approximate 2.9% annually, and the terms range from 5 to 25 years. The lease receivables that exist at September 30, 2023, relate to leases whose terms expire between December 2023 and January 2028. At the commencement of a lease, the City initially measures the lease receivable at the present value of payments expected to be received during the lease term. Subsequently, the lease receivable is reduced by the principal portion of lease payments received. The deferred inflow of resources is initially measured as the initial amount of the lease receivable, adjusted for lease payments received at or before the lease commencement date. Subsequently, the deferred inflow of resources is recognized as revenue over the life of the lease term. The City has $978,867 remaining in lease receivables and $944,303 remaining in deferred inflow as of September 30, 2023. The City recorded lease revenue including interest of $400,966 in the fiscal year. As of September 30, 2023, the expected lease receipts through the expiration of all leases for which the City is a lessor is as follows: Fiscal Year Ending September 30, Principal Interest Total 2024 $ 252,124 $ 26,968 $ 279,092 2025 226,422 20,247 246,669 2026 239,670 13,331 253,001 2027 213,636 6,016 219,652 2028 47,015 284 47,299 Total $ 978,867 $ 66,846 $ 1,045,713 65 City of Southlake, Texas Notes to the Financial Statements Note 4. Capital Assets Capital asset activity for the year ended September 30, 2023, was as follows: Governmental Activities: Capital assets not being depreciated/amortized: Land Street infrastructure Construction -in -progress Total capital assets not being depreciated/amortized Capital assets being depreciated/amortized: Land improvements Buildings and building improvements Public art Equipment Vehicles Drainage infrastructure Right -to -use assets: Lease equipment Subscriptions Total capital assets being depreciated/amortized Accumulated depreciation/amortization: Land improvements Buildings and building improvements Public art Equipment Vehicles Drainage infrastructure Right -to -use assets: Lease equipment Subscriptions Total accumulated depreciation/amortization Total capital assets being depreciated/amortized, net Governmental activities capital assets, net Business Type Activities: Capital assets not being depreciated/amortized: Land Construction -In -Progress Total capital assets not being depreciated/amortized Capital assets being depreciated/amortized: Buildings and building improvements Equipment Vehicles Capacity rights Distribution system Total capital assets being depreciated/amortized Accumulated depreciation/amortization: Buildings and building improvements Equipment Vehicles Capacity rights Distribution system Total accumulated depreciation /a m ortizaf ion Total capital assets being depreciated/amortized, net Business type activities capital assets, net Beginning Capital Sales or Adjustments/ Ending Balance Acquisitions Disposals Transfers Balance $ 96,956,849 $ 356,950 $ 232,358,551 592,026 10,045,101 8,928,677 339,360,501 9,877,653 $ $ 97,313,799 232,950,577 (1,777,897) 17,195,881 (1,777,897) 347,460,257 41,721,306 349,129 42,070,435 142,247,034 62,200 142,309,234 1,814,405 - 142,315 1,956,720 21,920,658 4,597,845 (27,738) 15,317,603 41,808,368 15,317,603 - (15,317,603) - 64,168,812 6,598 1,635,582 65,810,992 545,069 264,171 (53,691) - 755,549 3,071,032 3,071,032 287,734,887 8,350,975 (81,429) 1,777,897 297,782,330 (26,189,569) (1,827,291) (28,016,860) (33,167,020) (3,188,259) (36,355,279) (1,172,753) (96,655) - (1,269,408) (16,635,059) (2,777,151) 27,738 (10,065,885) (29,450,357) (10,065,885) 10,065,885 (31,264,957) (1,773,106) (33,038,063) (211,430) (150,480) 53,691 (308,219) (704,116) (704,116) (118,706,673) (10,517,058) 81,429 (129,142,302) 169,028,214 (2,166,083) 1,777,897 168,640,028 $ 508,388,715 $ 7,711,570 $ $ $ 516,100,285 Beginning Capital Sales or Adjustments/ Ending Balance Acquisitions Disposals Transfers Balance $ 21,033,596 $ 414,198 $ $ - $ 21,447,794 1,414,673 4,670,170 (565,262) 5,519,581 22,448,269 5,084,368 (565,262) 26,967,375 935,501 - - 935,501 2,498,009 14,466 511,817 3,024,292 511,817 - (511,817) - 9,190,988 - - 9,190,988 153,926,558 1,264,723 565,262 155,756,543 167,062,873 1,279,189 565,262 168,907,324 (797,540) (30,318) - (827,858) (2,439,502) (35,901) (505,108) (2,980,511) (505,108) 505,108 (4,990,775) (183,820) - (5,174,595) (83,303,515) (4,898,148) (88,201,663) (92,036,440) (5,148,187) (97,184,627) 75,026,433 (3,868,998) 565,262 71,722,697 $ 97,474,702 $ 1,215,370 $ $ $ 98,690,072 City of Southlake, Texas Notes to the Financial Statements Depreciation/amortization expenses were charged as a direct expense to functions of the primary government as follows: Governmental activities: General government $ 2,584,421 Public safety 2,064,569 Public works 2,005,126 Culture and recreation 3,862,942 Total depreciation/amortization expense - governmental activities $ 10,517,058 Business -type activities: Water and Sewer $ 5,148,187 Note 5. 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 prior years, the City has legally defeased certain outstanding general obligation and revenue debt by placing funds into irrevocable trusts pledged to pay all future debt service payments of the refunded debt. Accordingly, a liability for the defeased debt issues is not included in the City's financial statements. As of September 30, 2023, the City had no additional outstanding bonds that were legally defeased. As of September 30, 2023, the City had $9,881,821 in authorized but unissued general obligation bonds. The City does not anticipate the issuance of additional general obligation debt within the next twelve months. 67 City of Southlake, Texas Notes to the Financial Statements General obligation bonds, certificates of obligation, tax notes, and governmental revenue bonds are as follows as of September 30, 2023: Final Interest Business - General Obligation Bonds and Certificates of Obligation Maturity Rates Governmental Type $11,300,000 Series 2012, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2032 3.0 - 4.25% $ 3,070,000 $ 1,445,000 $9,965,000 Series 2012, General Obligation Refunding Bonds 2026 3.0 - 4.25% 2,470,000 30,000 $14,250,000 Series 2013, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2033 2.0 - 5.0% - 1,445,000 $22,295,000 Series 2013, General Obligation Refunding Bonds 2026 2.0 - 5.0% 6,830,000 160,000 $21,330,000 Series 2014, General Obligation Refunding Bonds 2026 2.0 - 5.0% 185,000 345,000 $8,780,000 Series 2014, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2034 2.0 - 3.5% - 2,730,000 $3,295,000 Series 2015, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2035 2.75 - 4.0% - 2,245,000 $7,910,000 Series 2017, General Obligation Refunding Bonds 2028 3.0 - 4.0% 2,103,835 2,241,163 $5,400,000 Series 2017, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2037 2.25 - 5.0% - 4,240,000 $4,205,000 Series 2018, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2038 3.0 - 4.0% - 3,430,000 $17,290,000 Series 2019, General Obligation Refunding Bonds 2030 3.0 - 5.0% 3,305,000 4,275,000 $4,240,000 Series 2021, General Obligation Refunding Bonds 2031 1.21% 1,623,000 1,752,000 $8,595,000 Series 2022, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2037 4.0 - 5.0% 7,210,000 - $ 26,796,835 $ 24,338,163 City of Southlake, Texas Notes to the Financial Statements Governmental Revenue Bonds $16,000,000 Series 2014, Southlake Parks Development Corporation, Sales Tax Revenue Refunding Bonds $24,450,000 Series 2016, Southlake Community Enhancement and Development Corporation, Sales Tax Revenue Bonds $9,945,000 Series 2017, Southlake Community Enhancement and Development Corporation, Sales Tax Revenue Bonds Final Interest Maturity Rates Governmental 2027 3% $ 4,615,000 2036 3.00 - 5.00% 18,625,000 2036 2.00 - 5.00% 7,535,000 4) ;su, i i O,uuu Final Interest Governmental Tax Notes Maturity Rates Governmental $3,753,000 Series 2021, Tax Notes 2026 0.83% $ 2,023,000 $13,397,000 Series 2023, Tax Notes 2030 3.48% 13,397,000 $ 15,420,000 During 2023, the City issued $13,397,000 of Tax Notes, Series 2023. The debt was issued for the purpose of construction of roadway capital improvement projects. The following is a summary of long-term liability transactions for the year ended September 30, 2023: Amount Beginning Ending Due within Balance Additions Reductions Balance One year Governmental activities: General obligation bonds and certificates of obligation $ 32,848,669 $ $ (6,051,834) $ 26,796,835 $ 6,051,358 Sales tax revenue bonds 33,730,000 (2,955,000) 30,775,000 3,080,000 Tax notes 2,686,000 13,397,000 (663,000) 15,420,000 669,000 Bond premiums (discounts) 4,750,387 - (795,266) 3,955,121 - Total bonds payable 74,015,056 13,397,000 (10,465,100) 76,946,956 9,800,358 Total OPEB liability -SDBF 1,059,723 - (331,417) 728,306 - Net pension liability 1,332,735 16,985,509 18,318,244 - Compensated absences 2,721,441 2,341,730 (2,359,919) 2,703,252 591,235 Financed purchase liabilities 405,368 - (97,039) 308,329 99,853 Right -to -use lease liability 338,051 255,917 (145,064) 448,904 127,780 Subscription liability - 3,031,188 (865,793) 2,165,395 764,364 Total governmental activities $ 79,872,374 $ 36,011,344 $ (14,264,332) $ 101,619,386 $ 11,383,590 City of Southlake, Texas Notes to the Financial Statements Typically, liquidation of the liabilities for compensated absences, total OPEB, and net pension occurs within the General Fund, Community Enhancement Development Corporation Special Revenue Fund, and the Water and Sewer Enterprise Fund where the payroll costs are incurred. Typically, liquidation of bonds payable occurs from the General Obligation Debt Service Fund, Southlake Parks Development Corporation Debt Service Fund, and Community Enhancement Development Corporation Debt Service Fund. Amount Beginning Ending Due within Balance Additions Reductions Balance One year Business -type activities: General obligation bonds and certificates of obligation $ 26,777,331 $ - $ (2,439,168) $ 24,338,163 $ 2,488,640 Bond premiums 1,735,426 - (268,378) 1,467,048 - Total bonds payable 28,512,757 - (2,707,546) 25,805,211 2,488,640 Total OPEB liability - SDBF 82,972 - (23,381) 59,591 - Net pension liability 300,064 1,198,313 1,498,377 - Compensated absences 117,215 139,097 (157,758) 98,554 32,658 Total business -type activities $ 29,013,008 $ 1,337,410 $ (2,888,685) $ 27,461,733 $ 2,521,298 The annual aggregate maturities for each bond type are as follows: General Obligation Bonds and Certificates of Obligation Governmental Activities Fiscal Year Ending September 30, Principal Interest Total 2024 $ 6,051,358 $ 919,280 $ 6,970,638 2025 6,298,304 675,660 6,973,964 2026 6,560,251 419,782 6,980,033 2027 1,632,198 259,470 1,891,668 2028 1,695,724 197,119 1,892,843 2029-2033 3,724,000 422,006 4,146,006 2034-2038 835,000 72,550 907,550 Total $ 26,796,835 $ 2,965,867 $ 29,762,702 Sales Tax Revenue Bonds Governmental Activities Fiscal Year Ending September 30, Principal Interest Total 2024 $ 3,080,000 $ 939,106 $ 4,019,106 2025 3,025,000 816,731 3,841,731 2026 2,790,000 706,256 3,496,256 2027 2,640,000 618,506 3,258,506 2028 1,890,000 550,556 2,440,556 2029-2033 10,355,000 1,853,006 12,208,006 2034-2038 6,995,000 322,553 7,317,553 Total $ 30,775,000 $ 5,806,714 $ 36,581,714 70 City of Southlake, Texas Notes to the Financial Statements Tax Notes Governmental Activities Fiscal Year Ending September 30, Principal Interest Total 2024 $ 669,000 $ 539,802 $ 1,208,802 2025 804,000 472,395 1,276,395 2026 810,000 462,252 1,272,252 2027 3,115,000 402,967 3,517,967 2028 3,225,000 292,651 3,517,651 2029-2033 6,797,000 238,606 7,035,606 Total $ 15,420,000 $ 2,408,673 $ 17,828,673 General Obligation Bonds and Certificates of Obligation Business -Type Activities Fiscal Year Ending September 30, Principal Interest Total 2024 $ 2,488,640 $ 788,662 $ 3,277,302 2025 2,477,697 694,050 3,171,747 2026 2,565,748 598,818 3,164,566 2027 2,543,802 501,548 3,045,350 2028 2,633,276 408,500 3,041,776 2029-2033 8,174,000 1,103,606 9,277,606 2034-2038 3,455,000 226,019 3,681,019 Total $ 24,338,163 $ 4,321,203 $ 28,659,366 The City has entered into multiple arrangements for the purpose of financing the purchase of various equipment. The City's arrangements incur interest at 2.9% annually, and have 5 year terms expiring in 2026. The annual debt service requirement to amortize the financed purchase liabilities outstanding at September 30, 2023, are as follows: Financed Purchase Liabilities Governmental Activities Fiscal Year Ending September 30, Principal Interest Total 2024 $ 99,853 $ 8,942 $ 108,795 2025 102,748 6,046 108,794 2026 105,728 3,066 108,794 Total $ 308,329 $ 18,054 $ 326,383 71 City of Southlake, Texas Notes to the Financial Statements The City has entered into multiple lease agreements as lessee for the right -to -use equipment over the term of the lease. The City is required to make periodic payments at its incremental borrowing rate or the interest rate stated or implied within the leases. Effective October 1, 2021, the City implemented GASB Statement No. 87, Leases. At implementation of this statement, the City initially measured the lease liability at the present value of payments expected to be made during the remaining lease term. The City's lessee arrangements incur interest at rates of approximately 2.9% annually; all of which are accounted for within the City's governmental activities. All such arrangements range between 3 and 5 years in length. The annual debt service requirement to amortize the other lease liabilities outstanding at September 30, 2023, are as follows: Lease Liabilities Fiscal Year Ending September 30, 2024 2025 2026 2027 2028 2029 Principal $ 127,780 126,751 92,027 40,370 32,268 29,708 Governmental Activities Interest $ 8,126 5,085 2,159 1,106 601 294 Total $ 135,906 131,836 94,186 41,476 32,869 30,002 Total $ 448,904 $ 17,371 $ 466,275 Subscription Based Information Technology Arrangements (SBITA) The City has entered into multiple SBITAs that allow the right -to -use the SBITA vendor's information technology software over the subscription term. The City is required to make annual or monthly payments at its incremental borrowing rate or the interest rate stated or implied within the SBITAs. The SBITA rate, term and ending subscription liability are as follows: Interest Liability at SBITA Term Ending Rate(s) Commencement in Months Balance Governmental activities Software 2.240% - 3.257% 3,031,188 21 - 107 $ 2,165,395 Total governmental activities $ 2,165,395 72 City of Southlake, Texas Notes to the Financial Statements The future principal and interest SBITA payments as of fiscal year end are as follows: Fiscal Year Ending 2024 2025 2026 2027 2028 2029 - 2031 Principal Interest Total $ 764,364 $ 64,308 $ 828,672 615,512 42,021 657,533 269,633 23,748 293,381 156,211 15,478 171,689 137,117 77'1 cco 10,768 O 110 147,885 7'}1 L7L Total governmental activities $ 2,165,395 $ 165,441 $ 2,330,836 The value of the subscription assets as of the end of the current fiscal year was $3,071,032 and had accumulated amortization of $704,1 16. Note 6. Transfers All interfund transfers between the various funds are approved supplements to the operations of those funds. Individual fund transfers for fiscal year 2023 were as follows: Transfers out: General Fund Southlake Parks Development Corporation Fund Community Enhancement and Development Corporation Fund Nonmajor Governmental Funds Water and Sewer Enterprise Fund Total transfers Transfers in: General General Vehicle and Obligation Capital Nonmajor Water and Sewer Equipment General Debt Service Projects Governmental Enterprise Replacement Total Fund Fund Fund Funds Fund Fund transfers $ - $ - $ 8,600,000 $ 100,000 $ 67,091 $ 3,200,000 $ 11,967,091 408,593 9,284,383 9,692,976 478,930 - - 3,822,206 4,301,136 553,829 402,554 945,000 1,130,000 3,031,383 1,403,560 - - - 1,403,560 $ 2,844,912 $ 402,554 $ 9,545,000 $ 14,336,589 $ 67,091 $ 3,200,000 $30,396,146 73 City of Southlake, Texas Notes to the Financial Statements During the year, interfund transfers were used for the following recurring items: • To allocate indirect charges from the General Fund to the Southlake Parks Development Corporation, Water and Sewer Enterprise Fund, and other nonmajor governmental funds. • To move revenues from the fund with collection authorization to the General Obligation Debt Service Fund and other nonmajor debt service funds as debt service principal and interest payments become due. • To move funding for vehicle and equipment replacement from the General Fund to the internal service fund. • To fund the annual subsidy for commercial vehicle enforcement. Further, during the year ended September 30, 2023, the City made the following one-time transfers: • Transfer of $8,500,000 from the General Fund to the General Capital Projects Fund for infrastructure projects. • Transfer of $100,000 from the General Fund to the General Capital Projects Fund for public art projects. • Transfer of $6,500,000 from the Southlake Parks Development Corporation to the Southlake Parks Development Corporation Capital Projects Fund for parks projects. • Transfer of $1,375,000 from the Community Enhancement and Development Corporation to the Community Enhancement and Development Corporation Capital Projects Fund for community enhancement projects. • Transfer of $1,130,000 from nonmajor governmental funds to the Crime Control District Capital Projects Fund for crime control district projects. • Transfer of $945,000 from nonmajor governmental funds to the General Capital Projects Fund for infrastructure projects. • Transfer of $67,091 from the General Fund to the Water and Sewer Enterprise Fund to move revenue to the appropriate fund. Note 7. Retirement Plan A. Plan Description The City participates as one of 919 plans in the defined benefit cash -balance plan administered by the Texas Municipal Retirement System (TMRS). TMRS is a statewide public retirement plan 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 employees of Texas participating cities. The TMRS Act places the general administration and management of TMRS with a six -member, Governor -appointed Board of Trustees; however, TMRS is not fiscally dependent on the State of Texas. TMRS issues a publicly available Annual Comprehensive Financial Report (Annual Report) that can be obtained at 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 Member's benefit is calculated based on the sum of the Member's contributions, with interest, and the city -financed monetary credits with interest. The retiring Member may select one of seven monthly benefit payment options. Members may also choose to receive a portion of their benefit as a lump sum distribution in an amount equal to 12, 24 or 36 monthly payments, which cannot exceed 75% of the total Member contributions and interest. 74 City of Southlake, Texas Notes to the Financial Statements At the date the plan began, the City granted monetary credits for service rendered before the plan began of a theoretical amount at least equal to two times what would have been contributed by the employee, with interest, prior to establishment of the plan. Monetary credits for service since the plan began are a percent (100%, 150%, or 200%) of the employee's accumulated contributions. In addition, the City can grant, as often as annually, another type of monetary credit referred to as an updated service credit which is a theoretical amount which, when added to the employee's accumulated contributions and the monetary credits for service since the plan began, would be the total monetary credits and employee contributions accumulated with interest if the current employee contribution rate and City matching percent had always been in existence and if the employee's salary had always been the average of his salary in the last three years that are one year before the effective date. At retirement, the benefit is calculated as if the sum of the employee's accumulated contributions with interest and the employer -financed monetary credits with interest were used to purchase an annuity. Members can retire at ages 60 and above with 5 or more years of service or with 20 years of service. A member is vested after 5 years. The plan provisions are adopted by the governing body of the City, within the options available in the state statutes governing TMRS and within the actuarial constraints also in the statutes. Employees covered by benefit terms. At the December 31, 2022 valuation and measurement date, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 171 Inactive employees entitled to but not yet receiving benefits 304 Active employees C. Contributions 352 827 Member contribution rates in TMRS are either 5%, 6% or 7% of the Member's total compensation, 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 city's contribution rate is based on the liabilities created from the benefit plan options selected by the city and any changes in benefits or actual experience over time. Employees for the City were required to contribute 7% of their annual compensation during the fiscal year. The contribution rates for the City were 12.56% and 12.46% in calendar years 2022 and 2023, respectively. The city's contributions to TMRS for the year ended September 30, 2023, were $3,879,580 and were greater than the required contributions by $87,516. D. Net Pension Liability The city's Net Pension Liability (NPL) was measured as of December 31, 2022, and the Total Pension Liability (TPL) used to calculate the Net Pension Liability was determined by an actuarial valuation as of that date. 75 City of Southlake, Texas Notes to the Financial Statements Actuarial Assumptions The Total Pension Liability in the December 31, 2022 actuarial valuation was determined using the following actuarial assumptions: Inflation 2.5% per year Overall payroll growth 2.75% per year, adjusted down for population declines, if any Investment Rate of Return 6.75%, net of pension plan investment expense, including inflation Salary increases are based on a service -related table. Mortality rates for active members are based on the PUB(10) mortality tables with the Public Safety table used for males and the General Employee table used for females. Mortality rates for healthy retirees and beneficiaries are based on the Gender -distinct 2019 Municipal Retirees of Texas mortality tables. The rates for actives, healthy retirees and beneficiaries are projected on a fully generational basis by Scale UMP to account for future mortality improvements. For disabled annuitants, the same mortality tables for healthy retirees are used with a 4- year set -forward for males and a 3-year set -forward for females. In addition, a 3.5% and 3.0% minimum mortality rate is applied, for males and females respectively, to reflect the impairment for younger members who become disabled. The rates are projected on a fully generational basis by Scale UMP to account for future mortality improvements subject to the floor. The actuarial assumptions were developed primarily from the actuarial investigation of the experience of TMRS over the four-year period from December 31, 2014 to December 31, 2018. The assumptions were adopted in 2019 and first used in the December 31, 2019, actuarial valuation. The post -retirement mortality assumption for Annuity Purchase Rates (APRs) is based on the Mortality Experience Investigation Study covering 2009 through 2011 and dated December 31, 2013. Plan assets are managed on a total return basis with an emphasis on both capital appreciation as well as the production of income 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). The target allocation and best estimates of real rates of return for each major asset class in fiscal year 2023 are summarized in the following table: Long -Term Expected Real Target Rate of Return Asset Class Allocation (Arithmetic) Global Equity 35.0% 7.70% Core Fixed Income 6.0% 4.90% Non -Core Fixed Income 20.0% 8.70% Other public and private markets 12.0% 8.10% Real Estate 12.0% 5.80% Hedge funds 5.0% 6.90% Private Equity 10.0% 11.80% Total 100.0% City of Southlake, Texas Notes to the Financial Statements 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 Member 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 Members. 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. Changes in the Net Pension Liability Balance at 12/31/2021 Changes for the year: Service Cost Interest Change of benefit terms Difference between expected and actual experience Changes of assumptions Contributions - employer Contributions - employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net Changes Balance at 12/31/2022 Increase Total (Decrease) Net Pension Plan Fiduciary Pension Liability Net Position Liability (a) (b) (a) - (b) $ 129,296,554 $ 127,663,755 $ 1,632,799 4,838,653 - 4,838,653 8,750,754 - 8,750,754 1,059,885 - 1,059,885 - 3,714,760 (3,714,760) 2,070,328 (2,070,328) (9,335,205) 9,335,205 (4,150,172) (4,150,172) - (80,641) 80,641 - 96,228 (96,228) 10,499,120 (7,684,702) 18,183,822 $ 139,795,674 $ 119,979,053 $ 19,816,621 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 $ 41,676,615 $ 19,816,621 $ 2,081,726 Pension Plan Fiduciary Net Position Detailed information about the pension plan's Fiduciary Net Position is available in the Schedule of Changes in Fiduciary Net Position, by Participating City. That report may be obtained at trms.com. 77 City of Southlake, Texas Notes to the Financial Statements E. Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the year ended September 30, 2023, the City recognized pension expense of $5,667,661. At September 30, 2023, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Differences between expected and actual economic experience Changes in actuarial assumptions Difference between projected and actual investment earnings Contributions subsequent to the measurement date Total Deferred Deferred Outflows of Inflows of Resources Resources $ 1,138,771 $ - 69,944 - 8,283,395 - 3,005,459 - $ 12,497,569 $ - The $3,005,459 reported as deferred outflows of resources related to pensions resulting from contributions subsequent to the measurement date will be recognized as a reduction of the Net Pension Liability for the year ending September 30, 2024. 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 2024 $ 987,196 2025 2,367,315 2026 2,473,154 2027 3,664,445 Total $ 9,492,1 10 Note 8. Other Postemployment Benefits (OPEB) The City of Southlake provides for two other postemployment benefit (OPEB) plans; one provides for postemployment health insurance benefits through an agent -multiple employer defined benefit medical plan (Southlake Retiree Health Care Plan), and the other is the Texas Municipal Retirement System Supplemental Death Benefits Fund, a single employer defined benefit OPEB plan. Both plans are described in detail below. Aggregate amounts for the two OPEB plans are as follows: Retiree Healthcare TMRS Plan SDBF Total OPEB liability (asset) $ (452,288) $ 787,897 $ 335,609 Deferred outflows of resources 811,737 200,503 1,012,240 Deferred inflows of resources 546,311 437,037 983,348 OPEB expense (86,898) 53,634 (33,264) m City of Southlake, Texas Notes to the Financial Statements City of Southlake Retiree Health Care Plan Plan Description The City provides other postemployment healthcare benefits in accordance with City policy. Administration of the City of Southlake Retiree Healthcare Plan trust is through Public Agency Retirement Services (PARS) with an IRC Section 115 Irrevocable Exclusive Benefit Trust. Trustee for the plan is US Bank. Ultimate authority for investment decisions and actions necessary to maintain the City's participation in the program resides with the City Manager, appointed as Plan Administrator through a 2009 resolution of the City Council. Investment strategy is currently through the City's selection of PARS Moderately Conservative High Mark Plus. 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. A separate financial statement is not issued for the plan. Benefits Provided 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. Recommendations for plan benefits are presented to City Council for their approval during the annual budget process. Employees Covered by Benefit Terms The following table provides a summary of the number of participants in the plan as of December 31, 2022: Inactive employees currently receiving benefits 6 Inactive employees entitled to but not yet receiving benefits - Active Employees 339 345 Contributions The City's contributions during the fiscal year ending September 30, 2023 were $211,408 and were greater than the required contributions by $172,323. The benefit payments were determined in a manner similar to how the benefit payments for the measurement period were developed. The City, through its budgeting process, determines the annual contributions to the Plan based on the actuarially determined contribution and the availability of funds. Net OPEB Asset The City's total OPEB asset is based on an actuarial valuation performed as of December 31, 2022. 79 City of Southlake, Texas Notes to the Financial Statements Actuarial Assumptions The total OPEB asset in the December 31, 2022 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Actuarial Cost Method Individual Entry -Age Normal Single Discount Rate 5.00% as of December 31, 2022 Inflation rate 2.50% per year Salary Increases 3.50% to 11.50% including inflation Demographic Assumptions Based on the experience study covering the four-year period ending December 31, 2018 as conducted for the Texas Municipal Retirement System (TMRS). Mortality For healthy retirees, the gender -distinct 2019 Municipal Retirees of Texas mortality tables are used. The rates are projected on a fully generational basis using the ultimate mortality improvement rates in the MP tables published through 2019 to account for future mortality improvements. Healthcare Cost trend rates Initial rate of 7.00% declining to ultimate rates of 4.25% after 15 years. Participation Rates 30% of employees who retire at age 55 or older, or retire through disability retirement at any age, were assumed to maintain their health coverage after retirement. Single Discount Rate. Projected benefit payments are required to be discounted to their actuarial present values using a Single Discount Rate that reflects (1) a long-term expected rate of return on OPEB plan investments (to the extent that the plan's fiduciary net position is projected to be sufficient to pay benefits), and (2) tax-exempt municipal bond rate based on an index of 20-year general obligation bonds with an average AA credit rating as of the measurement date (to the extent that the contributions for use with the long-term expected rate of return are not met). For the purpose of this valuation, the expected rate of return on OPEB plan investments is 5.0%; the municipal bond rate is 1.84% (based on the daily rate closest to but not later than the measurement date of the Fidelity "20-Year Municipal GO AA Index"); and the resulting Single Discount Rate is 5.0%. The City's has consistently funded the actuarially determined employer contribution, which is based on a closed amortization policy. As a result, the plan's fiduciary net position is projected to be sufficient to pay benefits for all future years. :E City of Southlake, Texas Notes to the Financial Statements Changes in the Net OPEB Asset Balance at 12/31/2021 Changes for the year: Service Cost Interest Difference between expected and actual experience Changes of assumptions Contributions - employer Net investment income Benefit payments, including refunds of employee contributions Administrative expense Net Changes Balance at 12/31/2022 Increase (Decrease) Total Plan Net OPEB Fiduciary OPEB (Asset) Liability Net Position (Asset) Liability (a) (b) (a) - (b) $ 1,833,044 $ 2,550,451 $ (717,407) 120,612 - 120,612 92,533 - 92,533 (163,080) - (163,080) 89,089 - 89,089 - 225,370 (225,370) (343,355) 343,355 (85,370) (85,370) - - (7,980) 7,980 53,784 (211,335) 265,119 $ 1,886,828 $ 2,339,116 $ (452,288) Consistent with the requirements of GASB Statements No. 74, the employer contributions include "amounts for OPEB as the benefits come due that will not be reimbursed to the employer using OPEB plan assets." The $85,370 in benefit payments was paid by the City using its own assets. The plan fiduciary net position is 139% of the total OPEB liability as of the measurement date, resulting in the net OPEB asset. The benefit payments during the measurement period were determined as follows: City's explicit subsidy $ 12,625 City's implicit subsidy (explicit subsidy * 5.522) 72,745 Total benefit payments $ 85,370 The 5.522 implicit factor equals the ratio of the expected implicit subsidy to the expected explicit subsidy. Sensitivity of the Net OPEB Asset to Changes in the Discount Rate and Healthcare Cost Trend Rates Regarding the sensitivity of the net OPEB asset to changes in the Single Discount Rate, the following presents the plan's net OPEB asset, calculated using a discount rate of 5.00%, as well as what the plan's net OPEB asset would be if it were calculated using a discount rate that is one percent lower or one percent higher: 1 % Decrease 1 % Increase in Discount Discount in Discount Rate (4.00%) Rate (5.00%) Rate (6.00%) Net OPEB asset $ (280,776) $ (452,288) $ (606,527) m City of Southlake, Texas Notes to the Financial Statements Regarding the sensitivity of the net OPEB asset to changes in the healthcare cost trend rates, the following presents the plan's net OPEB asset, calculated using the assumed trend rates as well as what the plan's net OPEB asset would be if it were calculated using a trend rate that is one percent lower or one percent higher: Current Healthcare Cost Rate 1%Decrease Assumption 1%Increase Net OPEB asset $ (635,302) $ (452,288) $ (236,267) OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources For the year ended December 31, 2022, the City recognized OPEB expense of $(86,898). At September 30, 2023, the reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Difference between Expected and Actual Economic Experiences $ 13,607 $ 376,091 Changes in Assumptions 291,511 170,220 Investment Experience 314,383 - Contributions subsequent to the measurement date 192,236 - $ 811,737 $ 546,311 The $192,236 reported as deferred outflows of resources related to OPEB resulting from contributions subsequent to the measurement date will increase the net OPEB asset during the year ending September 30, 2024. Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows: Fiscal Year Ended Sept. 30 2024 $ 24,330 2025 49,084 2026 68,741 2027 69,036 2028 (26,923) Thereafter (111,078) Total $ 73,190 Differences between expected and actual experience and changes in assumptions are recognized in OPEB expense using a systematic and rational method over a closed period equal to the average of the expected remaining service lives of all employees that are provided with OPEB through the OPEB plan (active employees and inactive employees) determined as of the beginning of the measurement period. The expected remaining service lives of all active employees in the plan were approximately 3,227 years. Additionally, the total plan membership (active employees and inactive employees) was 345. As a result, the average of the expected remaining service lives for purposes of recognizing the applicable deferred outflows and inflows of resources established in the current measurement period is 9.3548 years. m City of Southlake, Texas Notes to the Financial Statements Additionally, differences between projected and actual earnings on OPEB plan investments should be recognized in OPEB expense using a systematic and rational method over a closed five-year period. For this purpose, the deferred outflows and inflows of resources are recognized in the OPEB expense as a level dollar amount over the closed period identified above. Other Post Employment Benefits Supplemental Death Benefit Fund Plan Description Texas Municipal Retirement System ("TMRS") administers a defined benefit group -term life insurance plan known as the Supplemental Death Benefits Fund ("SDBF"). This is a voluntary program in which participating member cities may elect, by ordinance, to provide group -term life insurance coverage for their active members, including or not including retirees. Employers may terminate coverage under and discontinue participation in the SDBF by adopting an ordinance before November 1 of any year to be effective the following January 1. The City has elected to participate in the SDBF for its active members including retirees. As the SDBF covers both active and retiree participants, with no segregation of assets, the SDBF is considered to be an unfunded single -employer OPEB plan (i.e. no assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75) for City reporting. Benefits Provided The death benefit for active employees provides a lump -sum payment approximately equal to the employee's annual salary (calculated based on the employee's actual earnings, for the 12-month period preceding the month of death). The death benefit for retirees is considered an other postemployment benefit ("OPEB") and is a fixed amount of $7,500. At the December 31, 2022 valuation and measurement date, the following employees were covered by the benefit terms: Inactive employees currently receiving benefits 119 Inactive employees entitled to but not yet receiving benefits 81 Active Employees 352 552 Contributions The member city contributes to the SDBF at a contractually required rate as determined by an annual actuarial valuation. The rate is equal to the cost of providing one-year term life insurance. The funding policy for the SDBF program is to assure that adequate resources are available to meet all death benefit payments for the upcoming year. The intent is not to pre -fund retiree term life insurance during employees' entire careers. Contributions are made monthly based on the covered payroll of employee members of the participating member city. The contractually required contribution rate is determined annually for each city. The rate is based on the mortality and service experience of all employees covered by the SDBF and the demographics specific to the workforce of the city. There is a one-year delay between the actuarial valuation that serves as the basis for the employer contribution rate and the calendar year when the rate goes into effect. The funding policy of this plan is to assure that adequate resources are available to meet all death benefit payments for the upcoming year. m City of Southlake, Texas Notes to the Financial Statements The retiree portion of contribution rates to the SDBF for the City was 0.05% and 0.06% in calendar years 2022 and 2023, respectively. The City's contributions to the SDBF for the year ended September 30, 2023 were $14,788, and were equal to the required contributions. Total OPEB Liability The City's Total OPEB Liability (TOL) was measured as of December 31, 2022 and was determined by an actuarial valuation as of that date. Actuarial Assumptions The Total OPEB Liability in the December 31, 2022 actuarial valuation was determined using the following actuarial assumptions: Inflation Salary Increases Discount rate Retiree's share of benefit -related costs Administrative expenses 2.50% 3.50% to 11.50% including inflation 4.05% $0 All administrative expenses are paid through the Pension Trust and accounted for under reporting requirements of GASB Statement No. 68. Salary increases were based on a service -related table. Mortality rates for service retirees were based on the 2019 Municipal Retirees of Texas Mortality Tables. The rates are projected on a fully generational basis with scale UMP. Mortality rates for disabled retirees were based on 2019 Municipal Retirees of Texas Mortality Tables with a 4-year set -forward for males and a 3-year set -forward for females. In addition, a 3.5% and 3% minimum mortality rate will be applied to reflect the impairment for younger members who become disabled for males and females, respectively. The rates are projected on a fully generational basis with scale UMP to account for future mortality improvements subject to the floor. Actuarial assumptions used in the December 31, 2022 valuation were developed primarily from the actuarial investigation of the experience of TMRS over the four-year period from December 31, 2014 to December 31, 2018. They were first adopted in 2019 and first used in the December 31, 2019 actuarial valuation. The discount rate used to measure the Total OPEB Liability was 4.05% and was based on the Fidelity Index's "20-Year Municipal GO AA Index" rate as of December 31, 2022. RE City of Southlake, Texas Notes to the Financial Statements Changes in Total OPEB Liability Total OPEB Liability Balances as of 12/31/2021 $ 1,142,695 Changes for the year: Service cost 79,856 Interest 21,624 Difference between expected and actual experience 26,255 Changes of assumptions (467,745) Contributions - employer (14,788) Net Changes (354,798) Balances as of 12/31/2022 $ 787,897 Sensitivity of the Total OPEB Liability to Changes in the Discount Rate The following presents the total OPEB liability of the City, calculated using the discount rate of 4.05%, as well as what the City's total OPEB liability would be if it were calculated using a discount rate that is 1 percentage -point lower (3.05%) or 1 percentage -point higher (5.05%) than the current rate: 1 % Decrease Discount Rate 1 % Increase (3.05%) (4.05%) (5.05%) Total OPEB liability $ 964,063 $ 787,897 $ 653,413 OPEB Expense and Deferred Oufflows of Resources and Deferred Inflows of Resources Related to OPEB For the year ended September 30, 2023, the City recognized OPEB expense of $53,634. At September 30, 2023, the City reported deferred outflows and inflows of resources related to the OPEB plan from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Difference between expected and actual economic experiences $ - $ (27,836) Changes in actuarial assumptions 186,030 (409,201) Contributions subsequent to the measurement date 14,473 $ 200,503 $ (437,037) The $14,473 reported as deferred outflows of resources related to the OPEB plan resulting from contributions subsequent to the measurement date will reduce the Total OPEB liability during the year ending September 30, 2024. m City of Southlake, Texas Notes to the Financial Statements The other amounts reported as deferred outflows and inflows of resources related to the OPEB plan will be recognized in OPEB expense as follows: Fiscal Year Ended Sept. 30 2024 $ (33,058) 2025 (41,875) 2026 (31,951) 2027 (56,169) 2028 (69,614) Thereafter (18,340) Total $ (251,007) Note 9. 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. All amounts of compensation deferred under the plan, all property and rights purchased with such amounts, and all income attributable to such amounts, property, or rights are held in trust or under one or more annuity contracts described in Internal Revenue Code Section 401 (f). Except as may otherwise be permitted or required by law, no assets or income of the plan shall be used for, or diverted to, purposes other than for the exclusive purpose of providing benefits for participants and their beneficiaries or defraying reasonable expenses of administration of the plan. In accordance with GASB 97, the plans as amended are not included in the City's financial statements. Note 10. 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. Note 11. 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, 2023 were $4,01 1,159. City of Southlake, Texas Notes to the Financial Statements 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 12. Tax Abatement The City enters into economic development agreements authorized under Chapter 380 of the Texas Local Government Code. These agreements are planning tools designed to stimulate economic activity, redevelopment, community improvement, and provide a return on investment for the community. These programs abate or rebate property and/or sales taxes and may include other incentive payments such as fee reductions or construction cost reimbursements. Economic development agreements are considered on a case -by -case basis by the City Council and generally contain recapture provisions, which may require repayment or termination if recipients do not meet the required provisions of the economic incentives. Chapter 380 of the Texas Local Government Code allows the City to provide grants for the purpose of promoting local economic development. These grants are based on a percentage of property and/or sales tax received by the City. For the fiscal year ending September 30, 2023, the City rebated $236,989 in sales taxes, $136,003 in property taxes, and $556,662 in hotel occupancy taxes. The City also refunded $250,988 in public works, permit, and plan review fees and $943,606 in developer construction cost reimbursements for the fiscal year ending September 30, 2023. m Required Supplementary Information :• a Budgetary Comparison Schedules m City of Southlake, Texas General Fund Budgetary Comparison Schedule (GAAP Basis) For the Fiscal Year Ended September 30, 2023 Exhibit A-1 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES Ad valorem taxes, penalties and interest $ 26,990,927 $ 26,915,642 $ 26,578,947 $ (336,695) Franchise taxes 2,969,000 2,993,190 3,656,895 663,705 Municipal sales and mixed beverage tax 19,908,000 19,908,000 22,790,698 2,882,698 License, permits and fees 1,512,100 1,668,200 2,101,778 433,578 Charges for services 1,901,470 2,006,129 2,098,618 92,489 Fines and forfeitures 952,700 798,000 795,072 (2,928) Intergovernmental revenue 72,000 396,002 496,469 100,467 Investment income (losses) 36,550 1,259,700 2,088,292 828,592 Contributions 5,000 54,000 45,788 (8,212) Miscellaneous 185,000 185,000 230,110 45,110 Total revenues 54,532,747 56,183,863 60,882,667 4,698,804 EXPENDITURES General government City secretary/mayor 626,040 635,932 586,176 49,756 City manager's office 1,102,636 1,129,452 1,107,936 21,516 Human resources 1,005,686 1,033,494 965,103 68,391 Support services 4,596,989 4,708,000 4,891,905 (183,905) Economic development 361,748 361,748 332,109 29,639 Finance 2,008,960 1,920,224 1,847,819 72,405 Municipal court 855,746 832,831 799,731 33,100 Teen court 163,886 163,886 145,254 18,632 Information technology 4,448,800 4,989,208 3,635,409 1,353,799 Public safety Police services 8,610,351 8,429,762 8,263,315 166,447 Fire services 11,056,104 11,680,997 11,798,804 (117,807) Public safety support 1,607,350 1,697,559 1,575,064 122,495 Public works Public works administration 2,461,558 2,514,533 2,340,428 174,105 Streets and drainage 1,305,334 1,219,983 1,163,500 56,483 Planning 1,290,249 1,285,722 1,245,423 40,299 Building inspection 1,244,279 1,279,692 1,209,322 70,370 Culture and recreation Community services 1,528,915 1,533,774 1,415,750 118,024 Parks and recreation 4,267,603 4,318,521 4,268,243 50,278 Library services 1,096,363 1,136,726 1,139,467 (2,741) Capital Outlay 3,376,688 2,425,688 4,897,087 (2,471,399) Debt Service Principal - - 918,815 (918,815) Interest - - 24,257 (24,257) Total expenditures 53,015,285 53,297,732 54,570,917 (1,273,185) Excess of revenues over expenditures 1,517,462 2,886,131 6,311,750 3,425,619 OTHER FINANCING SOURCES (USES) Issuance of financed purchases 53,975 53,975 Issuance of subscriptions 2,608,340 2,608,340 Sale of capital assets - - 4,156 4,156 Transfers from other funds 2,707,410 2,844,912 2,844,912 - Transferstootherfunds (11,700,000) (11,967,091) (11,967,091) - Total other financing sources (uses) (8,992,590) (9,122,179) (6,455,708) 2,666,471 Net change in fund balance (7,475,128) (6,236,048) (143,958) 6,092,090 Fund balances, beginning of year 49,113,423 49,113,423 49,113,423 FUND BALANCES, END OF YEAR $ 41,638,295 $ 42,877,375 $ 48,969,465 $ 6,092,090 The Notes to the Budgetary Comparison Schedules are an integral part of this statement. 92 City of Southlake, Texas Southlake Parks Development Corporation Operating Fund Budgetary Comparison Schedule (GAAP Basis) For the Fiscal Year Ended September 30, 2023 REVENUES Municipal sales tax Charges for services Investment income (losses) Total revenues EXPENDITURES Community services Capital outlay Total expenditures Excess of revenues over expenditures OTHER FINANCING USES Transfers to other funds Net change in fund balance Fund balances, beginning of year, FUND BALANCE, END OF YEAR BUDGETED AMOUNTS ORIGINAL FINAL Exhibit A-2 VARIANCE WITH FINAL BUDGET - POSITIVE ACTUAL (NEGATIVE) $ 9,898,000 $ 9,898,000 $ 11,426,173 $ 1,528,173 153,824 153,824 116,376 (37,448) 4,200 163,000 306,621 143,621 10,056,024 10,214,824 11,849,170 1,634,346 1,691,151 1,709,826 1,632,063 77,763 228,200 316,944 291,744 25,200 1,919,351 2,026,770 1,923,807 102,963 8,136,673 8,188,054 9,925,363 1,737,309 (9,686,624) (9,692,976) (9,692,976) - (1,549,951) (1,504,922) 232,387 1,737,309 14,016,439 14,016,439 14,016,439 - $ 12,466,488 $ 12,511,517 $ 14,248,826 $ 1,737,309 The Notes to the Budgetary Comparison Schedules are an integral part of this statement. 93 City of Southlake, Texas Community Enhancement Development Corporation Special Revenue Fund Budgetary Comparison Schedule (GAAP Basis) For the Fiscal Year Ended September 30, 2023 REVENUES: Municipal sales tax Charges for services Investment income (losses) Contributions Miscellaneous Total revenues EXPENDITURES: Community services Capital outlay Debt Service Principal Interest Total expenditures Excess of revenues over expenditures OTHER FINANCING USES: Issuance of subscriptions Transfers to other funds Total other financing uses Net changes in fund balance Fund balances, beginning of year FUND BALANCES, END OF YEAR BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL Exhibit A-3 VARIANCE WITH FINAL BUDGET - POSITIVE (NEGATIVE) $ 7,423,500 $ 7,423,500 $ 8,463,832 $ 1,040,332 3,920,303 4,324,454 4,413,152 88,698 5,500 165,015 632,339 467,324 4,947 5,270 6,685 1,415 - - 9,573 9,573 11,354,250 11,918,239 13,525,581 1,607,342 5,442,174 5,442,174 5,097,866 344,308 - - 130,805 (130,805) - 21,862 (21,862) - - 1,143 (1,143) 5,442,174 5,442,174 5,251,676 190,498 5,912,076 6,476,065 8,273,905 1,797,840 - - 130,805 130,805 (4,276,356) (4,301,136) (4,301,136) - (4,276,356) (4,301,136) (4,170,331) 130,805 1,635,720 2,174,929 4,103,574 1,928,645 16,668,425 16,668,425 16,668,425 - $ 18,304,145 $ 18,843,354 $ 20,771,999 $ 1,928,645 The Notes to the Budgetary Comparison Schedules are an integral part of this statement. 94 City of Southlake, Texas Notes to Budgetary Comparison Schedules Budgetary Data The City Council adheres to the following procedures in establishing the budgets reflected in the financial statements: 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, Community Enhancement Development Corporation, Crime Control District, Parks Dedication, Hotel Occupancy, Storm Water Utility, Red Light Camera, Parks and Recreation, Court Security, Court Technology, Library, Commercial Vehicle Enforcement, 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. 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, Municipal Jury, Oil and Gas, Truancy Prevention, Disaster Recovery, and all Capital Projects Funds are not presented, as such funds are budgeted over the life of the respective project, and not on an annual basis. Budgetary information for the Proprietary Funds has not been presented since reporting on such budgets is not legally required. 7. General Fund reported expenditures in excess of appropriations for the year ended September 30, 2023 as follows: • Support services - ($183,905) Due to planned and approved developer reimbursement that was not budgeted because it was unclear when conditions for payment would be met. • Fire services - ($1 17,807) Due to additional salary and other personnel -related costs. • Library services - ($2,741) • Due to additional salary and other personnel -related costs. • Capital outlay - ($2,471,399) Due to implementation of GASB 96, not a true cash flow expenditure over budget. • Debt service: Principal - ($918,805) Due to implementation of GASB 96, not a true cash flow expenditure over budget. • Debt service: Interest - ($24,257) Due to implementation of GASB 96, not a true cash flow expenditure over budget. 95 W. Required Pension and OPEB Schedules 97 City of Southlake, Texas Schedule of Changes in Net Pension Liability and Related Ratios Texas Municipal Retirement System Last Nine Measurement Years Total pension liability: Service cost Interest Changes of benefit terms Difference between expected and actual experience Change in assumptions Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability - beginning Total pension liability - ending (a) Plan fiduciary net position: Contributions - employer Contributions - employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other Net change in plan fiduciary net position Plan fiduciary net position - beginning Plan fiduciary net position - ending (b) Net pension liability - ending (a) - (b) Plan fiduciary net position as a percentage of total pension liability Covered payroll Net pension liability as a percentage of covered payroll Measurement Measurement Measurement Year Year Year 2022 2021 2020 $ 4,838,653 $ 4,328,436 $ 4,289,132 8,750,754 8,133,486 7,554,362 1,059,885 426,450 39,572 (4,150,172) (3,847,375) (2,798,825) 10,499,120 9,040,997 9,084,241 129,296,554 120,255,557 111,171,316 139,795, 674 129,296,554 120,255,557 3,714,760 3,348,713 3,322,051 2,070,328 1,871,403 1,829,612 (9,335,205) 14,591,844 7,731,319 (4,150,172) (3,847,375) (2,798,825) (80,641) (67,416) (49,969) 96,228 462 (1,950) (7,684,702) 15,897,631 10,032,238 127,663,755 111,766,124 101,733,886 119,979,053 127,663,755 111,766,124 $ 19,816,621 $ 1,632,799 $ 8,489,433 85.82% 98.74% 92.94% $ 29,576,118 $ 26,441,262 $ 26,137,309 67.00% 6.18% 32.48% Exhibit A-4 Measurement Measurement Measurement Measurement Measurement Measurement Year Year Year Year Year Year 2019 2018 2017 2016 2015 2014 $ 4,190,311 $ 3,919,389 $ 3,579,734 $ 3,482,384 $ 3,222,126 $ 2,906,949 6,945,183 6,379,342 5,865,601 5,393,997 5,090,308 4,779,462 250,630 537,249 213,937 179,076 102,364 (1,602,645) 324,280 - - - 760,500 - (2,671,062) (2,506,166) (1,930,078) (2,304,726) (1,921,361) (1,680,030) 9,039,342 8,329,814 7,729,194 6,750,731 7,253,937 4,403,736 102,131,974 93,802,160 86,072,966 79,322,235 72,068,298 67,664,562 111,171,316 102,131,974 93,802,160 86,072,966 79,322,235 72,068,298 3,212,690 2,992,110 2,682,629 2,595,919 2,425,455 2,283,310 1,773,541 1,673,450 1,520,518 1,480,965 1,409,008 1,340,870 13,337,326 (2,598,044) 10,284,603 4,588,256 97,252 3,463,018 (2,671,062) (2,506,166) (1,930,078) (2,304,726) (1,921,361) (1,680,030) (75,264) (50,164) (53,258) (51,781) (59,224) (36,150) (2,262) (2,623) (2,699) (2,790) (2,925) (2,972) 15,574,969 (491,437) 12,501,715 6,305,843 1,948,205 5,368,046 86,158,917 86,650,354 74,148,639 67,842,796 65,894,591 60,526,545 101,733,886 86,158,917 86,650,354 74,148,639 67,842,796 65,894,591 $ 9,437,430 $ 15,973,057 $ 7,151,806 $ 11,924,327 $ 11,479,439 $ 6,173,707 91.51 % 84.36% 92.38% 86.15% 85.53% 91.43% $ 25,334,408 $ 23,710,761 $ 21,721,689 $ 21,156,637 $ 20,113,150 $ 19,154,225 37.25% 67.37% 32.92% 56.36% 57.07% 32.23% • • City of Southlake, Texas Exhibit A-5 Schedule of Pension Contributions Texas Municipal Retirement System Last Nine Fiscal Years Contribution in Relation of Contributions as Actuarially the Actuarially Contribution a Percentage of Determined Determined Deficiency Covered Covered Contribution Contribution (Excess) Payroll Payroll 2015 $ 2,439,627 $ 2,439,627 $ $ 20,034,712 12.18% 2016 2,508,791 2,632,209 (123,418) 21,551,426 12.21 2017 2,580,380 2,654,303 (73,923) 21,525,552 12.33% 2018 2,829,615 2,894,219 (64,604) 23,132,172 12.51 2019 3,101,504 3,182,749 (81,245) 25,156,408 12.65% 2020 3,131,667 3,201,451 (69,784) 25,202,798 12.70% 2021 3,244,987 3,297,682 (52,695) 26,156,402 12.61 2022 3,547,858 3,610,307 (62,449) 28,738,669 12.56% 2023 3,792,064 3,879,580 (87,516) 31,070,964 12.49% Note: The schedule is intended to show information for 10 years. Additional years will be displayed as they become available. No] City of Southlake, Texas Schedule of Changes in Net OPEB Liability (Asset) and Related Ratios Southlake Net OPEB Liability (Asset) for Health Insurance Last Six Measurement Years Total OPEB liability (asset): Service cost Interest Changes of benefit terms Difference between expected and actual experience Change in assumptions Benefit payments, including refunds of employee contributions Net change in total OPEB liability (asset) Total OPEB liability (asset) - beginning Total OPEB liability (asset) - ending (a) Plan fiduciary net position: Contributions - employer Net investment income Benefit payments, including refunds of employee contributions Administrative expense Net change in plan fiduciary net position Plan fiduciary net position - beginning Plan fiduciary net position - ending (b) Net OPEB liability (asset)- ending (a) - (b) Plan fiduciary net position as a Exhibit A-6 Measurement Measurement Measurement Measurement Measurement Measurement Year Year Year Year Year Year 2022 2021 2020 2019 2018 2017 $ 120,612 $ 80,561 $ 73,365 $ 66,950 $ 53,239 $ 55,061 92,533 97,367 114,848 108,953 87,706 84,496 (163,080) 6,855 (337,496) (1,262) 16,549 (3,965) 89,089 (217,142) 87,222 8,001 297,855 - (85,370) (83,319) (81,362) (75,967) (75,843) (76,779) 53,784 (115,678) (143,423) 106,675 379,506 58,813 1,833,044 1,948,722 2,092,145 1,985,470 1,605,964 1,547,151 1,886,828 1,833,044 1,948,722 2,092,145 1,985,470 1,605,964 225,370 323,319 321,362 165,967 172,843 116,779 (343,355) 117,346 201,804 207,145 (38,598) 121,500 (85,370) (83,319) (81,362) (75,967) (75,843) (76,779) (7,980) (7,918) (6,098) (5,348) (4,389) (3,483) (211,335) 349,428 435,706 291,797 54,013 158,017 2,550,451 2,201,023 1,765,317 1,473,520 1,419,507 1,261,490 2,339,116 2,550,451 2,201,023 1,765,317 1,473,520 1,419,507 $ (452,288) $ (717,407) $ (252,301) $ 326,828 $ 511,950 $ 186,457 percentage of total OPEB liability (asset) 123.97% 139.14% 112.95% 84.38% 74.22% Covered payroll $ 30,420,420 $ 27,287,214 $ 26,994,043 $ 26,143,074 $ 22,468,011 Net OPEB liability (assef)as a percentage of covered payroll -1.49% -2.63% -0.93% 1.25% 2.28% Note: Only six years of data is presented in accordance with GASB #75. Additional years' information will be displayed as it becomes available. 88.39% $ 20,607,676 0.90% UK City of Southlake, Texas Schedule of Contributions Southlake Net OPEB Liability for Health Insurance Last Six Fiscal Years Contribution in Relation of the Actuarially Actuarially Fiscal Determined Determined Year Contribution Contribution 2018 $ 89,240 $ 168,167 2019 89,240 177,639 2020 140,254 301,318 2021 142,458 332,082 2022 144,728 229,678 2023 39,085 211,408 Exhibit A-7 Contributions as Contribution a Percentage of Deficiency Covered Covered (Excess) Payroll Payroll $ (78,927) $ 23,132,172 0.73% (88,399) 24,537,271 0.72% (161,064) 24,988,882 1.21 % (189,624) 25,882,453 1.28% (84,950) 29,572,038 0.78% (172,323) 31,894,347 0.66% Note: The schedule is intended to show information for 10 years. Additional years will be displayed as they become available. City of Southlake, Texas Schedule of Changes in the Total OPEB Liability and Related Ratios Texas Municipal Retirement System - Supplemental Death Benefits Last Six Measurement Years Exhibit A-8 Measurement Measurement Measurement Measurement Measurement Measurement 2022 2021 2020 2019 2018 2017 Total OPEB liability: Service cost $ 79,856 $ 66,103 $ 52,275 $ 38,002 $ 42,679 $ 34,755 Interest 21,624 21,646 24,403 25,388 23,155 21,919 Changes of benefit terms - - - - - - Difference between expected and actual experience 26,255 (26,578) (37,301) (13,112) (18,599) - Change in assumptions (467,745) 38,907 156,506 149,523 (56,421) 62,407 Contributions - employer (14,788) (13,221) (2,614) (5,067) (2,371) (4,344) Net change in total pension liability (354,798) 86,857 193,269 194,734 (11,557) 114,737 Total OPEB liability- beginning 1,142,695 1,055,838 862,569 667,835 679,392 $ 564,655 Total OPEB liability - ending (a) $ 787,897 $ 1,142,695 $ 1,055,838 $ 862,569 $ 667,835 $ 679,392 Covered employee payroll $ 29,576,118 26,441,273 26,137,309 25,334,408 23,710,761 $ 21,721,689 Net pension liability as a percentage of covered employee payroll 2.66% 4.32% 4.04% 3.40% 2.82% 3.13% Note: The schedule is intended to show information for 10 years. Additional years will be displayed as they become available. 103 City of Southlake, Texas Schedule of OPEB Contributions Texas Municipal Retirement System - Supplemental Death Benefits Last Six Fiscal Years Contribution in Relation of Actuarially the Actuarially Fiscal Determined Determined Year Contribution Contribution 2018 $ 2,846 $ 2,846 2019 3,965 3,965 2020 3,206 3,206 2021 10,272 10,272 2022 21,326 21,326 2023 15,327 15,327 Exhibit A-9 Contribution Contributions as Deficiency Covered a Percentage of (Excess) Payroll Covered Payroll $ $ 23,132,172 0.01 25,156,408 0.02% 25,202,798 0.01 26,156,403 0.04% 28,738,669 0.07% 31,070,964 0.05% Note: The schedule is intended to show information for 10 years. Additional years will be displayed as they become available. 104 City of Southlake, Texas Condition Rating of Street System September 30, 2023 2023 2022 2021 International Roughness Index (IRI) 73.6 69.8 73.0 Pavement Condition Index (PCI) 81.2 78.6 80.0 Pavement Quality Index (PQI) 81.8 79.3 80.0 Needed Actual Difference 2019 $ 1,000,000 $ 813,411 $ (186,589) 2020 1,100,000 1,100,285 285 2021 1,200,000 1,336,244 136,244 2022 1,900,000 1,706,384 (193,616) 2023 1,900,000 1,982,896 82,896 Exhibit A-10 i-ITy Required Minimum 78.0 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 Standard for Roads Pavement Condition Index (SRPCI) as developed by the American Society for Testing and Materials (ASTM). The SRPCI 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 roughness survey and a surface distress survey, along with a deflection survey of selected roads. A present status analysis was conducted using data obtained from pavement condition survey to determine the International Roughness Index (IRI) and the Pavement Condition Index (PCI). These indices were then combined into the composite Pavement Quality Index (PQI). Values of PQI can range from 0 to 100. Typical values for a newly constructed pavement range from 95.0 to 100.0. The PQI level at which a pavement becomes in need of rehabilitation is typically in the 50.0 to 70.0 range. It was the City's policy to maintain a PQI of 73.0 until 2012 when the City increased the minimum PQI to 78.0. Needed maintenance is calculated based upon inspections and the PQI. In accordance with GASB Statement No. 34, the City is required to report at least three complete condition assessments at transition using the modified approach. The condition assessments were completed by the City and concluded that the eligible infrastructure assets are being preserved at or above the condition level established by the City. Half of the City's public streets will be assessed annually to ensure all public streets are assessed every two 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. 105 W. Combining and Individual Fund Financial Statements and Schedules 107 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 General Obligation Debt Service Fund Budgetary Comparison Schedule (GAAP Basis) For the Year Ended September 30, 2023 Exhibit B-1 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES Ad valorem taxes, penalties, and interest $ 5,943,869 $ 5,943,869 $ 5,886,605 $ (57,264) Investment income (losses) 6,300 110,000 155,007 45,007 Total revenues 5,950,169 6,053,869 6,041,612 (12,257) EXPENDITURES Debt Service Principal 5,795,832 5,795,832 5,795,832 - Interest 954,600 954,600 942,467 12,133 Total expenditures 6,750,432 6,750,432 6,738,299 12,133 Excess (deficiency) of revenues over (under) expenditures (800,263) (696,563) (696,687) (124) OTHER FINANCING SOURCES: Transfers from other funds 402,554 402,554 402,554 - Total other financing sources 402,554 402,554 402,554 Net change in fund balance (397,709) (294,009) (294,133) (124) Fund balance, beginning of year 3,287,396 3,287,396 3,287,396 - FUND BALANCE, END OF YEAR $ 2,889,687 $ 2,993,387 $ 2,993,263 $ (124) Special Revenue Funds The Special Revenue Funds are used to account for revenue sources that are legally restricted or committed 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 community services department. Parks Dedication Fund - Established to account for resources restricted for use by the community services department. Crime Control District Fund - 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 municipal sales taxes. Hotel Occupancy Fund - Established to account for all revenues and expenditures relating to the hotel occupancy tax received by the City. Storm Water Utility Fund - Established 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 to fund the activities required to comply with TCEQ regulations. Court Security Fund - Established to account for municipal court fees assessed to provide court security. Court Technology Fund - Established to account for municipal court fees assessed to provide court technology. Municipal Jury Fund - Established to account for municipal court fees assessed to provide jury services. Library Fund - Established to account for resources donated for use by library services. Red Light Camera Fund - Established to account for fees assessed for red light violations captured through the City's camera monitoring system. Oil and Gas Fund- Established to account for permits fees and the related expenditures for oil and gas drilling. Commercial Vehicle Enforcement Fund - Established to account for the fees assessed for commercial vehicle violations. Truancy Prevention - Established to account for municipal court fees assessed to provide for juvenile case manager services. Tax Increment Financing District - 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. Disaster Recovery - Established to account for grant awards to provide disaster relief. we 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. Community Enhancement and Development Corporation Debt Service Fund - Established to accumulate resources to finance the debt service of debt issues for the community entertainment and recreation center. Capital Projects Funds The Capital Projects Funds are utilized to account for financial resources to be used for the acquisition or construction of specified capital improvements (other than those financed by proprietary funds). Southlake Parks Development Corporation Capital Projects Fund - Established to fund the acquisition and construction of park recreational facilities as approved by the SPDC board of directors. The fund has been funded primarily through the issuance of general obligation debt. Community Enhancement and Development Corporation Capital Projects Fund - Established 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. Crime Control District Capital Projects Fund - Established 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 Nonmajor Governmental Funds Combining Balance Sheet September 30, 2023 ASSETS Cash and cash equivalents Accounts receivable Sales tax receivable Interest receivable TOTAL ASSETS LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable Accrued liabilities Retainage payable Total liabilities FUND BALANCES Restricted Committed Total fund balances TOTAL LIABILITIES AND FUND BALANCES SPECIAL REVENUE Parks Crime and Parks Control Police Recreation Dedication District $ 96,540 $ 216,447 $ 1,600,913 $ 4,689,014 - - - 828,399 28 62 456 1,340 $ 96,568 $ 216,509 $ 1,601,369 $ 5,518,753 $ 7,984 $ $ $ 79,243 - 63,218 7,984 142,461 88,584 216,509 - 5,376,292 - - 1,601,369 - 88,584 216,509 1,601,369 5,376,292 $ 96,568 $ 216,509 $ 1,601,369 $ 5,518,753 OWN Exhibit C-1 (Page 1 of 2) SPECIAL REVENUE Storm Hotel Water Court Court Municipal Red Light Occupancy Utility Security Technology Jury Library Camera $ 3,070,534 $ 1,959,643 $ 455,130 $ 301,206 $ 1,905 $ 19,528 $ 311,057 - 217,002 - - - - - 264,332 - - - - - - 875 559 130 86 1 6 89 $ 3,335,741 $ 2,177,204 $ 455,260 $ 301,292 $ 1,906 $ 19,534 $ 311,146 $ 138,831 $ 5,250 $ 2,512 $ 10,896 $ $ $ 71,648 11,747 9,380 1,891 - - 150,578 14,630 4,403 10,896 71,648 3,185,163 2,162,574 450,857 290,396 1,906 19,534 239,498 3,185,163 2,162,574 450,857 290,396 1,906 19,534 239,498 $ 3,335,741 $ 2,177,204 $ 455,260 $ 301,292 $ 1,906 $ 19,534 $ 311,146 113 City of Southlake, Texas Nonmajor Governmental Funds Combining Balance Sheet - Continued September 30, 2023 ASSETS Cash and cash equivalents Accounts receivable Sales tax receivable Interest receivable TOTAL ASSETS LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable Accrued liabilities Retainage payable TOTAL LIABILITIES FUND BALANCES Restricted Committed TOTAL FUND BALANCES TOTAL LIABILITIES AND FUND BALANCES SPECIAL REVENUE Tax Commercial Increment Oil and Vehicle Truancy Financing Disaster Gas Enforcement Prevention District Recovery $ 57,432 $ 212,080 $ 116,497 $ 9,318,088 $ 16 60 33 2,657 $ 57,448 $ 212,140 $ 116,530 $ 9,320,745 $ 6,153 $ 958,209 $ 15,341 6,153 973,550 - 205,987 116,530 8,347,195 57,448 - - - 57,448 205,987 116,530 8,347,195 $ 57,448 $ 212,140 $ 116,530 $ 9,320,745 $ 114 DEBT SERVICE Exhibit C-1 (Page 2 of 2) CAPITAL PROJECTS Southlake Community Southlake Community TOTAL Parks Enhancement Parks Enhancement Crime NON -MAJOR Development Development Development Development Control GOVERNMENTAL Corporation Corporation Corporation Corporation District FUNDS $ 2,022,413 $ 615,592 $ 21,481,980 $ 2,269,860 $ 2,625,971 $ 51,441,830 - - - - - 217,002 - - - - - 1,092,731 577 176 6,124 647 749 14,671 $ 2,022,990 $ 615,768 $ 21,488,104 $ 2,270,507 $ 2,626,720 $ 52,766,234 $ $ $ 546,379 $ 8,020 $ 6,154 $ 1,835,126 - - - 107,730 96,358 96,358 642,737 8,020 6,154 2,039,214 2,022,990 615,768 20,845,367 2,262,487 2,620,566 49,068,203 - - - - - 1,658,817 2,022,990 615,768 20,845,367 2,262,487 2,620,566 50,727,020 $ 2,022,990 $ 615,768 $ 21,488,104 $ 2,270,507 $ 2,626,720 $ 52,766,234 WIN City of Southlake, Texas Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended September 30, 2023 SPECIAL REVENUE Parks Crime and Parks Control Police Recreation Dedication District REVENUES Ad valorem taxes, penalties and interest $ - $ $ - $ Municipal sales tax - - 3,050,459 Licenses, permits and fees - 373,299 - Fines and forfeitures 10,809 - Charges for services - - - Grants - - - Investment income (losses) 3,938 8,398 58,572 170,543 Contributions - 35,140 - - Miscellaneous 22,240 - - - Total revenues 36,987 43,538 431,871 3,221,002 EXPENDITURES Current: General government Support services - - - Municipal court - - - Public safety Police services 72,854 - 1,698,546 Public works Streets and drainage - - - - Cultural and recreation Community services - 20,268 - - Library services - - - - Promotion of culture and tourism - - - Intergovernmental Capital outlay 13,257 - 589,446 Debt service: Principal retirement - - 160,131 Interest and fiscal charges - - - 12,031 Total expenditures 86,111 20,268 - 2,460,154 Excess (deficiency) of revenues over (under) expenditures (49,124) 23,270 431,871 760,848 OTHER FINANCING SOURCES (USES) Issuance of subscriptions - - 251,198 Transfers from other funds - - - - Transfers to other funds - - - (1,227,049) Total other financing sources (uses) - - - (975,851) Net change in fund balances (49,124) 23,270 431,871 (215,003) Fund balances, beginning of year 137,708 193,239 1,169,498 5,591,295 FUND BALANCES, END OF YEAR $ 88,584 $ 216,509 $ 1,601,369 $ 5,376,292 Exhibit C-2 (Page 1 of 2) SPECIAL REVENUE Storm Hotel Water Court Court Municipal Red Light Occupancy Utility Security Technology Jury Library Camera 2,185,990 - - - - 28,106 23,155 565 - 1,606,564 - - - 106,511 55,280 17,325 11,633 (1) 658 12,343 - - - - 12,201 - 2,292,501 1,661,844 45,431 34,788 564 12,859 12,343 - 29,890 55,772 350 - - - - - - 105,035 - 522,694 - - - - 7,929 863,647 - - 40,845 - - 4,847 - 2,241 1,141 - 271 - - 910,480 522,694 32,402 55,772 350 7,929 105,035 1,382,021 1,139,150 13,029 (20,984) 214 4,930 (92,692) 40,845 - - - - (891,400) (912,934) - - (850,555) (912,934) - - - 531,466 226,216 13,029 (20,984) 214 4,930 (92,692) 2,653,697 1,936,358 437,828 311,380 1,692 14,604 332,190 $ 3,185,163 $ 2,162,574 $ 450,857 $ 290,396 $ 1,906 $ 19,534 $ 239,498 117 City of Southlake, Texas Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Continued For the Year Ended September 30, 2023 SPECIAL REVENUE Tax Commercial Increment Oil and Vehicle Truancy Financing Disaster Gas Enforcement Prevention District Recovery REVENUES Ad valorem taxes, penalties and interest $ $ $ $ 9,834,043 $ Municipal sales tax - Licenses, permits and fees Fines and forfeitures 17,746 28,232 Charges for services - - - Grants - - - 254,541 Investment income (losses) 2,182 10,450 3,930 279,967 - Contributions - - - - Miscellaneous - - - - TOTAL REVENUES 2,182 28,196 32,162 10,114,010 254,541 EXPENDITURES Current: General government Support services 1,579,012 Municipal court - - Public safety Police services 155,912 396,792 Public works Streets and drainage - - Cultural and recreation Community services Library services Promotion of culture and tourism - - Intergovernmental 6,454,981 Capital outlay - 254,541 Debt service: Principal retirement - Interest and fiscal charges - - - TOTAL EXPENDITURES 155,912 - 8,430,785 254,541 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 2,182 (127,716) 32,162 1,683,225 - OTHER FINANCING SOURCES (USES) Issuance of subscriptions - - - Transfers from other funds 100,000 Transfers to other funds - TOTAL OTHER FINANCING SOURCES (USES) 100,000 - - NET CHANGE IN FUND BALANCES 2,182 (27,716) 32,162 1,683,225 FUND BALANCES, BEGINNING OF YEAR 55,266 233,703 84,368 6,663,970 FUND BALANCES, END OF YEAR $ 57,448 $ 205,987 $ 116,530 $ 8,347,195 $ Exhibit C-2 (Page 2 of 2) DEBT SERVICE CAPITAL PROJECTS Southlake Community Southlake Community Parks Enhancement Parks Enhancement Crime Development Development Development Development Control Corporation Corporation Corporation Corporation District TOTAL NON -MAJOR GOVERNMENTAL FUNDS $ $ $ $ $ 9,834,043 5,236,449 373,299 108,613 1,606,564 254,541 114,801 61,802 865,225 93,236 103,820 1,980,613 - - - - - 47,341 114,326 136,566 114,801 61,802 865,225 207,562 103,820 19,578,029 1,579,012 86,012 2,429,139 - 522,694 100,385 120,653 - 7,929 - - 863,647 - 6,454,981 - - 2,043,717 450,193 110,351 3,502,350 2,334,000 1,540,000 - - - 4,041,219 455,417 904,206 - - - 1,373,066 2,789,417 2,444,206 2,144,102 450,193 110,351 20,980,702 (2,674,616) (2,382,404) (1,278,877) (242,631) (6,531) (1,402,673) - - - - - 292,043 2,784,383 2,447,206 6,500,000 1,375,000 1,130,000 14,336,589 - - - - - (3,031,383) 2,784,383 2,447,206 6,500,000 1,375,000 1,130,000 11,597,249 109,767 64,802 5,221,123 1,132,369 1,123,469 10,194,576 1,913,223 550,966 15,624,244 1,130,118 1,497,097 40,532,444 $ 2,022,990 $ 615,768 $ 20,845,367 $ 2,262,487 $ 2,620,566 $ 50,727,020 City of Southlake, Texas Police Special Revenue Fund Budgetary Comparison Schedule (GAAP Basis) For the Year Ended September 30, 2023 Exhibit C-3 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES Fines and forfeitures $ $ 10,809 $ 10,809 $ - Investment income (losses) 2,400 3,938 1,538 Miscellaneous 22,240 22,240 Total revenues 35,449 36,987 1,538 EXPENDITURES Public safety I Police services 86,061 86,061 72,854 13,207 Capital outlay - - 13,257 (13,257) Total expenditures 86,061 86,061 86,111 (50) Excess (deficiency) of revenues over (under) expenditures (86,061) (50,612) (49,124) 1,488 Net change in fund balances (86,061) (50,612) (49,124) 1,488 Fund balances, beginning of year 137,708 137,708 137,708 - FUND BALANCES, END OF YEAR $ 51,647 $ 87,096 $ 88,584 $ 1,488 120 City of Southlake, Texas Parks and Recreation Special Revenue Fund Budgetary Comparison Schedule (GAAP Basis) For the Year Ended September 30, 2023 REVENUES Investment income (losses) Contributions Total revenues EXPENDITURES Cultural and recreation Community services Total expenditures Excess (deficiency) of revenues over (under) expenditures Net change in fund balances Fund balances, beginning of year FUND BALANCES, END OF YEAR BUDGETED AMOUNTS 600 $ 46,500 47,100 5,000 $ 35,000 Exhibit C-4 VARIANCE WITH FINAL BUDGET - POSITIVE ACTUAL (NEGATIVE) 8,398 $ 3,398 35,140 140 43,538 3,538 82,500 72,500 20,268 52,232 82,500 72,500 20,268 52,232 (35,400) (32,500) 23,270 55,770 (35,400) (32,500) 23,270 55,770 193,239 193,239 193,239 - $ 157,839 $ 160,739 $ 216,509 $ 55,770 121 City of Southlake, Texas Parks Dedication Special Revenue Fund Budgetary Comparison Schedule (GAAP Basis) For the Year Ended September 30, 2023 Exhibit C-5 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Licenses, permits, and fees $ 90,000 $ 373,300 $ 373,299 $ (1) Investment income (losses) 500 35,000 58,572 23,572 Total revenues 90,500 408,300 431,871 23,571 Net change in fund balance 90,500 408,300 431,871 23,571 Fund balances, beginning of year 1,169,498 1,169,498 1,169,498 - FUND BALANCES, END OF YEAR $ 1,259,998 $ 1,577,798 $ 1,601,369 $ 23,571 122 City of Southlake, Texas Crime Control District Special Revenue Fund Budgetary Comparison Schedule (GAAP Basis) For the Year Ended September 30, 2023 Exhibit C-6 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Municipal sales fax $ 2,424,000 $ 2,424,000 $ 3,050,459 $ 626,459 Investment income (losses) 2,225 104,000 170,543 66,543 Total revenues 2,426,225 2,528,000 3,221,002 693,002 EXPENDITURES: Public safety Police services 2,501,884 2,486,198 1,698,546 787,652 Capital outlay 65,000 65,000 589,446 (524,446) Debt service: Principal retirement - - 160,131 (160,131) Interest and fiscal charges - - 12,031 (12,031) Total expenditures 2,566,884 2,551,198 2,460,154 91,044 Excess (deficiency) of revenues over (under) expenditures (140,659) (23,198) 760,848 784,046 OTHER FINANCING SOURCES (USES): Issuance of subscriptions - - 251,198 251,198 Transfers to other funds (1,227,049) (1,227,049) (1,227,049) - Total other financing (uses) (1,227,049) (1,227,049) (975,851) - Net change in fund balance (1,367,708) (1,250,247) (215,003) 784,046 Fund balances, beginning of year 5,591,295 5,591,295 5,591,295 - FUND BALANCES, END OF YEAR $ 4,223,587 $ 4,341,048 $ 5,376,292 $ 784,046 123 City of Southlake, Texas Hotel Occupancy Special Revenue Fund Budgetary Comparison Schedule (GAAP Basis) For the Year Ended September 30, 2023 Exhibit C-7 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Municipal sales tax $ 1,705,300 $ 2,000,000 $ 2,185,990 $ 185,990 Investment income (losses) 2,500 60,000 106,511 46,511 Total revenues 1,707,800 2,060,000 2,292,501 232,501 EXPENDITURES: Promotion of culture and tourism 965,493 965,493 863,647 101,846 Capital Outlay - - 40,845 (40,845) Debt service: Principal retirement 4,847 (4,847) Interest and fiscal charges - - 1,141 (1,141) Total expenditures 965,493 965,493 910,480 55,013 Excess (deficiency) of revenues over (under) expenditures 742,307 1,094,507 1,382,021 287,514 OTHER FINANCING USES: Issuance of subscriptions - - 40,845 40,845 Transfers to other funds (824,482) (891,400) (891,400) Total other financing (uses) (824,482) (891,400) (850,555) Net change in fund balance (82,175) 203,107 531,466 328,359 Fund balances, beginning of year 2,653,697 2,653,697 2,653,697 - FUND BALANCES, END OF YEAR $ 2,571,522 $ 2,856,804 $ 3,185,163 $ 328,359 124 City of Southlake, Texas Storm Water Utility Special Revenue Fund Budgetary Comparison Schedule (GAAP Basis) For the Year Ended September 30, 2023 Exhibit C-8 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Charges for service $ 1,591,500 $ 1,604,500 $ 1,606,564 $ 2,064 Investment income (losses) 500 30,000 55,280 25,280 Total revenues 1,592,000 1,634,500 1,661,844 27,344 EXPENDITURES: Public works Streets and drainage 732,373 610,941 522,694 88,247 Excess revenues over expenditures 859,627 1,023,559 1,139,150 115,591 OTHER FINANCING USES: Transfers to other funds (911,234) (912,934) (912,934) - Net change in fund balance (51,607) 110,625 226,216 115,591 Fund balances, beginning of year 1,936,358 1,936,358 1,936,358 - FUND BALANCES, END OF YEAR $ 1,884,751 $ 2,046,983 $ 2,162,574 $ 115,591 125 City of Southlake, Texas Court Security Special Revenue Fund Budgetary Comparison Schedule (GAAP Basis) For the Year Ended September 30, 2023 REVENUES Fines and forfeitures Investment income (losses) Total revenues EXPENDITURES General government Municipal court Debt service: Principal retirement Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over (under) expenditures Net change in fund balance Fund balances, beginning of year FUND BALANCES, END OF YEAR $ Exhibit C-9 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE FINAL FINAL ACTUAL (NEGATIVE) 34,400 $ 25,000 $ 28,106 $ 3,106 500 10,500 17,325 6,825 78,580 78,580 29,890 48,690 - - 2,241 (2,241) 271 (271) (43,680) (43,080) 13,029 56,109 (43,680) (43,080) 13,029 56,109 437,828 437,828 437,828 - $ 394,148 $ 394,748 $ 450,857 $ 56,109 126 City of Southlake, Texas Court Technology Special Revenue Fund Budgetary Comparison Schedule (GAAP Basis) For the Year Ended September 30, 2023 REVENUES Fines and forfeitures Investment income (losses) Total revenues EXPENDITURES General government Municipal court Excess revenues over expenditures Net change in fund balance Fund balances, beginning of year FUND BALANCES, END OF YEAR BUDGETED AMOUNTS $ 27,500 $ 22,000 $ Exhibit C-10 VARIANCE WITH FINAL BUDGET - POSITIVE ACTUAL (NEGATIVE) 23,155 $ 1,155 28,000 29,000 34,788 5,788 59,500 59,500 55,772 3,728 (31,500) (30,500) (20,984) 9,516 (31,500) (30,500) (20,984) 9,516 311,380 311,380 311,380 - $ 279,880 $ 280,880 $ 290,396 $ 9,516 127 City of Southlake, Texas Library Special Revenue Fund Budgetary Comparison Schedule (GAAP Basis) For the Year Ended September 30, 2023 Exhibit C-I I VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES Investment income (losses) $ 70 $ 400 $ 658 $ 258 Contributions 4,000 9,000 12,201 3,201 Total revenue 4,070 9,400 12,859 3,459 EXPENDITURES Cultural and recreation Library services 8,000 8,000 7,929 71 Excess (deficiency) of revenues over (under) expenditures (3,930) 1,400 4,930 3,530 Net change in fund balance (3,930) 1,400 4,930 3,530 Fund balances, beginning of year 14,604 14,604 14,604 - FUND BALANCES, END OF YEAR $ 10,674 $ 16,004 $ 19,534 $ 3,530 Ml City of Southlake, Texas Red Light Camera Special Revenue Fund Budgetary Comparison Schedule (GAAP Basis) For the Year Ended September 30, 2023 Exhibit C-12 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Investment income (losses) $ 500 $ 7,600 $ 12,343 $ 4,743 EXPENDITURES: Public safety Police services 208,705 208,705 105,035 103,670 Excess (deficiency) of revenues (208,205) (201,105) (92,692) 108,413 over (under) expenditures Net change in fund balance (208,205) (201,105) (92,692) 108,413 Fund balances, beginning of year 332,190 332,190 332,190 - FUND BALANCES, END OF YEAR $ 123,985 $ 131,085 $ 239,498 $ 108,413 129 City of Southlake, Texas Commercial Vehicle Enforcement Budgetary Comparison Schedule (GAAP Basis) For the Year Ended September 30, 2023 Exhibit C-13 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES Fines and forfeitures $ 25,000 $ 15,000 $ 17,746 $ 2,746 Investment income (losses) 200 6,500 10,450 3,950 Total revenues 25,200 21,500 28,196 6,696 EXPENDITURES Public safety Police services 157,095 167,385 155,912 11,473 Excess (deficiency) of revenues over (under) expenditures (131,895) (145,885) (127,716) 18,169 OTHER FINANCING SOURCES Transfers from other funds 100,000 100,000 100,000 Total other financing sources 100,000 100,000 100,000 - Net change in fund balance (31,895) (45,885) (27,716) 18,169 Fund balances, beginning of year 233,703 233,703 233,703 - FUND BALANCES, END OF YEAR $ 201,808 $ 187,818 $ 205,987 $ 18,169 130 City of Southlake, Texas Exhibit C-14 Tax Increment Financing District Special Revenue Fund Budgetary Comparison Schedule (GAAP Basis) For the Year Ended September 30, 2023 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES Ad valorem taxes, penalties and interest $ 9,468,834 $ 9,834,043 $ 9,834,043 $ Investment income (losses) 3,990 170,000 279,967 109,967 Total revenues 9,472,824 10,004,043 10,114,010 109,967 EXPENDITURES General government: Support services 645,076 645,076 1,579,012 (933,936) Public safety: Police services 385,506 385,506 396,792 (11,286) Intergovernmental 6,051,811 6,454,981 6,454,981 Total expenditures 7,082,393 7,485,563 8,430,785 (945,222) Excess of revenues over expenditures 2,390,431 2,518,480 1,683,225 (835,255) Net change in fund balance 2,390,431 2,518,480 1,683,225 (835,255) Fund balance, beginning of year 6,663,970 6,663,970 6,663,970 FUND BALANCE, END OF YEAR $ 9,054,401 $ 9,182,450 $ 8,347,195 $ (835,255) 131 City of Southlake, Texas Southlake Parks Development Corporation Debt Service Fund Budgetary Comparison Schedule (GAAP Basis) For the Year Ended September 30, 2023 REVENUES: Investment income (losses) EXPENDITURES: Debt service: Principal retirement Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES: Transfers from other funds Total other financing sources Net change in fund balance Fund balances, beginning of year FUND BALANCES, END OF YEAR Exhibit C-15 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) $ 1,900 $ 76,000 $ 114,801 $ 38,801 2,334,000 456,383 2,334,000 2,334,000 (2,788,483) (2,714,383) (2,674,616) 39,767 2,784,383 2,784,383 2,784,383 2,784,383 2,784,383 2,784,383 (4,100) 70,000 109,767 39,767 1,913,223 1,913,223 1,913,223 - $ 1,909,123 $ 1,983,223 $ 2,022,990 $ 39,767 132 City of Southlake, Texas Community Enhancement Development Corporation Debt Service Fund Budgetary Comparison Schedule (GAAP Basis) For the Year Ended September 30, 2023 Exhibit C-16 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Investment income (losses) $ 1,050 $ 40,000 $ 61,802 $ 21,802 EXPENDITURES: Debt service: Principal retirement 1,540,000 1,540,000 1,540,000 - Interest and fiscal charges 907,206 907,206 904,206 3,000 TOTAL EXPENDITURES 2,447,206 2,447,206 2,444,206 3,000 Excess (deficiency) of revenues over (under) expenditures (2,446,156) (2,407,206) (2,382,404) 24,802 OTHER FINANCING SOURCES: Transfers from other funds 2,447,206 2,447,206 2,447,206 Total other financing sources 2,447,206 2,447,206 2,447,206 Net change in fund balance 1,050 40,000 64,802 24,802 Fund balances, beginning of year 550,966 550,966 550,966 - FUND BALANCES, END OF YEAR $ 552,016 $ 590,966 $ 615,768 $ 24,802 133 134 Statistical Section 135 136 City of Southlake, Texas Statistical Section (Unaudited) This part of the City of Southlake's annual comprehensive financial report presents detailed information as a context for understanding what the information in the financial statements, notes disclosures, and required supplementary information says about the City's overall financial health. This information has not been audited by the independent auditor. Contents Page FinancialTrend......................................................................................................................................................138 These tables contain trend information to help the reader understand how the City's financial performance and well-being have changed over time. RevenueCapacity...............................................................................................................................................144 These tables contain information to help the reader assess the City's two most significant local revenue source, the property and sales taxes. DebtCapacity......................................................................................................................................................148 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. Demographic and Economic Information.......................................................................................................152 These tables offer economic and demographic indicators to help the reader understand the environment within which the City's financial activities take place. OperatingInformation.........................................................................................................................................154 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 and the activities it performs. Sources: Unless otherwise noted, the information in these tables is derived from the annual comprehensive financial reports for the relevant year. 137 City of Southlake, Texas Net Position by Component (Accrual Basis of Accounting) Last Ten Fiscal Years (Unaudited) Governmental activities Net investment in capital assets Restricted Unrestricted Total governmental activities net position Business -type activities Net investment in capital assets Restricted Unrestricted Total business -type activities net position Primary government Net investment in capital assets Restricted Unrestricted Total primary governmental net position Source: Annual Comprehensive Financial Report Fiscal Year $ 338,303,633 $ 366,796,228 $ 364,161,725 $ 385,506,389 15,092,604 13,624,164 11,589,350 49,850,439 P V I L, I LU,JU/- P 4J7,VUu, 1 71- .P 4JU,/'io, I J4 P 'iu I ,Lu/ ,LJ`i $ 73,126,147 $ 78,143,445 $ 79,055,138 $ 82,251,014 2,140,022 3,151,309 6,817,038 7,804,197 13,945,038 10,509,498 12,487,875 15,721,755 $ 89,211,207 $ 91,804,252 $ 98,360,051 $ 105,776,966 $ 411,429,780 $ 444,939,673 $ 443,216,863 $ 467,757,403 17,232,626 16,775,473 18,406,388 57,654,636 72,677,183 69,957,298 93,479,954 61,652,181 $ 501,339,589 $ 531,672,444 $ 555,103,205 $ 587,064,220 HE Table 1 Fiscal Year 2018 2019 2020 2021 2022 2023 $ 392,406,812 $ 399,651,828 $ 415,945,257 $ 432,717,828 $ 444,246,656 $ 450,639,461 28,492,591 32,690,100 25,518,844 39,870,051 99,360,585 121,858,264 78,585,681 87,753,906 96,924,423 95,211,152 62,641,199 66,478,023 $ 499,485,084 $ 520,095,834 $ 538,388,524 $ 567,799,031 $ 606,248,440 $ 638,975,748 $ 83,461,157 $ 83,223,713 $ 76,271,158 $ 77,068,608 $ 77,774,937 $ 75,167,644 8,980,312 6,215,686 10,555,032 10,966,728 9,877,167 8,464,094 17,935,009 21,579,170 29,619,463 36,831,318 45,903,642 62,370,816 $ 110,376,478 $ 111,018,569 $ 116,445,653 $ 124,866,654 $ 133,555,746 $ 146,002,554 $ 475,867,969 $ 482,875,541 $ 492,216,415 $ 509,786,436 $ 522,021,593 $ 525,807,105 37,472,903 38,905,786 36,073,876 50,836,779 109,237,752 130,322,358 96,520,690 109,333,076 126,543,886 132,042,470 108,544,841 128,848,839 $ 609,861,562 $ 631,114,403 $ 654,834,177 $ 692,665,685 $ 739,804,186 $ 784,978,302 139 City of Southlake, Texas Changes in Net Position (Accrual Basis of Accounting) Last Ten Fiscal Years (Unaudited) Expenses Governmental activities: General government Public safety Public works Culture and recreation Interest on long-term debt Total governmental activities expenses Business -type activities: Water and sewer Total business -type activities expenses Total primary government expenses Program Revenues Governmental activities: Charges for Services: General government Public safety Public works Culture and recreation Operating grants and contributions Capital grants and contributions Total governmental activities program revenues Business -type activities: Charges for services: Water and sewer Capital grants and contributions Total business -type activities program revenues Total primary government program revenues Net(Expenses)Revenue Governmental activities Business -type activities Total primary government net expenses General Revenues and Other Changes in Net Position Governmental activities: General revenues: Property taxes Sales taxes Franchise taxes Investment income (losses) Gain (Loss) on sale of capital assets Miscellaneous Transfers Total governmental activities Business -type activities: Interest on investments Gain (Loss) on sale of capital assets Transfers Miscellaneous Total business -type activities Total primary government Change in Net Position Governmental activities Business -type activities Total primary government Source: Annual Comprehensive Financial Report Fiscal Year 2014 2015 2016 $ 13,417,904 $ 14,602,425 $ 12,851,787 18,245,617 18,176,698 19,300,590 8,870,998 9,762,184 11,950,671 8,948,841 9,311,006 10,655,763 5,097,036 2,528,113 3,005,359 54,580,396 54,380,426 57,764,170 25,030,426 26,692,373 24,741,428 25,030,426 26,692,373 24,741,428 $ 79,610,822 $ 81,072,799 $ 82,505,598 $ 2,657,883 $ 2,309,861 $ 2,363,499 3,907,068 4,427,137 4,620,030 360,529 265,432 223,533 1,379,658 1,399,822 1,537,185 443,157 455,575 310,636 4,436,346 8,967,466 2,228,863 13,184,641 17,825,293 11,283,746 23,591,438 24,792,619 25,474,777 3,510,936 5,776,438 1,638,842 27,102,374 30,569,057 27,113,619 $ 40,287,015 $ 48,394,350 $ 38,397,365 $ (41,395,755) $ (36,555,133) $ (46,480,424) 2,071,948 3,876,684 2,372,191 $ (39,323,807) $ (32,678,449) $ (44,108,233) $ 33,099,007 $ 33,176,285 $ 34,501,608 26,623,661 30,090,614 29,047,285 2,841,025 3,327,739 2,955,114 482,607 523,954 379,342 99,109 102,900 102,960 639,571 1,066,818 136,477 915,116 968,160 (3,767,400) 64,700,096 69,256,470 63,355,386 101,469 112,967 94,837 - 23,100 317,276 (915,116) (968,160) 3,767,400 6,963 4,521 4,095 (806,684) (827,572) 4,183,608 $ 63,893,412 $ 68,428,898 $ 67,538,994 $ 23,304,341 $ 32,701,337 $ 16,874,962 1,265,264 3,049,112 6,555,799 $ 24,569,605 $ 35,750,449 $ 23,430,761 140 Table 2 Fiscal Year 2017 2018 2019 2020 2021 2022 2023 $ 17,430,052 $ 18,255,444 $ 20,014,583 $ 21,275,487 $ 20,990,841 $ 20,685,238 $ 19,837,190 21,179,963 23,962,971 23,881,485 24,054,527 23,642,969 24,915,801 26,658,917 8,979,020 10,040,453 10,081,721 9,839,646 9,122,951 10,111,585 12,108,564 11,780,022 12,775,020 15,955,201 17,665,953 15,367,103 16,970,272 25,112,091 3,834,897 3,047,221 2,750,037 2,171,359 2,076,809 1,979,546 2,071,867 63,203,954 68,081,109 72,683,027 75,006,972 71,200,673 74,662,442 85,788,629 24,703,007 29,068,434 29,873,788 27,490,815 25,730,741 28,397,036 28,506,292 24,703,007 29,068,434 29,873,788 27,490,815 25,730,741 28,397,036 28,506,292 $ 87,906,961 $ 97,149,543 $ 102,556,815 $ 102,497,787 $ 96,931,414 $ 103,059,478 $ 114,294,921 $ 2,262,247 $ 2,895,701 $ 2,498,549 $ 1,631,816 $ 1,733,148 $ 1,957,434 $ 1,712,925 3,929,564 2,495,288 3,001,895 2,536,553 2,166,430 803,365 774,891 143,935 1,635,163 1,724,344 1,824,434 1,658,723 4,287,138 3,477,348 1,814,319 1,301,793 2,145,128 2,993,552 3,387,430 4,477,031 5,664,775 328,288 459,006 866,518 1,807,473 894,423 8,736,294 825,770 7,714,765 1,044,834 1,437,166 1,422,315 5,882,015 2,653,556 2,382,770 16,193,118 9,831,785 11,673,600 12,216,143 15,722,169 22,914,818 14,838,479 27,939,504 32,229,361 29,929,932 32,271,341 32,071,140 37,241,976 37,630,965 3,851,057 2,367,774 896,652 1,315,092 3,332,452 1,376,002 2,064,296 31,790,561 34,597,135 30,826,584 33,586,433 35,403,592 38,617,978 39,695,261 $ 47,983,679 $ 44,428,920 $ 42,500,184 $ 45,802,576 $ 51,125,761 $ 61,532,796 $ 54,533,740 $ (47,010,836) $ (58,249,324) $ (61,009,427) $ (62,790,829) $ (55,478,504) $ (51,747,624) $ (70,950,150) 7,087,554 5,528,701 952,796 6,095,618 9,672,851 10,220,942 11,188,969 $ (39,923,282) $ (52,720,623) $ (60,056,631) $ (56,695,211) $ (45,805,653) $ (41,526,682) $ (59,761,181) $ 37,705,796 $ 40,380,926 $ 41,734,946 $ 41,973,780 $ 41,660,369 $ 41,392,861 $ 42,315,760 29,968,331 30,822,431 31,868,204 32,119,114 38,461,312 43,723,490 47,917,152 2,907,537 2,972,143 3,114,117 2,811,573 2,671,726 2,988,874 3,656,895 843,082 2,108,804 3,247,401 1,721,876 101,746 (475,934) 7,934,301 71,284 - - - - - 4,156 216,881 - 476,577 1,222,231 709,736 804,354 512,725 (157,975) 1,211,036 1,178,932 1,234,945 1,284,122 1,360,830 1,336,469 71,554,936 77,495,340 81,620,177 81,083,519 84,889,011 89,794,475 103,677,458 167,068 320,473 868,227 566,411 32,272 (171,020) 2,594,308 350 - - - - - 157,975 (1,211,036) (1,178,932) (1,234,945) (1,284,122) (1,360,830) (1,336,469) 3,968 4,166 - 329,361 (886,397) (310,705) (668,534) (1,251,850) (1,531,850) 1,257,839 $ 71,884,297 $ 76,608,943 $ 81,309,472 $ 80,414,985 $ 83,637,161 $ 88,262,625 $ 104,935,297 $ 24,544,100 $ 19,246,016 $ 20,610,750 $ 18,292,690 $ 29,410,507 $ 38,046,851 $ 32,727,308 7,416,915 4,642,304 642,091 5,427,084 8,421,001 8,689,092 12,446,808 $ 31,961,015 $ 23,888,320 $ 21,252,841 $ 23,719,774 $ 37,831,508 $ 46,735,943 $ 45,174,116 141 City of Southlake, Texas Fund Balances, Governmental Funds (Modified Accrual Basis of Accounting) Last Ten Fiscal Years (Unaudited) General Fund Nonspendable Committed for: Police expenditures Assigned for: Teen Court expenditures Senior Center expenditures Recycling Reforestation expenditures Public art Facility maintenance Economic investment Strategic initiatives Unassigned Total general fund Table 3 Fiscal Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 $ 46,008 $ 27,826 $ 86,286 $ 57,997 $ 86,286 $ 63,189 $ 40,839 $ 69,373 $ 401,529 $ 54,317 28,647 34,609 46,657 18,832 19,077 19,835 19,684 19,835 20,427 20,693 20,721 20,882 21,862 10,623 10,624 10,743 10,671 10,743 10,938 11,064 11,074 11,042 11,486 34,609 40,612 59,163 52,811 59,163 66,253 70,395 76,458 138,291 70,977 44,098 101,873 111,728 112,300 111,728 63,030 35,150 54,847 96,012 153,918 - - - - 678,829 835,991 500,819 364,046 441,984 610,439 6,708,556 7,222,995 8,813,795 9,351,441 10,064,326 11,843,299 - - - - 2,237,211 2,282,718 3,525,280 2,870,637 2,950,994 3,225,478 7,980,605 7,673,680 5,297,998 6,052,063 5,299,595 7,585,671 10,603,712 15,096,120 20,306,807 15,383,080 16,399,991 18,230,317 19,762,633 18,745,735 11,799,021 12,517,340 14,022,976 15,810,846 14,681,556 17,594,609 $ 24,563,413 $ 26,138,618 $ 25,348,386 $ 25,097,918 $ 27,010,967 $ 30,668,552 $ 37,644,723 $ 43,725,563 $ 49,113,423 $ 48,969,465 All Other Governmental Funds* Nonspendable $ - $ - $ - $ - Restricted for: Debt Service 12,150,184 11,057,196 9,005,985 8,029,607 Capital projects - - - - Municipal court expenditures 860,556 878,490 838,458 868,393 Reinvestment zone expenditures 4,422,565 4,010,195 3,851,783 1,954,971 Parks and recreation 53,053,840 41,949,791 72,654,652 78,664,646 Storm water - - - - Police expenditures Library expenditures Promotion of culture and tourism - - - - Committed for: Police expenditures 5,532,996 7,813,849 4,986,804 3,645,226 Parks and recreation 8,020,248 10,720,498 11,125,967 17,968,695 Oil and gas expenditures 53,160 53,168 53,227 53,404 Storm water expenditures 450,824 451,371 4,856,336 453,374 Library expenditures 7,967 8,832 7,132 7,432 Capital projects - - - - Assigned for: $ 50,177 $ - $ - $ - $ - $ - 7,750,782 8,419,008 7,102,145 5,594,579 5,751,585 5,632,021 - - - - 26,395,656 34,698,804 851,104 847,247 739,828 775,437 835,268 859,689 923,093 2,925,977 4,999,895 5,641,893 6,663,970 8,347,195 40,726,831 24,372,567 9,381,019 24,792,059 47,632,465 58,345,188 - - 1,789,612 1,255,873 1,936,358 2,162,574 - - 7,791,993 8,530,927 - - 14,604 19,534 - - 1,834,337 2,089,422 2,653,697 3,185,163 4,743,948 5,254,694 5,256,684 6,549,013 1,169,498 1,601,369 8,904,671 8,815,413 11,121,825 1,793,351 55,266 57,448 53,719 54,754 55,424 55,541 - - 456,388 465,180 - - 8,338 9,528 11,323 12,725 34,285,874 44,554,528 45,315,086 44,304,341 Capital projects 19,442,768 27,706,556 Unassigned (175,833) Total all other governmental funds $ 84,552,340 $ 76,943,390 $ 107,380,344 $ 111,645,748 $ 98,704,748 $ 95,718,896 $ 87,431,345 $ 92,864,234 $ 120,343,128 $ 151,146,468 Source: Annual Comprehensive Financial Report Notes: ° Includes encumbrances and prepaid items. * The City started splitting parks and recreation with storm water and promotion of culture and tourism in 2020 4 142 City of Southlake, Texas Changes in Fund Balances, Governmental Funds (Modified Accrual Basis of Accounting) Last Ten Fiscal Years (Unaudited) REVENUES Ad valorem taxes, penalties and interest Franchise taxes Municipal sales tax and mixed beverage tax Licenses, permits and fees Charges for services Fines and forfeitures Intergovernmental revenue Capital recovery fees Investment income (losses) Contributions Miscellaneous Total revenues EXPENDITURES General government Public safety Public works Culture and recreation Intergovernmental Capital outlay Debt service Principal retirement Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Sale of property Issuance of tax notes payable Issuance of general obligation bonds Premium (Discount) on issuance of refunding bonds Issuance of sales tax revenue bonds Issuance of refunding bonds Issuance of financed purchase obligation Issuance of subscriptions Premium (Discount) on issuance of general obligation bonds Payment to refund bond escrow agent Transfer from other funds Transfer to other funds Total other financing sources (uses) NET CHANGE IN FUND BALANCES Debt service as a percentage of noncapital expenditures Source: Annual Comprehensive Financial Report Table 4 Fiscal Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 $ 33,174,810 $ 33,294,062 $ 34,445,902 $ 37,688,372 $ 40,484,511 $ 41,744,243 $ 41,980,391 $ 41,675,661 $ 41,429,872 $ 42,299,595 2,841,025 3,327,739 2,955,114 2,907,537 2,972,143 3,114,117 2,811,573 2,671,726 2,988,874 3,656,895 26,623,661 30,090,614 29,047,285 29,968,331 30,822,431 31,868,204 32,119,114 38,461,312 43,723,490 47,917,152 3,925,956 4,385,000 4,590,477 4,103,003 2,184,965 3,161,228 2,868,166 2,041,189 3,071,428 2,475,077 1,778,003 1,849,747 1,797,676 1,909,922 1,984,377 4,970,991 5,013,769 5,783,552 7,104,883 8,234,710 2,374,221 1,943,406 2,011,137 1,969,180 2,040,036 1,798,033 968,495 954,809 1,213,211 903,685 214,152 90,428 128,489 100,899 2,108,228 124,141 1,737,849 760,658 9,974,795 1,545,199 474,172 866,782 1,237,552 308,095 376,004 621,715 693,293 232,525 773,745 466,928 457,820 490,551 71,411 118,956 2,044,822 3,123,081 1,634,301 96,183 (448,117) 7,485,826 130,564 112,409 383,732 859,199 97,644 198,449 82,225 72,565 242,645 110,067 552,544 672,333 528,093 544,727 481,919 341,934 1,544,346 836,962 324,548 512,725 72,546,928 77,123,071 77,196,868 80,478,221 85,597,080 91,066,136 91,453,522 93,587,142 110,399,374 115,607,859 8,629,250 8,974,058 9,301,750 9,608,516 11,053,010 12,988,724 13,233,455 14,236,006 13,493,594 15,976,466 16,924,285 16,968,939 17,376,310 18,520,588 19,806,464 21,145,351 21,534,858 22,015,080 22,719,906 24,066,322 6,303,749 5,332,402 5,483,131 19,112,170 23,225,431 5,687,428 7,834,577 7,177,205 8,861,496 10,287,273 7,227,628 7,441,366 8,456,526 8,783,323 8,026,149 21,815,043 13,226,045 11,202,609 13,118,278 14,545,618 3,834,118 4,478,312 4,623,919 5,348,444 6,045,218 6,123,926 7,214,798 6,049,200 5,934,584 6,454,981 14,623,962 21,349,324 8,658,067 4,800,627 12,214,328 8,285,716 15,951,425 11,521,223 11,601,162 15,026,038 11,930,280 14,489,311 13,394,604 13,258,185 12,220,242 8,385,059 9,896,675 10,341,201 8,645,737 10,777,728 4,982,567 3,894,535 3,796,740 4,084,086 3,695,048 3,175,731 3,108,014 2,629,585 2,321,838 2,436,839 74,455,839 82,928,247 71,091,047 83,515,939 96,285,890 87,606,978 91,999,847 85,172,109 86,696,595 99,571,265 (1,908,911) (5,805,176) 6,105,821 (3,037,718) (10,688,810) 3,459,158 (546,325) 8,415,033 23,702,779 16,036,594 1,521 3,271 - 6,019 27,288 52,124 4,156 - - - 3,753,000 - 13,397,000 4,380,000 - - - - - - - 884,928 1,329,086 8,595,000 - 24,450,000 9,945,000 - - 23,400,000 - 3,830,000 10,860,000 1,989,000 - - - - - - 514,162 53,975 - - - 3,031,188 1,301,376 2,168,153 737,765 - (25,547,122) - - (4,309,151) (12,311,639) - (1,954,804) - - 20,498,983 21,925,067 23,584,605 23,332,602 23,056,973 17,941,263 15,937,424 14,161,081 28,575,100 27,129,055 (20,383,867) (22,156,907) (28,352,005) (24,940,577) (23,345,937) (20,662,331) (16,702,479) (14,876,959) (29,714,270) (28,992,586) 3,650,891 (228,569) 21,850,753 8,742,802 (288,964) (2,837,602) (765,055) 3,098,606 8,759,881 14,622,788 $ 1,741,980 $ (6,033,745) $ 27,956,574 $ 5,705,084 $ (10,977,774) $ 621,556 $ (1,311,380) $ 11,513,639 $ 32,462,660 $ 30,659,382 27.7% 29.1 % 27.0% 25.5% 21.8% 16.1% 17.1% 17.6% 14.6% 15.6% 143 City of Southlake, Texas Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years (Unaudited) Estimated Market Value Fiscal Year Real Property 2014 $ 5,935,122,961 2015 6,341,625,915 2016 6,635,586,201 2017 7,556,442,291 2018 8,254,704,348 2019 9,002,807,317 2020 9,653,389,547 2021 9,802,447,688 2022 10,643,270,202 2023 12,463,083,634 Source: Tarrant Appraisal District Personal Property $ 588,389,191 614,607,452 542,023,423 543,192,799 602,971,804 614,999,492 659,212,511 667,695,748 653,950,010 668,386,843 Less: Tax -Exempt Property $ 638,106,472 756,399,951 1,039,819,893 1,364,174,169 1,683,599,421 1,845,495,105 1,967,287,039 2,040,326,726 2,094,175,854 2,280,735,668 Total Taxable Assessed Value $ 5,885,405,680 6,199,833,416 6,137,789,731 6,735,460,921 7,174,076, 731 7,772,311,704 8,345,315,019 8,429,816,710 9,203,044,358 10,850,734,809 Table 5 Total Direct Tax Rate 0.46200 0.46200 0.46200 0.46200 0.46200 0.44700 0.41000 0.40500 0.39000 0.36000 144 City of Southlake, Texas Direct and Overlapping Property Tax Rates (Per $100 of Assessed Value) Last Ten Fiscal Years (Unaudited) Table 6 City Direct Rates Overlapping Rates General Carroll Tarrant County Tarrant County Operating/ Obligation Independent Hospital College Fiscal Year General Rate Debt Service Total Direct School District Tarrant County District District 2014 0.34200 0.12000 0.46200 1.40000 0.264000 0.227897 0.149500 2015 0.34200 0.12000 0.46200 1.40000 0.264000 0.227897 0.149500 2016 0.36200 0.10000 0.46200 1.39500 0.264000 0.227897 0.149500 2017 0.36200 0.10000 0.46200 1.39000 0.254000 0.227897 0.144730 2018 0.36200 0.10000 0.46200 1.38500 0.244000 0.224429 0.140060 2019 0.35700 0.09000 0.44700 1.38000 0.234000 0.224429 0.136070 2020 0.33000 0.08000 0.41000 1.30000 0.234000 0.224429 0.130170 2021 0.33000 0.07500 0.40500 1.28640 0.234000 0.224429 0.130170 2022 0.32500 0.06500 0.39000 1.26860 0.229000 0.224429 0.130170 2023 0.29500 0.06500 0.36000 1.21880 0.224000 0.224429 0.130170 Source: Tarrant Appraisal District 145 City of Southlake, Texas Principal Property Tax Payers Current Year and Nine Years Ago (Unaudited) Table 7 2023 2014 ercen age Or ercen age o Total City Total City Taxable Taxable Taxable Assessed Assessed Taxable Assessed Assessed Taxpayer Value Value° Taxpayer Value Value Town Square Ventures LP $ 235,528,626 2.17% Verizon Wireless Texas LLC $ 177,921,915 3.02% Cellco Partnership 114,233,083 1.05% Town Square Ventures LP 116,505,690 1.98% TD Ameritrade Services Company INC 82,935,654 0.76% SLTS Grand Avenue/II LP 73,544,854 1.25% SC Southlake Owner LLC 66,858,035 0.62% Wyndham Properties Ltd 52,366,496 0.89% Carroll/1709 LTD 56,721,930 0.52% Sabre Headquarters LLC 45,538,556 0.77% Excel Southlake LP 50,505,178 0.47% Carroll/1709 Ltd 44,199,577 0.75% 3503 RP Southlake Corners Kimball LP 47,999,900 0.44% H & C Southlake Hilton LLC 30,000,000 0.51 % 1400 Plaza Place Southlake Owner LLC 42,222,000 0.39% Inland Western Southlake Corners Ltd 27,700,000 0.47% DSL Landlord II LLC 37,702,272 0.35% Cambridge 114 Inc 20,924,941 0.36% MCI Communications Svcs Inc 36,802,911 0.34% Costco Wholesale Corporation 20,309,231 0.35% Total $ 771,509,589 7.11 % Total $ 609,011,260 10.35% Total Assessed Valuation $ 10,850,734,809 100.00% Total Assessed Valuation $ 5,885,405,680 100.00% Source: Tarrant Appraisal District Notes: °Taxpayers are assessed on January 1, 2022 (2022 tax year) for the 2023 fiscal year. bTaxpayers are assessed on January 1, 2017 (2017 tax year) for the 2018 fiscal year. 146 City of Southlake, Texas Ad Valorem Tax Levies and Collections Last Ten Fiscal Years (Unaudited) Collected within the Fiscal Year of the Levy Taxes Levied for the Collections in Fiscal Year Fiscal Year Amount Percentage of Levy Subsequent Years 2014 $ 27,136,997 $ 26,865,897 99.00 $ 71,124 2015 27,791,839 27,556,790 99.15 106,959 2016 28,965,792 28,684,131 99.03 169,955 2017 31,410,934 31,054,006 98.86 95,328 2018 33,358,429 32,975,600 98.85 62,938 2019 34,957,519 34,486,820 98.65 12,206 2020 34,109,141 33,572,469 98.43 84,975 2021 34,329,457 33,833,652 98.56 (107,814) 2022 34,526,168 34,013,771 98.52 (57,965) 2023 34,929,247 34,409,848 98.51 - Source: Tarrant County Tax Office Total Collections Amount $ 26,937,021 27,663,749 28,854,086 31,149,334 33,038,538 34,499,026 33,657,444 33,725,838 33,955,806 34,409,848 Table 8 Percentage of Levy 99.26 99.54 99.61 99.17 99.04 98.69 98.68 98.24 98.35 98.51 147 City of Southlake, Texas Table 9 Ratios of Outstanding Debt by Type Last Ten Fiscal Years (Unaudited) Fiscal Year General Obligation Bonds Certificates of Obligation Governmental Activities Financed Revenue Bonds Tax Notes Purchases Business -Type Activities General Contract Obligation Certificates Revenue Leases Subscriptions Bonds of Obligation Obligations Total Primary Government Percentage of Personal Income° Per Capita' 2014 $ 45,355,674 $ 41,553,855 $ 27,150,000 $ $ 18,923,955 $28,009,860 $ 1,100,000 $ 162,093,344 10.93 $ 5,910 2015 40,847,363 33,182,855 25,540,000 15,422,270 30,035,860 750,000 145,778,348 9.03 5,238 2016 40,733,282 29,511,905 48,330,000 12,974,232 29,143,202 385,000 161,077,621 9.30 5,694 2017 39,022,933 18,706,525 57,207,643 13,846,422 28,963,708 - 157,747,231 8.08 5,358 2018 30,112,187 11,050,000 53,605,000 9,187,813 30,550,000 134,505,000 6.14 4,547 2019 40,949,900 6,606,486 44,592,458 14,816,097 22,463,654 129,428,595 6.01 4,270 2020 33,224,148 6,172,109 41,767,697 12,678,798 21,352,753 115,195,505 5.29 3,793 2021 27,428,338 3,782,833 38,832,936 3,753,000 - - 12,916,025 18,217,805 104,930,937 4.84 3,363 2022 22,757,701 12,783,180 35,788,175 2,686,000 405,368 338,051 11,319,357 17,193,400 103,271,232 4.12 3,271 2023 17,925,536 10,953,008 32,648,415 15,420,000 308,329 448,904 2,165,395 9,676,216 16,128,995 105,674,798 4.09 3,305 Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. 'See Table 13 for personal income and population data. Mr. City of Southlake, Texas Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years (Unaudited) General Bonded Debt Outstanding Less: Available General Certificates of Debt Service Fiscal Year Obligation Bonds Obligation Total Funds 2014 $ 64,279,629 $ 69,563,715 $ 133,843,344 $ 9,809,483 2015 56,269,633 63,218,715 119,488,348 8,735,479 2016 53,707,514 58,655,107 112,362,621 6,899,109 2017 52,869,355 47,670,233 100,539,588 7,444,512 2018 39,300,000 41,600,000 80,900,000 7,345,622 2019 55,765,997 29,070,140 84,836,137 8,009,333 2020 45,902,946 27,524,862 73,427,808 6,774,153 2021 40,344,363 22,000,638 62,345,001 5,315,367 2022 34,077,058 29,976,580 64,053,638 5,436,574 2023 27,601,752 27,082,003 54,683,755 5,256,902 Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. °See Table 5 for property value data. bSee Table 13 for population data. Table 10 Percentage of Actual Taxable Net General Value of Bonded Debt Property° Per Capita $ 124,033,861 2.11 % $ 4,523 110,752,869 1.79% 3,979 105,463,512 1.72% 3,728 93,095,076 1.38% 3,162 73,554,378 1.03% 2,487 76,826,804 0.99% 2,535 66,653,655 0.80% 2,195 57,029,634 0.68% 1,828 58,617,064 0.64% 1,857 49,426,853 0.50% 1,710 149 City of Southlake, Texas Direct and Overlapping Governmental Activities Debt As of September 30, 2023 (Unaudited) Governmental Unit Debt repaid with property taxes Carroll ISD Denton County Grapevine-Colleyville ISD Keller ISD Northwest ISD Tarrant County Tarrant County College District Tarrant County Hospital District Subtotal, overlapping debt City of Southlake (direct debt) Total direct and overlapping debt Gross Bonded Debt Percentage of Debt Applicable to Area Table 11 Share of Overlapping Debt $ 288,580,000 85.02% $ 245,350,715 624,655,000 0.15% 936,983 289,240,590 1.62% 4,685,698 782,924,989 2.43% 19,025,077 1,807,155,334 0.93% 16,806,545 376,120,000 4.09% 15,383,308 591,230,000 4.09% 24,181,307 448,410,000 4.09% 18,339,969 344,709,602 $ 79,869,587 100.00% 79,869,587 $ 424,579,189 Source: Municipal Advisory Council of Texas. Note: Includes only debt of the City's governmental activities. Note: Per the Municipal Advisory Council of Texas, the overlapping percentages are calculated by determining the estimated share assessed valuation of taxable property within the overlapping taxing bodies and the City, and then dividing that share value by the total assessed value of taxable property within the overlapping tax body. 150 City of Southlake, Texas Pledged -Revenue Coverage - Southlake Parks Development Corporation Last Ten Fiscal Years (Unaudited) Table 12 Southlake Parks Development Corporation - Sales Tax Revenue Refunding Bonds Debt Service Total Annual Fiscal Year Sales Tax Collections Principal Interest Requirement' Times Coverage 2014 $ 6,571,836 $ - $ 93,333 $ 93,333 70.41 2015 7,440,726 1,120,000 463,200 1,583,200 4.70 2016 7,318,490 1,150,000 429,150 1,579,150 4.63 2017 7,578,446 1,190,000 394,050 1,584,050 4.78 2018 7,705,009 1,225,000 357,825 1,582,825 4.87 2019 7,741,005 1,260,000 320,550 1,580,550 4.90 2020 7,908,601 1,300,000 282,150 1,582,150 5.00 2021 9,249,930 1,340,000 242,550 1,582,550 5.84 2022 10,610,993 1,385,000 201,675 1,586,675 6.69 2023 12,829,196 1,415,000 159,675 1,574,675 8.15 Note: °Includes Principal and Interest 151 City of Southlake, Texas Table 13 Pledged -Revenue Coverage - Southlake Community Enhancement and Development Corporation Last Ten Fiscal Years (Unaudited) Southlake Community Enhancement and Development Corporation - Sales Tax Revenue Bonds Debt Service Total Annual Fiscal Year Sales Tax Collections Principal Interest Requirement° Times Coverage 2016 (1) $ 5,421,104 $ $ - $ - - 2017 5,613,664 - 869,749 869,749 6.45 2018 5,707,414 1,190,000 1,252,239 2,442,239 2.34 2019 5,734,078 1,280,000 1,163,406 2,443,406 2.35 2020 5,858,223 1,340,000 1,102,406 2,442,406 2.40 2021 6,851,800 1,410,000 1,033,656 2,443,656 2.80 2022 7,859,995 1,475,000 968,056 2,443,056 3.22 2023 8,463,832 1,540,000 899,206 2,439,206 3.47 Note: 'Includes Principal and Interest (1) This was the year of issuance. Accordingly, no principal or interest payments were scheduled in this year, and no debt was outstanding in the previous 2 years that was secured by pledged revenue. 152 City of Southlake, Texas Demographic and Economic Statistics Last Ten Calendar Years (Unaudited) Fiscal Year Estimated Population° 2014 27,425 2015 27,833 2016 28,290 2017 29,440 2018 29,580 2019 30,310 2020 30,370 2021 31,199 2022 31,569 2023 31,975 Note: 'City of Southlake Economic Development 6Carroll Independent School District `Texas Workforce Commission Per Capita Personal Personal Income Income School Enrollment $ 1,483,500,525 $ 54,093 7,864 1,613,952,171 57,987 7,884 1,732,875,660 61,254 8,177 1,951,901,440 66,301 8,190 2,189,038,320 74,004 8,341 2,151,828,140 70,994 8,344 2,177,863,070 71,711 8,509 2,169,765,654 69,546 8,318 2,506,862,721 79,409 8,382 2,585,284,275 80,853 8,318 Table 14 Unemployment Rated 4.4% 3.5% 3.5% 3.0% 3.2% 2.7% 5.2% 3.6% 3.0% 3.6% 153 City of Southlake, Texas Principal Employers Current Year and Nine Years Ago (Unaudited) Employer° Sabre Holdings TD Ameritrade Carroll ISD Gateway Church Verizon Wireless Keller Williams City of Soufhlake Central Market Total Total Southlake Daytime Employeesb Source: °City of Soufhlake Economic Development bTexas Workforce Commission 2023 Percentage of Total Employees° City Employment 2,200 13.75% 1,876 11.72% 1,176 7.35% 706 4.41 % 650 4.06% 650 4.06% 448 2.80% 390 2.44% 8,096 50.60% . lull Table 15 2014 Percentage of Total Employees° City Employment 3,000 23.24% 1,123 8.70% 570 4.42% 637 4.93% 487 3.77% 337 2.61 % 360 2.79% 6,514 12,909 50.46% 154 City of Southlake, Texas Full-time Equivalent City Government Employees by Function/Program Last Ten Fiscal Years (Unaudited) Table 16 Fiscal Year Function/Program 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 General Government and Administration 55.75 52.00 51.00 57.00 60.00 74.00 75.75 78.14 80.64 82.64 Public Safety 140.45 140.95 140.95 139.95 141.45 145.15 145.15 145.15 145.15 149.70 Public Works 27.25 33.25 35.25 34.50 35.50 35.00 35.00 35.00 34.35 35.35 Culture and Recreational 62.15 65.65 71.40 72.03 114.78 108.93 111.80 113.93 113.93 121.48 Water and Sewer 29.50 29.50 30.25 31.00 31.00 31.00 30.00 30.00 31.65 31.65 Community Development 23.00 23.00 23.00 23.00 23.00 22.00 23.00 22.50 22.50 23.50 Economic Development 4.00 4.00 4.00 1.00 1.00 2.00 3.63 3.63 4.00 4.00 Total 342.10 348.35 355.85 358.48 406.73 418.08 424.33 428.35 432.22 448.32 Source: City Budget 155 City of Southlake, Texas Operations Indicators by Function/Program Last Ten Fiscal Years (Unaudited) Table 17 Fiscal Year Function/Program 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Public Safety Police Number of Employees 68 68 68 67 68 72 72 72 72 76 Number of Violations (Citations) 18,122 16,241 15,003 13,840 13,492 13,759 9,095 8,230 9,551 7,342 Number of Arrests 1,284 1,095 513 1,148 1,027 719 1,025 838 640 324 Number of Alarm calls 3,087 3,497 3,673 3,284 3,434 3,171 2,465 2,549 893 1,469 Fire Number of Employees 72 72 73 73 73 73 73 73 73 74 Number of Fire runs 1,245 1,220 760 807 811 748 999 1,036 834 894 Number of EMS runs 1,492 1,448 1,745 1,808 1,802 1,875 1,517 1,994 2,256 2,418 Number of Hazardous materials runs 56 43 95 105 109 90 94 92 111 93 Number of Alarm calls 461 501 608 652 651 678 602 748 659 590 Development Services Streets maintained (miles) 268 204 209 199 211 213 214 214 214 217 Streets crack sealed (blocks) 94 N/A N/A 75 391 384 5 0 68 0 Roadway signage replaced/installed 188 N/A 568 N/A 21 136 13 132 128 137 Asphalt repairs (tons) 2,802 4,849 4,667 6,671 5,191 6,100 213 7,747 151 250 Concrete repairs to roads/sidewalks (cu. yds.) 240 2,421 308 1,462 1,188 503 41 1,269 11 7 Right-of-way maintenance (miles) 484 N/A N/A 5 417 417 558 55 7 2 Building Permits Issued° 3,051 2,979 2,703 3,163 3,453 3,133 2,834 3,209 3,372 2,990 Planning & Zoning cases heard 143 136 190 100 110 76 62 82 53 65 Cultural and Recreational Parks and Recreation Park maintain& operate per acre 1,205 1,200 1,106 1,106 1,106 1,106 1,106 561 561 561 Participants in Leisure Service Programs 6,227 6,200 8,687 8,735 9,844 17,555 8,065 7,360 13,010 25,000 Participants in Special Events 47,000 60,000 66,000 72,625 71,400 65,000 900 36,300 44,000 48,000 Participants in Senior Center Programs 4,935 4,900 8,868 13,449 13,552 14,068 4,989 6,390 6,691 8,663 Library Volumes in Collection 46,781 44,971 45,416 44,899 43,947 41,789 43,699 41,895 42,607 42,034 Patrons 16,662 16,838 13,461 13,764 14,327 15,267 13,274 14,467 15,446 17,054 Water and Sewer Number of Water Consumers 9,825 10,183 10,581 10,941 11,009 11,133 11,236 11,349 11,461 11,528 Number of Sewer accounts 7,770 8,167 8,470 8,889 9,111 11,886 9,053 9,142 9,229 9,319 Line inspections (feet) 217,000 1,086,624 789,266 687,246 574,136 641,941 377,081 214,789 141,503 189,370 Water meters installed/repaired/replaced 745 1,284 10,566 135 191 279 186 359 4,099.00 102 Transmitters installed/replaced 610 N/A 10,566 489 124 113 466 1,327 7,891.00 6,666 Gallons purchased from Ft. Worth (millions) 3,220,075 3,069,971 2,904,048 3,206,363 3,156,019 2,762,227 3,013,801 3,057,825 3,914,878 3,805,874 Gallons distributed (millions) 2,964,457 2,870,430 2,935,818 2,900,926 3,229,438 2,363,542 2,957,582 2,731,697 3,569,090 3,539,810 Maximum Storage Capacity (million of gallons) 21 21 21 21 21 21 21 21 21 21 Source: City Departments 6,576,470 7,215,563 6,844,057 7,003,047 7,166,675 5,978,074 6,461,341 6,161,822 7,799,580 7,720,950 Notes: N/A Data not available °Includes residential, commercial, and miscellaneous (e.g. pools, fences) permits. 156 City of Southlake, Texas Capital Asset Statistics by Function/Program Last Ten Fiscal Years (Unaudited) Table 18 _ Fiscal Year Function/Program 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Public Safety Police Stations 3 Police Patrol Units 26 Fire Stations 3 Police Motorcycle Units 5 Cultural and Recreational Parks 18 Playgrounds 5 Dog Park 1 Senior Center 1 Tennis Courts 21 In -line hockey rink/turf field° 1 Ballfields 44 Soccer Fields 17 Nature Center 1 Water and Sewer Wafer Mains (miles) 294 Lift Stations 14 Sanitary Sewer Mains (miles) 209 Drainage, ditches/creeks (miles) 91 Fire hydrants 2,486 Wafer valves 6,686 Source: City Departments Note: N/A - Data not available °In -line hockey rink converted to turf field in 2020. 3 3 3 3 3 3 3 3 3 25 25 25 25 25 21 23 20 23 3 3 3 3 3 3 3 3 3 5 5 5 5 5 5 5 5 5 18 18 18 18 18 18 35 35 35 7 6 1 1 6 1 6 1 7 1 7 1 6 1 7 1 7 1 1 1 21 21 1 21 1 21 1 21 1 21 1 21 1 21 1 21 1 1 32 27 1 29 1 29 1 29 1 29 1 22 1 22 1 22 13 12 21 21 21 21 21 21 21 285 290 284 298 301 304 293 294 296 13 13 14 15 15 15 9 13 13 206 209 212 216 218 220 220 222 223 36 36 48 52 51 51 42 51 51 2,594 2,643 2,723 2,774 2,809 2,854 2,919 2,938 2973 N/A 7,154 7,360 7,553 7,673 7,818 8,023 8,104 8212 157 City of Southlake, Texas Single Audit Report For the Fiscal Year Ended September 30, 2023 weaver Assurance - ,,x • Advisory City of Southlake, Texas Single Audit Report For the Fiscal Year Ended September 30, 2023 Table of Contents Page Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards................................................................................................................................................................1 Independent Auditor's Report on Compliance for Each Major State Program, Report on Internal Control over Compliance, and Report on Schedule of Expenditures of State Awards Required by the TexasGrant Management Standards.................................................................................................................3 Schedule of Expenditures of State Awards...........................................................................................................6 Notes to Schedule of Expenditures of State Awards...........................................................................................7 Schedule of Findings and Questioned Costs........................................................................................................8 CorrectiveAction Plan..........................................................................................................................................10 weaver Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards The Honorable Mayor and Members of the City Council of the City of Southlake, Texas We have audited, 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, the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Southlake, Texas (the City) as of and for the year ended September 30, 2023, and the related notes to the financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated March 14, 2024. Report on Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting (internal control) as a basis for designing procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. However, as described in the accompanying schedule of findings and questioned costs, we did identify certain deficiencies in internal control that we consider to be a significant deficiency. A deficiency in internal control exists when the design or operation of a control does not allow management or employees in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the deficiency described in the accompanying schedule of findings and questioned costs as item 2023-001 to be a significant deficiency. Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Weaver and Tidwell, L.L.P. 2300 North Field Street, Suite 1000 1 Dallas, Texas 75201 Main: 972.490.1970 CPAs AND ADVISORS I WEAVER.COM The Honorable Mayor and Members of the City Council of the City of Southlake, Texas City's Response to Findings Government Auditing Standards requires the auditor to perform limited procedures on the City's response to the findings identified in our audit and described in the accompanying Corrective Action Plan. The City's response was not subjected to the other auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. WEAVER AND TIDWELL, L.L.P. Dallas, Texas March 14, 2024 2 weaver Independent Auditor's Report on Compliance for Each Major State Program, Report on Internal Control over Compliance, and Report on Schedule of Expenditures of State Awards Required by the Texas Grant Management Standards To the Honorable Mayor and Members of the City Council of the City of Southlake, Texas Report on Compliance for Each Major State Program Opinion on Each Major State Program We have audited the City of Southlake, Texas (the City)'s compliance with the types of compliance requirements identified as subject to audit in the Texas Grant Management Standards that could have a direct and material effect on each of the City's major state programs for the year ended September 30, 2023. The City's major state programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. In our opinion, the City complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major state programs for the year ended September 30, 2023. Basis for Opinion on Each Major State Program We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America (GAAS); the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards); and the Texas Grant Management Standards (TxGMS) issued by the Texas Comptroller of Public Accounts Statewide Procurement Division. Our responsibilities under those standards and TxGMS are further described in the Auditor's Responsibilities for the Audit of Compliance section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on compliance for each major state program. Our audit does not provide a legal determination of the City's compliance with the compliance requirements referred to above. Responsibilities of Management for Compliance Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules and provisions of contracts or grant agreements applicable to the City's state programs. Weaver and Tidwell, L.L.P. 2300 North Field Street, Suite 1000 1 Dallas, Texas 75201 Main: 972.490.1970 3 CPAs AND ADVISORS I WEAVER.COM The Honorable Mayor and Members of the City Council of the City of Southlake, Texas Auditor's Responsibilities for the Audit of Compliance Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on the City's compliance based on our audit. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS, Government Auditing Standards, and TxGMS will always detect material noncompliance when it exists. The risk of not detecting material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Noncompliance with the compliance requirements referred to above is considered material, if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about the City's compliance with the requirements of each major state program as a whole. In performing an audit in accordance with GAAS, Government Auditing Standards, and TxGMS, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material noncompliance, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the City's compliance with the compliance requirements referred to above and performing such other procedures as we considered necessary in the circumstances. • Obtain an understanding of the City's internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the TxGMS, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control over compliance. Accordingly, no such opinion is expressed. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit. Report on Internal Control Over Compliance A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a state program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a state program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a state program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. 4 The Honorable Mayor and Members of the City Council of the City of Southlake, Texas Our consideration of internal control over compliance was for the limited purpose described in the Auditor's Responsibilities for the Audit of Compliance section above and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies in internal control over compliance. Given these limitations, during our audit we did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, material weaknesses or significant deficiencies in internal control over compliance may exist that were not identified. Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the TxGMS. Accordingly, this report is not suitable for any other purpose. Report on Schedule of Expenditures of State Awards Required by the Texas Grant Management Standards We have audited the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City as of and for the year ended September 30, 2023, and the related notes to the financial statements, which collectively comprise the City's basic statements. We issued our report thereon dated March 14, 2024, which contained an unmodified opinion on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedule of expenditures of state awards is presented for purposes of additional analysis as required by the Texas Grant Management Standards and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic 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 schedule of expenditures of state awards is fairly stated in all material respects in relation to the basic financial statements as a whole. l tJ�G,uP� a4 f ;f• f WEAVER AND TIDWELL, L.L.P. Dallas, Texas March 14, 2024 5 City of Southlake, Texas Schedule of Expenditures of State Awards For the Fiscal Year Ended September 30, 2023 State Grantor/Pass-Through Grantor/ Grant State Program Title Number Expenditures Office of the Governor, Public Safety Office FY23 Bullet -Resistant Shield Grant Program 4605/01 $ 154,726 Texas Comptroller of Public Accounts LEOSE - Law Enforcement Officer Standards and Education N/A 3,412 Texas Department of State Health Services Passed through North Central Texas Trauma Regional Advisory Council FY23 EMS County Assistance Allocations N/A 6,652 Texas Department of Transportation Regional Toll Revenue Funding for N White Chapel Blvd; Bluestem to Wingate 0902-90-249 597,421 Texas Division of Emergency Management 2023 Spring Fire Weather TX-TFMS-230003 25,483 2023 Spring Fire Weather TX-TFMS-230003 32,289 2023 Summer Fire Weather TX-TFMS-230007 142,134 2023 Summer Fire Weather TX-TFMS-230007 80,852 2023 Summer Fire Weather TX-TFMS-230007 22,375 2023 Summer Fire Weather TX-TFMS-230007 46,224 2023 Summer Fire Weather TX-TFMS-230007 28,085 Passed through Texas A&M Engineering Extension Service 22-0027 Severe Weather 4Nov 471090-100133-5474 6,699 22-0030 Severe Weather 12DEC 471090-100135-5474 2,387 22-0004 SV WX 23JAN 471090-100137-5474 5,895 22-0008 02APR SV WX 471090-100140-5474 1,230 23-0017 15June SV WX 471090-100146-5474 6,665 Total Texas Division of Emergency Management 400,318 TOTAL STATE ASSISTANCE $ 1,162,529 See accompanying Notes to the Schedule of Expenditures of State Awards. 6 City of Southlake, Texas Notes to the Schedule of Expenditures of State Awards Note 1. General and Basis of Presentation The accompanying schedule of expenditures of state awards (Schedule) includes the state award activity of the City of Southlake, Texas (City) under programs of the state governments for the year ended September 30, 2023. The accompanying notes are an integral part of this Schedule. The information in this Schedule is presented in accordance with the requirements of the State of Texas Grant Management Standards (TxGMS) issued by the Texas Comptroller of Public Accounts Statewide Procurement Division. Because the Schedule presents only a selected portion of the operations of the City, it is not intended to and does not present the financial position, changes in net position or cash flows of the City. Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the TxGMS, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. Note 2. Subrecipients Of the state expenditures presented in the Schedule, the City provided no state awards to subrecipients. Note 3. Loans At September 30, 2023, the City had no loans or loan guarantees outstanding with state awarding agencies. Note 4. Indirect Cost Rate The City has elected not to use the 10 percent de minimis indirect cost rate allowed under the TxGMS. 7 City of Southlake, Texas Schedule of Findings and Questioned Costs For the Fiscal Year Ended September 30, 2023 Section 1. Summary of Auditor's Results Financial Statements An unmodified opinion was issued on the financial statements. Internal control over financial reporting: • Material weakness(es) identified? • Significant deficiency(ies) identified that are not considered to be material weakness(es)? Noncompliance material to the financial statements noted? State Awards Yes X No X Yes None reported Yes X No An unmodified opinion was issued on compliance for the major programs. Internal control over major programs: • Material weakness(es) identified? • Significant deficiencies identified that are not considered to be material weakness(es)? Any audit findings disclosed that are required to be reported in accordance with Texas Grant Management Standards? Identification of major programs: Assistance Listing/Grant Identification Number Major State Program: 0902-90-249 Dollar threshold used to distinguish between Type A and Type B programs: Yes X No Yes X None reported Yes X No Name of State Program or Cluster Regional Toll Revenue Funding for N White Chapel Blvd; Bluestem to Wingate $750,000 0 City of Southlake, Texas Schedule of Findings and Questioned Costs - Continued For the Fiscal Year Ended September 30, 2023 Section 2. Financial Statement Findings Finding 2023-001 Significant Deficiency in Internal Controls over Financial Reporting- Payroll Criteria Management is responsible for maintaining effective internal controls over financial reporting. As part of this responsibility, management sets the City's objectives, implements controls and evaluates the internal control system. Condition and Context It was identified that the City's Human Resource Department manually adjusted overtime based on calculations performed by Human Resources' personnel. Cause The manual adjustments to overtime did not receive a secondary review and are posted by the preparer of the calculation. This lead to a lack of segregation of duties in the internal control environment related to overtime calculations. Effect or Potential Effect Failure to implement effective internal controls over manually adjusted overtime could result in errors. Recommendation We recommend the City implement a process in which all payroll calculations are performed by the City's payroll system. If manual adjustments are required the manual adjustment is reviewed and approved by a second individual prior to posting. Views of Responsible Officials and Planned Corrective Action See corrective action plan. Section 3. State Award Findings and Questioned Costs None Section 4. Schedule of Prior Year Findings and Questioned Costs None C'-i - 0l SOUTHLAKE Finance Department Planned Corrective Action: The City's Finance and Human Resources Departments will work with Tyler Technologies to implement overtime calculations within Munis, the Financial ERP system used by the City, which will eliminate manual overtime calculations in the payroll cycle. Additionally Human Resources will institute secondary review and approval procedures for all changes occurring during payroll processing. Responsible officials: Nicole Bradshaw, Deputy Director of Finance Stacey Black, Senior Director of Human Resources Planned completion date: Review and approval procedures will be implemented immediately, and ERP system modifications are planned to be completed by June 30, 2024. 10 1400 Main Street, Suite 440, Southlake, TX 76092, (817) 748-8345