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Item 4ECITY OF SOUTHLAKI Item 4E MEMORANDUM March 9, 2015 To: Shana Yelverton, City Manager From: Sharen Jackson, Chief Financial Officer Subject: Approval of the 2014 Comprehensive Annual Financial Report Action Requested: Approval of September 30, 2014 Comprehensive Annual Financial Report. Background Information: 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 2014. City received an unmodified ("clean") opinion on the City's financial statements for the year ended September 30, 2014. Shawn Parker, Partner, will present the report to the audit committee on Tuesday during the committee meeting scheduled at 5.00 prior to the city council meeting. Financial Considerations: None required Strategic Link: F4 Establish and maintain effective internal controls Citizen Input/ Board Review: None required Legal Review: None required Alternatives: None required Supporting Documents: 2014 CAFR Staff Recommendation: Approval of 2014 Comprehensive Annual Financial Report CITY OF SOUTH Al<,,,E TEXAS Comprehensive Annual Financial Report For The Fiscal Year Ended September 30, 2014 CITY OF SOUTHLAKE, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2014 As Prepared By Sharen Jackson, CPA Chief Financial Officer CITY OF SOUTHLAKE, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2014 TABLE OF CONTENTS Exhibit Page INTRODUCTORY SECTION Letter of Transmittal i Certificate of Achievement viii Organizational Chart ix List of Principal Officials x aI�Fil�INFil1&yxQ1101► Independent Auditor's Report 1 A. MANAGEMENT'S DISCUSSION AND ANALYSIS 4 B. BASIC FINANCIAL STATEMENTS Government -Wide Financial Statements Statement of Net Position 1 15 Statement of Activities 2 16 Fund Financial Statements Governmental Funds Financial Statements Balance Sheet 3 17 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 4 19 Statement of Revenues, Expenditures, and Changes in Fund Balance 5 20 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance to the Statement of Activities 6 22 Proprietary Funds Financial Statements Statement of Net Position 7 23 Statement of Revenues, Expenses, and Changes in Net Position 8 24 Statement of Cash Flows 9 25 Fiduciary Fund Financial Statement Statement of Fiduciary Net Position 10 26 Notes to the Basic Financial Statements 27 CITY OF SOUTHLAKE, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2014 TABLE OF CONTENTS Exhibit Page C. REQUIRED SUPPLEMENTARY INFORMATION Budgetary Comparison Schedule - General Fund A-1 54 Budgetary Comparison Schedule - Crime Control District Special Revenue Fund A-2 55 Budgetary Comparison Schedule - Tax Increment Financing District Special Revenue Fund A-3 56 Notes to Required Supplementary Information 57 Condition Rating of Street System A-4 58 D. COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES Major Governmental Funds Budgetary Comparison Schedule - General Obligation Debt Service Fund B-1 60 Nonmajor Governmental Funds Combining Balance Sheet - Nonmajor Governmental Funds C-1 63 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance - Nonmajor Governmental Funds C-2 66 Budgetary Comparison Schedule - Parks Dedication Special Revenue Fund C-3 69 Budgetary Comparison Schedule - Southlake Parks Development Corporation Special Revenue Fund C-4 70 Budgetary Comparison Schedule - Hotel Occupancy Special Revenue Fund C-5 71 Budgetary Comparison Schedule - Storm Water Utility Special Revenue Fund C-6 72 Budgetary Comparison Schedule - Red Light Camera Special Revenue Fund C-7 73 Budgetary Comparison Schedule - Southlake Parks Development Corporation Debt Service Fund C-8 74 Agency Funds Statement of Changes in Assets and Liabilities - Cash Escrow Agency Fund F-1 76 E. Capital Assets Used in the Operation of Governmental Funds Comparative Schedules of Capital Assets by Source G-1 77 Schedule of Changes in Capital Assets by Function and Activity G-2 78 CITY OF SOUTHLAKE, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2014 TABLE OF CONTENTS Exhibit Page III. STATISTICAL SECTION Table Net Position By Component 1 79 Changes in Net Position 2 81 Fund Balances, Governmental Funds 3 83 Changes in Fund Balances, Governmental Funds 4 84 Assessed Value and Estimated Actual Value of Taxable Property 5 85 Direct and Overlapping Property Tax Rates 6 86 Principal Property Tax Payers 7 87 Ad Valorem Tax Levies and Collection 8 88 Ratio of Outstanding Debt By Type 9 89 Ratio of General Bonded Debt Outstanding 10 91 Direct and Overlapping Governmental Activities Debt 11 92 Pledged -Revenue Coverage 12 93 Demographic and Economic Statistics 13 94 Principal Employers 14 95 Full -Time Equivalent City Government Employees By Function/Program 15 96 Operating Indicators By Function/Program 16 97 Capital Asset Statistics By Function/Program 17 98 INTRODUCTORY SECTION e CITY OF SOU 1 1 iLAKE Finance Department March 11, 2015 Honorable Mayor John Terrell and Members of City Council City of Southlake Southlake, Texas Honorable Mayor and Councilmembers: It is with pleasure that we submit to you the Comprehensive Annual Financial Report (CAFR) of the City of Southlake for the fiscal year ended September 30, 2014. This report was prepared by the Finance Department in accordance with the Southlake Charter, Statutes and generally accepted accounting principles for governments. In addition to meeting legal requirements, this report reflects the City's commitment to full financial disclosure. We encourage you to thoroughly read this report and take the opportunity to discuss some of the important items it addresses. In developing and evaluating the City's accounting system, consideration is given to the adequacy of internal accounting controls. These controls are designed to provide reasonable, but not absolute, assurance regarding the safeguarding of assets against loss from unauthorized use or disposition, and the reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that the cost of a control should not exceed the benefits likely to be derived, and the evaluation of costs and benefits requires estimates and judgments by management. We believe that the City's current system of internal controls adequately safeguards assets and provides reasonable assurance of proper recording of financial transactions. The financial statements are presented in accordance with Governmental Accounting Standards Board Statement 34, Basic Financial Statements -and Management's Discussion and Analysis -For State and Local Governments. The presentation of the City's financial information includes two financial statements that provide a government - wide perspective using the accrual basis of accounting. The two government -wide statements present governmental activities separately from business -type activities. The inclusion of the government -wide statements in this format enables a more thorough understanding of the financial operations and condition of the City. 1400 Main Street, Suite 440, Southlake, TX 76092 (817) 748-8345 Innovation 0 Integrity 0 Accountability 0 Commitment to Excellence 0 Teamwork i The fund financial statements focus on individual major funds. Each major fund is presented in a separate column in the fund financial statements. Nonmajor funds are aggregated and presented in a combined column. Budget to actual comparisons are presented as required supplementary information and are limited to the general fund and major special revenue funds. The comparisons are now more informative, including both the original adopted budget and the final amended budget. We believe the reporting model will assist in making economic, social and political decisions and in assessing accountability to the residents by: • comparing actual financial results with the legal adopted budget, where appropriate; • assessing financial condition and results of operations; • assisting in determining compliance with fiscally -oriented laws, rules and regulations; and • assisting in evaluating the efficiency and effectiveness of City operations. Responsibility for both the accuracy of the presented data and the completeness and fairness of the presentation, including all disclosures, rests with the City. To the best of our knowledge and belief, the data, as presented, is accurate in all material respects and is reported in a manner designed to present fairly the financial position and results of operations. All disclosures necessary to enable the reader to gain an understanding of the City's financial activities have been included. FINANCIAL STATEMENT FORMAT This report has been prepared and organized to meet the requirements of the Government Finance Officers Association (GFOA) Certificate of Achievement for Excellence in Financial Reporting Program. By following the guidelines of this program, the report's format facilitates understanding by the residents and provides information needed by the most sophisticated and interested financial observers. The report is presented in three sections: introductory, financial and statistical. • The introductory section, which is unaudited, includes this transmittal letter, GFOA certificate, the City's organizational chart, and a list of principal officials. This section is designed to provide an overview and general understanding of the report. ii • The financial section provides a detailed presentation of the financial position and results of operations for the fiscal year ended September 30, 2014. The financial section is divided into four main subsections: o Management's Discussion and Analysis o Basic Financial Statements and related notes o Required Supplementary Information o Combining and Individual Fund Financial Statements Readers are encouraged to pay particular attention to Management's Discussion and Analysis and to the footnotes to the basic financial statements. These provide valuable analysis and explanation of the financial statements. • The statistical section, which is unaudited, includes a number of multi -year tables and other data designed to present social, economic and financial trends of the City, providing an overall view of the fiscal capacity of the City. The financial reporting entity includes all the funds of the primary government, as well as all of its component units in accordance with GASB Codification of Governmental Accounting and Financial Reporting Standards, Section 2100, "Defining the Reporting Entity. " Component units are legally separate entities for which the primary government is financially accountable and for which the nature and significance of their relationship with the primary government are such that exclusion would cause the City's basic financial statements to be misleading or incomplete. The primary government is considered financially accountable if it appoints a voting majority of an organization's governing body and imposes its will on that organization. The primary government may also be financially accountable if an organization is fiscally dependent on the primary government regardless of the authority of the organization's governing board. Blended component units, although legally separate entities, are, in substance, part of the primary government's operations and are included as part of the primary government. Accordingly, the Southlake Parks Development Corporation ("SPDC"), Southlake Crime Control and Prevention District (the "District") and Tax Increment Reinvestment Zone ("TIF") are included in the governmental funds (special revenue) of the primary government as blended component units. SPDC was formed in January 1994 pursuant to a successful election in November 1993 to adopt an additional 1/2 cent sales tax for park and recreation facility development. SPDC is organized exclusively to act on behalf of the City for the financing, development and operation of parks and recreation facilities. Also included in this report is financial information for the District. In November 1997, voters approved an additional '/2 cent sales tax for Crime Control and Prevention initiatives. The District is organized exclusively to act on behalf of the City for the financing, development and crime control throughout the City. Also, included are the financial statements of the TIF which was created in 1997 to encourage quality commercial growth. The TIF was formed to finance and make public improvements, under the authority of the Tax Increment Financing Act. iii PROFILE OF THE GOVERNMENT General Information Although Southlake has been a high -growth community for years, when the first settlers arrived in 1845 they found only a vast area of land and trees where the grand prairie and cross timbers merged. As the site of the first permanent settlement in Tarrant County, a portion of present day Southlake was homesteaded in 1866, which consisted of 360 acres. Keeping with the time, the primary industry was agriculture. Farmers grew peanuts, grains and cotton, and families raised their own livestock. The area that would become Southlake remained a rural farming community for more than 100 years until the U.S. Army Corps of Engineers built Lake Grapevine in 1952. The lake spurred much of the area's early growth and was the beginning of dramatic change. The town officially incorporated on September 25, 1956 by a public vote of 30 in favor and 24 against. The original town contained 1.62 square miles and had a population of just over 100. The residents chose to call this new town Southlake because it was... south of Lake Grapevine! The Southlake Fire Department was launched in 1965 and the first piece of fire equipment was a 1950 Diamond T-Military unit with a tank capacity of 1,000 gallons and an auxiliary pump. The first chief of police was hired in 1966, and the City purchased its first patrol car in 1967. The opening of the Dallas -Fort Worth International Airport in 1974 served as the next catalyst of growth in the area and Southlake residents adopted a home -rule charter in April 1987, which created the current council-manager form of government with six Council Members and a Mayor who are elected at large on a non -partisan basis for staggered three-year terms. But the single most important event in bringing residential subdivision development to Southlake was the completion of water and sewer lines in the southern portion of the city in the early 1990s. Since that time, much like the area's first settlers were attracted to the area with its endless possibilities, Southlake has continued to attract the suburban settler desiring a high quality of life and the small town charm that has been preserved from Southlake's past. Services Provided Services provided by the City under general governmental functions include public events, public safety, planning and development, engineering, street maintenance, parks operation and maintenance, recreation, library services, and general administrative services. The City does not provide educational or welfare services. Water and sewer services and solid waste collection are provided under an Enterprise Fund concept, with user charges set by the City Council to ensure adequate coverage of operating expenses and payments of outstanding debt. Economic Condition and Outlook The City of Southlake continues to be one of the major growth areas in Texas. The City is in a prime location in Northeast Tarrant County, 5 minutes west of Dallas/Fort Worth iv International Airport, and 10 minutes east of the Alliance Airport, a commercial aviation and industrial complex in north Fort Worth. State Highway 114, FM1709, and FM1938, the regional road arterials, serve the City. 150 100 50 0 Single Farniry Resldentisl Home Permits 2010 2011 2012 2013 2014 There were 197 single family residential permits issued in Fiscal Year 2014 with an average new home construction value, excluding land value, of more than $665,000. Residential home construction has increased as evidenced by the chart. Water customers Number of Water Cuslorners increased from 9,812 in Fiscal Year 2013 to i0,i00 10,000 9,800 9,600 9,400 9,200 9 000 9,964 in 2014, while wastewater customers increased from 7,756 to 8,129 during the same year. The chart shows the five-year trend of increasing water customers, the result of 2010 2011 2012 2013 2014 the building permit activity. The City has developed master plans for land use, water, sewer, parks, trails, and thoroughfares, and has implemented regulatory controls that will maintain the anticipated quality growth into the future. Saks Tax Revenue 30,00,000 25,00,000 20,000,000 15,0a0,a0n 10.000.001) s,00a,00n 2010 2011 2012 2013 2014 ■General oSPDC �Criure The City of Southlake experienced an increase in sales tax collections during the fiscal year as indicated on the chart. Sales tax collections totaled $25,346,047 in fiscal year 2014, a 17.7% increase from the previous year. v Future Development During 2014, approximately 42 new construction commercial permits were issued by the City, representing over 630,277 square feet of future retail/office. Residential also experienced an increase in activity; several subdivisions were approved for development with an estimated average home value over $850,000. Financial Management Principles The City has strong financial management principles that provide the framework for the City's financial sustainability. • Tax rate management. The tax rate is allocated properly between maintenance/operations and debt service. • Structural balance. The City's ability to weather potential economic downturns or other financial challenges is critical. The City does not use reserves to balance the operating budget. • Reserve management. The City's fund balance policy requires a minimum 15% and optimum 25% balance. The City uses "excess" reserves as a means to fund one-time, "pay-as-you-go" projects. • Multi -year financial plan. The long-term effect of today's decisions on tomorrow's financial situation is an important consideration during the budget process. • Quality service delivery. The City is committed to meeting the needs of our community through high quality service delivery. • Risk management. The City supports ongoing initiatives to safeguard the public trust by internal audits and other initiatives to maintain a strong control environment. For fiscal year 2014, the property tax rate was held steady at $0.462 per $100 net taxable valuation. OTHER INFORMATION Independent Audit The City Charter requires an annual audit of the financial status of the City by independent Certified Public Accountants selected by the City Council. This requirement has been met and the auditor's report has been included in this report. Avunrdc The Certificate of Achievement is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government financial reports. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized comprehensive annual financial report, whose contents conform to program standards. vi Such CAFR must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. The City of Southlake received a Certificate of Achievement for the year ended September 30, 2013, and believes our current report conforms to the Certificate of Achievement program requirements, and we are submitting it to GFOA. In addition, the City also received the GFOA's Distinguished Budget Presentation award for its annual budget dated October 1, 2013. In order to qualify for this award, the City's budget document was judged to be proficient in all categories, including as a policy document, a financial plan, and operations guide, and a communications device. The City received the silver member designation for the Texas Comptroller's Leadership Circle for online financial transparency. Acknowledgments The preparation of this report could not be accomplished without the dedication and efficiency of the entire staff and our independent auditor. I would like to express my sincere appreciation to all employees who contributed to its preparation. I would also like to thank the Mayor and members of the City Council for their support in planning and conducting the financial operations of the City in a responsible and efficient manner. Respectfully submitted, Sharen Jackson, CPA Chief Financial Officer vii Goverr,rnont Fr'nauce Officm Association Certificate of Achievement for Excellence in Financial. Reporting Pros ailed to City of Southlake Texas for its Compreher►sive Annual Knaneial Report for the Fiscal Year Ended September 30, 2013 *e f*,� I e d 0-;: PAO W,,;, ExKtitive Director/CEO CITY OF SOUTHLAKE ORGANIZATIONAL CHART SOUTHLAKE CITIZENS MAYOR AND CITY COUNCIL _ _ _ _ _ _ _ _ CITY MANAGER CITY CITY ATTORNEY SECRETARY ASSISTANT CITY MANAGER COMMUNITY I I I FIRE SERVICES SERVICES POLICE SERVICES PLANNING & DEVELOPMENT ASSISTANT CITY MANAGER CITY MANAGER'S OFFICE HUMAN RESOURCES ECONOMIC DEVELOPMENT & TOURISM PUBLIC WORKS MUNICIPAL JUDGE INFORMATION TECHNOLOGY FINANCE IX LIST OF PRINCIPAL OFFICIALS John Terrell Mayor Laura K. Hill Mayor Protem Brandon Bledsoe Deputy Mayor Protem Shahid Shall Council Member Carolyn Morris Council Member Randy Williams Council Member Gary Fawks Council Member Shana K. Yelverton City Manager Benjamin Thatcher Assistant City Manager Alison Ortowski Assistant City Manager Lori Payne City Secretary Sharen Jackson Chief Financial Officer Shannon Hamons Director of Economic Development Robert Price Director of Public Works Chris Tribble Director of Community Services Stacey Black Director of Human Resources Ken Baker Director of Planning/Development x FINANCIAL SECTION weaver- INDEPENDENT AUDITOR'S REPORT To Members of the City Council and City Manager City of Southlake, Texas We have audited the accompanying financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Southlake (the City) as of and for the year ended September 30, 2014, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. AN INDEPENDENT MEMBER OF WEAVER AND TIDWELL, L.L.P. 12221 MERIT DRIVE, SUITE 1400, DALLAS, TX 75251 BAKER TILLY INTERNATIONAL CERTIFIED PUBLIC ACCOUNTANTS AND ADVISORS P: 972.490.1970 r- 972.702.8321 City of Southlake Page 2 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City, as of September 30, 2014, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. Change in Accounting Principle As discussed in Note 14 to the financial statements, the City adopted new accounting guidance, GASB Statement No. 65, "Items Previously Reported as Assets and Liabilities", in 2014. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis (pages 4 through 14), budgetary comparison information (pages 54 through 57), and condition rating of street system (page 58) be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The introductory section, combining and individual fund financial statements and schedules, and statistical section, are presented for purposes of additional analysis and are not a required part of the financial statements. The combining and individual fund statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. City of Southlake Page 3 Such information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund financial statements and schedules are fairly stated in all material respects in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 11, 2015, on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. "45� aaw T�4-�- WEAVER AND TIDWELL, L.L.P. Dallas, Texas March 11, 2015 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 take time to read and evaluate all sections of the report, including the footnotes and the other Required Supplementary Information that is provided in addition to this MD&A. FINANCIAL HIGHLIGHTS The assets of the City of Southlake exceeded its liabilities at September 30, 2014 by $501,339,589 (net position). Of this amount, $74,817,205 (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 $24,569,605. This increase can be attributed to increases in ad valorem, sales tax revenue, fines and forfeitures, contributions, and charges for services. At September 30, 2014, the City's governmental funds reported combined ending fund balances of $109,115,753. Approximately 15.0 percent of this amount, $16,399,991, 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 $16,399,991 or 47.9 percent of total General Fund expenditures. At the end of the current fiscal year, the City of Southlake outstanding debt totals $172,776,503, a net decrease of $4,501,576 from the previous year. 4 OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City's basic financial statements. The reporting focus is on the City as a whole and on individual major funds. It is intended to present a more comprehensive view of the City's financial activities. The basic financial statements are comprised of three components: 1) government -wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. GOVERNMENT -WIDE FINANCIAL STATEMENTS The government -wide financial statements include the Statement of Net Position and the Statement of Activities. These statements are designed to provide readers with a broad overview of the City's finances in a manner similar to a private -sector business. Both are prepared using the economic resources measurement focus and the accrual basis of accounting; meaning that all the current year's revenues and expenses are included regardless of when cash is received or paid. The Statement of Net Position presents information on all of the City's assets and liabilities, 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. G7 Business -Type activities- Activities for which the City charges a fee to customers to pay most or all of the costs of a service it provides are reported here. The City's business - type activities include water distribution and wastewater collection and solid waste collection and disposal. The government -wide financial statements are found on pages 15-16 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. 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 provide a reconciliation to facilitate this comparison. The reconciliation explains the differences between the government's activities as reported in the government -wide financial statements and the information presented in the governmental funds financial statements. The City maintains 22 individual governmental funds. Information is presented separately in the governmental funds Balance Sheet and in the governmental funds Statement of Revenues, Expenditures and Changes in Fund Balances for the General Fund, General Obligation Debt Service Fund, General Capital Projects Fund, Crime Control District, Southlake Parks Development Corporation Capital Projects Fund, Crime Control District Capital Projects Fund and Tax Increment Financing District Fund, all of which are considered to be major funds. Data for the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of the Cel 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 17-22 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 its vehicle fleet. Proprietary funds financial statements provide the same type of information as the government -wide financial statements, only in more detail. The proprietary funds financial statements provide separate information for the water and sewer operations, which is considered to be a major fund of the City. 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 27-53 of this report. GOVERNMENT -WIDE FINANCIAL ANALYSIS Total assets of the City at September 30, 2014 were $678,576,118 while total deferred outflows of resources were $4,836,883 and total liabilities were $182,073,412 resulting in a net position balance of $501,339,589. The largest portion of the City's net position, $411,429,780 reflects its investment in capital assets (land and improvements, building, infrastructure, machinery and equipment net of accumulated depreciation); less any related debt used to acquire those assets that is still outstanding. The City uses these assets to provide services to its citizens; consequently, these assets are not available for future spending. Although the City reports its capital assets net of related debt, the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. 7 Governmental Activities net position increased by $23,304,341. This increase is primarily attributable to increases in both property taxes and charges for services. Business -type Activities net position increased by $1,265,264. The majority of this change can be attributed to an increase in charges for service which resulted from increased consumption during the dry summer months. The following analysis highlights the net position as of September 30, 2014: Current and other assets: Capital assets Total assets Deferred outflows of resources Other liabilities Long-term debt outstanding Total liabilities Net position: Net investment in capital assets Restricted -debt service Restricted -other Unrestricted Total net position Governmental Business -Type 2014 Activities Activities Total $ 119,160,773 418,439,098 537,599,871 3,975,876 6,767,682 $ 31,831,555 109,144,692 140,976,247 861,007 2,529,227 $ 150,992,328 527,583,790 678,576,118 4,836,883 9,296,909 122,679,683 50,096,820 172,776,503 129,447,365 52,626,047 182,073,412 338,303,633 73,126,147 411,429,780 9,809,483 - 9,809,483 5,283,121 - 5,283,121 58,732,145 16,085,060 74,817,205 $ 412,128,382 $ 89,211,207 $ 501,339,589 The following analysis highlights the net position as of September 30, 2013: Current and other assets Capital assets Total assets Other liabilities Long-term debt outstanding Total liabilities Net position: Net investment in capital assets Restricted -debt service Restricted -other Unrestricted Total net position Governmental Business -Type 2013 Activities Activities Total $ 119,020,782 406,118,126 525,138,908 7,069,502 $ 31,750,452 108,810,198 140,560,650 2,244,656 $ 150,771,234 514,928,324 665,699,558 9,314,158 127,604,967 49,673,112 177,278,079 134,674,469 51,917,768 186,592,237 324,928,883 70,968,919 395,897,802 10,056,551 - 10,056,551 5,122,247 - 5,122,247 50,356,758 17,673,963 68,030,721 $ 390,464,439 $ 88,642,882 $ 479,107,321 8 The following analysis highlights the changes in net position for the year ended September 30, 2014: Governmental Business -Type 2014 Activities Activities Total Revenues: Program revenues: Charges for services $ 8,305,138 $ 23,591,438 $ 31,896,576 Operating grants and contributions 443,157 - 443,157 Capital grants and contributions 4,436,346 3,510,936 7,947,282 General revenues: Taxes 62,563,693 - 62,563,693 Interest on investments 482,607 101,469 584,076 Gain on sale of capital assets 99,109 - 99,109 Miscellaneous 639,571 6,963 646,534 Total revenues 76,969,621 27,210,806 104,180,427 Expenses: General government 13,417,904 - 13,417,904 Public safety 18,245,617 - 18,245,617 Public works 8,870,998 - 8,870,998 Culture and recreation 8,948,841 - 8,948,841 Interest on long-term debt 5,097,036 - 5,097,036 Water and sewer - 25,030,426 25,030,426 Total expenses 54,580,396 25,030,426 79,610,822 Increase in net position before transfers 22,389,225 2,180,380 24,569,605 Transfers 915,116 (915,116) - Increase in net position 23,304,341 1,265,264 24,569,605 Net position -beginning of year, as previously stated 390,464,439 88,642,882 479,107,321 Cumulative effect of change in accounting principle (1,640,398) (696,939) (2,337,337) Net position -End of Year $ 412,128,382 $ 89,211,207 $ 501,339,589 9 The following analysis highlights the changes in net position for the year ended September 30, 2013: Governmental Activities Business -Type Activities 2013 Total Revenues: Program revenues: Charges for services $ 8,119,595 $ 22,806,432 $ 30,926,027 Operating grants and contributions 639,230 - 639,230 Capital grants and contributions 2,244,965 1,981,354 4,226,319 General revenues: Taxes 57,151,241 - 57,151,241 Interest on investments 30,110 25,227 55,337 Gain on sale of capital assets 89,923 - 89,923 Miscellaneous 836,068 37,527 873,595 Total revenues 69,111,132 24,850,540 93,961,672 Expenses: General government 12,892,140 - 12,892,140 Public safety 18,425,878 - 18,425,878 Public works 8,528,331 - 8,528,331 Culture and recreation 8,829,394 - 8,829,394 Interest on long-term debt 6,747,628 - 6,747,628 Water and sewer - 22,119,518 22,119,518 Total expenses 55,423,371 22,119,518 77,542,889 Increase in net position before transfers 13,687,761 2,731,022 16,418,783 Transfers 915,475 (915,475) - Increase in net position 14,603,236 1,815,547 16,418,783 Net position -beginning of year 375,861,203 86,827,335 462,688,538 Net position -End of Year $ 390,464,439 $ 88,642,882 $ 479,107,321 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 $109,115,753. Approximately 15.0 percent or $16,399,991 constitutes unassigned fund balance, which is available for spending at the government's discretion. Other portions of the fund balance are either nonspendable, restricted, committed or assigned for specific purposes to pay for debt service ($12,150,184), recycling ($34,609), police expenditures ($5,561,643), parks ($8,020,248), capital projects ($53,053,840), reinvestment zone expenditures ($4,422,565), municipal court expenditures ($860,556), oil and gas expenditures ($53,160), storm water expenditures ($450,824), strategic initiative expenditures ($7,980,605) and other ($127,528). 10 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 $16,399,991. As a measure of the General Fund's liquidity, it may be useful to compare both the unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 47.9 percent of total General Fund expenditures, while total fund balance represents 71.7 percent of total General Fund expenditures. The fund balance of the General fund increased $3,780,891 during the current fiscal year. The key factor in the increase is attributable to the revenue increases in taxes and licenses, permits and fees of $2,914,509 and $341,705, respectively. The General Obligation Debt Service Fund has a fund balance of $10,477,887, all of which is restricted for the payment of debt service. The fund balance decreased during the year by $352,517, primarily due to the increased debt service payments. The fund balance in the General Capital Projects Fund ended the year at $40,264,035, an increase of $1,521,101, primarily due to the issuance of bonds and transfers. Fund balance in the Crime Control District Fund increased by $651,149, primarily the result of increased sales tax revenues. Fund balance in the Southlake Parks Development Corporation and Crime Control District Capital Projects Funds decreased by $3,680,449 and $768,148, respectively, due to spending on capital projects. Fund balance in the Tax Increment Financing District Fund increased $124,055, primarily due to increased property tax revenues. FINANCIAL ANALYSIS OF THE PROPRIETARY FUNDS The City's proprietary funds provide the same type of information found in the government -wide financial statements, but in more detail. Unrestricted net position reported in the Proprietary Funds were: $16,085,060 in the Water and Sewer Fund and $3,356,178 in the Vehicle Replacement Fund. Both the Water and Sewer Fund and Vehicle Replacement Fund net position increased by $1,265,264 and $417,545, respectively. The increase in water, sewer and garbage, contributions -impact fees and transfers from the previous year are the primary reasons for the change in net position. GENERAL FUND BUDGETARY HIGHLIGHTS There was an increase in appropriations from the original budget to the final amended budget of $152,927, which is attributable to field equipment purchased with grant funds. 11 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, 2014 amount to $527,583,790 (net of accumulated depreciation). This investment in capital assets includes land, buildings, improvements, machinery and equipment, infrastructure and construction in progress. The City has elected to use the modified approach for its street system in lieu of the depreciation method. An up-to-date inventory of these infrastructure assets was performed and the annual costs to maintain and preserve these assets was established and disclosed through administrative policy. The current condition level of the street system meets the target condition level established by the City. There were no significant changes in the condition levels of infrastructure assets, and the differences between the estimated amounts necessary to maintain and preserve the street system at target condition levels and the actual amount of expense incurred for that purpose for 2014 was not material. Major capital projects completed during the current year included the following: • 30" Waterline to TW King • DPS North Facility • Pavement Management System — various overlays and rehab • Various Sidewalks Land and improvements Buildings and improvements Improvements Infrastructure Machinery and equipment Construction in Progress Total Land and improvements Buildings and improvements Improvements Infrastructure Machinery and equipment Construction in Progress Total Governmental Business -Type 2014 Activities Activities Total $ 98,522,782 $ 16,789,625 68,008,655 380,505 - 88,570,613 221,430,610 8,655,433 21,821,618 $ 418,439,098 1,293,725 2,110,224 $ 109,144,692 $ 115,312,407 68,389,160 88,570,613 221,430,610 9,949,158 23,931,842 $ 527,583,790 Governmental Business -Type 2013 Activities Activities Total $ 98,045,799 $ 54,149,660 219,628,317 8,153,856 26,140,494 $ 406,118,126 15,731,876 410,823 79,670,303 1,444,099 11,553,097 $ 108,810,198 $ 113,777,675 54,560,483 79,670,303 219,628,317 9,597,955 37,693,591 $ 514,928,324 Additional information on the City's capital assets can be found in Note 4 on pages 42-43 of this report. 12 Long-term Debt- At the end of the current fiscal year, the City of Southlake had $121,633,943 total long-term debt outstanding of bonds issued to finance capital improvements for roadway, parks and recreation, public building and infrastructure. $49,775,833 of Utility System bonds, which financed projects to increase capacity of the Utility system, was also outstanding. An additional $1,123,237 was reported for compensated absences at year-end. Bonds payable Unearned revenue Compensated absences Total Bonds payable Unearned revenue Compensated absences Total Governmental Business -Type 2014 Activities Activities Total $ 121,633,943 1,045,740 $ 122,679,683 $ 49,775,833 243,490 77,497 $ 50,096,820 $ 171,409,776 243,490 1,123,237 $ 172,776,503 Governmental Business -Type 2013 Activities Activities Total $ 130,421,645 1,002,623 $ 131,424,268 $ 50,227,759 253,764 81,477 $ 50,563,000 $ 180,649,404 253,764 1,084,100 $ 181,987,268 The City's bonds are rated "AAA" by Standard and Poor's and FitchRatings. The City is permitted by Article XI, Section 5, of the State of Texas Constitution to levy taxes up to $2.50 per $100 of assessed valuation for general governmental services including the payment of principal and interest on general obligation long-term debt. The current ratio of tax -supported debt to the assessed value of all taxable property is 1.48 percent. Additional information on the City's long-term debt can be found in Note 6 on pages 44- 48 of this report. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES The State of Texas, by constitution, does not have a personal income tax and therefore the State operates primarily using sales and gasoline taxes. Local governments primarily rely on property taxes and fees to fund their government activities. While property taxes are important to the City, they represent 45.7% of total governmental revenue. Sales tax continues to grow as the second largest governmental resource representing 36.7% of total governmental revenue. The City monitors all of its resources and determines the need for program adjustment or fee increases accordingly. The FY 2015 Adopted Budget maintains the City's property tax rate at $0.462 per $100 net taxable valuation, which is unchanged from the FY 2014 rate. The City's property tax roll on net taxable value increased $331,666,203 or 5.9 percent from the 2013 certified roll to the 2014 certified roll. 13 As a result, the City is projected to collect more in FY 2015 than in FY 2014, even without a tax rate increase. The estimate of the FY 2015 tax roll is based on the certified roll as provided by the Tarrant Appraisal District (TAD) in July. The assumed collection rate is 100 percent. Requests for Information This financial report is designed to provide a general overview of the City of Southlake's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Office of the Chief Financial Officer, 1400 Main Street, 4`h Floor Finance Department, Southlake, Texas 76092. 14 BASIC FINANCIAL STATEMENTS GOVERNMENT -WIDE FINANCIAL STATEMENTS CITY OF SOUTHLAKE, TEXAS STATEMENT OF NET POSITION SEPTEMBER 30, 2014 ASSETS Cash and cash equivalents Investments Receivables (net of allowance for uncollectibles) Prepaid items Inventories Restricted assets Cash and cash equivalents Investments Receivables OPEB asset Capital assets: Non -depreciable Depreciable (net of depreciation) TOTAL ASSETS DEFERRED OUTFLOW OF RESOURCES Deferred charge for refunding LIABILITIES Accounts payable Accrued liabilities Accrued interest payable Unearned revenue Liabilities payable from restricted assets Accrued interest Customer meter deposits Non -current liabilities: Due within one year Due in more than one year TOTAL LIABILITIES NET POSITION Net investment in capital assets Restricted for debt service Restricted for municipal court Restricted for reinvestment zone Unrestricted TOTAL NET POSITION The Notes to Financial Statements are an integral part of this statement. EXHIBIT 1 PRIMARY GOVERNMENT GOVERNMENTAL BUSINESS -TYPE ACTIVITIES ACTIVITIES TOTAL $ 71,226,780 $ 5,647,256 $ 76,874,036 31,014,965 1,070,854 32,085,819 6,033,184 4,025,085 10,058,269 7,699 - 7,699 38,309 - 38,309 3,264,893 9,697,392 12,962,285 7,226,055 11,390,968 18,617,023 72,572 - 72,572 276,316 - 276,316 294,224,374 18,899,849 313,124,223 124,214,724 90,244,843 214,459,567 537,599,871 140,976,247 678,576,118 3,975,876 861,007 4,836,883 3,339,087 1,603,882 4,942,969 2,019,135 361,534 2,380,669 - 236,708 236,708 655,423 - 655,423 754,037 - 754,037 - 327,103 327,103 14,583,251 5,203,182 19,786,433 108,096,432 44,893,638 152,990,070 129,447,365 52,626,047 182,073,412 338,303,633 73,126,147 411,429,780 9,809,483 - 9,809,483 860,556 - 860,556 4,422,565 - 4,422,565 58,732,145 16,085,060 74,817,205 $ 412,128,382 $ 89,211,207 $ 501,339,589 15 m Q x W C � a1:r c O 'y O a1 O E a a a E a v �Z >O y,> y to ._ O U � i C Q Q a) x O C w m a` vU z a3 C N a1 •N E �= C > a1 U O Q to N C � O R � O Q u VL1 O Cl) LJ W cm C W x W W W (/) ~�0 1~0 U J Q W LL O W W >. W OWE UU)LL Iz'IT O) M O o 0 00 00 Iz ((C LLQ O) O) 000 m00 M't�O) O) N (O M O N O M O O M O V r- lf') N N (`0") Eft 'IT I' 1 �1 �1 000) O O O N N N Eft 69 r- (3) M 0 (()1 LO I LO (M 00 V N LO LO MONO M_ M (O O V V � U7 Eft M' m M M co ER 69 r- 00 M LO V V 6rT m co N 00 0 LO M M co L 00 O (O ' 00) LO M W ((O M(M°(M Lo LO N M M N N (`") 6-1 O- (3) V (M 1 Ml N N N O) (O O) 00 (M V V 00 LO O O0 O O OV r- V j 00 M M ,rN 00 O) LO O O (0 M00 00 00 V LO LO N LO N (3) r- 61) 1 1 611 to N a1 � > ? z W a °E c o w Lu .0 :> E 2 w E :E N 0 Q z t C U& E U a) (7 C C rn> °°° Y a a o n� O a O O a)� N O N O aI L= d E N O N w N w U) � D D D w C N F t o (D co -1Li d (D coOF O (O N�OM N O N M 00 O (O O O - L ' V (O (M (, 0 O) M T V O) (0 M O) r- r- O) O(NO 000 LO °)((00 W f0 M M m N N (0 N r- N O V LO 6-1 O) (0 N 00 I0) DN o (O 0 m v 00 N (O N 00 00 63 r-OO)- LO r- O) - (0'(O O) 00 N 0(0 NOOr- -O) M 00 (00(O- UQ O M V MM M�N00O V V O0 N0(0OVO(O 00 'IT (00) r-M - C M(0N V M O M N (O N O)M 6-1 a1 f6 a1 to O. >. U to � 7 a O- u! > OI O a1 c N i O Q � Q w D A a) O O C U N R a) N C _ rn ul N Z O E as > ° m a N a) N � �~ E C U p > O +6 > O rn p -O a) ' v d a! c a w E° n ; v a x w x> w N Z z o O v 0 N X O C x 0'� O a) Z F O F > 'O-' L O u! C w in in N N U O (6 -Fu iJ O O O magi°CL ���°°)a) o z a a ° x a co LL a 'M M C: ~ = w w �H �(7� U z U z (7 H FUND FINANCIAL STATEMENTS GOVERNMENTAL FUNDS FINANCIAL STATEMENTS CITY OF SOUTHLAKE, TEXAS BALANCE SHEET GOVERNMENTAL FUNDS SEPTEMBER 30, 2014 GENERAL OBLIGATION GENERAL CRIME DEBT CAPITAL CONTROL GENERAL SERVICE PROJECTS DISTRICT ASSETS Cash and cash equivalents $ 13,375,148 $ 3,264,893 $ 28,698,401 $ 3,789,848 Investments 11,892,980 7,226,055 11,980,708 174,386 Receivables, net of allowances for uncollectibles: Ad valorem taxes 189,399 62,124 - - Franchise taxes 505,534 - - Sales taxes 2,281,221 - - 1,047,090 Interest 39,617 10,448 44,998 16 Other 73,194 - 259,662 - Due from other funds 803 - Inventories 38,309 Prepaid items 7,699 - - - TOTAL ASSETS $ 28,403,904 $ 10,563,520 $ 40,983,769 $ 5,011,340 LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES LIABILITIES Accounts payable $ 1,142,015 $ $ 719,734 $ 2,428 Accrued liabilities 1,729,805 - 40,742 Due to other funds - - Unearned revenue 655,423 TOTAL LIABILITIES 3,527,243 719,734 43,170 DEFERRED INFLOWS OF RESOURCES Unavailable resources 313,248 85,633 TOTAL DEFERRED INFLOWS OF RESOURCES 313,248 85,633 FUND BALANCES Nonspendable for: Inventories 38,309 - Prepaid expenditures 7,699 - Restricted for: Debt service - 10,477,887 Municipal court expenditures - Reinvestment zone expenditures - Capital projects - 40,264,035 - Committed for: Police expenditures 28,647 - 4,968,170 Parks and recreation - - Oil and gas expenditures Storm water expenditures Library - Assigned for: Teen Court expenditures 18,832 Senior Center expenditures 10,623 Recycling 34,609 Reforestation expenditures 44,098 Strategic initiatives 7,980,605 Unassigned 16,399,991 - - - TOTAL FUND BALANCES 24,563,413 10,477,887 40,264,035 4,968,170 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES $ 28,403,904 $ 10,563,520 $ 40,983,769 $ 5,011,340 The Notes to Financial Statements are an integral part of this statement. 17 EXHIBIT 3 SOUTHLAKE PARKS CRIME DEVELOPMENT CONTROL TAX CORPORATION DISTRICT INCREMENT NON -MAJOR TOTAL CAPITAL CAPITAL FINANCING GOVERNMENTAL GOVERNMENTAL PROJECTS PROJECTS DISTRICT FUNDS FUNDS $ 6,060,963 $ 1,016,124 $ 4,117,158 $ 13,240,867 $ 73,563,402 2,663,206 111,248 305,378 1,568,829 35,922,790 - - - - 251,523 - 505,534 - 1,162,652 4,490,963 11,791 11 29 4,806 111,716 - 303,487 636,343 - 803 38,309 - - - - 7,699 $ 8,735,960 $ 1,127,383 $ 4,422,565 $ 16,280,641 $ 115,529,082 $ 1,001,917 $ - $ - $ 472,993 $ 3,339,087 - 248,588 2,019,135 803 803 - 655,423 1,001,917 722,384 6,014,448 - - 398,881 398,881 38,309 - 7,699 1,672,297 12,150,184 - 860,556 860,556 - - 4,422,565 - 4,422,565 7,734,043 1,127,383 - 3,928,379 53,053,840 - - 564,826 5,561,643 8,020,248 8,020,248 53,160 53,160 450,824 450,824 7,967 7,967 - 18,832 10,623 34,609 44,098 7,980,605 - - - - 16,399,991 7,734,043 1,127,383 4,422,565 15,558,257 109,115,753 $ 8,735,960 $ 1,127,383 $ 4,422,565 $ 16,280,641 $ 115,529,082 18 CITY OF SOUTHLAKE, TEXAS EXHIBIT 4 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION AS OF SEPTEMBER 30, 2014 Total fund balances - governmental funds $ 109,115,753 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not current financial resources and, therefore, are not reported in the governmental funds balance sheet (Less $1,864,321 in assets allocated to governmental activities from the internal service fund). 416,574,777 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. (754,037) Internal service funds are used by management to charge the cost of certain activities, such as fleet management, to individual funds. This amount represents the assets less the liabilities of the internal service fund allocated to governmental activities. 5,220,499 OPEB asset has not been included in the governmental fund financial statements, as these assets do not represent current financial resources. 276,316 Revenues earned but not available within sixty days of the year end are not recognized as revenue on the fund financial statements. 398,881 For debt refundings, the difference between the acquisition price and net carrying amount of the debt has been deferred and amortized in the government -wide financial statements. 3,975,876 Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the fund financial statements. (122,679,683) Net position of governmental activities $ 412,128,382 The Notes to Financial Statements are an integral part of this statement. 19 CITY OF SOUTHLAKE, TEXAS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2014 GENERAL OBLIGATION GENERAL CRIME DEBT CAPITAL CONTROL GENERAL SERVICE PROJECTS DISTRICT REVENUES Ad valorem taxes, penalties and interest $ 19,193,801 $ 6,732,167 $ $ Franchise taxes 2,841,025 - Municipal sales and mixed beverage taxes 12,585,569 6,516,603 Licenses, permits and fees 2,411,851 - Charges for services 1,778,003 Fines and forfeitures 1,330,324 Grants 213,630 Capital recovery fees - - 474,172 Interest earned 193,537 103,366 117,064 (1,258) Contributions - - 71,974 Miscellaneous 358,757 - 26,175 - TOTAL REVENUES 40,906,497 6,835,533 689,385 6,515,345 EXPENDITURES Current General government City secretary/mayor 381,127 City manager's office 810,604 Human resources 622,991 Support services 2,857,271 Economic development 240,014 Finance 1,120,153 Municipal court 586,020 Teen court 130,282 Information technology 1,874,521 Public safety - Police services 5,875,416 618,921 Fire services 7,550,397 - Public safety support 1,213,567 Building inspection 909,420 - Public works Public works administration 1,738,788 1,548,583 Streets and drainage 1,671,514 494,466 Planning 850,398 - Cultural and recreation Community services 874,931 Parks and recreation 4,256,617 Library services 673,188 Intergovernmental - - Capital outlay - 6,052,429 Debt service: Principal retirement 11,235,280 - Interest and fiscal charges - 3,642,965 72,806 TOTAL EXPENDITURES 34,237,219 14,878,245 8,168,284 618,921 Excess (deficiency) of revenues over (under) expenditures 6,669,278 (8,042,712) (7,478,899) 5,896,424 OTHER FINANCING SOURCES (USES) Issuance of long-term debt - - 4,380,000 - Proceeds from issuance of refunding bonds 7,400,000 - Payment to refund bond escrow agent (7,887,452) Premium on issuance of long-term debt 675,875 Proceeds from the sale of property - - - Transfersfromotherfunds 1,601,613 7,501,772 4,620,000 Transfers to other funds (4,490,000) - - (5,245,275) TOTAL OTHER FINANCING SOURCES (USES) (2,888,387) 7,690,195 9,000,000 (5,245,275) NET CHANGE IN FUND BALANCES 3,780,891 (352,517) 1,521,101 651,149 FUND BALANCES, BEGINNING OF YEAR 20,782,522 10,830,404 38,742,934 4,317,021 FUND BALANCES, END OF YEAR $ 24,563,413 $ 10.477,887 $ 40.264, 335 $ 4,968,1 00 The Notes to Financial Statements are an integral part of this statement. 20 EXHIBIT 5 SOUTHLAKE PARKS CRIME DEVELOPMENT CONTROL TAX CORPORATION DISTRICT INCREMENT NON -MAJOR TOTAL CAPITAL CAPITAL FINANCING GOVERNMENTAL GOVERNMENTAL PROJECTS PROJECTS DISTRICT FUNDS FUNDS $ $ $ 7,248,842 $ $ 33,174,810 - 2,841,025 7,521,489 26,623,661 1,514,105 3,925,956 - 1,778,003 1,043,897 2,374,221 522 214,152 - 474,172 29,038 (803) (2,204) 19,080 457,820 - - 58,590 130,564 167,612 552,544 29,038 (803) 7,246,638 10,325,295 72,546,928 381,127 810,604 622,991 2,857,271 240,014 1,120,153 586,020 - 130,282 6,267 1,880,788 756,564 7,250,901 - 7,550,397 1,213,567 909,420 3,287,371 2,165,980 850,398 - 874,931 1,400,711 5,657,328 - 22,181 695,369 - - 3,834,118 - 3,834,118 6,359,487 1,767,345 - 444,701 14,623,962 695,000 11,930,280 1,266,796 4,982,567 6,359,487 1,767,345 3,834,118 4,592,220 74,455,839 (6,330,449) (1,768,148) 3,412,520 5,733,075 (1,908,911) - - 4,380,000 16,000,000 23,400,000 (17,659,670) (25,547,122) 625,501 1,301,376 - - 1,521 1,521 2,650,000 1,000,000 3,125,598 20,498,983 (3,288,465) (7,360,127) (20,383,867) 2,650,000 1,000,000 (3,288,465) (5,267,177) 3,650,891 (3,680,449) (768,148) 124,055 465,898 1,741,980 11,414,492 1,895,531 4,298,510 15,092,359 107,373,773 $ 7,734,043 $ 1.127. 883 $ 4.422. 665 $ 15,558,257 $ 109,115,753 21 CITY OF SOUTHLAKE, TEXAS EXHIBIT 6 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2014 Net change in fund balances - total governmental funds $ 1,741,980 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount of capital assets recorded in the current period. (Does not include $717,766 allocated from internal service fund). 13,437,783 Depreciation expense on capital assets is reported in the statement of activities but does not require the use of current financial resources. Therefore, depreciation expense is not reported as expenditures in the governmental funds. (Does not include $507,028 allocated from internal service fund). (5,752,901) The issuance of long-term debt (e.g. bonds) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds report the effect of premiums, discounts, and similar items when debt is first issued, whereas the amounts are deferred and amortized in the statement of activities. This amount is the net effect of the following items: o Bond proceeds (27,780,000) o Payment to refunded bond escrow 25,547,122 o Bond premiums (1,301,376) o Deferred loss on refunding (net) (7,938) o Repayments 11,930,280 o Amortization of premiums 859,958 o Amortization of deferred loss on refunding (303,768) 8,944,278 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. (43,117) Changes in the other post employment benefit assets and liabilities are not reported at the fund level; however they are reported at the government -wide level. 88,408 Current year changes in accrued interest payable do not require the use of current financial resources; and therefore, are not reported as expenditures in governmental funds. 120,868 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. 417,545 Governmental funds do not recognize assets contributed by developers. However, in the statement of activities the fair market value of those assets are recognized as revenue, then allocated over their estimated useful lives and reported as depreciation expense. 4,436,346 Loss on disposal of capital assets results in a decrease in net position, but the net effect is not reported in governmental funds. (10,994) 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. (75,855) Change in net position of governmental activities $ 23,304,341 The Notes to Financial Statements are an integral part of this statement. 22 PROPRIETARY FUNDS FINANCIAL STATEMENTS CITY OF SOUTHLAKE, TEXAS EXHIBIT 7 STATEMENT OF NET POSITION PROPRIETARY FUNDS SEPTEMBER 30, 2014 BUSINESS -TYPE GOVERNMENTAL ACTIVITIES ACTIVITIES WATER AND SEWER VEHICLE REPLACEMENT ENTERPRISE INTERNAL SERVICE FUND FUND ASSETS CURRENT ASSETS Cash and cash equivalents $ 5,647,256 $ 928,271 Investments 1,070,854 2,318,230 Receivables, net of allowance for uncollectibles: Trade accounts 2,094,570 - Unbilled trade accounts 1,905,146 - Interest 25,369 109,677 Restricted assets Cash restricted for capital 9,697,392 Investments restricted for customer meter deposits 327,103 Investments restricted for capital 11,063,865 Total current assets 31,831,555 3,356,178 NON -CURRENT ASSETS Capital assets Land and improvements 16,789,625 - Buildings and improvements 935,501 Distribution system 133,654,657 Equipment 2,415,927 - Vehicles 572,041 4,617,436 Capacity rights 9,190,988 - Construction in progress 2,110,224 Total capital assets 165,668,963 4,617,436 Less: accumulated depreciation (56,524,271) (2,753,115) Capital assets, net of accumulated depreciation 109,144,692 1,864,321 Total non -current assets 109,144,692 1,864,321 TOTAL ASSETS $ 140,9 66,247 $ 5,220,499 DEFERRED OUTFLOW OF RESOURCES Deferred charge for refunding 861,007 LIABILITIES AND NET POSITION CURRENT LIABILITIES Accounts payable $ 1,603,882 $ Accrued liabilities 361,534 Accrued interest 236,708 Current portion of general obligation debt 4,770,685 Current portion of contract obligation debt 350,000 Current portion of compensated absences 77,497 Current portion of unearned revenue 5,000 Payable from restricted assets: Customer meter deposits 327,103 Total current liabilities 7,732,409 NON -CURRENT LIABILITIES Unearned revenue 238,490 Contract revenue obligations 750,000 General obligation debt 43,905,148 Total non -current liabilities 44,893,638 TOTAL LIABILITIES 52,626,047 NET POSITION Net investment in capital assets 73,126,147 1,864,321 Unrestricted 16,085,060 3,356,178 TOTAL NET POSITION $ 89.211.207 $ 5,220,499 The Notes to Financial Statements are an integral part of this statement. 23 CITY OF SOUTHLAKE, TEXAS EXHIBIT 8 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2014 OPERATING REVENUES Charges for sales and services: Water, sewer and garbage Service charges Miscellaneous Total operating revenues OPERATING EXPENSES: Personnel services Contractual services Lease payments Supplies Utilities Administrative Maintenance Professional benefits Depreciation and amortization Total operating expenses OPERATING INCOME (LOSS) NON -OPERATING REVENUES (EXPENSES) Gain (loss) on sale of capital assets Interest income Interest 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 Cumulative effect of change in accounting principle NET POSITION, END OF YEAR The Notes to Financial Statements are an integral part of this statement. BUSINESS -TYPE GOVERNMENTAL ACTIVITIES ACTIVITIES WATER AND SEWER VEHICLE REPLACEMENT ENTERPRISE INTERNAL SERVICE FUND FUND $ 23,419,974 171,464 6,963 23,598,401 2,307,754 1,349,077 - 186 19,000 113,489 - 9,005,661 - 296,754 - 3,261,120 - 21,105 - 4,753,156 485,147 21,108, 302 504,147 2,490,099 (504,147) (55) 99,109 101,469 - (3,922,069) 22,583 (3,820,655) 121,692 (1,330,556) (382,455) 2,508,221 1,002,715 - - 800,000 (915,116) 2,595,820 800,000 1,265,264 417,545 88, 642, 882 4,802,954 (696,939) $ 89,211,207 $ 5, 220,499 24 CITY OF SOUTHLAKE, TEXAS EXHIBIT 9 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2014 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers and users Cash payments to suppliers Cash payments to employees Net cash provided by (used in) operating activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital expenses Principal payments on bonds Proceeds from issuance of bonds Interest paid Proceeds from sale of capital assets Contributions - impact fees Net cash used in capital and related financing activities CASH FLOWS FROM NON -CAPITAL FINANCING ACTIVITIES Transfers from other funds Transfers to other funds Net cash provided by (used in) non -capital financing activities CASH FLOWS FROM INVESTING ACTIVITIES Net purchases of investments Interest received Net cash provided by investing activities NET CHANGE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR CASH AND CASH EQUIVALENTS, END OF YEAR RECONCILIATION TO STATEMENT OF NET POSITION Cash and cash equivalents Cash restricted for capital Total cash and cash equivalents RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization Decrease (increase) in assets Receivables Increase (decrease) in liabilities Payables and accruals Customer deposits Net cash provided by (used in) operating activities BUSINESS -TYPE GOVERNMENTAL ACTIVITIES ACTIVITIES WATER AND SEWER VEHICLE REPLACEMENT ENTERPRISE INTERNAL SERVICE FUND FUND $ 23,412,319 $ (13,817,955) (19,000) (2,311,734) 7,282,630 (19,000) (2,550,603) (695,885) (19,704,505) 19,252,579 - (3,935,180) 22,583 - 99,109 1,002,715 - (5,934,994) (574,193) 800,000 (915,116) - (915,116) 800,000 4,839,872 111,930 103,876 - 4,943,748 111,930 5,376,268 318,737 9,968,380 609,534 $ 15,344,648 $ 928,271 $ 5,647,256 $ 928,271 9,697,392 - $ 15,344,648 $ 928,271 $ 2,490,099 $ (504,147) 4,753,156 485,147 (244,053) - 215,116 68,312 $ 7,282,630 $ (19,000) NON -CASH CAPITAL AND RELATED FINANCING: Contributions of capital assets from developers $ 2,508,221 $ The Notes to Financial Statements are an integral part of this statement. 25 FIDUCIARY FUND FINANCIAL STATEMENTS CITY OF SOUTHLAKE, TEXAS CASH ESCROW AGENCY FUND STATEMENT OF FIDUCIARY NET POSITION SEPTEMBER 30, 2014 ASSETS Cash and cash equivalents Investments Accrued interest receivable Ito] Iri1 WeF:9NkK LIABILITIES Due to builders TOTAL LIABILITIES The Notes to Financial Statements are an integral part of this statement. EXHIBIT 10 Agency Fund Cash Escrow $ 57,380 10,687 3 $ 68,070 $ 68,070 $ 68,070 26 NOTES TO BASIC FINANCIAL STATEMENTS CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Statement The City of Southlake (the City) operates under a Home Rule Council — Manager form of government. All powers of the City are vested in an elected council, which enables local legislation, adopts budgets, determines policies and appoints the City Manager. The City Manager is responsible for executing the laws and administering the government of the City. The accounting and reporting policies of the City relating to the funds included in the accompanying basic financial statements conform to accounting principles generally accepted in the United States of America applicable to state and local governments. Generally accepted accounting principles for local governments include those principles prescribed by the Governmental Accounting Standards Board (GASB). The more significant accounting policies of the City are described below. Financial Reporting Entity The City is governed by an elected mayor and a six -member council and has the authority to make decisions, appoint administrators and managers, and significantly influence operations. It also has the primary accountability for fiscal matters. Therefore, the City is a financial reporting entity as defined by the Governmental Accounting Standards Board (GASB) in its Statement No. 14, "The Financial Reporting Entity", as amended by GASB Statement No. 39 "Determining Whether Certain Organizations Are Component Units" and GASB Statement No. 61, "The Financial Reporting Entity: Omnibus —an amendment of GASB Statements No. 14 and No. 34." Under GASB 14 component units are organizations for which the City is financially accountable and all other organizations for which the nature and significance of their relationship with the City are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. Financial accountability exists if the City appoints a voting majority of an organization's governing board and is either able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the City. The City may be financially accountable for governmental organizations with a separately elected governing board, a governing board appointed by another government, or a jointly appointed board that is fiscally dependent on the City. The financial statements of the component units may be discretely presented in a separate column from the primary government or blended with the financial statements of the primary government. GASB 39 added clarification to GASB 14 by including entities which meet all three of the following requirements: 1. The economic resources received or held by the separate organization are entirely for the direct benefit of the primary government, its component units, or its constituents. 2. The primary government, or its component units, is entitled to, or has the ability to otherwise access, a majority of the economic resources received or held by the separate organization. 3. The economic resources received or held by an individual organization that the specific primary government, or its component units, is entitled to, or has the ability to otherwise access, are significant to that primary government. 27 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES —CONTINUED Financial Reporting Entity — Continued Based on these criteria, the financial information of the following entities has been blended within the reporting entity. Individual financial statements are not available for these component units. Southlake Parks Development Corporation (the Corporation) - The Corporation is a nonprofit industrial development corporation formed in January 1994 under the Development Corporation Act of 1979. The Corporation is organized exclusively to act on behalf of the City for the financing, development and operation of parks and recreation facilities. The affairs of the Corporation are managed by a seven member board of directors, of which four are members of the City Council. The annual corporate budget and issuance of debt must be approved by the City Council. Since the Board of the Corporation is substantively the same as the City Council, the Corporation has been reported as a blended component unit. Southlake Tax Increment Financing District (the TIF) - The TIF was formed to finance and make public improvements, under the authority of the Tax Increment Financing Act. The TIF is governed by a twelve member board of directors consisting of the eight members appointed by the City Council, and one member each appointed by Carroll Independent School District, Tarrant County, Tarrant County Junior College District, and the Tarrant County Hospital District Board of Directors. Since the Board of the TIF is substantively the same as the City Council, the TIF has been reported as a blended component unit. Southlake Crime Control and Prevention District (the District) — The District was formed under Chapter 363 of the Texas Local Government Code, the Crime Control and Prevention Act. The District is organized exclusively to act on behalf of the City for the financing, development and crime control throughout the City. The District is governed by a seven member board appointed by the City Council. The annual budget and issuance of debt must be approved by the City Council. Since the District provides services entirely to the City, it has been reported as a blended component unit. Basis of Presentation The government -wide financial statements (the statement of net position and the statement of activities) report information on all of the activities of the City, except for fiduciary funds. The effect of interfund activity, within the governmental and business -type activities columns, has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given program are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific program. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given program and 2) operating or capital grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Taxes and other items not properly included among program revenues are reported instead as general revenues. 28 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES —CONTINUED Fund Financial Statements: The City segregates transactions related to certain functions or activities in separate funds in order to aid financial management and to demonstrate legal compliance. Separate statements are presented for governmental funds and proprietary funds. These statements present each major fund as a separate column in the fund financial statements; all non -major funds are aggregated and presented in a single column. Governmental funds are those funds through which most governmental functions typically are financed. The measurement focus of governmental funds is on the sources, uses and balances of current financial resources. Governmental Funds The City reports the following major governmental funds: General Fund - The General Fund is the general operating fund of the City. It is used to account for all financial resources not accounted for in other funds. All general tax revenues and other receipts that are not restricted by law or contractual agreement to some other fund are accounted for in this fund. General operating expenditures, fixed charges and capital improvement costs that are not paid through other funds are paid from the General Fund. General Obligation Debt Service Fund - The General Obligation Debt Service Fund is used to account for the accumulation of financial resources for the payment of principal, interest and related costs on long-term debt paid primarily from taxes levied by the City. The fund balance of the General Obligation Debt Service Fund is restricted to signify the amounts that are restricted exclusively for debt service expenditures. General Capital Projects Fund - The General Capital Projects Fund is used to account for resources used for the acquisition and/or construction of capital facilities by the City, except those financed by proprietary funds and not accounted for by another capital projects fund. Crime Control District - The Crime Control District Special Revenue Fund was established to account for the operations of the Crime Control District, which was established for the financing and development of crime control within the City. The Crime Control Fund is funded primarily through the receipt of municipal sales taxes. Southlake Parks Development Corporation Capital Projects Fund - The Southlake Parks Development Corporation ("SPDC") Capital Projects Fund is utilized to fund the acquisition and construction of park recreational facilities as approved by the SPDC board of directors. The fund has been financed through the issuance of general obligation debt. 29 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES —CONTINUED Basis of Presentation — Continued Crime Control District Capital Projects Fund - The Crime Control District Capital Projects Fund is utilized to account for the acquisition and construction of capital assets as approved by the District's board of directors. The fund has been funded primarily through the issuance of general obligation debt. Tax Increment Financing District - The Tax Increment Financing ("TIF") District Fund was established to account for the general operations of the TIF, which was formed to finance and make public improvements. The TIF is funded primarily through the assessment of ad valorem taxes. In addition, the City reports the following non -major governmental funds: Special Revenue Funds — The City's Special Revenue Funds are used to account for revenue sources that are committed or restricted to expenditures for specified purposes, as follows: Police Fund - The Police Fund was established to account for the resources required to be utilized by the police department. Parks and Recreation Fund - The Parks and Recreation Fund was established to account for resources restricted for use by the parks and recreation department. Parks Dedication Fund - The Parks Dedication Fund was established to account for resources restricted for use by the parks department. The primary source of revenue for the Parks Dedication Fund is user charges for the use of City parks. Southlake Parks Development Corporation - The Southlake Parks Development Corporation ("SPDC") Fund was established to account for the general operations of the non-profit corporation established to finance, develop and operate park and recreational facilities. The SPDC is funded primarily through the receipt of municipal sales taxes. Hotel Occupancy - The Hotel Occupancy Tax Fund accounts for all revenues and expenditures relating to the hotel occupancy tax received by the City. Storm Water Utility - The Storm Water Utility Fund is used to account for fees collected for the purpose of improving, upgrading and maintaining the City's drainage system. Court Security Fund - The Court Security Fund is used to account for Municipal Court fees assessed to provide for court security. 30 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES —CONTINUED Basis of Presentation — Continued Court Technology Fund - The Court Technology Fund is used to account for Municipal Court fees assessed to provide for court technology. Library Fund - The Library Fund was established to account for resources donated for use by City library services. Red Light Camera Fund - The Red Light Camera Fund is used to account for fees assessed for red light violations captured through the City's camera monitoring system. Storm Water Maintenance Fund - The Storm Water Maintenance Fund is used to account for the maintenance on storm water infrastructure. Oil and Gas Fund - The Oil and Gas Fund is used to account for permit fees and the related expenditures for oil and gas drilling. Commercial Vehicle Enforcement Fund - The Commercial Vehicle Enforcement Fund is used to account for the fees assessed for commercial vehicle violations. Southlake Parks Development Corporation Debt Service Fund - The Southlake Parks Development Corporation Debt Service Fund is utilized to account for the accumulation of financial resources, primarily transfers from other funds, for the payment of long- term principal and interest costs associated with the financing of improvements of the Southlake Parks Development Corporation. Capital Projects Funds — The City's Capital Projects Funds are utilized to account for financial resources to be used for the acquisition or construction of specified capital improvements (other than those financed by proprietary funds). Such resources are derived from proceeds of general obligation debt, other sources designated for improvements and interest earned on such proceeds. The City's non -major Capital Projects Fund is as follows: Tax Increment Financing District Capital Projects Fund - The Tax Increment Financing District Capital Projects Fund is utilized to fund the acquisition and construction of public improvements as approved by the TIF board of directors. The fund has been financed through the issuance of general obligation debt. 31 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES —CONTINUED Basis of Presentation — Continued Proprietary Funds - Proprietary Funds are accounted for using the economic resources measurement focus and the accrual basis of accounting. The accounting objectives are determinations of net income, financial position and cash flow. All assets and liabilities are included in the Statement of Net Position. The City reports the following major proprietary fund Water and Sewer Enterprise Fund - The Water and Sewer Enterprise Fund is used to account for the acquisition, operation and maintenance of a municipal water and sewer utility, supported primarily by user charges to the public. Additionally, the City reports an Internal Service Fund which is used to account for vehicle replacement provided to departments of the City. Proprietary funds distinguish operating revenues and expenses from non -operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. Operating expenses for the proprietary funds include the cost of personnel and contractual services, supplies and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non -operating revenues and expenses. The City also presents one agency fund, the Cash Escrow Agency Fund. This fund is custodial in nature and does not involve measurement of results of operations. Financial statements for the Cash Escrow Agency Fund are prepared on the accrual basis of accounting. Measurement Focus and Basis of Accounting Measurement focus refers to what is being measured; basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurement made, regardless of the measurement focus applied. The government -wide statements and fund financial statements for proprietary and fiduciary funds are reported using the accrual basis of accounting. The government -wide and proprietary fund financial statements are prepared using the economic resources measurement focus; however, the fiduciary funds have no measurement focus. The economic resources measurement focus means all assets and liabilities (whether current or non -current) are included in the statement of net position and the operating statements present increases (revenues) and decreases (expenses) in net total position. Under the accrual basis of accounting, revenues are recognized when earned, including unbilled water and sewer services which are accrued. Expenses are recognized at the time the liability is incurred. 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. 32 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES —CONTINUED Measurement Focus and Basis of Accounting — Continued "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The City considers all revenues as available if they are collected within 60 days after year end. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on long-term debt which is recognized when due, and certain compensated absences and claims and judgments which are recognized when the obligations are expected to be liquidated with expendable available financial resources. Property taxes, sales taxes, franchise taxes and interest are susceptible to accrual. Other receipts become measurable and available when cash is received by the City and are recognized as revenue at that time. Cash, Cash Equivalents and Investments In accordance with GASB Statement No. 31, the City's general policy is to report money market investments and short-term participating interest -earning investment contracts at amortized cost and to report nonparticipating interest -earning investment contracts using a cost -based measure. However, if the fair value of an investment is significantly affected by the impairment of the credit standing of the issuer or by other factors, it is reported at fair value. All other investments are reported at fair value unless a legal contract exists which guarantees a higher value. The term "short-term" refers to investments, which have a remaining term of one year or less at the time of purchase. The term "nonparticipating" means that the investment's value does not vary with market interest rate changes. The City's cash and cash equivalents are defined as cash on hand, demand deposits, and short- term investments with original maturities of three months or less from the date of acquisition for classification in the statement of cash flows for proprietary fund types. The City pools idle cash from all funds for the purpose of increasing income through coordinated investment activities. As of September 30, 2014, the investments held by the City had a remaining maturity of greater than one year from purchase and accordingly are carried at fair value. Interest earnings are allocated to the respective funds based upon each fund's relative balance in the pool. Cash and cash equivalents and investments reported as restricted are restricted for the acquisition and construction of capital assets, and for utility deposits held by the City. Property Taxes The City's property tax is levied each October 1 on the assessed value listed as of the prior January 1 for all real and certain personal property located within the City. Appraised values are established by the Central Appraisal District of Tarrant County at 100% of estimated market value and certified by the Appraisal Review Board. The assessed value upon which the 2014 levy was based on was $5,629,996,800. 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, 2014 was $0.462 per $100 of assessed valuation. 33 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES —CONTINUED Property Taxes — Continued In Texas, countywide central appraisal districts are required to assess all property within the appraisal district on the basis of 100% of its appraised value and are prohibited from applying any assessment ratios. The value of property within the appraisal district must be reviewed every five years; however, the City may, at its own expense, require annual reviews of appraised values. The City may challenge appraised values established by the appraisal district through various appeals and, if necessary, legal action. Under this legislation, the City continues to set tax rates on City property. However, if the effective tax rate, excluding tax rates for bonds and other contractual obligations, adjusted for new improvements, exceeds the rate for the previous year by more than 8%, qualified voters of the City may petition for an election to determine whether to limit the tax rate to no more than 8% above the tax rate of the previous year. Interfund Receivables and Payables Activities between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as "due to/from other funds." Any residual balances outstanding between the governmental activities and business -type activities are reported in the government -wide financial statements as "internal balances". Transactions Between Funds Interfund services provided and used are accounted for as revenues, expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from it that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as a reduction of expenditures/expenses in the fund reimbursed. All other interfund transactions, except interfund services provided and used and reimbursements, are recorded as transfers. Restricted Resources When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted first, then unrestricted resources as required. Inventories Inventories are stated at cost (first -in, first -out) and are determined annually by taking a physical inventory. Inventory in the general fund consists of gasoline and supplies held for consumption and is reported on the consumption method. Under the consumption method the cost is recorded as an expenditure at the time individual inventory items are utilized. Prepaid Items Certain payments reflect costs applicable to future periods and are recorded as prepaid items in the government -wide and fund financial statements. These items consist principally of postage and building deposits and are reported on the consumption method. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets, are reported in the applicable governmental or business -type activities columns in the government -wide financial statements and in the fund financial statements for proprietary funds. All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Donated assets are valued at fair market value on the date donated. 34 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED Capital Assets — Continued The costs of normal repairs and maintenance that do not add to the value of the asset or materially extend the asset lives are not capitalized. Renewals and betterments are capitalized. Interest has not been capitalized during the construction period on property, plant and equipment. Assets capitalized have an original cost of $5,000 or more and over one year of useful life. Depreciation has been calculated on each class of depreciable property using the straight-line method. Estimated useful lives are as follows: Buildings 20 - 50 Years Water and Sewer distribution system 35 - 50 Years Water hydrants 10-15 Years Water tanks 35 Years Computer equipment 5 Years Heavy equipment and vehicles 10 - 20 Years Light vehicles 2 - 10 Years Vehicles 5 Years Improvements 25 Years Infrastructure 10 Years The street network is not depreciated. The City has elected to use the modified approach in accounting for its street infrastructure. The modified approach allows governments to report as expenses in lieu of depreciation, infrastructure expenditures which maintain the asset but do not add to or improve the asset. Additions and improvements to the street network are capitalized. The City uses an asset management system to rate street condition and quantify the results of maintenance efforts. The City has established the Vehicle Replacement Internal Service Fund to account for all City - owned vehicles. Charges for use of the vehicle in the form of lease payments are made by the City departments to the Vehicle Replacement Internal Service Fund to provide for future acquisitions and replacement of City -owned vehicles. Vacation and Sick Leave (Compensated Absences) City employees earn vacation and sick leave, which may either be taken or accumulated, up to certain amounts, until paid upon retirement or termination. Upon termination or retirement, an employee is reimbursed up to a maximum number of hours of vacation pay and sick leave based upon the years of service. All vacation and sick pay is accrued in the government -wide and proprietary fund financial statements. A liability for these amounts is reported in the governmental funds only if they have matured. Long -Term Obligations In the government -wide financial statements and proprietary fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business -type activities, or proprietary fund statement of net position. Bond premiums and discounts, as well as any deferred losses on the refunding of bonds, are amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. 35 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES —CONTINUED Long -Term Obligations — Continued 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. Fund Equity The City has adopted the provisions of GASB Statement No. 54, Fund Balance Reporting and Government Fund Type Definitions. The objective of the statement is to enhance the usefulness of fund balance information by providing clearer fund balance classifications that can be more consistently applied and by clarifying the existing government fund type definitions. The statement establishes fund balance classifications that comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds. Fund balance classifications, under GASB 54 are Nonspendable, Restricted, Committed, Assigned, and Unassigned. These classifications reflect not only the nature of funds, but also provide clarity to the level of restriction placed upon fund balance. Fund balance can have different levels of constraint, such as external versus internal compliance requirements. The General Fund should be the only fund that reports a positive unassigned balance. In all other funds, unassigned is limited to negative residual fund balance. In accordance with GASB Statement No. 54, the City classifies governmental fund balances as follows: 1. Nonspendable fund balance — includes amounts that are not in a spendable form or are required to be maintained intact (example — inventory or permanent funds). 2. Restricted fund balance — includes amounts that can be spent only for the specific purposes stipulated by external resource providers either constitutionally or through enabling legislation (example — court technology and court security funds). 3. Committed fund balance — includes amounts that can only be used for specific purposes determined by City Council (example — reforestation and park dedication). 4. Assigned fund balance — comprises amounts intended to be used by the City for specific purposes. Intent can be expressed by the City Council or their designee (Chief Financial Officer). In governmental funds other than the general fund, assigned fund balance represents the amount that is not restricted or committed. This indicates that resources in other governmental funds are, at a minimum, intended to be used for the purpose of that fund (example — Facility Maintenance and Strategic Initiative Fund). 5. Unassigned fund balance — is the residual classification of the general fund and includes all amounts not contained in other classifications. In accordance with GASB 54, the City has also adopted the following policies: Committed Fund Balance - The City Council is the City's highest level of decision -making authority and approval by resolution is required to establish, modify, or rescind a fund balance commitment. The resolution must either be approved or rescinded, as applicable, prior to the last day of the fiscal year. The amount subject to the constraint may be determined in the subsequent period. Assigned Fund Balance - The City Council has authorized the City's Chief Financial Officer as the official authorized to assign fund balance to a specific purpose as approved by this fund balance policy. 36 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES —CONTINUED Fund Equity — Continued Unassigned Fund Balance_- It is the goal of the City to maintain a fund balance in the General Fund, equal to a minimum of 15% of General Fund budgeted operating expenditures, with the optimum goal of 25%. The City considers a balance of less than 15% to be cause for concern, barring unusual or deliberate circumstances. It is the goal of the City to maintain 60 days of working capital in the Enterprise Fund, with the optimum goal of 90 days of working capital. The City shall also maintain all Reserve funds for all statutorily required reserve funds to guarantee debt service. Order of Expenditure of Funds - When multiple categories of fund balance are available for expenditures, the City will start with the most restricted category and spend those funds first before moving to the next category with available funds (restricted, committed, assigned and unassigned). During fiscal year 2006, the City began designating funds for strategic initiatives. The source of these funds is reserves in excess of 25% of general fund expenditures. The funds will be used for one-time high impact projects involving infrastructure maintenance, community enhancement and capital acquisition; and are reported as assigned fund balance in the general fund. Net Position Net position represents the difference between assets and liabilities. Net investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowing used for the acquisition, construction or improvements of those assets, and adding back unspent proceeds. Net position is reported as restricted when there are limitations imposed on their use either through the enabling legislations adopted by the City or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses/expenditures during the reporting period. Actual results could differ from those estimates. Subsequent Events The City has evaluated all events or transactions that occurred after September 30, 2014 up through March 11, 2015, the date the financial statements were available to be issued. During this period, there were no subsequent events requiring disclosure. 37 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 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, 2014 the carrying amount of the City's deposits was $15,368,599 and the bank balance was $16,321,508. As of September 30, 2014, none of the City's deposits were uncollateralized. Legal and contractual provisions governing deposits and investments: The Public Funds Investment Act (Government Code Chapter 2256) contains specific provisions in the areas of investment practices, management reports and establishment of appropriate policies. Among other things, it requires the City to adopt, implement, and publicize an investment policy. That policy must address the following areas: (1) safety of principal and liquidity, (2) portfolio diversification, (3) allowable investments, (4) acceptable risk levels, (5) expected rates of return, (6) maximum allowable stated maturity of portfolio investments, (7) maximum average dollar -weighted maturity allowed based on the stated maturity date for the portfolio, (8) investment staff quality and capabilities, (9) and bid solicitation preferences for certificates of deposit. Statutes and the City's investment policy authorized the City to invest in the following investments as summarized in the table below: Maximum Maximum Authorized Maximum Percentage Investment Investment Type Maturity of Portfolio In One Issuer U.S. Government Securities 5 years 100% None Commercial Paper 270 days 20% None Eligible Investment Pools 365 days 100% None The Act also requires the City to have independent auditors perform test procedures related to investment practices as provided by the Act. The City is in substantial compliance with the requirements of the Act and with local policies. Cash and investments as of September 30, 2014 are classified in the accompanying financial statements as follows: Primary Government Cash and cash equivalents $ 76,874,036 Investments 32,085,819 Restricted cash and cash equivalents 12,962,285 Restricted investments 18,617,023 Total primary government 140,539,163 Fiduciary Funds: Cash 57,380 Investments 10,687 Total fiduciary funds 68,067 Total cash and investments $ 140,607,230 38 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 NOTE 2. CASH AND INVESTMENTS — CONTINUED Cash and investments as of September 30, 2014 consist of the following: Cash on hand $ 3,471 Deposits with financial institutions 15,368,599 Investments 125,235,160 Total cash and investments $ 140,607,230 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, 2014, the City had the following investments: Investment Type Government agency securities Mutual funds TexStar TexPool Certificates of Deposit Commercial Paper Total Amount $ 36,922,094 30,144,366 18,553,890 25,823,375 8,141,435 5,650,000 $ 125,235,160 Weighted Average Maturity 919 days 41 days 51 days 48 days 404 days 549 days As of September 30, 2014 the City did not invest in any securities which are highly sensitive to interest rate fluctuations. Disclosures relating to Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the Public Funds Investment Act, the City's investment policy, or debt agreements, and the actual rating as of year-end for each investment type. Investment Type Government agency securities Mutual funds TexStar TexPool Certificates of Deposit Commercial Paper Total Amount $ 36,922,094 30,144,366 18,553,890 25,823,375 8,141,435 5,650,000 $ 125,235,160 Minimum Rating as Legal of Year Rating End N/A Not rated N/A AAAm N/A AAAm N/A AAAm N/A AAAm N/A Aa3 39 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 NOTE 2. CASH AND INVESTMENTS — CONTINUED Concentration of Credit Risk The investment policy of the City contains no limitations on the amount that can be invested in any one issuer. As of September 30, 2014, investments other than external investment pools that represent 5% or more of the City's investments are as follows: Issuer Investment Type Reported Amount FNMA Government agency securities $ 24,000,000 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, 2014, none of the City's cash deposits were uncollateralized. Investment in State Investment Pools The City is a voluntary participant in two investment pools: TexStar and TexPool. The State Comptroller of Public Accounts exercises responsibility over TexPool. This oversight includes the ability to significantly influence operations, designation of management, and accountability for fiscal matters. Additionally, the State Comptroller has established an advisory board composed of both participants in TexPool and other persons who do not have a business relationship with TexPool. TexPool operates in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. TexPool uses amortized costs rather than market value to report net position to compute share prices. Accordingly, the fair value of the position in TexPool is the same as the value of TexPool shares. TexStar is administered by First Southwest Asset Management, Inc. and JPMorgan Chase. Together these organizations bring to the TexStar program the powerful partnership of two leaders in financial services with a proven and noted track record in local government investment pool management. TexStar is a local government investment pool created under the Interlocal Cooperation Act specifically tailored to meet Texas state and local government investment objectives of preservation of principal, daily liquidity, and competitive yield. TexStar uses amortized costs rather than market value to report net position to compute share prices. Accordingly, the fair value of the position in TexStar is the same as the value of TexStar shares. 40 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 NOTE 3. RECEIVABLES Receivables at September 30, 2014, for the government's individual major, non -major, internal service, and fiduciary funds in the aggregate, including the applicable allowances for uncollectible accounts, consist of the following: Southlake General Parks Crime Obligation General Crime Development Corp Control District Debt Capital Control Capital Capital General Service Projects District Projects Projects Receivables: Property taxes $ 393,181 $ 141,884 $ $ - $ $ Sales taxes 2,281,221 - 1,047,090 Franchise taxes 505,534 - Accounts - - 259,662 Interest 39,617 10,448 44,998 16 11,791 11 Other 73,194 - - - - Gross receivables 3,292,747 152,332 304,660 1,047,106 11,791 11 Less: allowance 203,782 79,760 - - - Net total receivables $ 3,088,965 $ 72,572 $ 304,660 $1,047,106 $ 11,791 $ 11 Tax Non - Increment Major Water Financing Govern- and Internal District mental Sewer Service Agency Total Receivables: Property taxes $ $ - $ $ $ $ 535,065 Sales taxes 1,162,652 4,490,963 Franchise taxes - 505,534 Accounts - 4,388,597 4,648,259 Interest 29 4,806 25,369 109,677 3 246,765 Other 303,487 - - 376,681 Gross receivables 29 1,470,945 4,413,966 109,677 3 10,803,267 Less: allowance - 388,881 - 672,423 Net total receivables $ 29 $ 1,470,945 $4,025,085 $ 109,677 $ 3 $ 10,130,844 The Water and Sewer Fund accounts receivable include unbilled charges for services rendered through September 30, 2014 of $1,905,146 . 41 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 NOTE 4. CAPITAL ASSETS Capital asset activity for the year ended September 30, 2014, was as follows: Governmental Activities: Capital assets not being depreciated: Land Street infrastructure Construction -in -progress Total capital assets not being depreciated Capital assets being depreciated: Land improvements Buildings and building improvements Public art Office equipment Communications equipment Field equipment Heavy equipment Computer equipment Computer software Vehicles Drainage Bridges, road signs, and fiber optic lines Park improvements Pathways Total capital assets being depreciated Accumulated depreciation: Land improvements Buildings and building improvements Public art Office equipment Communications equipment Field equipment Heavy equipment Computer equipment Computer software Vehicles Drainage Bridges, road signs, and fiber optic lines Park improvements Pathways Total accumulated depreciation Beginning Capital Sales or Adjustments/ Ending Balance Acquisitions Disposals Transfers Balance $ 83,418,898 $ 1,870,865 $ $ $ 85,289,763 185, 357, 392 1,755,601 187,112,993 26,140,494 12,679,494 (16,998,370) 21,821,618 294,916,784 16,305,960 (16,998,370) 294,224,374 6,806,154 - - 6,806,154 64,540,493 15,404,776 79,945,269 859,802 168,050 1,027,852 1,824,994 611,389 2,436,383 3,845,411 - 23,840 3,869,251 1,382,297 311,168 (17,800) - 1,675,665 2,057,038 57,252 (30,000) - 2,084,290 1,286,453 145,000 79,720 1,511,173 3,443,802 - - 3,443,802 9,580,608 962,634 (400,450) - 10,142,792 39,579,023 809,881 514,410 40,903,314 3,250,517 - 3,250,517 15,593,483 - 15,593,483 9,612,740 - 196,185 9,808,925 163,662,815 2,285,935 44( 8,250) 16,998,370 182,498,870 (591,492) (945) - (592,437) (11,056,473) (1,626,450) (12,682,923) (194,162) (87,381) (281,543) (587,298) (99,263) (686,561) (2,874,859) (125,218) - (3,000,077) (764,104) (177,607) 17,800 (923,911) (1,253,668) (143,716) 30,000 (1,367,384) (992,847) (118,243) - (1,111,090) (3,224,682) (86,154) - (3,310,836) (5,569,294) (928,226) 389,456 (6,108,064) (13,459,061) (1,028,079) - (14,487,140) (1,017,710) (18,802) (7,181,245) (1,392,936) (3,694,578) (426,909) - (52,461,473) (6,259,929) 437,256 (1,036,512) (8,574,181) (4,121,487) (58,284,146) Total capital assets being depreciated, net 111,201,342 (3,973,994) (10,994) 16,998,370 124,214,724 Governmental activities capital assets, net $ 406,118,126 $ 12,331,966 $ 1( 0,994) $ - $ 418,439,098 42 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 NOTE 4. CAPITAL ASSETS — CONTINUED Business Type Activities: Capital assets not being depreciated: Land Construction -In -Progress Total capital assets not being depreciated Capital assets being depreciated: Buildings and building improvements Equipment Vehicles Capacity rights Distribution system Total capital assets being depreciated Accumulated depreciation: Buildings and building improvements Equipment Vehicles Capacity rights Distribution system Total accumulated depreciation Total capital assets being depreciated, net Business type activities capital assets, net Beginning Capital Sales or Adjustments/ Ending Balance Acquisitions Disposals Transfers Balance $ 15,731,876 $ 1,057,749 $ $ - $ 16,789,625 11,553,097 2,039,013 (11,481,886) 2,110,224 27,284,973 3,096,762 (11,481,886) 18,899,849 935,501 - 935,501 2,320,801 102,626 (7,500) 2,415,927 572,041 - 572,041 9,190,988 - - 9,190,988 120,315,204 1,863,333 (5,766) 11,481,886 133,654,657 133,334,535 1,965,959 (13,266) 11,481,886 146,769,114 (524,678) (30,318) - - (554,996) (1,120,975) (220,051) 7,500 (1,333,526) (327,768) (32,949) - (360,717) (3,336,398) (183,820) - (3,520,218) (46,499,491) (4,257,293) 1,970 (50,754,814) (51,809,310) (4,724,431) 9,470 - (56,524,271) 81,525,225 (2,758,472) (3,796) 11,481,886 90,244,843 $ 108,810,198 $ 338,290 $ (3,796) $ - $ 109,144,692 Depreciation expense was charged as a direct expense to functions of the primary government as follows: Governmental activities: General government $ 1,150,024 Public safety 1,186,325 Public works 2,116,571 Culture and recreation 1,807,009 Total depreciation expense - governmental activities $ 6,259,929 Business -type activities: Water and Sewer $ 4,724,431 43 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 NOTE 5. DEFERRED INFLOWS OF RESOURCES/UNEARNED REVENUE Governmental funds report deferred inflows of resources in connection with receivables for revenue that is not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned (unearned revenue). At the end of the current fiscal year, the various components of unearned revenue and deferred inflows of resources reported in the governmental funds were as follows: General Debt Service Deferred inflows of resources: Fund Fund Property taxes $ 165,890 $ 85,633 Other 147,358 - Total deferred inflows of resources $ 313,248 $ 85,633 Unearned revenue: Franchise taxes $ 652,393 Other 3,030 Total unearned revenue $ 655,423 NOTE 6. LONG-TERM DEBT Total $ 251,523 147,358 $ 398,881 $ 652,393 3,030 $ 655,423 The City issues general obligation bonds, combination tax and revenue certificates of obligation and tax notes to provide for the acquisition and construction of major capital facilities and infrastructure. Combination tax and revenue certificates of obligation are issued for both governmental and business -type activities. General obligation bonds, governmental revenue bonds and tax notes pledge the full faith and credit of the City. Combination tax and revenue certificates of obligation are payable from the net revenues of the water and sewer system and general debt service tax. In May 2014, the City issued $8,780,000 of Series 2014, Tax and Waterworks and Sewer System (limited pledge) certificates of obligation. The debt was issued to pay the costs of various general capital project improvements. The obligations are payable over the next 20 years. In May 2014, the City issued $21,330,000 of Series 2014, General Obligation Refunding Bonds, of which $13,930,000 is included as part of business -type activities. The debt was issued to refund a portion of the City's outstanding debt to achieve a present value debt service savings. Net proceeds from the sale of the bonds totaled $22,988,151. Of these proceeds, $22,743,519 was placed with an escrow agent to provide for all future debt payments of the refunded bonds. This refunding resulted in a decrease in the City's debt service payments of $1,880,970, which resulted in an economic gain (difference between the present value of the debt service payments of the old debt and new debt) of $1,788,489. As a result of this transaction, $22,445,000 of general obligation bonds, of which $14,661,074 was included as part of business -type activities, is considered legally defeased, and is no longer included as a liability in the City's basic financial statements. In May 2014, the City also issued $16,000,000 of Series 2014, Southlake Parks Development Corporation (SPDC) Sales Tax Revenue Refunding Bonds. The debt was issued to refund the SPDC's outstanding sales tax revenue bonds and to lower the debt service requirements of the obligations. The obligations are payable over the next 12 years. This refunding resulted in a decrease in the City's debt service payments of $2,096,890, which resulted in an economic gain (difference between the present value of the debt service payments of the old debt and new debt) of $1,637,191. As a result of this transaction, $17,295,000 of revenue bonds was refunded, is considered legally defeased, and is no longer included as a liability in the City's basic financial statements. CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 NOTE 6. LONG-TERM DEBT— Continued General obligation bonds, combination certificates of obligation, tax notes and governmental revenue bonds are as follows as of September 30, 2014: Final Interest Business - General Obligation Bonds and Certificates of Obligation Maturity Rates Governmental Type $6,075,000 Series 2006, Combination Tax and Waterworks and Sewer System Revenue Certificates of Obligation 2026 3.75 - 4.375% $ 260,000 $ $6,540,000 Series 2007, Combination Tax and Waterworks and Sewer System Revenue Certificates of Obligation 2018 4.0 - 5.0% 2,715,000 - $14,015,000 Series 2008, Combination Tax and Waterworks and Sewer System Revenue Certificates of Obligation 2028 3.5 - 4.625% 5,388,855 5,749,860 $24,835,000 Series 2009, Combination Tax and Waterworks and Sewer System Revenue Certificates of Obligation 2029 2.0 - 5.0% 10,395,000 5,315,000 $26,730,000 Series 2010, General Obligation Refunding Bonds 2023 3.0 - 4.0% 8,805,674 3,373,955 $4,480,000 Series 2011A, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2018 2.00 - 5.00% 2,695,000 - $3,365,000 Series 2011 B, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2031 2.00 - 4.125% - 3,000,000 $15,745,000 Series 2010, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2030 3.0 - 4.25% 4,800,000 4,575,000 $11,300,000 Series 2012, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2032 3.0 - 4.25% 1,685,000 2,555,000 $9,965,000 Series 2012, General Obligation Refunding Bonds 2026 3.0-4.25% 8,790,000 275,000 $14,250,000 Series 2013, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2033 2.0 - 5.0% 9,235,000 2,415,000 $22,295,000 Series 2013, General Obligation Refunding Bonds 2026 2.0 - 5.0% 20,360,000 1,345,000 $21,330,000 Series 2014, General Obligation Refunding Bonds 2026 2.0 - 5.0% 7,400,000 13,930,000 $8,780,000 Series 2014, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2034 2.0 - 3.5% 4,380,000 4,400,000 Governmental Revenue Bonds $15,745,000 Series 2010, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation $3,285,000 Series 2011C, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation $11,300,000 Series 2012, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation $16,000,000 Series 2014, Southlake Parks Development Corporation, Sales Tax Revenue Refunding Bonds $ 86,909,529 $ 46,933,815 Final Interest Business - Maturity Rates Governmental Type 2030 3.00 - 4.25% $ 2,800,000 $ 2031 2.00 - 4.125% 2,930,000 2032 3.0 - 4.25% 5,420,000 2027 3% 16,000,000 $ 27,150,000 $ 45 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 NOTE 6. LONG-TERM DEBT — Continued The City has entered into various contractual agreements to unconditionally finance the principal and interest or a fixed percentage of principal and interest of Trinity River Authority (TRA) Contract Revenue Bonds. Under the agreements, the TRA utilized the bond proceeds to administer and construct various sewer and wastewater treatment projects on the City's behalf. Such agreements provide the City title to the assets upon retirement of the debt or capacity rights in the use of constructed assets. The City has included in its financial statements its proportionate share of these obligations and its investment in these assets as capacity rights. Contract revenue obligations at September 30, 2014 consist of the following: Contract Revenue Obligations Series 2001, TRA- Denton Creek Wastewater Pressure Interceptor - Refunding Final Business - Maturity Governmental Type 2017 $ $ 1,100,000 The following is a summary of long-term transactions for the year ended September 30, 2014: Amount Beginning Ending Due within Balance Additions Reductions Balance One year Governmental activities: General obligation bonds and certificates of obligation $ 94,378,649 $ 11,780,000 $ (19,249,120) $ 86,909,529 $ 12,879,311 Sales tax revenue bonds 28,910,000 16,000,000 (17,760,000) 27,150,000 1,610,000 Bond premiums (discounts) 7,132,996 1,301,376 (859,958) 7,574,414 - Total bonds payable 130,421,645 29,081,376 (37,869,078) 121,633,943 14,489,311 Compensated absences 1,002,623 1,045,740 (1,002,623) 1,045,740 93,940 Total governmental activities $ 131,424,268 $ 30,127,116 $(38,871,701) $ 122,679,683 $ 14,583,251 The general fund has been used to liquidate capital lease liabilities with respect to acquisitions of governmental capital assets and has also typically been used in prior years to liquidate the liability for compensated absences. Amount Beginning Ending Due within Balance Additions Reductions Balance One year Business -type activities: Revenue bonds and certificates of obligation $ 47,824,609 $ 18,330,000 $ (19,220,794) $ 46,933,815 $ 4,770,685 Contract revenue obligations 1,435,000 - (335,000) 1,100,000 350,000 Bond premiums 968,150 922,579 (148,711) 1,742,018 - Total bonds payable 50,227,759 19,252,579 (19,704,505) 49,775,833 5,120,685 Unearned revenue 253,764 - (10,274) 243,490 5,000 Compensated absences 81,477 77,497 (81,477) 77,497 77,497 Total business -type activities $ 50,563,000 $19,330,076 $(19,796,256) $ 50,096,820 $ 5,203,182 46 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 NOTE 6. LONG-TERM DEBT— CONTINUED The annual aggregate maturities for each bond type are as follows: General Obligation Bonds and Certificates of Obligation Fiscal Year Ending September 30, 2015 2016 2017 2018 2019 2020-2024 2025-2029 2030-2034 Total Sales Tax Revenue Bonds Fiscal Year Ending September 30, 2015 2016 2017 2018 2019 2020-2024 2025-2029 2030-2034 Total Principal $ 12,879,311 11,734,601 11,543,185 9,271,424 5,314,835 22,988,569 12,867,634 310,000 $ 86,909,559 Principal $ 1,610,000 1,660,000 1,715,000 1,765,000 1,815,000 9,970,000 6,815,000 1,800,000 $ 27,150,000 Revenue Bonds and Certificates of Obligation Fiscal Year Ending September 30, 2015 2016 2017 2018 2019 2020-2024 2025-2029 2030-2034 Total Principal $ 4,770,685 4,870,396 4,961,814 4,643,576 3,415,165 11,226,069 9,691,110 3,355,000 $ 46,933,815 Governmental Activities Interest $ 3,061,219 2,594,249 2,184,568 1,798,946 1,521,689 4,837,700 1,002,416 6,588 $ 17,007,375 Governmental Activities Interest $ 835,120 782,445 731,144 678,944 624,868 2,239,179 776,527 76,009 $ 6,744,236 Business -Type Activities Total $ 15,940,530 14,328,850 13,727,753 11,070,370 6,836,524 27,826,269 13,870,050 316,588 $ 103,916,934 Total $ 2,445,120 2,442,445 2,446,144 2,443,944 2,439,868 12,209,179 7,591,527 1,876,009 $ 33,894,236 Interest Total $ 1,666,118 1,424,242 1,228,247 1,057,017 934,612 3,429,727 1,504,765 211,829 $ 11,456,557 $ 6,436,803 6,294,638 6,190,061 5,700,593 4,349,777 14,655,796 11,195,875 3,566,829 $ 58,390,372 47 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 NOTE 6. LONG-TERM DEBT —CONTINUED Contract Revenue Obligations Fiscal Year Ending September 30, 2015 2016 2017 Total Principal $ 350,000 365,000 385,000 Business -Type Activities Interest Total $ 46,250 $ 396,250 28,375 393,375 9,625 394,625 $ 1,100, 000 $ 84,250 $ 1,184, 250 In previous years, the City has legally defeased certain outstanding general obligation and revenue debt by placing funds into irrevocable trusts pledged to pay all future debt service payments of the refunded debt. Accordingly, a liability for the defeased debt issues is not included in the City's financial statements. As of September 30, 2014, the City had no outstanding bonds that were legally defeased. NOTE 7. INTERFUND TRANSFERS All interfund transfers between the various funds are approved supplements to the operations of those funds. Individual fund transfers for fiscal year 2014 were as follows: Transfer In Transfer Out Amount Purpose Internal service fund General fund $ 800,000 To replace aging vehicles Non major governmental funds General fund 40,000 To fund operations General capital project funds General fund 150,000 To fund illuminated street signs and angled parking spaces at DPS headquarters General capital project funds General fund 3,500,000 To fund a reserve for a future multi -purpose facility General fund Non major governmental funds 36,594 To fund indirect charges General fund Non major governmental funds 137,226 To fund attractive spaces and future art projects General fund Non major governmental funds 53,824 To fund indirect charges General capital project funds Non major governmental funds 650,000 To fund various drainage projects General obligation debt service fund Non major governmental funds 194.172 To pay the debt service for bonds issued on the Districts' behalf General obligation debt service fund Tax increment financing district fund 3,288,465 To fund the debt repayment for bonds issued for tax increment financing district projects General fund Non major governmental funds 232,713 To fund indirect charges Southlaka parks development corporation Non major governmental funds 2,650,000 To assist with the funding of large park projects capital projects fund Non major governmental funds Non major governmental funds 3,085,598 To pay the principal and interest on debt incurred General fund Crime control disitrict 226,140 To fund indirect charges Crime control district capital projects fund Crime control disitrict 1,000,000 To fund construction of DPS North General obligation debt service fund Crime control disitrict 4,019,135 To paythe debt service for bonds issued on the Districts' behalf General capital project funds Non major governmental funds 320,000 To fund various projects General fund Water and sewer fund 915,116 To fund indirect charges $ 21,298,983 Interfund balances, recorded as "due to/from other funds" represent short-term financing of deficit cash. CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 NOTE 8. RETIREMENT PLAN Plan Description The City provides pension benefits for all of its full-time employees through a non-traditional, joint contributory, hybrid defined benefit plan in the state-wide Texas Municipal Retirement System (TMRS), an agent multiple -employer public employee retirement system. The plan provisions that have been adopted by the City are within the options available in the governing state statutes of TMRS. Benefits depend upon the sum of the employee's contributions to the plan, with interest, and the City -financed monetary credits, with interest. At the date the plan began, the City granted monetary credits for service rendered before the plan began of a theoretical amount 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 (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/her 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 regardless of age. 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. Contrihutions Under the state law governing TMRS, the actuary annually determines the City contribution rate. This rate consists of the normal cost contribution rate and the prior service contribution rate, both of which are calculated to be a level percent of payroll from year to year. The normal cost contribution rate finances the currently accruing monetary credits due to City matching percent, which are the obligation of the City as of an employee's retirement date, not at the time the employee's contributions are made. The normal cost contribution rate is the actuarially determined percent of payroll necessary to satisfy the obligation of the City to each employee at the time his/her retirement becomes effective. The prior service contribution rate amortizes the unfunded (overfunded) actuarial liability (asset) over the remainder of the plan's 30-year amortization period. The Entry Age Normal (EAN) actuarial cost method is used for determining the City contribution rate (EAN was first used in the December 31, 2013 valuation; previously, the projected unit credit method was used). Both the employees and the City make contributions monthly. Since the City needs to know its contribution rate in advance for budgetary purposes, there is a one-year delay between the actuarial valuation that serves as the basis for the rate and the calendar year when the rate goes into effect. (i.e. December 31, 2012 valuation is effective for the rates beginning January 2014). Annual Pension Cost Contributions by the City were $2,293,837 for the year ended September 30, 2014, or 12.6% of the covered payroll of $18,245,842 as required by the actuarial valuation. The total fiscal year 2014 payroll was $19,387,630. 49 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 NOTE 8. RETIREMENT PLAN — CONTINUED Annual City pension cost and related information for the last three years is as follows: SCHEDULE OF ACTUARIAL LIABILITIES AND FUNDING PROGRESS Actuarial Information: 12/31 /2013 12/31 /2012 Actuarial cost method Entry Age Normal Projected Unit Credit Projected Unit Credit Amortization method Level % Level % Level % Amortization period Asset valuation method Assumptions Investment return Projected salary increases Inflation Cost -of -living adjustment City specific assumptions Payroll growth assumption Withdrawal rates for male/female (low, mid/low, mid, mid/high or high) Schedule of Funding Information Actuarial valuation date 30.0 years -closed period 10-year smoothed market 7.0% varies by age and services 3.0% 1.5% (3.0% CPI) 3.0% Mid-High/Mid Actuarial Value of Assets Actuarial Accrued Liability Unfunded (Overfunded) Actuarial Accrued Liability (UAAL) Funded ratio Annual Covered Payroll UAAL as a Percentage of Covered Payroll 25.3 years -closed period 10-year smoothed market 7.0% varies by age and services 3.0% 1.5% (3.0% CPI) 3.0% Mid-High/Mid 12/31/2011 26.2 years -closed period 10-year smoothed market 7.0% varies by age and services 3.0% 1.5% (3.0% CPI) 3.0% Mid-High/Mid 12/31 / 13 12/31 / 12 12/31 / 11 $ 57,189,902 $ 51,561,469 $ 46,290,272 $ 67,664,562 $ 59,529,822 $ 55,624,216 $ 10,474,660 $ 7,968,353 $ 9,333,944 84.5% 86.6% 83.2% $ 18,254,842 $ 17,171,257 $ 16,708,049 57.38% 46.41 % 55.90% The City's net pension obligation (NPO) for TMRS at September 30, 2014, 2013 and 2012 is calculated as follows: 9/30/2014 9/30/2013 9/30/2012 NPO at the beginning of the period $ - $ - $ - Annual required contribution 2,293,837 2,152,516 2,068,611 Contributions made (100%) 2,293,837 2,152,516 2,068,611 NPO at the end of the period $ - $ - $ - The City adopted the Updated Service Credit provision in 1992, on a repeating basis. Additionally, the City adopted annuity increases for its retirees, on a repeating basis in 1992 equal to 70% of the change in consumer price index. The City of Southlake is one of 847 municipalities having the benefit plan administered by TMRS. Each of the 847 municipalities has an annual, individual actuarial valuation performed. All assumptions for the December 31, 2013 valuations are contained in the 2013 TMRS Comprehensive Annual Financial Report, a copy of which may be obtained by writing to P.O. Box 149153, Austin, Texas 78714-9153. 50 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 NOTE 9. OTHER POSTEMPLOYMENT BENEFITS Plan Description The City provides other postemployment benefits (OPEB) in the form of health insurance benefits through a single -employer defined benefit medical plan. Regular full-time employees retiring from the City of Southlake have the option to continue medical insurance coverage until the retiree becomes eligible for Medicare or is eligible to be covered under another medical plan. The City contributes $125 per month towards the premium for retiree insurance coverage or $225 towards the premium for retirees and dependents. A third -party administrator is utilized to provide claims administration and payment of claims. Insurance is purchased to provide specific stop loss and aggregate stop loss protection. The Plan does not issue a separate financial report. Funding Policy The City passed a resolution in September 2009, electing to participate in the PARS Public Agencies Post -Retirement Health Care Plan Trust (the Trust) to fund post -employment benefits for its employees as specified in the City's policies and/or applicable collective bargaining agreements. The Trust is a multiple employer trust arrangement established to provide economies of scale and efficiency of administration to public agencies that adopt it to hold the assets used to fund its OPEB obligation. The City has made a determination to fund its annual required contribution. For fiscal year 2014, the City contributed $125,000 to the Trust. Annual OPEB Cost and Net OPEB Obligation The City's annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years on an open basis. The City's annual OPEB cost and net OPEB obligation (asset) for the prior three years is shown below: Annual required contribution Interest on prior year Net OPEB obligation Adjustment to annual required contribution Annual OPEB cost Contributions made Increase (decrease) in net OPEB obligation Net Obligation (asset) - beginning of year Net Obligation (asset) - end of year 2014 2013 2012 $ 36,592 $ 36,592 $ 155,999 (11,274) (5,970) (4,530) 11,274 5,970 4,530 36,592 36,592 155,999 125,000 125,000 180,000 (88,408) (88,408) (24,001) (187,908) (99,500) (75,499) $ (276,316) $ (187,908) $ (99,500) Percentage of OPEB costs contributed 341.60% 341.60% 115.39% 51 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 NOTE 9. OTHER POSTEMPLOYMENT BENEFITS — CONTINUED Funded Status and Funding Progress — Continued The funded status of other postemployment benefits as of December 31, 2012, the date of the latest actuarial valuation, was as follows: Actuarial accrued liability $ 686,413 Actuarial value of plan assets (856,451) Overfunded actuarial accrued liability $ (170,038) Funded ratio 124.8% Covered payroll $18,254,842 Unfunded actuarial accrued liability as a percentage of covered payroll 0.93% Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. The unfunded actuarial accrued liability is being amortized assuming 10 level annual payments on an open basis. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revisions as actual results are compared with past expectations and new estimates are made about the future. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long- term perspective of the calculations. In the December 31, 2012 actuarial valuation, the projected unit credit cost method was used. Key actuarial assumptions include: (a) level percent of payroll amortization method; (b) a 3.0% net real rate of investment return; (c) a sliding scale payroll growth rate for financing the Unfunded Actuarial Accrued Liability ranging from 5.5%-12.0% based on years of service; (d) a sliding scale of medical inflation from 7.5% in 2013 to 4.5% by 2021 and later; and (e) general inflation assumed to be 3.0%. NOTE 10. DEFERRED COMPENSATION PLAN The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all City employees, permits them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. The laws governing 457 plans were changed to state that plans would not be considered eligible plans unless all assets and income of the plans are held in trust for the exclusive benefit of the participants and their beneficiaries. The City amended the plan documents to comply with these requirements. In accordance with GASB 32, the plans as amended are not included in the City's financial statements. 52 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 NOTE 11. RISK FINANCING AND INSURANCE The City is exposed to various risks of loss related to torts, theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. During the fiscal year 1990, the City joined the Texas Municipal League Workers Compensation Joint Insurance Fund ("the Pool") for risks related to employees. Premiums are paid to the Pool, which retains a limit of loss. Reinsurance companies insure the risks beyond those limits. The City retains, as a risk, only the deductible amount of each policy. The City continues to carry commercial insurance with Texas Municipal League provided by Mutual of Omaha for other risks including general liability, property, and errors and omissions. There were no significant reductions in coverage in the past year and there were no settlements exceeding insurance coverage in any of the past three years. NOTE 12. COMMITMENTS AND CONTINGENCIES The City has entered into various contracts with the Trinity River Authority (TRA) and other cities. Terms of the agreements provide the City will pay an amount equal to its proportional share of maintenance and operations and debt service based upon volumes of wastewater transported, treated, or disposed of. The City's proportional share of future costs under these contracts is indeterminable and has not been recorded. Payments to the TRA under these contracts for the year ended September 30, 2014 were $1,144,628. The City has authorized various contracts obligating future funds of the City as the contracted services are performed. Significant amounts unexpended under such contracts at year end are reflected as reserves for authorized contracts in the applicable funds. The City has certain claims and litigation pending with respect to matters arising in the normal course of operations. City management is of the opinion that the settlement of these matters will not have a material adverse impact on the City's financial statements. NOTE 13. FUTURE REPORTING REQUIREMENTS Statement No. 68, "Accounting and Financial Reporting for Pensions -an amendment of GASB Statement No. 27." — This statement changes the focus of pension accounting for employers from whether they are responsibly funding their plan over time to a point -in -time liability that is reflected in the employer's financial statements for any actuarially unfunded portion of pension benefits earned to date. This statement will become effective for the City in fiscal year 2015. Management has not yet determined the effect of this statement on the financial statements. NOTE 14. CUMULATIVE EFFECT OF ADOPTION OF GASB STATEMENT NO. 65 As a result of the implementation of GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, an adjustment has been made to write off all unamortized bond issuance costs from previous years. As a result, the beginning net position of governmental activities and business -type activities has been decreased by $1,640,398 and $696,939, respectively. 53 REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON GENERAL FUND CITY OF SOUTHLAKE, TEXAS EXHIBIT A-1 GENERALFUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2014 REVENUES Ad valorem taxes, penalties and interest Franchise taxes Municipal sales and mixed beverage tax License, permits and fees Charges for services Fines and forfeitures Grants Interest earned Miscellaneous TOTAL REVENUES EXPENDITURES Current: General government City secretary/mayor City manager's office Human resources Support services Economic development Finance Municipal court Teen court Information technology Public safety Police services Fire services Public safety support Building inspection Public works Public works administration Streets and drainage Planning Culture and recreation Community services Parks and recreation Library services VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) $ 17,718,230 $ 19,201,395 $ 19,193,801 $ (7,594) 2,651,751 2,834,404 2,841,025 6,621 9,020,000 11,680,000 12,585,569 905,569 1,944,900 2,270,500 2,411,851 141,351 1,727,530 1,905,250 1,778,003 (127,247) 1,015,000 1,215,000 1,330,324 115,324 104,070 210,000 213,630 3,630 84,300 51,980 193,537 141,557 275,500 334,965 358,757 23,792 34,541,281 39,703,494 40,906,497 1,203,003 387,628 393,009 381,127 11,882 805,444 812,294 810,604 1,690 634,550 636,951 622,991 13,960 3,163,614 3,243,925 2,857,271 386,654 269,255 271,336 240,014 31,322 1,233,689 1,181,982 1,120,153 61,829 651,354 644,888 586,020 58,868 144,737 146,651 130,282 16,369 2,084,782 2,057,288 1,874,521 182,767 5,798,000 5,987,780 5,875,416 112,364 7,345,506 7,734,799 7,550,397 184,402 1,352,224 1,088,124 1,213,567 (125,443) 925,854 995,192 909,420 85,772 2,124,249 1,937,321 1,738,788 198,533 1,620,490 1,692,165 1,671,514 20,651 966,014 909,276 850,398 58,878 921,310 921,323 874,931 46,392 4,437,625 4,364,236 4,256,617 107,619 675,493 676,205 673,188 3,017 TOTAL EXPENDITURES 35,541,818 35,694,745 34,237,219 1,457,526 Excess (deficiency) of revenues over expenditures (1,000,537) 4,008,749 6,669,278 2,660,529 OTHER FINANCING SOURCES (USES) Transfers from other funds 1,505,874 2,751,612 1,601,613 (1,149,999) Transfers to other funds (7,625,000) (5,640,000) (4,490,000) 1,150,000 TOTAL OTHER FINANCING SOURCES (USES) (6,119,126) (2,888,388) (2,888,387) 1 NET CHANGE IN FUND BALANCE (7,119,663) 1,120,361 3,780,891 2,660,530 FUND BALANCES, BEGINNING OF YEAR 20,782,522 20,782,522 20,782,522 - FUND BALANCES, END OF YEAR $ 13,662,859 $ 21,902,883 $ 24,563,413 $ 2,660,530 See Notes to Required Supplementary Information 54 CITY OF SOUTHLAKE, TEXAS EXHIBIT A-2 CRIME CONTROL DISTRICT SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2014 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Municipal sales tax $ 5,650,000 $ 6,400,000 $ 6,516,603 $ 116,603 Interest 3,500 500 (1,258) (1,758) TOTAL REVENUES 5,653,500 6,400,500 6,515,345 114,845 EXPENDITURES Police services 836,099 747,912 618,921 128,991 Excess of revenues over expenditures 4,817,401 5,652,588 5,896,424 243,836 OTHER FINANCING USES Transfers to other funds (5,245,275) (5,245,275) (5,245,275) - TOTAL OTHER FINANCING USES (5,245,275) (5,245,275) (5,245,275) - Net change in fund balance (427,874) 407,313 651,149 243,836 Fund balance at beginning of year 4,317,021 4,317,021 4,317,021 - Fund balance at end of year $ 3,889,147 $ 4,724,334 $ 4,968,170 $ 243,836 See Notes to Required Supplementary Information 55 CITY OF SOUTHLAKE, TEXAS EXHIBIT A-3 TAX INCREMENT FINANCING DISTRICT SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2014 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES Ad valorem taxes, penalties and interest $ 6,642,975 $ 7,248,842 $ 7,248,842 $ - Interest 2,000 1,000 (2,204) (3,204) Total revenues 6,644,975 7,249,842 7,246,638 (3,204) EXPENDITURES: Intergovernmental 3,254,686 3,834,118 3,834,118 - Total expenditures 3,254,686 3,834,118 3,834,118 - Excess of revenues over expenditures 3,390,289 3,415,724 3,412,520 (3,204) OTHER FINANCING USES Transfers to other funds (3,288,465) (3,288,465) (3,288,465) - Total other financing uses (3,288,465) (3,288,465) (3,288,465) - Excess (deficiency) of revenues over expenditures and other financing uses 101,824 127,259 124,055 (3,204) Fund balance at beginning of year 4,298,510 4,298,510 4,298,510 - Fund balance at end of year $ 4,400,334 $ 4,425,769 $ 4,422,565 $ (3,204) See Notes to Required Supplementary Information 56 CITY OF SOUTHLAKE, TEXAS NOTES TO REQUIRED SUPPLEMENTARY INFORMATION YEAR ENDED SEPTEMBER 30, 2014 Budgetary Data The City Council adheres to the following procedures in establishing the budgets reflected in the financial statements: 1. Each year the City Manager is required to submit to the City Council, between sixty and ninety days prior to the beginning of each fiscal year, a proposed budget for the fiscal year beginning on the following October 1. The operating budget includes proposed expenditures and the means of financing them. 2. Public hearings are conducted to obtain taxpayers' comments. 3. Prior to October 1, the budget is legally enacted by the City Council through passage of an ordinance. 4. Annual budgets are legally adopted for the General Fund, the Tax Increment Financing District, Crime Control, Parks Dedication, Hotel Occupancy, Storm Water Utility, Red Light Camera, and Southlake Parks Development Corporation Special Revenue Funds and all Debt Service Funds on a basis consistent with accounting principles generally accepted in the United States of America. Formal budgetary integration is not employed for proprietary funds. However, the City does adopt an annual budget for those funds for managerial control. Control over expenditures for the capital projects funds are maintained through general obligation bond indenture agreements, and authorized construction contracts. Accordingly, formal budgetary integration is not employed for the capital projects funds. During the fiscal year, the City Council may transfer funds allocated to a department to another department or re -estimate revenues or expenditures. The City Manager may transfer budgeted funds within a department. Expenditures should not exceed appropriations at the department level. 6. Budgetary data for the Police, Parks and Recreation, Court Security, Court Technology, Library, Storm Water Maintenance, Oil and Gas and Commercial Vehicle Enforcement Special Revenue Funds, and all Capital Projects Funds are not presented, as such funds are budgeted over the life of the respective grant or project, and not on an annual basis. Budgetary information for the Proprietary Funds have not been presented since reporting on such budgets is not legally required. 7. Expenditures in excess of appropriations for the year ended September 30, 2014 were: General Fund: Public Safety Support ($125,443) 57 CITY OF SOUTHLAKE, TEXAS EXHIBIT A-4 CONDITION RATING OF STREET SYSTEM SEPTEMBER 30, 2014 CONDITION OF ROADWAY SYSTEM Index 2014 RCI 11.1 SDI 10.0 PQI 9.6 COMPARISON OF NEEDED -TO -ACTUAL MAINTENANCE/PRESERVATION Needed Actual Difference 2010 $1,250,000 $ 936,158 (313,842) 2011 1,250,000 1,025,665 (224,335) 2012 1,250,000 1,252,394 2,394 2013 800,000 755,398 (44,602) 2014 800,000 1,050,404 250,404 Total $5,350, 000 $5,020,019 (329 981 The City hired a consultant to implement a pavement management system (PMS) to cover all public streets within the City. The condition of street pavement is measured using the Asphalt Pavement Rating Form as developed by the Asphalt Institute. The Asphalt Pavement Rating Form is based on a weighted average of thirteen defects found in pavement surfaces. The consultant conducted a pavement condition survey on all City owned streets. This consisted of a ride condition or roughness survey, a surface distress survey and a deflection survey. A present status analysis was conducted using data obtained from the pavement condition survey to determine the Ride Condition Index (RCI) and the Surface Distress Index (SDI). These indices were then combined into the composite Pavement Quality Index (PQI). Values of PQI can range from 0 to 10. Typical values for a newly constructed pavement range from 9.5 to 10.0. The PQI level at which a pavement becomes in need of rehabilitation is typically in the 5.0 to 7.0 range. It was the City's policy to maintain a PQI of 7.3 until 2012 when the City increased the minimum PQI to 7.8 Needed maintenance is calculated based upon inspections and the pavement quality index. In accordance with GASB Statement No. 34, the City is required to report at least one complete condition assessment at transition using the modified approach. The condition assessment was completed by the City and documented that the eligible infrastructure assets are being preserved at or above the condition level established by the City. A third of the City's public streets will be assessed annually to ensure all public streets are assessed every three years. The City calculates needed maintenance of its street system annually. However, the scheduling of these road projects often crosses fiscal years. Therefore, actual maintenance may be less than the calculated needed maintenance in one fiscal year and greater than the calculated needed maintenance in the subsequent fiscal year. 58 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES MAJOR GOVERNMENTAL FUNDS GENERAL OBLIGATION DEBT SERVICE FUND The General Obligation Debt Service Fund is used to account for the accumulation of resources for, and the payment of, general obligation bonds and interest from governmental resources. 59 CITY OF SOUTHLAKE, TEXAS EXHIBIT B-1 GENERAL OBLIGATION DEBT SERVICE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2014 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Ad valorem taxes $ 6,655,483 $ 6,732,483 $ 6,732,167 $ (316) Interest 20,000 20,000 103,366 83,366 Total revenues 6,675,483 6,752,483 6,835,533 83,050 EXPENDITURES: Principal retirement 11,235,275 11,235,275 11,235,280 (5) Interest and fiscal charges 3,490,770 3,490,770 3,642,965 (152,195) Total expenditures 14,726,045 14,726,045 14,878,245 (152,200) Deficiency of revenues over expenditures (8,050,562) (7,973,562) (8,042,712) (69,150) OTHER FINANCING SOURCES (USES) Proceeds from refunding bonds - - 7,400,000 Payment to refund bond escrow agent - - (7,887,452) Premium on bonds issued - - 675,875 Transfers from other funds 7,501,772 7,501,772 7,501,772 7,400,000 (7,887,452) 675,875 Total other financing sources (uses) 7,501,772 7,501,772 7,690,195 188,423 Deficiency of revenues and other financing sources over expenditures and other financing uses Fund balance, beginning of year Fund balance, end of year (548,790) (471,790) (352,517) 119,273 10,830,404 10,830,404 10,830,404 $10,281,614 $10,358,614 $10,477,887 $ 119,273 .91 NON -MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS The Special Revenue Funds are used to account for revenue sources that are legally restricted to expenditures for specified purposes. Police Fund -- Established to account for resources required to be utilized by the police department. Parks and Recreation Fund — Established to account for resources restricted for use by the parks and recreation department. Parks Dedication Fund — Established to account for resources restricted for use by the parks department. Southlake Parks Development Corporation Special Revenue Fund — Established to account for the general operations of the non-profit corporation established to finance, develop and operate park and recreational facilities. Hotel Occupancy Fund - The Hotel Occupancy Tax Fund accounts for all revenues and expenditures relating to the hotel occupancy tax received by the City. Storm Water Utility Fund — This fund is used to account for fees collected for the purpose of improving, upgrading and maintaining the City's drainage system. The City is mandated by the Texas Commission on Environmental Quality (TCEQ) to develop and maintain a Storm Water Management Plan in order to address capacity and quality issues and protect its residents and their properties from possible flooding and pollution problems. Drainage fees are collected by residents to fund the activities required to comply with TCEQ regulations. Court Security Fund — Established to account for municipal court fees assessed to provide for court security. Court Technology Fund — Established to account for municipal court fees assessed to provide for court technology. Library Fund — Established to account for resources donated for use by library services. Red Light Camera Fund — The Red Light Camera Fund is used to account for fees assessed for red light violations captured through the City's camera monitoring system. Storm Water Maintenance Fund- The Storm Water Maintenance Fund is used to account for the maintenance on storm water infrastructure. Oil and Gas Fund- The Oil and Gas Fund is used to account for permits fees and the related expenditures for oil and gas drilling. Commercial Vehicle Enforcement Fund- The Commercial Vehicle Enforcement Fund is used to account for the fees assessed for commercial vehicle violations. 61 DEBT SERVICE FUNDS The Debt Service Funds are utilized to account for the accumulation of financial resources for, and the payment of, long-term debt principal, interest, and related costs arising from the issuance of bonds. Southlake Parks Development Corporation Debt Service Fund — Established to accumulate resources to finance the debt service of debt issues of the Southlake Parks Development Corporation. CAPITAL PROJECTS FUNDS The Capital Projects Funds are utilized to account for financial resources to be used for the acquisition or construction of specified capital improvements (other than those financed by proprietary funds). Tax Increment Financing District Capital Projects Fund — The Tax Increment Financing District capital projects fund was established to account for the financing and construction of projects of the Tax Increment Financing District. CITY OF SOUTHLAKE, TEXAS NON -MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET SEPTEMBER 30, 2014 ASSETS Cash and cash equivalents Investments Accounts receivable Sales tax receivable Interest receivable TOTAL ASSETS Ue1:114111 I NRYe101 Ul WP► 1 I1=1e1 We101 Is] *? LIABILITIES Accounts payable Accrued liabilities Due to other funds TOTAL LIABILITIES FUND BALANCES Restricted for: Municipal court expenditures Debt service Capital projects Committed for: Police expenditures Parks and recreation Storm water expenditures Oil and gas drilling Library TOTAL FUND BALANCES TOTAL LIABILITIES AND FUND BALANCES SPECIAL REVENUE Southlake Parks Parks and Parks Development Police Recreation Dedication Corporation $14,994 $ 91,180 $ 589,757 $ 6,463,320 2,037 6,282 7,033 - - - - 1,083,212 - - 1 - $17,031 $ 97,462 $ 596,791 $ 7,546,532 $ 7,984 $ - $ - $ 2,667 - - 209,638 8,232 7,984 - 209,638 10,899 9,047 - - - - 97,462 387,153 7,535,633 9,047 97,462 387,153 7,535,633 $17,031 $ 97,462 $ 596,791 $ 7,546,532 63 SPECIAL REVENUE EXHIBIT C-1 CONTINUED Storm Hotel Water Court Court Red Light Occupancy Utility Security Technology Library Camera $ 798,593 $1,757,977 $396,196 $ 347,138 $ 6,971 $ 608,543 677,688 589,172 70,944 47,543 880 92,384 695 205,443 - - 154 97,191 79,440 - - - - - 1,036 3,758 6 4 - - $1,557,452 $2,556,350 $467,146 $ 394,685 $ 8,005 $ 798,118 $ 162,475 $ 7,108 $ 241 $ - $ 38 $ 292,480 12,306 7,090 1,034 - - 1,402 174,781 14,198 1,275 - 38 293,882 - - 465,871 394,685 - - 1,382,671 2,542,152 - - - - - - - - - 504,236 - - - - 7,967 - 1,382,671 2,542,152 465,871 394,685 7,967 504,236 $1,557,452 $2,556,350 $467,146 $ 394,685 $ 8,005 $ 798,118 64 CITY OF SOUTHLAKE, TEXAS NON -MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET SEPTEMBER 30, 2014 EXHIBIT C-1 CONCLUDED SPECIAL DEBT CAPITAL REVENUE SERVICE PROJECTS Southlake Tax TOTAL Commercial Parks Increment NON -MAJOR Storm Water Oil and Vehicle Development Financing GOVERNMENTAL Maintenance Gas Enforcement Corporation District FUNDS ASSETS Cash and cash equivalents $ 403,748 $ 44,839 $ 60,429 $ 1,657,182 $ - $ 13,240,867 Investments 47,072 8,320 - 15,115 4,359 1,568,829 Accounts receivable 4 - - - 303,487 Sales tax receivable - - 1,162,652 Interest receivable - 1 - - 4,806 TOTAL ASSETS $ 450,824 $ 53,160 $ 60,429 $ 1,672,297 $ 4,359 $ 16,280,641 LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable $ $ $ - $ $ $ 472,993 Accrued liabilities 8,886 248,588 Due to other funds - 803 803 TOTAL LIABILITIES 8,886 803 722,384 FUND BALANCES Restricted for: Municipal court expenditures - - 860,556 Debt service 1,672,297 - 1,672,297 Capital projects - - 3,556 3,928,379 Commited for: Police expenditures 51,543 - 564,826 Parks and recreation - 8,020,248 Storm water expenditures 450,824 450,824 Oil and gas drilling - 53,160 53,160 Library - - - - 7,967 TOTAL FUND BALANCES 450,824 53,160 51,543 1,672,297 3,556 15,558,257 TOTAL LIABILITIES AND FUND BALANCES $ 450,824 $ 53,160 $ 60,429 $ 1,672,297 $ 4,359 16,280,641 65 CITY OF SOUTH LAKE, TEXAS NON -MAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED SEPTEMBER 30, 2014 SPECIAL REVENUE Southlake Parks Parks and Parks Development Police Recreation Dedication Corporation REVENUES Municipal sales tax $ - $ - $ - $ 6,571,837 Licenses, permits and fees - - 151,940 - Fines and forfeitures - - - - G ra nts - - - - Interest (15) (45) (47) 8,945 Contributions 1,050 57,540 - - Miscellaneous - - - 153,824 Total revenues 1,035 57,495 151,893 6,734,606 EXPENDITURES Current: Court technology - - - - Public safety Police services - - - - Cultural and recreation Parks and recreation - - - 647,484 Library services - - - - Capital outlay - - - - Debt service: Principal retirement - - - - Interest and fiscal charges - - - - Total expenditures - - - 647,484 Excess (deficiency) of revenues over expenditures 1,035 57,495 151,893 6,087,122 OTHER FINANCING SOURCES (USES) Proceeds from issuance of refunding bonds - - - - Discount on issuance of long term debt - - - - Payment to refund bond escrow agent - - - - Proceeds from the sale of property 1,521 - - - Transfers from other funds - - - - Transfers to other funds - - - (5,968,311) Total other financing sources (uses) 1,521 - - (5,968,311) NET CHANGE IN FUND BALANCES 2,556 57,495 151,893 118,811 FUND BALANCES, BEGINNING OF YEAR 6,491 39,967 235,260 7,416,822 FUND BALANCES, END OF YEAR $ 9,047 $ 97,462 $ 387,153 $ 7,535,633 EXHIBIT C-2 CONTINUED SPECIAL REVENUE Storm Hotel Water Court Court Red Light Occupancy Utility Security Technology Library Camera $ 949,652 $ - $ - $ - $ - $ - - 1,362,165 - - - - - - 36,378 48,475 - 856,100 - - - - 522 - 1,168 4,868 (512) (343) (6) (667) - - - - 13,788 - 950,820 1,367,033 35,866 48,132 14,304 855,433 - - - 6,267 - - - - - 5,936 - 633,165 753,227 - - - - - - - - - 22,181 - - 395,880 34,976 - - - 753,227 395,880 34,976 12,203 22,181 633,165 197,593 971,153 890 35,929 (7,877) 222,268 (173,820) (897,996) - - - (320,000) (173,820) (897,996) - - - (320,000) 23,773 73,157 890 35,929 (7,877) (97,732) 1,358,898 2,468,995 464,981 358,756 15,844 601,968 $ 1,382,671 $ 2,542,152 $ 465,871 $ 394,685 $ 7,967 $ 504,236 RYA CITY OF SOUTHLAKE, TEXAS EXHIBIT C-2 NON -MAJOR GOVERNMENTAL FUNDS CONCLUDED COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED SEPTEMBER 30, 2014 REVENUES Municipal sales tax Licenses, permits and fees Fines and forfeitures Grants Interest Contributions Miscellaneous Total revenues EXPENDITURES Current: Court technology Public safety Police services Cultural and recreation Parks and recreation Library services Capital outlay Debt service: Principal retirement Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over expenditures OTHER FINANCING SOURCES (USES) Proceeds from issuance of refunding bonds Premium on issuance of long term debt Payment to refund bond escrow agent Proceeds from the sale of property Transfers from other funds Transfers to other funds Total other financing sources (uses) NET CHANGE IN FUND BALANCES FUND BALANCES, BEGINNING OF YEAR FUND BALANCES, END OF YEAR SPECIAL DEBT CAPITAL REVENUE SERVICE PROJECTS Southlake Tax TOTAL Commercial Parks Increment NON -MAJOR Storm Water Oil and Vehicle Development Financing GOVERNMENTAL Maintenance Gas Enforcement Corporation District FUNDS $ $ $ $ $ $ 7,521,489 1,514,105 102,944 1,043,897 - 522 (340) (60) 6,166 (32) 19,080 - - - - 58,590 - - - - 167,612 (340) (60) 102,944 6,166 (32) 10,325,295 - 6,267 117,463 756,564 - 1,400,711 - 22,181 - 13,845 444,701 695,000 - 695,000 - 1,266,796 1,266,796 117,463 1,961,796 13,845 4,592,220 (340) (60) (14,519) (1,955,630) (13,877) 5,733,075 - - 16,000,000 16,000,000 625,501 625,501 (17, 659, 670) (17, 659, 670 ) - - 1,521 40,000 3,085,598 3,125,598 (7,360,127) 40,000 2,051,429 (5,267,177) (340) (60) 25,481 95,799 (13,877) 465,898 451,164 53,220 26,062 1,576,498 17,433 15,092,359 $ 450,824 $ 53,160 $ 51,543 $ 1,672,297 $ 3,556 $ 15,558,257 CITY OF SOUTHLAKE, TEXAS EXHIBIT C-3 PARKS DEDICATION SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2014 REVENUES: Park fees Interest Total revenues Excess of revenues over expenditures Fund balance at beginning of year Fund balance at end of year BUDGETED AMOUNTS ORIGINAL FINAL VARIANCE WITH FINAL BUDGET - POSITIVE ACTUAL (NEGATIVE) $ 30,000 $ 80,000 $151,940 $ 71,940 1,500 250 (47) (297) 31,500 80,250 151,893 71,643 31,500 80,250 151,893 71,643 235,260 235,260 235,260 - $ 266,760 $315,510 $387,153 $ 71,643 CITY OF SOUTHLAKE, TEXAS EXHIBIT C-4 SOUTHLAKE PARKS DEVELOPMENT CORPORATION SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2014 REVENUES: Municipal sales tax Miscellaneous Interest Total revenues EXPENDITURES Parks and recreation Excess of revenues over expenditures OTHER FINANCING USES: Transfers to other funds Excess (deficiency) of revenues over expenditures and other uses Fund balance at beginning of year Fund balance at end of year BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL VARIANCE WITH FINAL BUDGET - POSITIVE (NEGATIVE) $ 5,650,000 $ 6,400,000 $ 6,571,837 $ 171,837 153,816 153,816 153,824 8 14,000 7,500 8,945 1,445 5,817,816 6,561,316 6,734,606 173,290 732,976 657,865 647,484 10,381 5,084,840 5,903,451 6,087,122 183,671 (5,918,311) (5,968,311) (5,968,311) (833,471) (64,860) 118,811 7,416,822 7,416,822 7,416,822 183,671 $ 6,583,351 $ 7,351,962 $ 7,535,633 $ 183,671 70 CITY OF SOUTHLAKE, TEXAS EXHIBIT C-5 HOTEL OCCUPANCY SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2014 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Municipal sales tax Interest Total revenues EXPENDITURES: Parks and recreation Excess of revenues over expenditures OTHER FINANCING USES: Transfers to other funds Excess of revenues over expenditures and other uses Fund balance at beginning of year Fund balance at end of year $ 879,176 $ 914,343 $ 949,652 $ 35,309 2,000 500 1,168 668 881,176 914,843 950,820 35,977 846,844 832,803 753,227 79,576 34,332 82,040 197,593 115,553 (167,423) (173,820) (173,820) (133,091) (91,780) 23,773 1,358,898 1,358,898 1,358,898 115,553 $ 1,225,807 $1,267,118 $ 1,382,671 $ 115,553 71 CITY OF SOUTHLAKE, TEXAS EXHIBIT C-6 STORM WATER UTILITY SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2014 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Interest Licenses, permits and fees Total revenues EXPENDITURES: Capital outlay Excess of revenues over expenditures OTHER FINANCING USES: Transfers to other funds Excess of revenues over expenditures and other uses Fund balance at beginning of year Fund balance at end of year $ 1,500 $ 1,500 $ 4,868 $ 3,368 1,285,000 1,344,100 1,362,165 18,065 1,286,500 1,345,600 1,367,033 21,433 512,426 512,426 395,880 116,546 774,074 833,174 971,153 137,979 (895,632) (897,996) (897,996) (121,558) (64,822) 73,157 2,468,995 2,468,995 2,468,995 137,979 $ 2,347,437 $ 2,404,173 $ 2,542,152 $ 137,979 72 CITY OF SOUTHLAKE, TEXAS EXHIBIT C-7 RED LIGHT CAMERA SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2014 REVENUES: Fines and forfeitures Interest Total revenues EXPENDITURES: Public safety Excess of revenues over expenditures OTHER FINANCING USES Transfers to other funds Total other financing uses Deficiency of revenues over expenditures and other financing uses Fund balance, beginning of year Fund balance, end of year VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) $ 1,072,838 $ 831,278 $ 856,100 $ 24,822 1,500 200 (667) (867) 1,074,338 831,478 855,433 23,955 886,054 679,054 633,165 45,889 188,284 152,424 222,268 69,844 (170,000) (320,000) (320,000) - (170,000) (320,000) (320,000) - 18,284 (167,576) (97,732) 69,844 601,968 601,968 601,968 - $ 620,252 $ 434,392 $ 504,236 $ 69,844 73 CITY OF SOUTHLAKE, TEXAS EXHIBIT C-8 SOUTHLAKE PARKS DEVELOPMENT CORPORATION DEBT SERVICE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2014 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Interest $ 10,000 $ 10,000 $ 6,166 $ (3,834) Total revenues 10,000 10,000 6,166 (3,834) EXPENDITURES: Principal retirement 1,730,000 1,730,000 695,000 1,035,000 Interest and fiscal charges 1,357,098 1,357,098 1,266,796 90,302 Total expenditures 3,087,098 3,087,098 1,961,796 1,125,302 Deficiency of revenues over expenditures (3,077,098) (3,077,098) (1,955,630) 1,121,468 OTHER FINANCING SOURCES (USES): Proceeds from issuance of refunding bonds - - 16,000,000 16,000,000 Premium on issuance of long term debt 625,501 625,501 Payment to refund bond escrow agent - - (17,659,670) (17,659,670) Transfers from other funds 3,085,598 3,085,598 3,085,598 - Total other financing sources (uses) 3,085,598 3,085,598 2,051,429 (1,034,169) Excess of revenues and other financing sources over expenditures and other financing uses Fund balance, beginning of year Fund balance, end of year 8,500 8,500 95,799 87,299 1,576,498 1,576,498 1,576,498 $ 1,584,998 $1,584,998 $ 1,672,297 $ 87,299 74 AGENCYFUNDS The Agency Funds are used to account for resources held for others in a custodial capacity. The City maintains the following Agency Fund: Cash Escrow Agency Fund - accounts for the receipt and subsequent disbursement of deposits paid to the City by builders/developers. 75 CITY OF SOUTHLAKE, TEXAS EXHIBIT F-1 CASH ESCROW AGENCY FUND STATEMENT OF CHANGES IN ASSETS AND LIABILITIES FOR THE YEAR ENDED SEPTEMBER 30, 2014 Balance at Balance at Beginning End of Year Additions Deletions of Year ASSETS Cash and cash equivalents Investments Accrued interest receivable TOTAL ASSETS LIABILITIES Due to builders TOTAL LIABILITIES $ 50,895 $ 6,485 $ - $ 57,380 17,246 - 6,559 10,687 4 - 1 3 $ 68,145 $ 6,485 $ 6,560 $ 68,070 $ 68,145 $ (75) $ - $ 68,070 $ 68,145 $ (75) $ - $ 68,070 76 CITY OF SOUTHLAKE, TEXAS EXHIBIT G-1 COMPARATIVE SCHEDULES OF CAPITAL ASSETS BY SOURCE SEPTEMBER 30, 2014 AND 2013 General capital assets Land and improvements Buildings and improvements Equipment Infrastructure Construction in progress Total capital assets Investment in general capital assets Capital projects funds General and other fund revenues Gifts Total investment in capital assets 2014 $ 107,689,400 80,973,121 25,163,356 241, 075, 749 21,821,618 2013 $ 105,818,535 65,400,295 23,420,603 237,799,672 26,140,494 $ 476,723,244 $ 458,579,599 $ 350,478,620 $ 337,799,126 80,231,223 79,203,418 46,013,401 41,577,055 $ 476,723,244 $ 458,579,599 77 CITY OF SOUTHLAKE, TEXAS EXHIBIT G-2 SCHEDULE OF CHANGES IN CAPITAL ASSETS BY FUNCTION AND ACTIVITY FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2014 Capital Capital Assets Assets October 1, September 30, Function and Activity 2013 Additions Deductions 2014 General government $ 187,302,817 $ 169,590 $ - $ 187,472,407 Public safety 59,242,528 18,765,513 (16,353,388) 61,654,653 Public works 212,034,254 16,655,161 (1,093,231) 227,596,184 Total capital assets $ 458,579,599 $ 35,590,264 $ (17,446,619) $ 476,723,244 General Public Public Government Safety Works Total Land and improvements $ 2,418,798 $ 4,303,925 $ 100,966,677 $ 107,689,400 Buildings and improvements 25,818,684 48,666,203 6,488,234 80,973,121 Equipment 6,166,285 8,528,626 10,468,445 25,163,356 Infrastructure 153,068,640 114,414 87,892,695 241,075,749 Construction in Progress - 41,485 21,780,133 21,821,618 Total $ 187,472,407 $ 61,654,653 $ 227,596,184 $ 476,723,244 78 STATISTICAL SECTION STATISTICAL SECTION This part of the City of Southlake's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, notes disclosures, and required supplementary information says about the City's overall financial health. This information has not been audited by the independent auditor. Contents Table #s Financial Trends 1, 2, 3 & 4 These tables contain trend information to help the reader understand how the City's financial performance and well-being have changed over time. Revenue Capacity 5, 6, 7 & 8 These tables contain information to help the reader assess the City's two most significant local revenue sources, the property and sales taxes. Debt Capacity 9, 10, 11 & 12 These tables present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future. Economic and Demographic Information 13 & 14 These tables offer economic and demographic indicators to help the reader understand the environment within which the City's financial activities take place. Operating Information 15, 16 & 17 These tables contain service and infrastructure data to help the reader understand how the information in the City's financial report relates to the services the City provides. Source: Unless otherwise noted, the information in these tables is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in fiscal year 2003: tables presenting government -wide information include information beginning in that year. CITY OF SOUTH LAKE, TEXAS NET POSITION BY COMPONENT LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) Fiscal Year 2005 2006 2007 2008 Governmental activities Net investment in capital assets $ 188,066,133 $ 190,896,842 $ 209,824,992 $ 222,046,528 Restricted 3,448,724 4,050,884 6,076,676 6,499,447 Unrestricted 38,254,925 52,221,446 59,208,874 75,986,531 Total governmental activities net position $ 229,769,782 $ 247,169,172 $ 275,110,542 $ 304,532,506 Business -type activities Net investment in capital assets $ 38,279,220 $ 42,821,538 $ 50,177,976 $ 47,834,458 Restricted - - - - Unrestricted 19,016,836 23,951,465 23,777,277 29,794,140 Total business -type activities net position $ 57,296,056 $ 66,773,003 $ 73,955,253 $ 77,628,598 Primary government Net investment in capital assets $ 226,345,353 $ 233,718,380 $ 260,002,968 $ 269,880,986 Restricted 3,448,724 4,050,884 6,076,676 6,499,447 Unrestricted 57,271, 761 76,172, 911 82, 986,151 105, 780,671 Total primary governmental net position $ 287,065,838 $ 313,942,175 $ 349,065,795 $ 382,161,104 Source: Comprehensive Annual Financial Report 79 TABLE 1 Fiscal Year 2009 2010 2011 2012 2013 2014 $ 246,238,808 $ 277,985,305 $ 298,418,769 $ 291,690,099 $ 324,928,883 $ 338,303,633 7,850,231 8,814,621 9,739,189 67,444,322 15,178,798 15,092,604 69,949,380 58,438,700 53,157,494 16,726,782 50,356,758 58,732,145 $ 324,038,419 $ 345,238,626 $ 361,315,452 $ 375,861,203 $ 390,464,439 $ 412,128,382 $ 60,541,445 $ 65,039,374 $ 68,911,163 $ 67,918,830 $ 70,968,919 $ 73,126,147 21,171,185 18,831,525 17,613,924 18,908,505 17,673,963 16,085,060 $ 81,712,630 $ 83,870,899 $ 86,525,087 $ 86,827,335 $ 88,642,882 $ 89,211,207 $ 306,780,253 $ 343,024,679 $ 367,329,932 $ 359,608,929 $ 395,897,802 $ 411,429,780 7,850,231 8,814,621 9,739,189 67,444,322 15,178,798 15,092,604 91,120,565 77,270,225 70,771,418 35,635,287 68,030,721 74,817,205 $ 405,751,049 $ 429,109,525 $ 447,840,539 $ 462,688,538 $ 479,107,321 $ 501,339,589 :S, CITY OF SOUTHLAKE, TEXAS CHANGES IN NET POSITION, LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) Fiscal Year 2005 2006 2007 2008 2009 Expenses Governmental activities: General government $ 5,926,466 $ 8,465,930 $ 9,833,572 $ 4,406,913 $ 11,068,965 Public safety 10,548,265 10,965,357 11,729,107 12,770,012 12,920,263 Public works 3,470,227 3,707,519 4,813,692 8,669,156 5,840,432 Culture and recreation 4,463,075 5,085,976 5,510,247 5,911,730 6,439,100 Interest on long-term debt 5,003,130 5,052,472 5,804,295 5,506,967 5,854,931 Total governmental activities expenses 29,411,163 33,277,254 37,690,913 37,264,778 42,123,691 Business -type activities: Water and sewer 14,130,259 16,168,430 14,729, 469 17,689,865 18,066,346 Total business -type activities expenses 14,130,259 16,168,430 14,729,469 17,689,865 18,066,346 Total primary government expenses $ 43,541,422 $ 49,445,684 $ 52,420,382 $ 54,954,643 $ 60,190,037 Program Revenues Governmental activities Charges for Services: General government $ 1,321,236 $ 1,956,949 $ 1,778,215 $ 1,340,864 $ 1,949,993 Public safety 2,151,270 1,873,524 2,979,947 2,843,923 2,633,437 Public works 250,760 411,381 223,329 199,833 68,369 Culture and recreation 752,062 813,837 1,156,965 1,269,571 1,369,725 Operating grants and contributions 319,593 459,688 304,246 241,144 239,364 Capital grants and contributions 3,639,953 3,575,240 11,425,990 5,690,613 1,833,160 Total governmental activities program revenues 8,434,874 9,090,619 17,868,692 11,585,948 8,094,048 Business -type activities: Charges for services: Water and sewer 16,100,215 20,180,636 15,414,131 18,543,025 19,321,095 Capital grants and contributions 2,471,700 3,510,000 5,589,196 3,748,161 2,212,867 Total business -type activities program revenues 18,571,915 23,690,636 21,003,327 22,291,186 21,533,962 Total primary government program revenues $ 27,006,789 $ 32,781,255 $ 38,872,019 $ 33,877,134 $ 29,628,010 Net (Expenses) Revenue Governmental activities $ (20,976,289) $ (24,186,635) $ (19,822,221) $ (25,678,830) $ (34,029,643) Business -type activities 4,441,656 7,522,206 6,273,858 4,601,321 3,467,616 Total primary government net expenses $ (16,534,633) $ (16,664,429) $ (13,548,363) $ (21,077,509) $ (30,562,027) General Revenues and Other Changes in Net Position Governmental activities- Taxes - Property taxes $ 19,604,411 $ 21,439,614 $ 24,509,730 $ 28,950,945 $ 30,911,161 Sales taxes 12,503,357 16,040,418 16,931,180 18,781,043 17,256,272 Franchise taxes 2,015,893 1,983,381 2,435,803 2,654,701 2,816,111 Interest on investments 860,725 2,591,520 3,598,458 3,128,226 1,703,418 Gain (Loss) on sale of capital assets (33,071) 35,317 - - 167,127 Transfers - - 275,595 229,436 341,957 Miscellaneous 7,008 166,789 8,688 52,023 339,510 Total governmental activities 34,958,323 42,257,039 47,759,454 53,796,374 53,535,556 Business -type activities: Interest on investments 412,793 1,024,603 1,183,987 594,891 953,739 Gain (Loss) on sale of capital assets - 930,138 (3,396) - - Transfers - (275,595) (229,436) 2,187 Miscellaneous - - - 10,989 (339,510) Total business -type activities 412,793 1,954,741 904,996 376,444 616,416 Total primary government $ 35,371,116 $ 44,211,780 $ 48,664,450 $ 54,172,818 $ 54,151,972 Change in Net Position Governmental activities $ 13,982,034 $ 18,070,404 $ 27,937,233 $ 28,117,544 $ 19,505,913 Business -type activities 4,854,449 9,476,947 7,178,854 4,977,765 4,084,032 Total primary government $ 18,836,483 $ 27,547,351 $ 35,116,087 $ 33,095,309 $ 23,589,945 Source: Comprehensive Annual Financial Report 81 TABLE 2 Fiscal Year 2010 2011 2012 2013 2014 $ 11,814,836 $ 13,754,529 $ 13,277,006 $ 12,892,140 $ 13,417,904 14,885,499 15,144,173 15,891,911 18,425,878 18,245,617 5,767,688 6,279,687 6,399,819 8,528,331 8,870,998 7,287,434 7,897,173 8,158,291 8,829,394 8,948,841 6,515,269 5,638,272 5,865,798 6,747,628 5,097,036 46,270,726 48,713,834 49,592,825 55,423,371 54,580,396 18,948,438 20,724,651 22,530,688 22,119,518 25,030,426 18,948,438 20,724,651 22,530,688 22,119,518 25,030,426 $ 65,219,164 $ 69,438,485 $ 72,123,513 $ 77,542,889 $ 79,610,822 $ 2,476,000 $ 2,616,321 $ 2,575,773 $ 2,755,038 $ 2,657,883 2,706,847 2,818,913 3,744,708 3,650,079 3,907,068 240,916 71,129 179,094 291,926 360,529 1,387,558 1,384,823 1,400,794 1,422,552 1,379,658 688,803 532,100 200,434 639,230 443,157 5,994,206 2,309,613 518,617 2,244,965 4,436,346 13,494,330 9,732,899 8,619,420 11,003,790 13,184,641 18,897,356 22,571,056 22,451,738 22,806,432 23,591,438 2,578,400 1,433,278 1,214,395 1,981,354 3,510,936 21,475,756 24,004,334 23,666,133 24,787,786 27,102,374 $ 34,970,086 $ 33,737,233 $ 32,285,553 $ 35,791,576 $ 40,287,015 $ (32,776,396) $ (38,980,935) $ (40,973,405) $ (44,419,581) $ (41,395,755) 2,527,318 3,279,683 1,135,445 2,668,268 2,071,948 $ (30,249,078) $ (35,701,252) $ (39,837,960) $ (41,751,313) $ (39,323,807) $ 32,298,360 $ 31,568,583 $ 31,166,847 $ 31,844,930 $ 33,099,007 17,610,781 18,969,870 20,076,478 22,659,917 26,623,661 2,606,248 2,783,279 2,598,074 2,646,394 2,841,025 414,852 258,556 232,722 30,110 482,607 21,465 26,741 91,134 89,923 99,109 596,093 791,830 890,220 915,475 915,116 428,804 658,902 463,681 836,068 639,571 53,976,603 55,057,761 55,519,156 59,022,817 64,700,096 155,173 123,872 46,212 25,227 101,469 (596,093) (791,830) (890,220) (915,475) (915,116) 71,871 42,463 10,811 37,527 6,963 (369,049) (625,495) (833,197) (852,721) (806,684) $ 53,607,554 $ 54,432,266 $ 54,685,959 $ 58,170,096 $ 63,893,412 $ 21,200,207 $ 16,076,826 $ 14,545,751 $ 14,603,236 $ 23,304,341 2,158,269 2,654,188 302,248 1,815,547 1,265,264 $ 23,358,476 $ 18,731,014 $ 14,847,999 $ 16,418,783 $ 24,569,605 RVA LL v (n z OH z z LL O J U HQ z LL Cn � 'O^ �Q/ VI W L Fn !'r> CO Q W O J LU Q } J 2 W U V P V U Cn OQQLLw cn<w CoLL ~ D O 0 z0inz ULL-J- I� N M M� � O V M N O O) 0 0) (O V O) V (O N (O V ' ' ' ' ' ' ' ' ' ' M (O 2 O fA fA fA fA V O N N N O N N O M V V N (O V ' ' ' ' ' ' ' ' ' ' N N N 2 O MN (O M N M fA fA fA fA ' ' ' ' ' ' ' ' ' ' CO I� M 2 O� N M I� O r O (O O) M M M M � N � � O fA fA fA fA V M M O N E N r (O O O M (O N � M ' ' V O� O) � I� N � O I� V� (O � I� M � O I� (O ' ' ' ' ' ' ' ' ' ' (O I� O M B M O O) O) M O M V I� fA fA fA fA V I� fA fA fA fA fA fA fA fA V CO fA fA fA fA COO CO V CEO N CNO � O O N � fA fA fA fA COO O- O LO O m fA fA fA fA � ''6 0 Q (6 a a� T LL a w 0 WT WT� w o�� a�� m 1. �� aw a N N UI a a Y w N N a" E �>-, > �r�.� ���oa�� �Q oE��a�� � �= oz� zx 2 E U a�x m� F m o c �- E o o wl ow m� Z w w E .w) m .E -o m- Z o w a o� o -o w Ea a U��U m w °' > u, U EaaOU� ww0aaU� UO U U,- Z U Q �� C7[ U o LL m u s m a o O o z o oZ a M co It w � � � \| m 0 2 D LL � Zo wZ �w 22 >k R< (LL C/)qO m 27m w��� �,Q LU / D D _j 2 D « �LLU�� 0—<LL5 mm02w � 0woILP Zk in «k o lo \�o \f ) a -o wm \ww 2\!`£)°\ E wo § - 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