Independence Events Center Community Improvement District (A Component Unit of the City of Independence, Missouri)

Transcription

1 Independence Events Center Community Improvement District (A Component Unit of the City of Independence, Missouri) Financial Report June 30, 2016

2 Contents Independent auditor s report 1-2 Basic financial statements: Government-wide financial statements: Statement of net position governmental activities 3 Statement of activities governmental activities 4 Fund financial statements: Balance sheet General Fund 5 Statement of revenues, expenditures and changes in fund balance General Fund 6 Notes to basic financial statements 7-11 Required supplementary information: Schedule of revenues, expenditures and changes in fund balance budget and actual General Fund 12 Note to required supplementary information 13

3 Independent Auditor's Report To the Board of Directors Independence Events Center Community Improvement District Independence, Missouri Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities and the major fund of the Independence Events Center Community Improvement District (the District), a component unit of the City of Independence, Missouri, as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the District 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 from 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. 1

4 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and the major fund of the District as of June 30, 2016, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the General Fund budgetary comparison information on page 12 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. Management has omitted Management s Discussion and Analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing 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 the financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. Our opinion on the basic financial statements is not affected by this missing information. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 19, 2016 on our consideration of the District 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 District s internal control over financial reporting and compliance. Kansas City, Missouri December 19,

5 Statement of Net Position - Governmental Activities June 30, 2016 Assets Cash $ 3,384,399 Taxes receivable 902,023 Total assets $ 4,286,422 Liabilities, due to City of Independence (See Note 4) $ 18,629 Net position, restricted 4,267,793 Total liabilities and net position $ 4,286,422 See notes to basic financial statements. 3

6 Statement of Activities - Governmental Activities For the Year Ended June 30, 2016 Expenses: Governmental activities: Payments to City of Independence - debt service and economic activities taxes $ 4,397,238 Economic development 126,718 Total expenses 4,523,956 General revenues: Sales tax 5,741,439 Investment income 10,879 Total revenues 5,752,318 Change in net position 1,228,362 Net position, beginning of year 3,039,431 Net position, end of year $ 4,267,793 See notes to basic financial statements. 4

7 Balance Sheet - General Fund June 30, 2016 Assets Cash $ 3,384,399 Taxes receivable 902,023 Total assets $ 4,286,422 Liabilities and fund balance Liabilities, due to City of Independence (See Note 4) $ 18,629 Fund balances, restricted 4,267,793 Total liabilities and fund balance $ 4,286,422 See notes to basic financial statements. 5

8 Statement of Revenues, Expenditures and Changes in Fund Balance - General Fund For the Year Ended June 30, 2016 Revenues: Sales taxes $ 5,741,439 Investment income 10,879 Total revenues 5,752,318 Expenditures: Current: Payments to City of Independence - debt service and economic activities taxes 4,397,238 Professional services and other expenditures 126,718 Total expenditures 4,523,956 Excess of revenues over expenditures 1,228,362 Fund balance, beginning of year 3,039,431 Fund balance, end of year $ 4,267,793 See notes to basic financial statements. 6

9 Notes to Basic Financial Statements Note 1. Summary of Significant Accounting Policies Reporting entity: The Independence Events Center Community Improvement District (the District) was established on December 20, 2007 under the Missouri Community Improvement District Act, Sections to of the Revised Statutes of Missouri. The District was created to levy certain taxes for the purpose of funding certain public improvements and services that serve the property within the District. The District is the basic level of government which has financial accountability and control over the activities related to the funding of the improvements. The accounting and reporting policies of the District conform to accounting principles generally accepted in the United States of America. The more significant accounting and reporting policies and practices employed by the District are what follow. Generally accepted accounting principles require that the basic financial statements present the District and its component units. Component units are required to be included in the District s reporting entity because of the significance of their operational or financial relationships with the District. Based on the evaluation criteria, there are no component units related to the District which should be accounted for in the basic financial statements. The District is a component unit of the City of Independence, Missouri and is included in the City s comprehensive annual financial report as a blended component unit. Basis of presentation: The District s basic financial statements include both government-wide (reporting the District as a whole) and fund financial statements (reporting the District s major fund). Government-wide financial statements: The statement of net position and the statement of activities display information about the District, the primary government, as a whole. Governmental activities are generally financed through taxes. The government-wide statement of activities presents a comparison between expenses and program revenues for each program of the governmental activities. Expenses are specifically associated with a service, program or department and are therefore clearly identifiable to a particular function. Program revenues include charges paid by the recipients of the goods or services offered by the programs and grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues are presented as general revenues. The comparison of program revenues and expenses identifies the extent to which each program is self-financing or draws from the general revenues of the District. The government-wide focus is more on the sustainability of the District as an entity and the change in the District s net position resulting from the current year s activities. Fund financial statements: Fund financial statements report detailed information about the District. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. The District maintains one governmental fund, the General Fund, which accounts for all the resources of the District. 7

10 Notes to Basic Financial Statements Note 1. Summary of Significant Accounting Policies (Continued) Measurement focus and basis of accounting: Government-wide financial statements: The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Non-exchange transactions, in which the District gives (or receives) value without directly receiving (or giving) equal value in exchange include sales tax, grants, and donations. Revenues from sales taxes are recognized at the time the underlying taxable event occurs. Revenues from grants and donations are recognized in the fiscal year in which all eligibility requirements have been satisfied. Because the criteria for measurement and recognition of revenues and expenses differ at the government-wide level and the fund level, there may be differences between the amounts recorded on these financial statements. Therefore, the governmental fund financial statements include a reconciliation with brief explanations to better identify the relationship between the government-wide statements and the statements for governmental funds. For the year ending June 30, 2016, there were no differences between the statements. Governmental fund financial statements: All governmental funds are accounted for using the modified accrual basis of accounting and the current financial resources measurement focus. Under this basis, revenues are recognized in the accounting period in which they become measurable and available. Expenditures are recognized in the accounting year in which the fund liability is incurred, if measurable. Revenue recognition: In applying the susceptible to accrual concept under the modified accrual basis, certain revenue sources are deemed both measurable and available (collectible within the current year or within sixty (60) days of year-end and available to pay obligations of the current period). This includes investment earnings and sales taxes. Expenditure recognition: The measurement focus of governmental fund accounting is on decreases in net financial resources (expenditures) rather than expenses. Most expenditures are measurable and are recorded when the related fund liability is incurred. However, principal and interest on long-term debt, which have not matured are recognized when due. Allocations of cost, such as depreciation and amortization, are not recognized in the governmental funds. Capital assets: Capital assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated assets are recorded at estimated fair value as of the date of the donation. Capital assets are defined by the District as assets with an initial, individual cost of $1,000 or more, and an estimated useful life of greater than one year. Additions or improvements and other capital outlays that significantly extend the useful life of an asset, or that significantly increase the capacity of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. As of June 30, 2016, the District does not have any capital assets. Fund balances/net position: In the fund financial statements, governmental funds may report the following fund balance classifications: Nonspendable: This consists of amounts that cannot be spent because they are either not in spendable form or legally or contractually required to be maintained intact. 8

11 Notes to Basic Financial Statements Note 1. Summary of Significant Accounting Policies (Continued) Restricted: This consists of amounts where constraints are placed on the use of those resources which are either externally imposed by creditors, grantors, contributors, laws or regulations of other governments, or imposed by law through constitutional provisions or enabling legislation. Committed: This consists of amounts which can only be used for specific purposes pursuant to constraints imposed by formal action of the Board of Directors of the District. Assigned: This consists of amounts which are constrained by District s management with Board of Director s approval, intent for these to be used for a specific purpose but are neither formally restricted by external sources nor committed by Board of Director s action. Unassigned: This consists of the residual fund balance that does not meet the requirements for the non-spendable, restricted, committed or assigned classifications. The District first utilizes restricted resources to finance qualifying activities. All of the District s fund balance is considered restricted. Net position: In the government-wide statements, equity is shown as net position and classified into three components: Net investment in capital assets: Consisting of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgage notes or other borrowings, if any, that are attributable to the acquisition, construction or improvement of those assets. The District currently does not have any net assets classified as net investment in capital assets. Restricted net position: Consisting of net position with constraints placed on its use either by (1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments; or (2) law through constitutional provisions or enabling legislation. The District first utilizes restricted resources to finance qualifying activities. Unrestricted net position: All other net position that does not meet the definition of restricted or net investment in capital assets. All of the District s net position is considered restricted. Use of estimates: The preparation of basic 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 basic financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 9

12 Notes to Basic Financial Statements Note 2. Deposits Missouri State Statutes authorize the District, with certain restrictions, to deposit funds in open accounts and time deposits and to invest in certificates of deposit; bonds of the state of Missouri, of the United States or of any wholly-owned corporation of the United States; or in other short-term obligations of the United States. Statutes also require that collateral pledged against deposits must have a fair value equal to 100 percent of the funds on deposit, less insured amounts. Collateral securities must be held by the District or an independent third party and must be of the kind prescribed by State Statutes and approved by the State. Custodial credit risk: The custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, the District will not be able to recover deposits or will not be able to recover collateral securities that are in the possession of an outside party. The District does not have a policy with respect to the management of custodial credit risk on cash deposits. As of June 30, 2016, the District s deposits were insured by Federal depository insurance and uninsured deposits were fully collateralized by securities held in the District s name by their financial institution s agent. Note 3. Sales Tax Revenues Qualified voters of the District approved up to a maximum one percent sales tax on retail sales for a period of thirty-five years in the District (CID sales taxes). The District s current tax rate is three-quarters of one percent. Note 4. City of Independence, Missouri The City of Independence, Missouri (the City) provides administrative support to the District. As compensation for this support, the City receives an administration fee equal to 2 percent of total CID sales taxes collected. For the year ended June 30, 2016, administrative fees totaled $114,874, of which $18,629 was due to the City as of June 30, Additionally, portions of the District s boundaries are located within several of the City s tax increment financing districts (TIF Districts). Because portions of the District exist within the boundaries of the TIF Districts, a portion of the CID sales taxes collected are remitted to the TIF districts as economic activity taxes (EATS) under Missouri Statute (the Property Tax Increment Allocation Redevelopment Act ). For the year ended June 30, 2016, CID sales taxes associated with the related TIF Districts totaled $891,764 and was transferred to the City s TIF Fund. The CID also transferred $3,505,474 to the City for debt service payments related to the Events Center revenue bonds. Note 5. Events Center Revenue Bonds Series 2008, 2011 and 2012 Revenue Bonds: The City has issued various bonds totaling $93,085,000 related to the Independence Event Center (the Project). The bonds mature annually through 2038 in amounts ranging from $30,000 to $12,540,000 with interest rates of 2.0 percent to 5.75 percent. The District has assessed and is responsible for collecting a one-half cent sales tax which will primarily be used to pay debt service costs associated with these bond issues. In addition, the agreements governing the TIF Districts have been amended to redirect the EATS portion of the CID sales taxes to be used to pay debt service costs of these bonds. 10

13 Notes to Basic Financial Statements Note 5. Events Center Revenue Bonds (Continued) The City has elected to report the obligation for these bonds within its own financial statements. Accordingly, the District has not reported any obligation for these bonds in its financial statements. A summary of the Events Center Revenue Bonds activity for the year ended June 30, 2016, is as follows: Beginning Ending Due in Balance Increases Decreases Balance One Year Revenue bonds $ 90,555,000 $ - $ 730,000 $ 89,825,000 $ 830,000 Premium on bonds payable 151,379-6, ,725 - Discount on bonds payable (263,656) - (11,589) (252,067) - $ 90,442,723 $ - $ 725,065 $ 89,717,658 $ 830,000 $12,325,000 Series 2008 D semiannual installments of $30,000 to $410,000 through 2038; interest at 4.00% to 5.75% $ 10,820,000 $11,815,000 Series 2011 A annual installments of $70,000 to $1,585,000 through 2038; interest at 2.00% to 5.50% 11,255,000 $68,945,000 Series 2012 C annual installments of $105,000 to $12,540,000 through 2038; interest at 2.00% to 4.00% 67,750,000 $ 89,825,000 Scheduled maturities: The following is a schedule of maturities for the Events Center Revenue Bonds: Year Ending June 30: Principal Interest Total 2017 $ 830,000 $ 4,094,094 $ 4,924, ,000 4,063,931 5,028, ,055,000 4,022,981 5,077, ,210,000 3,976,706 5,186, ,370,000 3,923,906 5,293, ,450,000 18,611,056 28,061, ,635,000 16,013,481 35,648, ,135,000 10,211,669 43,346, ,175,000 1,679,050 23,854,050 $ 89,825,000 $ 66,596,874 $ 156,421,874 11

14 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - General Fund For the Year Ended June 30, 2016 Original Variance and Final with Budget Actual Budget Revenues: Sales taxes $ 5,505,540 $ 5,741,439 $ 235,899 Investment income 4,200 10,879 6,679 Total revenues 5,509,740 5,752, ,578 Expenditures: Current: Payments to City of Independence - debt service and economic activities taxes 4,849,116 4,397, ,878 Professional services and other expenditures 122, ,718 (4,412) Total expenditures 4,971,422 4,523, ,466 Excess of revenues over expenditures $ 538,318 1,228,362 $ 690,044 Fund balance, beginning of year 3,039,431 Fund balance, end of year $ 4,267,793 See note to required supplementary information. 12

15 Note to Required Supplementary Information Note 1. Basis of Accounting Budgetary Schedule The annual budget is prepared under the modified accrual basis of accounting and is adopted prior to the beginning of each fiscal year for the General Fund. Under Missouri state law, control of budget appropriations is exercised at the fund level. 13

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