OFFICIAL STATEMENT $6,235,000 CITY OF DODGE CITY, KANSAS GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS SERIES 2013-A

Transcription

1 OFFICIAL STATEMENT NEW ISSUE BOOK-ENTRY ONLY RATING: S&P A+ See Bond Ratings herein In the opinion of Gilmore & Bell, P.C., Bond Counsel, under existing law and assuming continued compliance with certain requirements of the Internal Revenue Code of 1986, as amended (the Code ): (1) the interest on the Bonds is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; (2) the interest on the Bonds is exempt from income taxation by the State of Kansas; and (3) the Bonds are qualified tax-exempt obligations within the meaning of Code 265(b)(3). See TAX MATTERS Opinion of Bond Counsel in this Official Statement. 6,235,000 CITY OF DODGE CITY, KANSAS GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS SERIES 2013-A Dated: December 12, 2013 Due: September 1, As shown on the inside cover The General Obligation Refunding and Improvement Bonds, Series 2013-A (the Bonds ) will be issued by the City of Dodge City, Kansas (the Issuer ), as fully registered bonds, without coupons, and, when issued, will be registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company ( DTC ), New York, New York. DTC will act as securities depository for the Bonds. Purchases of the Bonds will be made in book-entry form, in the denominations of 5,000 or any integral multiple thereof (the Authorized Denomination ). Purchasers will not receive certificates representing their interests in Bonds purchased. So long as Cede & Co. is the registered owner of the Bonds, as nominee of DTC, references herein to the Bond owners or registered owners shall mean Cede & Co., as aforesaid, and shall not mean the Beneficial Owners (as herein defined) of the Bonds. Principal will be payable annually on September 1, beginning in 2014, and semiannual interest will be payable on March 1 and September 1, beginning on March 1, 2014 (the Interest Payment Dates ). Principal will be payable upon presentation and surrender of the Bonds by the registered owners thereof at the office of the Treasurer of the State of Kansas, Topeka, Kansas, as paying agent and bond registrar (the Paying Agent and Bond Registrar ). Interest payable on each Bond shall be paid to the persons who are the registered owners of the Bonds as of the close of business on the fifteenth day (whether or not a business day) of the calendar month preceding each interest payment date by check or draft of the Paying Agent mailed to such registered owner, or in the case of an interest payment to a registered owner of 500,000 or more in aggregate principal amount of Bonds, by electronic transfer. So long as DTC or its nominee, Cede & Co., is the Owner of the Bonds, such payments will be made directly to DTC. DTC is expected, in turn, to remit such principal and interest to the DTC Participants (herein defined) for subsequent disbursement to the Beneficial Owners. The Bonds and the interest thereon will constitute general obligations of the Issuer, payable from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the Issuer. MATURITY SCHEDULE LISTED ON INSIDE COVER PAGE At the option of the Issuer, Bonds maturing on September 1, 2021, and thereafter will be subject to redemption and payment prior to maturity on September 1, 2020, or thereafter as described herein. See THE BONDS - Redemption Provisions herein. The Bonds are offered when, as and if issued by the Issuer, subject to the approval of legality by Gilmore & Bell, P.C., Wichita, Kansas, Bond Counsel. Certain other legal matters will be passed upon by Ken Strobel, Esq., counsel for the Issuer. It is expected that the Bonds will be available for delivery through the facilities of DTC on or about December 12, THE COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. THE COVER PAGE IS NOT A SUMMARY OF THIS ISSUE. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT, INCLUDING ALL APPENDICES ATTACHED HERETO TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. APPENDIX C SUMMARY OF FINANCING DOCUMENTS CONTAINS DEFINITIONS USED IN THIS OFFICIAL STATEMENT. The date of this Official Statement is November 18, 2013.

2 6,235,000 CITY OF DODGE CITY, KANSAS GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS SERIES 2013-A Stated Maturity September 1 MATURITY SCHEDULE Principal Amount Annual Rate of Interest Yield , % 0.350% UJ , % 0.450% UK , % 0.650% UL , % 0.950% UM , % 1.200% UN , % 1.450% UP , % 1.800% UQ , % 2.050% UR , % 2.250% US , % 2.350% UT , % 2.500% UU , % 2.600% UV , % 2.800% UW , % 2.800% UX , % 3.000% UY 9 (All plus accrued interest, if any) CUSIP (1) Number (Base: ) (1) CUSIP numbers have been assigned to this issue by Standard & Poor's CUSIP Service Bureau, a division of McGraw Hill Financial Inc., and are included solely for the convenience of the Owners of the Bonds. Neither the Issuer nor the Underwriter shall be responsible for the selection or correctness of the CUSIP numbers set forth above.

3 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE BONDS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE BONDS ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION. THE REGISTRATION, QUALIFICATION OR EXEMPTION OF THE BONDS IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTIONS IN WHICH THESE SECURITIES HAVE BEEN REGISTERED, QUALIFIED OR EXEMPTED SHOULD NOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THESE JURISDICTIONS NOR ANY OF THEIR AGENCIES HAVE GUARANTEED OR PASSED UPON THE SAFETY OF THE BONDS AS AN INVESTMENT, UPON THE PROBABILITY OF ANY EARNINGS THEREON OR UPON THE ACCURACY OR ADEQUACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE. THIS OFFICIAL STATEMENT CONTAINS STATEMENTS THAT ARE FORWARD-LOOKING STATEMENTS AS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF WHEN USED IN THIS OFFICIAL STATEMENT, THE WORDS ESTIMATE, INTEND, EXPECT AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED IN SUCH FORWARD-LOOKING STATEMENTS. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF. IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED.

4 CITY OF DODGE CITY, KANSAS City Hall 806 2nd Avenue Dodge City, Kansas (620) ELECTED OFFICIALS E. Kent Smoll, Mayor & Commissioner Joyce Warshaw, Commissioner Brian Delzeit, Commissioner Rick Sowers, Commissioner Jim Lembright, Commissioner ADMINISTRATIVE OFFICERS CITY MANAGER AND CITY ATTORNEY Ken W. Strobel, Esq. DIRECTOR OF FINANCE, CITY CLERK AND TREASURER Nannette Pogue PUBLIC WORKS SUPERINTENDENT Corey Keller FINANCIAL ADVISOR Stifel, Nicolaus & Company, Inc. Wichita, Kansas BOND COUNSEL Gilmore & Bell, P.C. Wichita, Kansas CERTIFIED PUBLIC ACCOUNTANTS Kennedy, McKee & Company, LLP Dodge City, Kansas UNDERWRITER Country Club Bank Prairie Village, Kansas (i)

5 No dealer, broker, salesman or other person has been authorized by the Issuer or the Underwriter to give any information or to make any representations with respect to the Bonds other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein concerning the Issuer has been furnished by the Issuer and other sources which are believed to be reliable, but such information is not guaranteed as to accuracy or completeness. The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the Federal Securities Laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Issuer since the date hereof. This Official Statement does not constitute a contract between the Issuer or the Underwriter and any one or more of the purchasers, Owners or Beneficial Owners of the Bonds. TABLE OF CONTENTS INTRODUCTION... 1 THE BONDS... 1 THE DEPOSITORY TRUST COMPANY... 6 THE PROJECTS... 7 THE REFUNDING PLAN... 7 SOURCES AND USES OF FUNDS... 8 RISK FACTORS AND INVESTMENT CONSIDERATIONS... 8 BOND RATINGS... 9 ABSENCE OF LITIGATION LEGAL MATTERS TAX MATTERS FINANCIAL ADVISOR UNDERWRITING AUTHORIZATION OF OFFICIAL STATEMENT APPENDIX A INFORMATION CONCERNING THE ISSUER... A-1 General... A-1 Economic Information... A-2 Financial Information... A-5 Debt Structure... A-12 APPENDIX B FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS (FOR THE FISCAL YEAR ENDED 12/31/2012)... B-1 APPENDIX C SUMMARY OF FINANCING DOCUMENTS... C-1 [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] Page (ii)

6 OFFICIAL STATEMENT 6,235,000 CITY OF DODGE CITY, KANSAS GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS SERIES 2013-A INTRODUCTION General Matters The purpose of this Official Statement is to furnish information relating to the City of Dodge City, Kansas (the Issuer or the City ), and the General Obligation Refunding and Improvement Bonds, Series 2013-A (the Bonds ), of the Issuer, dated December 12, 2013 (the Dated Date ). The Appendices to this Official Statement are integral parts of this document, to be read in their entirety. The Issuer is a municipal corporation duly organized and existing under the laws of the State of Kansas (the State ). Additional information regarding the Issuer is contained in APPENDIX A to this Official Statement. The materials contained on the cover page, in the body and in the Appendices to this Official Statement are to be read in their entirety. All financial and other information presented herein has been compiled by the Issuer. The presentation of information herein, including tables of receipts from various taxes, is intended to show recent historic information, and is not intended to indicate future or continuing trends in the financial position or other affairs of the Issuer. No representation is made that past experience, as might be shown by such financial or other information, will necessarily continue or be repeated in the future. Except to the extent described under the section captioned LEGAL MATTERS, Bond Counsel expresses no opinion as to the accuracy or sufficiency of any other information contained herein. Definitions Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in APPENDIX C SUMMARY OF FINANCING DOCUMENTS. Continuing Disclosure The Securities and Exchange Commission (the SEC ) has promulgated amendments to Rule 15c2-12 (the Rule ), requiring continuous secondary market disclosure. The Issuer has adopted an Omnibus Continuing Disclosure Undertaking (the Disclosure Undertaking ) wherein the Issuer has covenanted to provide annually certain financial information and operating data and other information necessary to comply with the Rule, and to transmit the same to the Municipal Securities Rulemaking Board. In the Bond Resolution, hereinafter defined, the Issuer has covenanted with the Underwriter and the Beneficial Owners to apply the provisions of the Disclosure Undertaking to the Bonds. This covenant is for the benefit of and is enforceable by the Beneficial Owners of the Bonds. In the past the Issuer has failed to file its Annual Report within the time period stipulated in previous undertakings under the Rule. However, the Issuer has taken remedial action and is now in compliance with such filing requirements. For more information regarding the Issuer's continuing disclosure undertaking, see APPENDIX C SUMMARY OF FINANCING DOCUMENTS THE DISCLOSURE UNDERTAKING. Additional Information Additional information regarding the Issuer or the Bonds may be obtained from the Issuer s Director of Finance at the address set forth in the preface to this Official Statement. Authority for the Bonds THE BONDS The Bonds are being issued pursuant to and in full compliance with the Constitution and statutes of the State, including K.S.A to , inclusive, K.S.A et seq., K.S.A et seq., and K.S.A et seq., all as amended and supplemented from time to time (collectively the Act ), an ordinance passed by the governing body of the 1

7 Issuer and a resolution adopted by the governing body of the Issuer on November 18, 2013 (collectively the Bond Resolution ). Security for the Bonds The Bonds shall be general obligations of the Issuer payable as to both principal and interest from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the Issuer. The full faith, credit and resources of the Issuer are irrevocably pledged for the prompt payment of the principal of and interest on the Bonds as the same become due. Levy and Collection of Annual Tax, Transfer to Debt Service Account The governing body of the Issuer shall annually make provision for the payment of principal of, premium, if any, and interest on the Bonds as the same become due by, to the extent necessary, levying and collecting the necessary taxes upon all of the taxable tangible property within the Issuer in the manner provided by law. Such taxes shall be extended upon the tax rolls in each of the several years, respectively, and shall be levied and collected at the same time and in the same manner as the other ad valorem taxes of the Issuer are levied and collected. The proceeds derived from said taxes shall be deposited in the Bond and Interest Fund, shall be kept separate and apart from all other funds of the Issuer, shall thereafter be transferred to the Debt Service Account and shall be used solely for the payment of the principal of and interest on the Bonds as and when the same become due, taking into account any scheduled mandatory redemptions, and the fees and expenses of the Paying Agent. Description of the Bonds The Bonds shall consist of fully registered book-entry-only bonds in an Authorized Denomination and shall be numbered in such manner as the Bond Registrar shall determine. All of the Bonds shall be dated as of the Dated Date, become due in the amounts on the Stated Maturities, subject to redemption and payment prior to their Stated Maturities, and shall bear interest at the rates per annum set forth on the inside cover page of this Official Statement (computed on the basis of twelve 30-day months) from the later of the Dated Date or the most recent Interest Payment Date to which interest has been paid, on the Interest Payment Dates in the manner hereinafter set forth. Designation of Paying Agent and Bond Registrar The Issuer will at all times maintain a paying agent and bond registrar meeting the qualifications set forth in the Bond Resolution. The Issuer reserves the right to appoint a successor paying agent or bond registrar. No resignation or removal of the paying agent or bond registrar shall become effective until a successor has been appointed and has accepted the duties of paying agent or bond registrar. Every paying agent or bond registrar appointed by the Issuer shall at all times meet the requirements of Kansas law. The Treasurer of the State of Kansas, Topeka, Kansas (the Bond Registrar and Paying Agent ) has been designated by the Issuer as paying agent for the payment of principal of and interest on the Bonds and bond registrar with respect to the registration, transfer and exchange of Bonds. Method and Place of Payment of the Bonds The principal of, or Redemption Price, and interest on the Bonds shall be payable in any coin or currency which, on the respective dates of payment thereof, is legal tender for the payment of public and private debts. The principal or Redemption Price of each Bond shall be paid at Maturity to the Person in whose name such Bond is registered on the Bond Register at the Maturity thereof, upon presentation and surrender of such Bond at the principal office of the Paying Agent. The interest payable on each Bond on any Interest Payment Date shall be paid to the Owner of such Bond as shown on the Bond Register at the close of business on the Record Date for such interest (a) by check or draft mailed by the Paying Agent to the address of such Owner shown on the Bond Register or at such other address as is furnished to the Paying Agent in writing by such Owner; or (b) in the case of an interest payment to Cede & Co. or any Owner of 500,000 or more in aggregate principal amount of Bonds, by electronic transfer to such Owner upon written notice given to the Bond Registrar by such Owner, not less than 15 days prior to the Record Date for such interest, containing the electronic transfer instructions including the bank, ABA routing number and account number to which such Owner wishes to have such transfer directed. Notwithstanding the foregoing, any Defaulted Interest with respect to any Bond shall cease to be payable to the Owner of such Bond on the relevant Record Date and shall be payable to the Owner in whose name such Bond is registered at the close of business on the Special Record Date for the payment of such Defaulted Interest, which Special Record Date shall be fixed as hereinafter specified. The Issuer shall notify the Paying Agent in writing of the amount of Defaulted Interest 2

8 proposed to be paid on each Bond and the date of the proposed payment (which date shall be at least 30 days after receipt of such notice by the Paying Agent) and shall deposit with the Paying Agent an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest. Following receipt of such funds the Paying Agent shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 nor less than 10 days prior to the date of the proposed payment. The Paying Agent shall notify the Issuer of such Special Record Date and shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, by first class mail, postage prepaid, to each Owner of a Bond entitled to such notice not less than 10 days prior to such Special Record Date. SO LONG AS CEDE & CO., REMAINS THE REGISTERED OWNER OF THE BONDS, THE PAYING AGENT SHALL TRANSMIT PAYMENTS TO THE SECURITIES DEPOSITORY, WHICH SHALL REMIT SUCH PAYMENTS IN ACCORDANCE WITH ITS NORMAL PROCEDURES. See THE BONDS Book-Entry Bonds; Securities Depository. Payments Due on Saturdays, Sundays and Holidays In any case where a Bond Payment Date is not a Business Day, then payment of principal, Redemption Price or interest need not be made on such Bond Payment Date but may be made on the next succeeding Business Day with the same force and effect as if made on such Bond Payment Date, and no interest shall accrue for the period after such Bond Payment Date. Book-Entry Bonds; Securities Depository The Bonds shall initially be registered to Cede & Co., the nominee for the Securities Depository, and no Beneficial Owner will receive certificates representing their respective interests in the Bonds, except in the event the Bond Registrar issues Replacement Bonds. It is anticipated that during the term of the Bonds, the Securities Depository will make bookentry transfers among its Participants and receive and transmit payment of principal of, premium, if any, and interest on, the Bonds to the Participants until and unless the Bond Registrar authenticates and delivers Replacement Bonds to the Beneficial Owners as described in the following paragraphs. The Issuer may decide, subject to the requirements of the Operational Arrangements of DTC (or a successor Securities Depository), and the following provisions of this section to discontinue use of the system of book-entry transfers through DTC (or a successor Securities Depository): (a) If the Issuer determines (1) that the Securities Depository is unable to properly discharge its responsibilities, or (2) that the Securities Depository is no longer qualified to act as a securities depository and registered clearing agency under the Securities and Exchange Act of 1934, as amended, or (3) that the continuation of a book-entry system to the exclusion of any Bonds being issued to any Owner other than Cede & Co. is no longer in the best interests of the Beneficial Owners of the Bonds; or (b) if the Bond Registrar receives written notice from Participants having interest in not less than 50% of the Bonds Outstanding, as shown on the records of the Securities Depository (and certified to such effect by the Securities Depository), that the continuation of a book-entry system to the exclusion of any Bonds being issued to any Owner other than Cede & Co. is no longer in the best interests of the Beneficial Owners of the Bonds, then the Bond Registrar shall notify the Owners of such determination or such notice and of the availability of certificates to owners requesting the same, and the Bond Registrar shall register in the name of and authenticate and deliver Replacement Bonds to the Beneficial Owners or their nominees in principal amounts representing the interest of each, making such adjustments as it may find necessary or appropriate as to accrued interest and previous calls for redemption; provided, that in the case of a determination under (a)(1) or (a)(2) of this paragraph, the Issuer, with the consent of the Bond Registrar, may select a successor securities depository in accordance with the following paragraph to effect book-entry transfers. In such event, all references to the Securities Depository herein shall relate to the period of time when the Securities Depository has possession of at least one Bond. Upon the issuance of Replacement Bonds, all references herein to obligations imposed upon or to be performed by the Securities Depository shall be deemed to be imposed upon and performed by the Bond Registrar, to the extent applicable with respect to such Replacement Bonds. If the Securities Depository resigns and the Issuer, the Bond Registrar or Owners are unable to locate a qualified successor of the Securities Depository, then the Bond Registrar shall authenticate and cause delivery of Replacement Bonds to Owners, as provided herein. The Bond Registrar may rely on information from the Securities Depository and its Participants as to the names of the Beneficial Owners of the Bonds. The cost of printing, registration, authentication, and delivery of Replacement Bonds shall be paid for by the Issuer. 3

9 In the event the Securities Depository resigns, is unable to properly discharge its responsibilities, or is no longer qualified to act as a securities depository and registered clearing agency under the Securities and Exchange Act of 1934, as amended, the Issuer may appoint a successor Securities Depository provided the Bond Registrar receives written evidence satisfactory to the Bond Registrar with respect to the ability of the successor Securities Depository to discharge its responsibilities. Any such successor Securities Depository shall be a securities depository which is a registered clearing agency under the Securities and Exchange Act of 1934, as amended, or other applicable statute or regulation that operates a securities depository upon reasonable and customary terms. The Bond Registrar upon its receipt of a Bond or Bonds for cancellation shall cause the delivery of the Bonds to the successor Securities Depository in appropriate denominations and form as provided in the Bond Resolution. Registration, Transfer and Exchange of Bonds As long as any of the Bonds remain Outstanding, each Bond when issued shall be registered in the name of the Owner thereof on the Bond Register. Bonds may be transferred and exchanged only on the Bond Register as hereinafter provided. Upon surrender of any Bond at the principal office of the Bond Registrar, the Bond Registrar shall transfer or exchange such Bond for a new Bond or Bonds in any authorized denomination of the same Stated Maturity and in the same aggregate principal amount as the Bond that was presented for transfer or exchange. Bonds presented for transfer or exchange shall be accompanied by a written instrument or instruments of transfer or authorization for exchange, in a form and with guarantee of signature satisfactory to the Bond Registrar, duly executed by the Owner thereof or by the Owner's duly authorized agent. In all cases in which the privilege of transferring or exchanging Bonds is exercised, the Bond Registrar shall authenticate and deliver Bonds in accordance with the provisions of the Bond Resolution. The Issuer shall pay the fees and expenses of the Bond Registrar for the registration, transfer and exchange of Bonds. Any additional costs or fees that might be incurred in the secondary market, other than fees of the Bond Registrar, are the responsibility of the Owners of the Bonds. In the event any Owner fails to provide a correct taxpayer identification number to the Paying Agent, the Paying Agent may make a charge against such Owner sufficient to pay any governmental charge required to be paid as a result of such failure. The Issuer and the Bond Registrar shall not be required (a) to register the transfer or exchange of any Bond that has been called for redemption after notice of such redemption has been mailed by the Paying Agent and during the period of 15 days next preceding the date of mailing of such notice of redemption; or (b) to register the transfer or exchange of any Bond during a period beginning at the opening of business on the day after receiving written notice from the Issuer of its intent to pay Defaulted Interest and ending at the close of business on the date fixed for the payment of Defaulted Interest. Mutilated, Lost, Stolen or Destroyed Bonds If (a) any mutilated Bond is surrendered to the Bond Registrar or the Bond Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Bond, and (b) there is delivered to the Issuer and the Bond Registrar such security or indemnity as may be required by each of them, then, in the absence of notice to the Issuer or the Bond Registrar that such Bond has been acquired by a bona fide purchaser, the Issuer shall execute and, upon the Issuer's request, the Bond Registrar shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Bond, a new Bond of the same Stated Maturity and of like tenor and principal amount. If any such mutilated, destroyed, lost or stolen Bond has become or is about to become due and payable, the Issuer, in its discretion, may pay such Bond instead of issuing a new Bond. Upon the issuance of any new Bond, the Issuer may require the payment by the Owner of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Paying Agent) connected therewith. Nonpresentment of Bonds If any Bond is not presented for payment when the principal thereof becomes due at Maturity, if funds sufficient to pay such Bond have been made available to the Paying Agent all liability of the Issuer to the Owner thereof for the payment of such Bond shall forthwith cease, determine and be completely discharged, and thereupon it shall be the duty of the Paying Agent to hold such funds, without liability for interest thereon, for the benefit of the Owner of such Bond, who shall thereafter be restricted exclusively to such funds for any claim of whatever nature on his part under this Bond Resolution or on, or with respect to, said Bond. If any Bond is not presented for payment within four (4) years following the date when such Bond becomes due at Maturity, the Paying Agent shall repay to the Issuer the funds theretofore held by it for payment of such Bond, and such Bond shall, subject to the defense of any applicable statute of limitation, thereafter be an unsecured obligation of the Issuer, and the Owner thereof shall be entitled to look only to the Issuer for payment, and then only to the extent of the amount so repaid to it by the Paying Agent, and the Issuer shall not be liable for any interest thereon and shall not be regarded as a trustee of such money. 4

10 Redemption Provisions Optional Redemption. At the option of the Issuer, Bonds maturing on September 1 in the years 2021, and thereafter, will be subject to redemption and payment prior to their Stated Maturity on September 1, 2020, and thereafter, as a whole or in part (selection of maturities and the amount of Bonds of each maturity to be redeemed to be determined by the Issuer in such equitable manner as it may determine) at any time, at the Redemption Price of 100% (expressed as a percentage of the principal amount), plus accrued interest to the Redemption Date. Selection of Bonds to be Redeemed. Bonds shall be redeemed only in an Authorized Denomination. When less than all of the Bonds are to be redeemed and paid prior to their Stated Maturity, such Bonds shall be redeemed in such manner as the Issuer shall determine, Bonds of less than a full Stated Maturity shall be selected by the Bond Registrar in minimum Authorized Denomination in such equitable manner as the Bond Registrar may determine. In the case of a partial redemption of Bonds by lot when Bonds of denominations greater than a minimum Authorized Denomination are then Outstanding, then for all purposes in connection with such redemption each minimum Authorized Denomination of face value shall be treated as though it were a separate Bond of a minimum Authorized Denomination. If it is determined that one or more, but not all, of the minimum Authorized Denomination value represented by any Bond is selected for redemption, then upon notice of intention to redeem such minimum Authorized Denomination, the Owner or the Owner's duly authorized agent shall forthwith present and surrender such Bond to the Bond Registrar: (1) for payment of the Redemption Price and interest to the Redemption Date of such minimum Authorized Denomination value called for redemption, and (2) for exchange, without charge to the Owner thereof, for a new Bond or Bonds of the aggregate principal amount of the unredeemed portion of the principal amount of such Bond. If the Owner of any such Bond fails to present such Bond to the Paying Agent for payment and exchange as aforesaid, such Bond shall, nevertheless, become due and payable on the redemption date to the extent of the minimum Authorized Denomination value called for redemption (and to that extent only). Notice and Effect of Call for Redemption. Unless waived by any Owner of Bonds to be redeemed, if the Issuer shall call any Bonds for redemption and payment prior to the Stated Maturity thereof, the Issuer shall give written notice of its intention to call and pay said Bonds to the Bond Registrar and the Underwriter. In addition, the Issuer shall cause the Bond Registrar to give written notice of redemption to the Owners of said Bonds. Each of said written notices shall be deposited in the United States first class mail not less than 30 days prior to the Redemption Date. All official notices of redemption shall be dated and shall contain the following information: (a) the Redemption Date; (b) the Redemption Price; (c) if less than all Outstanding Bonds are to be redeemed, the identification (and, in the case of partial redemption of any Bonds, the respective principal amounts) of the Bonds to be redeemed; (d) a statement that on the Redemption Date the Redemption Price will become due and payable upon each such Bond or portion thereof called for redemption and that interest thereon shall cease to accrue from and after the Redemption Date; and (e) the place where such Bonds are to be surrendered for payment of the Redemption Price, which shall be the principal office of the Paying Agent. The failure of any Owner to receive notice given as heretofore provided or an immaterial defect therein shall not invalidate any redemption. Prior to any Redemption Date, the Issuer shall deposit with the Paying Agent an amount of money sufficient to pay the Redemption Price of all the Bonds or portions of Bonds that are to be redeemed on such Redemption Date. Official notice of redemption having been given as aforesaid, the Bonds or portions of Bonds to be redeemed shall become due and payable on the Redemption Date, at the Redemption Price therein specified, and from and after the Redemption Date (unless the Issuer defaults in the payment of the Redemption Price) such Bonds or portion of Bonds shall cease to bear interest. For so long as the Securities Depository is effecting book-entry transfers of the Bonds, the Bond Registrar shall provide the notices specified to the Securities Depository. It is expected that the Securities Depository shall, in turn, notify its Participants and that the Participants, in turn, will notify or cause to be notified the Beneficial Owners. Any failure on the part of the Securities Depository or a Participant, or failure on the part of a nominee of a Beneficial Owner of a Bond (having been mailed notice from the Bond Registrar, the Securities Depository, a Participant or otherwise) to notify the Beneficial Owner of the Bond so affected, shall not affect the validity of the redemption of such Bond. In addition to the foregoing notice, the Issuer shall provide such notices of redemption as are required by the Disclosure Undertaking. The Paying Agent is also directed to comply with any mandatory or voluntary standards then in effect for processing redemptions of municipal securities established by the State or the Securities and Exchange Commission. Failure to comply with such standards shall not affect or invalidate the redemption of any Bond. 5

11 THE DEPOSITORY TRUST COMPANY 1. The Depository Trust Company ( DTC ), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered bond certificate will be issued for each scheduled maturity of the Bonds, and will be deposited with DTC. 2. DTC, the world s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.6 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non- U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has a Standard & Poor s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at 3. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC s records. The ownership interest of each actual purchaser of each Bond ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. 4. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. 5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. 6. Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. 7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from the Issuer or Paying Agent, on the payment date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and 6

12 not of DTC nor its nominee, the Paying Agent, or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer or Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. 9. A Beneficial Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Paying Agent, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant s interest in the Bonds, on DTC s records, to the Paying Agent. The requirement for physical delivery of the Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC s records and followed by a book-entry credit of tendered Bonds to the Paying Agent s DTC account. 10. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Issuer or Paying Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered. 11. The Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC. 12. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that the Issuer believes to be reliable, but the Issuer takes no responsibility for the accuracy thereof. THE PROJECTS The Bonds are being issued for the purpose of providing permanent financing for the construction of certain main trafficway improvements (collectively the Improvements ), more specifically described as follows: Project Description Ord./Res. No. Authority (K.S.A.) Authorized Amount Trail St. Asphalt Mill & Overlay Ord. 2297/Res et seq. 500,000 U.S. 50 Mill & Overlay W. City Limits to E. Ord. 3569/Res et seq. 250,000 City Limits Comanche St. Construction 14 th Ave. to Highway 50 Ord. 3038/Res et seq. 8,808,000 Trail St. Reconstruction 2 nd Ave. to 14 th Ave. Ord. 3572/Res et seq. 4,800,000* Total 14,358,000 * It is anticipated that approximately 600,000 of this project will be paid or reimbursed from funds received from KDOT THE REFUNDING PLAN Proceeds of the Bonds will be applied to retire the following general obligation bonds of the Issuer (the Refunded Bonds ): General Obligation Refunding and Improvement Bonds, Series 2004-A, Dated September 30, 2004 Maturity Amount Maturity Date Interest Rate Redemption Date Redemption Price 205,000 09/01/ % December 12, % 210,000 09/01/ % December 12, % 7

13 SOURCES AND USES OF FUNDS The following table summarizes the sources and uses of funds associated with the issuance of the Bonds: Sources of Funds: Principal Amount of the Bonds 6,235, Bid Premium 205, Total 6,440, Uses of Funds: Deposit to Improvement Fund 5,950, Trail Street Asphalt Mill & Overlay 500, U.S. 50 Mill & Overlay 250, Comanche Street Construction 1,000, Trail Street Reconstruction 4,200, Deposit to Redemption Fund 419, Costs of Issuance & Misc. 70, Total 6,440, RISK FACTORS AND INVESTMENT CONSIDERATIONS A PROSPECTIVE PURCHASER OF THE BONDS DESCRIBED HEREIN SHOULD BE AWARE THAT THERE ARE CERTAIN RISKS ASSOCIATED WITH THE BONDS WHICH MUST BE RECOGNIZED. THE FOLLOWING STATEMENTS REGARDING CERTAIN RISKS ASSOCIATED WITH THE OFFERING SHOULD NOT BE CONSIDERED AS A COMPLETE DESCRIPTION OF ALL RISKS TO BE CONSIDERED IN THE DECISION TO PURCHASE THE BONDS. PROSPECTIVE PURCHASERS OF THE BONDS SHOULD ANALYZE CAREFULLY THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT AND ADDITIONAL INFORMATION IN THE FORM OF THE COMPLETE DOCUMENTS SUMMARIZED HEREIN, COPIES OF WHICH ARE AVAILABLE AND MAY BE OBTAINED FROM THE ISSUER OR THE UNDERWRITER. Legal Matters Various state and federal laws, regulations and constitutional provisions apply to the obligations created by the Bonds. There is no assurance that there will not be any change in, interpretation of, or addition to such applicable laws, provisions and regulations which would have a material effect, either directly or indirectly, on the Issuer or the taxing authority of the Issuer. Limitations on Remedies Available to Owners of Bonds The enforceability of the rights and remedies of the owners of Bonds, and the obligations incurred by the Issuer in issuing the Bonds, are subject to the following: the federal Bankruptcy Code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect; usual equity principles which may limit the specific enforcement under state law of certain remedies; the exercise by the United States of America of the powers delegated to it by the United States Constitution; and the reasonable and necessary exercise, in certain unusual situations, of the police power inherent in the State of Kansas and its governmental subdivisions in the interest of serving a legitimate and significant public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or state government, if initiated, could subject the owners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy and otherwise, and consequently may involve risks of delay, limitation or modification of their rights. Taxation of Interest on the Bonds An opinion of Bond Counsel will be obtained to the effect that interest earned on the Bonds is excludable from gross income for federal income tax purposes under current provisions of the Internal Revenue Code of 1986, as amended (the Code ), and applicable rulings and regulations under the Code; however, an application for a ruling has not been made and an opinion of counsel is not binding upon the Internal Revenue Service. There can be no assurance that the present provisions of the Code, or the rules and regulations thereunder, will not be adversely amended or modified, thereby rendering the interest earned on the Bonds includable in gross income for federal income tax purposes. The Issuer has covenanted in the Bond Resolution and in other documents and certificates to be delivered in connection with the issuance of the Bonds to comply with the provisions of the Code, including those which require the 8

14 Issuer to take or omit to take certain actions after the issuance of the Bonds. Because the existence and continuation of the excludability of the interest on the Bonds depends upon events occurring after the date of issuance of the Bonds, the opinion of Bond Counsel described under TAX MATTERS assumes the compliance by the Issuer with the provisions of the Code described above and the regulations relating thereto. No opinion is expressed by Bond Counsel with respect to the excludability of the interest on the Bonds in the event of noncompliance with such provisions. The failure of the Issuer to comply with the provisions described above may cause the interest on the Bonds to become includable in gross income as of the date of issuance. Premium on Bonds The initial offering prices of certain maturities of the Bonds that are subject to optional redemption are in excess of the respective principal amounts thereof. Any person who purchases a Bond in excess of its principal amount, whether during the initial offering or in a secondary market transaction, should consider that the Bonds are subject to redemption at par under the various circumstances described under THE BONDS Redemption Provisions. No Additional Interest or Mandatory Redemption upon Event of Taxability The Bond Resolution does not provide for the payment of additional interest or penalty on the Bonds or the mandatory redemption thereof if the interest thereon becomes includable in gross income for federal income tax purposes. Likewise, the Bond Resolution does not provide for the payment of any additional interest or penalty on the Bonds if the interest thereon becomes subject to income taxation by the State. Suitability of Investment The tax exempt feature of the Bonds is more valuable to high tax bracket investors than to investors who are in low tax brackets, and so the value of the interest compensation to any particular investor will vary with individual tax rates. Each prospective investor should carefully examine this Official Statement, including the Appendices hereto, and its own financial condition to make a judgment as to its ability to bear the economic risk of such an investment, and whether or not the Bonds are an appropriate investment. Market for the Bonds Bond Rating. The Bonds have been assigned the financial rating set forth in the section hereof entitled BOND RATINGS. There is no assurance that a particular rating will remain in effect for any given period of time or that it will not be revised, either downward or upward, or withdrawn entirely, if in the judgment of the agency originally establishing such rating, circumstances so warrant. Any downward revision or withdrawal of any rating may have an adverse affect on the market price of the Bonds. Secondary Market. There is no assurance that a secondary market will develop for the purchase and sale of the Bonds. Prices of bonds traded in the secondary market, though, are subject to adjustment upward and downward in response to changes in the credit markets. From time to time it may be necessary to suspend indefinitely secondary market trading in the Bonds as a result of financial condition or market position of broker-dealers, prevailing market conditions, lack of adequate current financial information about the Issuer, or a material adverse change in the financial condition of the Issuer, whether or not the Bonds are in default as to principal and interest payments, and other factors which may give rise to uncertainty concerning prudent secondary market practices. BOND RATINGS Standard & Poor s Ratings Services, a division of McGraw Hill Financial Inc., has assigned a rating of A+ to the Bonds. Such rating reflects only the view of such rating agency, and an explanation of the significance of such rating may be obtained therefrom. No such rating constitutes a recommendation to buy, sell, or hold any bonds, including the Bonds, or as to the market price or suitability thereof for a particular investor. The Issuer furnished such rating agency with certain information and materials relating to the Bonds that have not been included in this Official Statement. Generally, rating agencies base their ratings on the information and materials so furnished and on investigations, studies and assumptions by the rating agencies. There is no assurance that a particular rating will remain in effect for any given period of time or that it will not be revised, either downward or upward, or withdrawn entirely, if in the judgment of the agency originally establishing such rating, circumstances so warrant. Any downward revision or withdrawal of any rating may have an adverse effect on the market price of the Bonds. 9

15 ABSENCE OF LITIGATION The Issuer, in the ordinary course of business, is a party to various legal proceedings. In the opinion of management of the Issuer, any judgment rendered against the Issuer in such proceedings would not materially adversely affect the financial position of the Issuer. The Issuer certifies that there is no controversy, suit or other proceeding of any kind pending or threatened wherein or whereby any question is raised or may be raised, questioning, disputing or affecting in any way the legal organization of the Issuer or its boundaries, or the right or title of any of its officers to their respective offices, or the legality of any official act or the constitutionality or validity of the indebtedness represented by the Bonds or the validity of said Bonds, or any of the proceedings had in relation to the authorization, issuance or sale thereof, or the levy and collection of a tax to pay the principal and interest thereof. Approval of Bonds LEGAL MATTERS All matters incident to the authorization and issuance of the Bonds are subject to the approval of Gilmore & Bell, P.C., Wichita, Kansas ( Bond Counsel ). The factual and financial information appearing herein has been supplied or reviewed by certain officials of the Issuer and its certified public accountants, as referred to herein. Bond Counsel has participated in the preparation of the Official Statement but expresses no opinion as to the accuracy or sufficiency thereof, except for the matters appearing in the sections of this Official Statement captioned THE BONDS, LEGAL MATTERS, TAX MATTERS and APPENDIX C SUMMARY OF FINANCING DOCUMENTS. Payment of the legal fee of Bond Counsel is contingent upon the delivery of the Bonds. Certain legal matters have been passed on for the Issuer by Ken Strobel, Esq., City Attorney. TAX MATTERS The following is a summary of the material federal and State of Kansas income tax consequences of holding and disposing of the Bonds. This summary is based upon laws, regulations, rulings and judicial decisions now in effect, all of which are subject to change (possibly on a retroactive basis). This summary does not discuss all aspects of federal income taxation that may be relevant to investors in light of their personal investment circumstances or describe the tax consequences to certain types of holders subject to special treatment under the federal income tax laws (for example, dealers in securities or other persons who do not hold the Bonds as a capital asset, tax-exempt organizations, individual retirement accounts and other tax deferred accounts, and foreign taxpayers), and, except for the income tax laws of the State of Kansas, does not discuss the consequences to an owner under state, local or foreign tax laws. The summary does not deal with the tax treatment of persons who purchase the Bonds in the secondary market at a premium or a discount. Prospective investors are advised to consult their own tax advisors regarding federal, state, local and other tax considerations of holding and disposing of the Bonds. Opinion of Bond Counsel In the opinion of Bond Counsel, under the law existing as of the issue date of the Bonds: Federal Tax Exemption. The interest on the Bonds is excludable from gross income for federal income tax purposes. Alternative Minimum Tax. Interest on the Bonds is not an item of tax preference for purposes of computing the federal alternative minimum tax imposed on individuals and corporations, but is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. Bank Qualification. The Bonds are qualified tax-exempt obligations within the meaning of Code 265(b)(3). Kansas Tax Exemption. The interest on the Bonds is exempt from income taxation by the State of Kansas. Bond Counsel s opinions are provided as of the date of the original issue of the Bonds, subject to the condition that the Issuer comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excludable from gross income for federal income tax purposes. The Issuer has covenanted to comply with all of these requirements. Failure to comply with certain of these requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes retroactive to the date of issuance of the 10

16 Bonds. Bond Counsel is expressing no opinion regarding other federal, state or local tax consequences arising with respect to the Bonds. Other Tax Consequences Original Issue Premium. If a Bond is issued at a price that exceeds the stated redemption price at maturity of the Bond, the excess of the purchase price over the stated redemption price at maturity constitutes premium on that Bond. Under Code 171, the purchaser of that Bond must amortize the premium over the term of the Bond using constant yield principles, based on the purchaser s yield to maturity. As premium is amortized, the owner s basis in the Bond and the amount of tax-exempt interest received will be reduced by the amount of amortizable premium properly allocable to the owner. This will result in an increase in the gain (or decrease in the loss) to be recognized for Federal income tax purposes on sale or disposition of the Bond prior to its maturity. Even though the owner s basis is reduced, no Federal income tax deduction is allowed. Prospective investors should consult their own tax advisors concerning the calculation and accrual of bond premium. Sale, Exchange or Retirement of Bonds. Upon the sale, exchange or retirement (including redemption) of a Bond, an owner of the Bond generally will recognize gain or loss in an amount equal to the difference between the amount of cash and the fair market value of any property received on the sale, exchange or retirement of the Bond (other than in respect of accrued and unpaid interest) and such owner s adjusted tax basis in the Bond. To the extent the Bonds are held as a capital asset, such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the Bond has been held for more than 12 months at the time of sale, exchange or retirement. Reporting Requirements. In general, information reporting requirements will apply to certain payments of principal, interest and premium paid on Bonds, and to the proceeds paid on the sale of Bonds, other than certain exempt recipients (such as corporations and foreign entities). A backup withholding tax will apply to such payments if the owner fails to provide a taxpayer identification number or certification of foreign or other exempt status or fails to report in full dividend and interest income. The amount of any backup withholding from a payment to an owner will be allowed as a credit against the owner s federal income tax liability. Collateral Federal Income Tax Consequences. Prospective purchasers of the Bonds should be aware that ownership of the Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with excess net passive income, foreign corporations subject to the branch profits tax, life insurance companies, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry or have paid or incurred certain expenses allocable to the Bonds. Bond Counsel expresses no opinion regarding these tax consequences. Purchasers of Bonds should consult their tax advisors as to the applicability of these tax consequences and other federal income tax consequences of the purchase, ownership and disposition of the Bonds, including the possible application of state, local, foreign and other tax laws. FINANCIAL ADVISOR Stifel, Nicolaus & Company, Inc., Wichita, Kansas, has acted as Financial Advisor to the Issuer in connection with the sale of the Bonds. The Financial Advisor has assisted the Issuer in the preparation of this Official Statement and in other matters relating to the issuance of the Bonds. The Financial Advisor will not be a manager or a member of any underwriting group submitting a proposal for the purchase of the Bonds. The fees of the Financial Advisor are contingent upon the issuance of the Bonds. UNDERWRITING The Bonds have been sold at public sale by the Issuer to Country Club Bank, Prairie Village, Kansas (the Underwriter ) on the basis of lowest true interest cost. Five (5) bids were received by the Issuer. The Underwriter has agreed, subject to certain conditions, to purchase the Bonds at a price equal to the principal amount of the Bonds, plus accrued interest from the Dated Date to the Issue Date, plus a bid premium of 205, The Bonds will be offered to the public initially at the prices determined to produce the yield to maturity or applicable redemption date set forth on the inside cover page of this Official Statement. The Underwriter may offer and sell the Bonds to certain dealers (including dealers depositing the Bonds into investment trusts) at prices other than the price stated on the inside cover page hereof and may change the initial offering price from time to time subsequent to the date hereof. In connection with the offering, the Underwriter may overallot or effect transactions which stabilize or maintain the 11

17 market price of the Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. AUTHORIZATION OF OFFICIAL STATEMENT The preparation of this Official Statement and its distribution has been authorized by the governing body of the Issuer as of the date on the cover page hereof. This Official Statement is submitted in connection with the issuance of the Bonds and may not be reproduced or used as a whole or in part for any other purpose. This Official Statement does not constitute a contract between the Issuer or the Underwriter and any one or more of the purchasers, Owners or Beneficial Owners of the Bonds. CITY OF DODGE CITY, KANSAS By /s/ E. Kent Smoll E. Kent Smoll, Mayor By: /s/ Nannette Pogue Nannette Pogue, Clerk/Director of Finance [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] 12

18 APPENDIX A INFORMATION CONCERNING THE ISSUER GENERAL Size and Location The City of Dodge City, Kansas (the City or the Issuer ) is the county seat of Ford County and is located approximately 150 miles west of Wichita and approximately 112 miles east of the Colorado-Kansas state line. The City encompasses approximately 14 square miles and has a current estimated population of approximately 28,075 persons. Government and Organization of the Issuer The City was incorporated in 1875 and became a city of the first class in The City operates under a Commission-Manager form of government. The five members of the City Commission are elected to four-year terms, with not more than three elected in each even-numbered year. The City Commissioners annually elect a Mayor and Vice Mayor, which shall be commissioners. The City Manager is appointed by the Commission and is charged with the efficient and effective administration of the City. The City Manager is the chief executive officer of the City. Ken Strobel currently serves both as the City Manager and as the City s legal counsel. Mr. Strobel attended Southwest College in Winfield, Kansas, from and graduated with a BA degree in History and Psychology from Wichita State University in He graduated from Washburn Law School in Topeka with a J.D. in 1965 and was admitted into legal practice in the same year. He was a member, then partner, with the Williams Law Firm in the City from August 1965 to September He has been, and is currently, a member of the Kansas Bar Association since He has served as City Attorney for the City of Dodge City since He has served as the USD No. 443 school attorney, Area Mental Health Center attorney, as well as served numerous other clients in the City and Southwest Kansas. He is a member of the Trinity Association, Kansas City Attorney s Association, Kansas City Manager s Association and International City Manager s Association. He has served on the Chamber of Commerce Board, the Economic Development Board, and several other boards and commissions in the community. Municipal Services and Utilities The City is a full service city and has 216 employees. The City operates a fire department of 25 full-time fire fighters. The police department employs 50 officers. The public works department handles all street maintenance, as well as the garbage and refuse collection. The City operates both the water utility and sewage treatment plant. The City maintains the infrastructure in all 8,367 acres of the City, including 24 parks and 160 miles of streets. Transportation and Communication Facilities The City has access to excellent ground and air transportation facilities. The main line of the Atchison, Topeka, and the Burlington Northern Santa Fe Railroad runs through the City and is joined by a spur of the Cotton Belt Railroad. Amtrak serves Dodge City twice daily. U.S. Highways 50, 56, 283 and 400 provide additional surface transportation routes for truck transport, passenger buses and automobile travel. The Dodge City Regional Airport provides convenient air transportation service including commercial, private aircraft and air charter services. Great Lakes regional feeder airline has daily scheduled local and long distance flights to major cities and smaller communities as well. Educational Institutions and Facilities The City is the location of offices for Unified School District No. 443, with thirteen attendance centers providing complete educational facilities for pre-kindergarten through high school, with a total enrollment of over 6,850. Sacred Heart Cathedral School provides parochial education for approximately 300. The Southwest Kansas Area Vocational Technical School has dissolved and its former classes are now being offered in the high school. Dodge City Community College was founded in 1935 and moved to its present modern campus in The Community College has an enrollment of over 1,900 students. Outreach services are provided by Fort Hays State University, Friends University and Kansas Newman College. A-1

19 Medical and Health Facilities Western Plains Medical Complex is a Joint Commission (JCAHO) accredited 99-bed hospital that serves as a regional referral center for southwest Kansas. Western Plains provides health services that include Diagnostic and Interventional Cardiology, a Cardiac Cath Lab and Cardiac Rehabilitation. Home health care is available to the community through Trinity Association. Hospice of the Prairie provides assistance to the terminally ill. Tourism Dodge City's Boot Hill and the replica of Front Street are a primary tourist attraction in Kansas. It is estimated that approximately 150,000 tourists visit each year and that at least three million dollars is added to the local economy from the Boot Hill and Front Street operation. This historic site is located on Wyatt Earp Boulevard, between Third and Fifth Avenues, and occupies approximately eight acres of land. The Boot Hill Museum has a Visitors Center which houses a theater, conference area, offices, and a gift shop. The Museum features an outstanding collection of photographs and artifacts from the pioneer Beeson family. Front Street, which comprises the main section of buildings on the site, was constructed in 1958 and features fully restored working replicas of the 1870's stores, saloons and shops found at the foot of Boot Hill when the main street of Dodge City was frequented by such famous people as Wyatt Earp, Doc Holiday and Bat Masterson. The Hardesty House, Santa Fe Depot, steam locomotive and country schoolhouse complete the Front Street complex. In addition to Boot Hill and Front Street, six national historic sites are located in the area. The Carnegie Art Center, Sacred Heart Cathedral, Lora Locke Hotel, and the Home of Stone are located in the heart of downtown Dodge City; wagon tracks of the Santa Fe Trail may be viewed 11 miles west of the City; and Hennessy Hall is located on the former Saint Mary of the Plains Campus. Several other historic buildings are located in and near Downtown Dodge City. The newly remodeled historic Santa Fe Depot is home to the Boothill Repertory Company. In early August each year, the City comes alive with a 10-day long celebration of western heritage. The Dodge City Days PRCA Rodeo draws many top cowboys and stock producers and is one of the top ranked rodeos in the nation. Seventeen motels with 700 rooms, including a convention center facility, and over 40 restaurants, provide accommodations for tourist and convention needs. A hotel adjacent to the Boothill Casino and Resort opened in March Currently two new motels in different parts of town are in various stages of planning and construction. In June, 1997, the voters of Dodge City and Ford County approved a retailer sales tax issue funded the construction and operation of several recreation and quality of life facilities. This included air conditioning at the Civic Center to provide year around use of the facility; Legends Field, a four-plex softball/baseball complex; Saint Mary s Complex, a soccer complex with 6 fields; and Dodge City Raceway Park, an outdoor motor sports complex. The final project, constituting the construction of a Special Events Center named United Wireless Arena/Magouirk Conference Center, opened in February The United Wireless Arena is a state of the art, multi-purpose facility that hosts concerts, sporting events, family shows, motorsports, trade shows, rodeos, equestrian events and community events. The Magouirk Conference Center features 10,000 square feet of meeting space with multiple room configurations to accommodate a wide variety of events, large and small. The Special Events Center is located adjacent to the Boothill Casino and Resort, a destination casino. The State legislature approved legislation that allowed voters in Ford County to vote whether or not they wanted a destination casino. The voters approved the destination casino and the committee for the State Gaming Commission selected Butler National as the Casino s manager and operator. Phase 1 of the Casino opened in December 2009, and Phase 2 is under construction and will open in the fall of The Casino is the State s first State-owned casino, and the City looks forward to the opportunities and growth this will bring to the community. A Hampton Inn is located adjacent to the casino and opened in March, Dodge City Raceway Park is a premier dirt track that hosts weekly car races as well as national car race events. ECONOMIC INFORMATION The City is a regional trade center for an area covering much of the southwestern quarter of Kansas, part of the Oklahoma panhandle, and extreme southeastern Colorado. Agriculture and the cattle industry form the economic foundation of the area with cattle feeding and beef processing as the primary industry. The City is ranked among the top twenty sales markets for cattle in the United States. Excel Corporation, a subsidiary of Cargill, Inc., operates the second largest beef processing plant in the United States. In 1994 HyPlains Dressed Beef, L.C. added a 17 million beef fabrication plant to its A-2

20 slaughter operation which initially created an additional 500 jobs. National Beef, a U.S. Premium Beef company, and affiliated entities, the fourth largest beef processor in the United States, has one of its two plants located in the City. Approximately 6,800 head of cattle are slaughtered and processed per day, six days a week, in the City. Major Employers Source: City Clerk Labor Force Listed below are the major employers located in City and the number employed by each: Major Employers Product/Service Number of Full and Part-time Employees National Beef Processed Beef 2950 Cargill Meat Solutions Processed Beef 2800 U.S.D. No. 443 Education 1102 Wal-Mart Discount Retail 400 Boothill Casino Entertainment 288 Dodge City Community College Education 280 Western Plains Medical Complex Health Care 273 Ford County County Government 250 City of Dodge City City Government 216 Crust Buster/Speed King, Inc. Manufacturing 150 The following table sets forth labor force figures for Ford County and the State of Kansas: Source: Kansas Department of Labor Retail Sales Tax Collections FORD COUNTY Year Total Labor Force Employed Unemployed Unemployed Rate ,881 17, % ,772 18, % ,124 18, % ,611 18, % ,129 19, % STATE OF KANSAS Year Total Labor Force Employed Unemployed Unemployed Rate ,481,037 1,415,915 65, ,508,062 1,400, , ,504,470 1,398, , ,498,872 1,401,055 97, ,489,320 1,403,866 85, The following table lists State of Kansas sales tax collections for the years indicated for sales occurring in Ford County, Kansas: Source: Kansas Statistical Abstract Year Sales Tax Collections Per Capita Sales Tax ,928, ,949, ,915, ,089, ,957, A-3

21 Ten Largest City Sales Tax Contributors The following table lists the ten largest City sales tax contributors for the Fiscal Year ended December 31, 2012: Source: Dodge City Clerk s Office Local Option Sales Tax Name Business Type Amount Paid 1. Wal Mart Retail 855, Victory Electric Utility 307, Dillon Companies Grocery 208, Brent Magouirk Chevrolet Car Dealership 178, G & G, Inc. Car Dealership 132, Lopp Motors, Inc.. Car Dealership 130, Dodge City Motors, Inc. Car Dealership 124, Lewis Ford Car Dealership 84, Black Hills, Kansas Utility 71, JC Penney Department Store 54,041 Total 2,146,768 The following table lists the amount of local sales tax collected for Ford County and the City for the years indicated: Year Ford County 1 City of Dodge City ,152,200 8,029, ,133,417 7,926, ,249,600 8,040, ,579,111 8,746, ,640,053 9,267,025 1 Ford County imposes a countywide retailers sales tax in the aggregate amount of one and one-half cents (1.5%). The first one cent was approved by the voters of Ford County in 1997 and the remaining one-half cent was approved by the voters of Ford County in The City imposes a citywide retailers sales tax in the aggregate amount of one cent (1%). Amount represents the aggregate amount of sales tax moneys received by the City from its one-cent retailers sales tax and the City s portion of the one and one-half cents County retailers sales tax. Source: Dodge City Clerk s Office Oil Production The oil production (in number of barrels) for Ford County for the years listed is indicated in the following table: Source: Kansas Geological Survey Financial and Banking Institutions Year Oil Production , , , , ,541 There are currently 11 banks located in Ford County. For the years listed, bank deposits of the County's banks are as follows (in thousands of dollars): Year Total Bank Deposits , , , , ,000 Source: Kansas Statistical Abstract A-4

22 Building Permits The following table indicates the number of building permits and total valuation of these permits issued within the City for the years indicated. These numbers reflect permits issued either for new construction or for major renovation. Source: Dodge City Building Department Population Trends Year Number of Permits Issued Value of Permits ,222 23,979, ,379, ,083 63,162, ,594 15,189, ,343 40,910, ,333 33,000,658 The following table shows the approximate population of City and Ford County in the years indicated: Year City Population Ford County Population ,737 32, ,689 32, ,955 33, ,340 33, ,921 34, ,075 34,752 Census. The median age of persons in Ford County and the State of Kansas is 30.4 and 36, respectively, per the 2010 Source: U.S. Census Bureau; , Kansas Division of Budget Personal Income Trends Ford County personal (in thousands of dollars) and per capita income and the State of Kansas per capita income are listed for the years indicated, in the following table. Source: Kansas Statistical Abstract Ford County Personal Income Ford County Per Capita Income State of Kansas Per Capita Income Year ,977 29,470 37, ,021,589 31,739 40, ,009,603 30,225 37, ,068,247 31,926 38, ,116,854 32,309 40,883 Accounting, Budgeting and Auditing Procedures FINANCIAL INFORMATION The City follows a modified accrual basis of accounting for all tax supported funds of the City, including the General Fund. An accrual basis of accounting is utilized for proprietary funds. An annual budget of estimated receipts and disbursements for the coming calendar year is required by statute to be prepared for all funds (unless specifically exempted). The budget is prepared utilizing the modified accrual basis which is further modified by the encumbrance method of accounting. For example, commitments such as purchase orders and contracts, in addition to disbursements and accounts payable, are recorded as expenditures. The budget lists estimated A-5

23 receipts by funds and sources and estimated disbursements by funds and purposes. The proposed budget is presented to the governing body of the City prior to August 1, with a public hearing required to be held prior to August 15, with the final budget to be adopted prior to August 25 of each year. Budgets may be amended upon action of the governing body after notice and public hearing, provided that no additional tax revenues may be raised after the original budget is adopted. Kansas law prohibits governmental units from creating indebtedness unless there are funds on hand in the proper accounts and unencumbered by previous action with which to pay such indebtedness. An exception to this cash-basis operation is made where provision has been made for payment of obligations by bonds or other specific debt obligations authorized by law. The financial records of the City are audited annually by a firm of independent certified public accountants in accordance with generally accepted auditing standards. In recent years, the annual audit has been performed by Kennedy McKee & Company LLP, Dodge City, Kansas. Copies of the audit reports for the past five (5) years are on file in the Clerk's office and are available for review. The audit for the Fiscal Year ended December 31, 2012, is attached hereto as APPENDIX B. The City does not anticipate any material adverse change in the financial condition of the City from the information contained in APPENDIX B attached hereto. The Governmental Accounting Standards Board (GASB) issued Statement No. 34, Basic Financial Statements and Management s Discussion and Analysis for State and Local Governments in June 1999 ( Statement 34 ), which established new requirements for the annual financial reports of state and local governments. Among the major changes embodied in Statement 34, governments will now be required to: (a) report on the overall state of the government s financial health, not just its overall funds in a newly required Management s Discussion and Analysis (MD&A), (b) provide the most complete information available about the cost of delivering services to their citizens in the annual report which will now also include financial statements prepared using full accrual accounting for all of the government s activities, (c) include information about the government s public infrastructure assets such as bridges, roads and storm sewers, and (d) prepare an introductory narrative section analyzing the government s financial performance. The City implemented Statement No. 34 for its financial statements for the fiscal year ending on December 31, The financial information contained in the Appendices to this Official Statement are an integral part of this document and are intended to be read in conjunction herewith. Sources of Revenue The City finances its general operations through the local property tax levy, various other taxes, a variety of license and permit fees, and other miscellaneous sources as indicated below for the current Fiscal Year: Source: Clerk Source Percent Local property tax 19.49% Delinquent taxes 0.33% Motor vehicle taxes 2.87% State shared revenues & other taxes 2.11% Expanded Lottery Tax 1.69% Gasoline tax 2.00% Liquor and drug tax 0.84% Special assessments 1.02% Grants 1.41% Sales 28.41% Franchise fees 4.50% Fines 3.04% User fees, licenses and sales 2.04% Golf fees 0.99% Sanitation fees 4.85% Water fees 12.18% Interest 0.32% Drainage fees 0.54% Wastewater 11.38% Total % A-6

24 Property Valuations The determination of assessed valuation and the collection of property taxes for all political subdivisions in the state of Kansas is the responsibility of the various counties under the direction of state statutes. The Ford County Appraiser's office determines the fair market value of all taxable property within Ford County and the assessed valuation thereof that is to be used as a basis for the mill levy on property located in the Issuer. Property subject to ad valorem taxation is divided into two classes, real property and personal property. Real property is divided into seven subclasses; there are six subclasses of personal property. The real property (Class 1) subclasses are: (i) real property used for residential purposes including multi-family mobile or manufactured homes and the real property on which such homes are located, assessed at 11.5%, (ii) agricultural land, valued on the basis of agricultural income or productivity, assessed at 30%, (iii) vacant lots, assessed at 12%, (iv) real property, owned and operated by a not-for-profit organization not subject to federal income taxation, pursuant to Code 501, assessed at 12%, (v) public utility real property, except railroad real property, assessed at the average rate that all other commercial and industrial property is assessed, assessed at 33%, (vi) real property used for commercial and industrial purposes and buildings and other improvements located on land devoted to agricultural use, assessed at 25%, and (vii) all other urban and real property not otherwise specifically classified, assessed at 30%. Tangible personal property (Class 2) subclasses are: (i) mobile homes used for residential purposes, assessed at 11.5%, (ii) mineral leasehold interests, except oil leasehold interests, the average daily production from which is 5 barrels or less, and natural gas leasehold interests, the average daily production from which is 100 mcf or less, which shall be assessed at 25%, assessed at 30%, (iii) public utility tangible personal property, including inventories thereof, except railroad personal property, including inventories thereof, which shall be assessed at the average rate all other commercial and industrial property is assessed, assessed at 33%, (iv) all categories of motor vehicles not defined and specifically valued and taxed pursuant to law enacted prior to January 1, 1985, assessed at 30%, (v) commercial and industrial machinery and equipment which if its economic life is 7 years or more, shall be valued at its retail cost, when new, less seven-year straight-line depreciation, or which, if its economic life is less than 7 years, shall be valued at its retail cost when new, less straight-line depreciation over its economic life, except that, the value so obtained for such property, notwithstanding its economic life and as long as such property is being used, shall not be less than 20% of the retail cost when new of such property, assessed at 25%, and (vi) all other tangible personal property not otherwise specifically classified, assessed at 30%. All property used exclusively for state, county, municipal, literary, educational, scientific, religious, benevolent and charitable purposes, farm machinery and equipment, merchants' and manufacturers' inventories, other than public utility inventories included in subclass (3) of class 2, livestock, and all household goods and personal effects not used for the production of income, shall be exempted from property taxation. The Kansas Legislature reduced the applicable assessment rates on motor vehicles from 30% of market value to 20% of market value as of January 1, The 2006 Kansas Legislature exempted from all property or ad valorem property taxes levied under the laws of the State all commercial, industrial, telecommunications and railroad machinery and equipment acquired by qualified purchase or lease after June 30, 2006 or transported into the State after June 30, 2006 for the purpose of expanding an existing business or creation of a new business. Assessed Valuation years: The following table shows the assessed valuation of the taxable tangible property within the City for the following Year Real Property Personal Property Utilities Motor Vehicles Total Valuation ,258,688 9,649,399 7,205,234 22,150, ,263, ,654,022 8,795,109 6,825,134 22,118, ,392, ,432,362 7,895,531 7,400,387 21,767, ,496, ,852,497 7,456,509 10,322,094 21,844, ,476, ,381,070 7,353,721 10,651,563 21,844, ,231,265 1 Preliminary 2013 assessed valuation figures used for budgeting purposes motor vehicle valuation not yet available; 2012 data used for estimation purposes only. Source: County Clerk A-7

25 Property Tax Levies and Collections Tax Collections: Tax statements are mailed November 1 each year and may be paid in full or one-half on or before December 20 with the remaining one-half due on or before May 10 of the following year. Taxes that are unpaid on the due dates are considered delinquent and accrue interest at a per annum rate established by State law until paid or until the property is sold for taxes. Real estate bearing unpaid taxes is advertised for sale on or before August 1 of each year and is sold by the County for taxes and all legal charges on the first Tuesday in September. Properties that are sold and not redeemed within two years after the tax sale are subject to foreclosure sale, except homestead properties which are subject to foreclosure sale after three years. Personal taxes are due and may be paid in the same manner as real estate taxes, with the same interest applying to delinquencies. If personal taxes are not paid when due, and after written notice, warrants are issued and placed in the hands of the Sheriff for collection. If not paid on or before October 1, legal judgment is entered and the delinquent tax becomes a lien on the property. Unless renewed, a non-enforced lien expires five years after it is entered. Motor vehicle taxes are collected periodically throughout the year concurrently with the renewal of motor vehicle tags based upon the value of such vehicles. Such tax receipts are distributed to all taxing subdivisions, including the State of Kansas, in proportion to the number of mills levied within each taxpayer's tax levy unit. Tax Rates: The City may levy taxes in accordance with the requirements of its adopted budget. Property tax levies are based on the adopted budget of the City and the assessed valuations provided by the County appraiser. The following table shows the City's mill levies by fund (per 1000 of assessed valuation) for each of the years indicated and the current year: Source: County Clerk Year General Fund Library Fund Liability Fund G.O. Bonds Misc. Funds Total Levy 2008/ / / / / / Aggregate Tax Levies: The aggregate tax levies (per 1000 assessed valuation) of the City and overlapping for the years indicated are included in the following table: Source: County Clerk Year City Ford County School District Dodge City Comm. College State Total Levy 2008/ / / / / / A-8

26 Tax Collection Record: The following table sets forth tax collection information for the City for the years indicated: Source: County Clerk Current Taxes Collected A-9 Current & Delinquent Taxes Collected Total Taxes Levied Amount Percentage Amount Percentage Year 2008/09 6,114,470 6,125, % 6,245, % 2009/10 6,193,538 6,360, % 6,498, % 2010/11 6,461,944 6,588, % 6,690, % 2011/12 6,613,021 6,664, % 6,831, % 2012/13 7,066,277 7,014, % 7,187, % Major Taxpayers: The following table sets forth the ten largest taxpayers in the City for taxes levied in the most recent tax collection period (2012/13): Source: County Clerk Risk Management Taxpayer Assessed Valuation Taxes Paid 1. BHC Development 4,944,925 1,244, Victory Electric 6,045,511 1,144, Western Plains Re DC Healthcare 2,570, , Wal-Mart 1,809, , BHC Lodging 1,736, , Black Hills Utility 1,692, , Southwestern Bell 1,426, , Cargill Meat Solutions Excel Corp 2,239, , BNSF 1,004, , DCM limited, LLC 924, ,113 The City is insured against the risks arising from general liability, property insurance and Workmen s Compensation by Traveler s Insurance. The City offers employee health insurance through Blue Cross/Blue Shield of Kansas. History of Employment Source: Clerk The following table indicates the history of the Issuer's employment for the years indicated. Employee Relations Total Full- Year Time Employees The City maintains and updates its Job Classification Plan on an annual basis. Wages and salaries for each job class are reviewed with peer group cities as well as throughout the community in order to maintain competitive wages. This aids in attracting and maintaining quality employees to serve the efficiency of all operations of the City. A number of employees in each department and division are also reviewed and compared with peer groups. In 2007, the City Commission hired a

27 consultant to conduct a wage and salary survey. The results of this survey were implemented over a 3 year period beginning in Additions of employees are always reviewed by the City Commission and are predicated somewhat on budgetary considerations as well as efficiency of the organization. Budget shortfalls have not yet impacted numbers of employees. In May, 2002, the City Commission voted to recognize employee groups who are interested in negotiating a contract with the City. To date, only one employee group, the Police Department, has negotiated a contract. The FOP is the bargaining unit for the Police Department contract. Pension and Employee Retirement Plans The City participates in the Kansas Public Employees Retirement System (KPERS) established in 1962, as an instrumentality of the State, pursuant to K.S.A et seq., to provide retirement and related benefits to public employees in Kansas. KPERS is governed by a board of trustees consisting of nine members, including four members appointed by the Governor subject to confirmation by the State Senate, one appointed by the President of the Senate, one appointed by the Speaker of the House of Representatives, two elected by members and retirants of the retirement system, which must be members of such system, and the State Treasurer. Members of the board of trustees serve four-year terms and elect a chairperson annually. The board of trustees appoints an Executive Director to serve as the managing officer of KPERS and employs a staff of approximately 95 people. As of December 31, 2012, KPERS serves about 286,000 members and 1,500 participating employers, including the State, school districts, counties, cities, public libraries, hospitals and other governmental units. KPERS administers the following three statewide, defined benefit retirement plans for public employees: (a) (b) (c) Kansas Public Employees Retirement System; Kansas Police and Firemen s Retirement System; and Kansas Retirement System for Judges. These three plans are separate and distinct with different membership groups, actuarial assumptions, experience, contribution rates and benefit options. The Kansas Public Employees Retirement System is the largest of the three plans, accounting for more than 95% of the members. The Kansas Public Employees Retirement System is further divided into two separate groups, as follows: (a) State/School Group - includes members employed by the State, school districts, community colleges, vocational-technical schools and educational cooperatives. The State of Kansas makes all employer contributions for this group, 85% of which comes from the State General Fund. State legislation enacted in 2003 made certain pre-1962 Board employees (which are part of a small group of pre-1962 Board and University of Kansas Hospital Authority employees known as the TIAA Group ), special members of the State/School Group. (b) Local Group - all participating cities, counties, library boards, water districts and political subdivisions are included in this group. Local employers contribute at a different rate than the State/School Group rate. State legislation enacted in 2003 made certain pre-1962 employees of the University of Kansas Hospital Authority (which are a part of a small group of pre-1962 Board and University of Kansas Hospital Authority employees known as the TIAA Group ), special members of the Local Group. KPERS is currently a qualified, governmental, 401(a) defined benefit pension plan, and has received IRS determination letters attesting to the plan s qualified status dated October 14, 1999 and March 5, KPERS is also a contributory defined benefit plan, meaning that employees make contributions to the plan. This contrasts it from noncontributory pension plans, which are funded solely by employer contributions. The City's employees currently annually contribute: (a) 4% of their gross salary to the plan if such employees are KPERS Tier 1 members (covered employment prior to July 1, 2009), or (b) 6% of their gross salary to the plan if such employees are KPERS Tier 2 members (covered employment on or after July 1, 2009). In 2012, the Kansas legislature created a new KPERS Tier 3 category (covered employment on or after January 1, 2015) based on a cash balance plan. Each Tier 3 participant shall have a retirement annuity account to which such participant shall contribute 6% of their gross salary to the plan. The employer or State contribution varies based on longevity of participant service: (a) 3% for less than 5 years; (b) 4% for at least 5 years but less than 12 years; (c) 5% for at least 12 years but less than 24 years; and (d) 6% for 24 or more years. Such account shall receive an interest credit of 5.25% per annum, and under certain circumstances, shall receive additional interest credits. Subject to certain exceptions, a Tier 3 participant, upon retirement, shall receive a single life annuity benefit. The 2012 Kansas legislature adopted a number of other changes to KPERS including: (a) increasing the statutory maximum employer contribution annual increase from 0.6% per year (status quo) to 0.9% per year in 2014, 1.0% in 2015, 1.1% in 2016 and 1.2% per year in 2017 and thereafter, (b) providing additional contribution flexibility for Tier 1 participants A-10

28 with corresponding benefit adjustments (effective January 1, 2014, subject to approval by the IRS), (c) eliminating COLA adjustments for Tier 2 participants with corresponding benefit adjustments (effective January 1, 2014), and (d) providing additional flexibility for alternative investments for the plan. The City's contribution varies from year to year based upon the annual actuarial valuation and appraisal made by KPERS, subject to legislative caps on percentage increases. The City's contribution is 7.94% of the employee s gross salary for calendar year The rate is scheduled to change to 8.84% beginning January 1, In addition, the City contributes 0.85% of the employee s gross salary for Death and Disability Insurance for covered employees. According to the Valuation Report as of December 31, 2012 (the Valuation Report ) the KPERS Local Group, of which the Issuer is a member, carried an unfunded accrued actuarial liability ( UAAL ) of billion at the end of KPERS actuaries identified that an employer contribution rate of 9.48% of covered payroll would be necessary, in addition to statutory contributions by covered employees, to eliminate the UAAL by 2033, the end of the actuarial period. The statutory contribution rate of employers is currently equal to the Valuation Report s actuarial rate of 9.48%.As a result, members of the Local Group are adequately funding their projected actuarial liabilities and the UAAL can be expected to diminish over time. KPERS actuaries project the required employer contribution rate to increase by the maximum statutorily allowed rate, which is currently 0.6% per year, then 0.9% in fiscal year 2014, 1.0% in fiscal year 2015, 1.1% in fiscal year 2016 and 1.2% in fiscal year The City has established membership in the Kansas Police and Fire Retirement System ( KPFRS ) for its police and fire personnel. KPFRS is a division of and is administered by KPERS. Annual contributions are adjusted annually based on actuarial studies, subject to legislative caps on percentage increases. Commencing with the first payroll period on or after July 1, 2013, employees contribute 7.15% of gross compensation and the City contributes 22.74% of employees' gross compensation. The 2013 Kansas Legislature adopted a number of changes to the KPFRS which included (a) raising the cap on maximum KPFRS benefits from 80% to 90% of final average salary and (b) permitting certain active KPFRS members to pay a lump sum amount prior to or on their retirement date to enhance the individual retirement benefit at their own cost. [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] A-11

29 DEBT STRUCTURE Debt Summary The following table summarizes certain key statistics with respect to the Issuer's general obligation debt, including the Bonds and excluding the Refunded Bonds: Debt Summary (As of December 12, 2013) City Debt Less Self Supporting Debt Fair Market Value of Taxable Property ,166,080,010 1,166,080,010 Equalized Assessed Valuation of Tangible Valuation for Computation of Bonded Debt Limitations ,231, ,231,265 Legal limitation of Bonded Debt ,969,380 48,969,380 Outstanding General Obligation Debt... 44,270,000 44,270,000 Statutory Exempt Debt... 20,070, Net Debt against Debt Limit Capacity... 24,199, Additional Debt Capacity... 24,770, Less Self Supporting Debt ,305,000 Non Self Supporting Debt ,965,000 Direct Debt Per Capita (Population = 28,075)... 1,577 1,139 Direct and Overlapping Debt Per Capita... 2,887 2,449 Direct Debt as a Percentage of Assessed Valuation % 19.58% Direct and Overlapping Debt as a Percentage of Assessed Valuation % 42.12% Statutory Direct Debt as a Percentage of Assessed Valuation % --- Direct Debt as a Percentage of Actual Fair Market Value % 2.74% Direct and Overlapping Debt as a Percentage of Actual Fair Market Value % 5.90% 1 See Property Valuations infra. 2 The assessed value of all tangible taxable property within the City, as certified to the County Clerk on the preceding August 25. Also includes the taxable value of motor vehicles within the City motor vehicle valuation not yet available; 2012 data used for estimation purposes only. See K.S.A et seq. 3 See K.S.A et seq. 4 Series 2012-A Bonds (Waterworks and Wastewater Utility System revenues). Current Indebtedness of the Issuer The following table sets forth as of the date of issuance of the Bonds all of the outstanding obligations of the Issuer including the Bonds and excluding the Refunded Bonds: GENERAL OBLIGATION BONDS Description of Indebtedness Series Dated Date Final Maturity Original Principal Amount Amount Outstanding Subject to Debt Limit G.O. Refunding & Improvement Bonds A 09/30/04 09/01/15 2,830, G.O. Bonds 2008-A 12/01/08 09/01/18 1,155, , ,000 G.O. Refunding & Improvement Bonds 2009-A 10/21/09 09/01/29 6,280,000 3,905,000 3,122,438 G.O. Waterworks and Wastewater Utility 2012-A 08/01/12 09/01/24 13,200,000 12,305,000 0 System Refunding Bonds G.O. Refunding & Improvement Bonds 2012-B 08/01/12 09/01/32 21,285,000 20,570,000 13,814,867 G.O. Refunding & Improvement Bonds 2013-A 12/12/13 09/01/28 6,235,000 6,235,000 6,235,000 Total 43,640,000 23,797,305 1 Excludes Refunded Bonds. A-12

30 TEMPORARY NOTES Description of Indebtedness Series Dated Date Final Maturity Original Principal Amount Amount Outstanding Subject to Debt Limit G.O. Temporary Notes /18/12 12/01/14 630, , ,981 REVENUE OBLIGATIONS Description of Indebtedness Series Dated Date Final Maturity Original Principal Amount Amount Outstanding Sales Tax Revenue Bonds /01/09 06/01/34 40,300,000 37,895,000 Source: Clerk History of General Obligation Indebtedness The following table sets forth general obligation debt information pertaining to the Issuer as of the end of each of the years indicated: Source: Clerk State Loans Year Total Debt Debt As Percentage of Assessed Value Debt Per Capita ,530, % ,465, ,335, ,088, ,770, ,785, The Issuer has never in its history defaulted on the payment of any of its debt obligations. The City has entered into two Loan Agreements (collectively the Loans ) with the Kansas Department of Health and Environment to finance improvements to the City's waterworks utility system and wastewater utility system. The term of the Loans are 20 years and they provide for approximately level annual debt service payments. Purpose of Dated Final Original Amount Indebtedness Date Payment Date Principal Amount Outstanding Wastewater Treatment Plant 09/09 09/31 29,532,000 22,386,730 The Loans are secured by a pledge of revenues of the City s waterworks and wastewater utility systems on the same basis of lien to the Issuer s Series 2012-A Bonds, together with a pledge of unlimited ad valorem property tax levies of the City. Source: Clerk A-13

31 Overlapping Indebtedness The following table sets forth overlapping indebtedness as of December 12, 2013, and the percent attributable (on the basis of assessed valuation) to the City: Outstanding General Obligation Indebtedness Percent Applicable to Issuer Amount Applicable to Issuer Taxing Jurisdiction Assessed Valuation Ford County 288,058,403 17,515, % 8,556,078 U.S.D. No ,891,718 31,295, % 21,083,442 Dodge City Community College 288,058,403 14,645, % 7,154,404 Total 36,793,924 Future Indebtedness The City regularly issues temporary notes and/or general obligation bonds in order to finance infrastructure improvements to serve the City. The City anticipates issuing temporary notes or general obligation bonds within the next 12 months to finance street improvements. [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] A-14

32 APPENDIX B FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS (FOR THE FISCAL YEAR ENDED 12/31/2012)

33 CITY OF DODGE CITY, KANSAS BASIC FINANCIAL STATEMENTS with INDEPENDENT AUDITOR'S REPORT YEAR ENDED DECEMBER 31, 2012 KENNEDY McKEE & COMPANY LLP =======================CERTIFIED Pusuc AccouNTANTS 1100 W. FRONTVtEw P.O. Box 1477 DoDGE CtTY, KANSAS (620)

34 CITY OF DODGE CITY, KANSAS TABLE OF CONTENTS Independent Auditor's Report...,... 1 Management's Discussion and Analysis... 4 BASIC FINANCIAL STATEMENTS Government-wide Financial Statements Statement of Net Position Statement of Activities Fund Financial Statements Balance Sheet- Governmental Funds Statement of Revenue, Expenditures and Changes in Fund Balances- Governmental Funds Statement of Net Position - Proprietary Funds Statement of Revenue, Expenses and Changes in Fund Net Position - Proprietary Funds Statement of Cash Flows - Proprietary Funds Component Unit Financial Statements Statement of Net Position- Major Component Units Statement of Activities- Major Component Units Budgetary Comparison Statements General Fund Sales Tax Fund Budget to GAAP Reconciliation Notes to Basic Financial Statements SUPPLEMENTARY INFORMATION COMBINING FINANCIAL STATEMENTS Combining Balance Sheet- Nonmajor Governmental Funds Combining Balance Sheet- Nonmajor Governmental Funds- Special Revenue Funds Combining Balance Sheet- Nonmajor Governmental Funds- Capital Projects Funds Combining Statement of Revenue, Expenditures and Changes in Fund Balances- Nonmajor Governmental Funds Combining Statement of Revenue, Expenditures and Changes in Fund Balances- Nonmajor Governmental Funds- Special Revenue Funds Page

35 TABLE OF CONTENTS (CONTINUED) SUPPLEMENTARY INFORMATION COMBINING FINANCIAL STATEMENTS (CONTINUED) Combining Statement of Revenue, Expenditures and Changes in Fund Balances- Nonmajor Governmental Funds- Capital Projects Funds Statement of Fiduciary Net Assets -Agency Funds APPENDICES Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor's Report on Compliance for Each Major Program and on Internal Control over Compliance Required by OMB Circular A Schedule of Expenditures of Federal Awards Schedule of Findings and Questioned Costs OTHER AUDIT Dodge City Public Library

36 1\.!nnecfy ~c1\!e e: Company LLP Certified Public Accountants 1100W. Frontview P. 0. Box 1477 Dodge City, Kansas Tel. (620) Fax (620) JAMES W. KENNEDY, CPA JAMES R. SHIRLEY, CPA LU ANN WETMORE, CPA ROBERT C. NEIDHART, CPA PATRICK M. FRIESS, CPA JOHN W. HENDRICKSON, CPA INDEPENDENT AUDITOR'S REPORT The Honorable Mayor and City Commissioners Dodge City, Kansas We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Dodge City, Kansas, as of and for the year ended December 31, 2012, which collectively comprise the City's basic financial statements as listed in the table of contents. We did not audit the financial statements of the Dodge City Housing Authority and Special Events Center Special Revenue Fund. Those financial statements were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Dodge City Housing Authority and Special Events Center Special Revenue Fund, is based on the reports of the other auditors. 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, the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States and the Kansas Municipal Audit and Accounting Guide. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. 1

37 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. Opinions In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Dodge City, Kansas, as of December 31, 2012, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the General Fund and the Sales Tax Fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and budgetary comparison information as listed in the table of contents 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 the 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 of Dodge City, Kansas' financial statements as a whole. The combining and individual nonmajor fund financial statements are presented for purposes of additional analysis and are not a required part of the financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Manaqement and Budqet Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the basic financial statements. 2

38 The combining and individual nonmajor fund financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The 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 financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements taken as a whole. Other Reoortinq Required bv Government Auditina Standards In accordance with Government Auditina Standards. we have also issued our report dated Auqust on our consideration of the Citv of Dodqe Citv. Kansas' internal control over financial reportinq and on our tests of its compliance with certain provisions of laws. requlations. contracts. and qrant aqreements and other matters. The purpose of that report is to describe the scope of our testinq of internal control over financial reportinq and compliance and the results of that testinq, and not to provide an opinion on internal control over financial reportinq or on compliance. That report is an inteqral part of an audit performed in accordance with Government Auditinq Standards in considering City of Dodge City, Kansas' internal control over financial reporting and compliance. August 23,

39 MANAGEMENT'S DISCUSSION AND ANALYSIS

40 CITY OF DODGE CITY MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED) December 31, 2012 MANAGEMENT'S DISCUSSION AND ANALYSIS Our discussion and analysis of the City of Dodge City's financial performance provides an overview of the City's financial activities for the year ended December 31, It should be read in conjunction with the City's basic financial statements, listed in the table of contents. USING THIS ANNUAL REPORT This annual report consists of a series of financial statements. The government-wide statements consist of the Statement of Net Position and the Statement of Activities. These provide information about the activities of the City as a whole and present a longer-term view of the City's finances. Fund financial statements follow the government-wide statements. For governmental activities, these statements tell how the services of the City were financed in the short term as well as what remains for future spending. Fund financial statements report the City's operations in more detail than the government-wide statements by providing information about the City's most significant funds. The Statement of Net Position and the Statement of Activities One of the most important questions asked about the City's finances is this: "Is the City as a whole better off or worse off as a result of the year's activities?" The Statement of Net Position and the Statement of Activities report information about the City as a whole and about its activities in a way that helps provide answers to this question. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the City's net position and the changes in them. The net position represents the difference between assets and liabilities. Net position is one way to measure the financial position of the City. Over time, increases or decreases in the City's net position is one indicator of whether its financial health is improving or deteriorating. Other factors, such as changes in the property tax base, and economic conditions at the state and local level must also be considered when assessing the overall financial health of the City. In the Statement of Net Position and in the Statement of Activities, the information is divided into three kinds of activities: Governmental activities-many of the City's basic services are reported here, including general government, public safety, public works, culture and recreation and community services. Property taxes, sales tax, franchise fees, service charges and fees, other types of governmental revenues and taxes, and federal and state grants finance most of these activities. Business-type-activities-The City charges a fee to residents to cover the cost of utility services it provides. These services are water, wastewater, solid waste, and drainage utilities. Component units-the City includes three separate legal entities in its report: the Dodge City Public Library, the Dodge City-Ford County Development Corporation, and the Dodge City Housing Authority. Although legally separate, these component units are important because of their relationship with the City. 4

41 USING THIS ANNUAL REPORT (CONTINUED) The Statement of Net Position and the Statement of Activities (continued) To assist in the understanding of the Statement of Activities some additional explanation is given. Of particular interest is the format that is significantly different from a typical Statement of Revenue, Expenditures, and Changes in Fund Balance. The expenses are listed in the first column with revenues from that particular program reported to the right. The result is a net (expense)/revenue. The reason for this kind of format is to highlight the relative financial burden of each of the functions on the City's taxpayers. It also identifies how much each function draws from the general revenues and how much it is self-financing through fees and grants. Fund Financial Statements Our analysis of the City's major funds follows in this discussion. The fund financial statements provide detailed information about the most significant funds - not the City as a whole. Some funds are required to be established by state law or by contract. However, the City Commission establishes many other funds to help control and manage money for particular purposes, or to show that it is meeting legal responsibilities for using certain taxes, grants, and other money. The City's two kinds of funds - governmental and proprietary- use different accounting approaches. Governmental funds-many of the City's basic services are reported in governmental funds. The focus is on how money flows into and out of those funds and on the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can be readily converted to cash. The governmental fund statements provide a detailed short-term view of the City's general government operations and the basic services it provides. Governmental fund information helps to determine whether there are more or fewer financial resources that can be spent in the near future to finance the City's programs. A reconciliation between the governmental funds reported here and the overall governmental activities column of the Statement of Net Position is provided. Proprietary funds-the City maintains two types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City's various functions. The City uses an internal service fund to account for its vehicle and equipment maintenance activities. Proprietary funds are reported using the same accounting approach that all activities use in the Statement of Net Position and in the Statement of Activities. Since the Enterprise funds use the same accounting approach in all statements, no reconciliation is necessary among the statements. 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. 5

42 THE CITY AS A WHOLE Government-Wide Statements - Overview The City's overall financial position and operations for the past two years are summarized as follows based on the information included in the government-wide financial statements: Governmental activities Business-type activities Total Current and other assets 30,655,635 28,741,945 9,049,693 10,268,541 39,705,328 39,010,485 Capital assets 117,521, ,967,055 70,442,058 68,983, ,963, ,950,920 Total assets 148,176, ,709, ,252, , ,961,405 Long-term liabilities 62,003,996 62,897,755 43,720,679 38,820, ,724, ,718,520 Other liabilities 2,533,513 2,342,326 2, ,713,310 Total liabilities 64,537,509 65,240, ,830 Deferred inflows of resources ,899, Net Position: Invested in capital assets net of related debt Restricted Unrestricted 57,448,166 13,513, ,806 63,247,554 9,741, ,721,379 25,148,101 1,486, ,169,545 13,513,489 11,606,933 88,395,655 11,228, Total net position For the years ended December 31, 2012 and 2011, net position changed as follows: Governmental activities Business-type activities Total Beginning net position 81,449,595 85,709,790 34,045,657 30,065, ,495, ,775,421 Increase (decrease) in net position (5,359, 134) (4,260, 195) (846,151) 3,980,026 (6,205,285) (280, 169) Ending net position _ ,252 Governmental current assets increased because the cash balances in most of the governmental funds were increased, particularly in the General Fund. This is the result of a concerted effort to focus on increasing the cash balances to a level described in the financial policies. Capital assets decreased slightly due to the normal depreciation on capital infrastructure. This depreciation expense exceeded the addition of capital assets. Current assets decreased in the business-type activities from 2011 to 2012 because of the repayment on the KDH&E Water Loan for the construction of the water reclamation facility. The capital assets increased because of the addition of the water reclamation facility and related assets. 6

43 THE CITY AS A WHOLE (CONTINUED) Government-Wide Statements- Overview (continued) Governmental activities Business-type activities Total primary government Revenue: Program revenue: Charges for services Operating grants Capital grants General revenue: Property taxes, levied for general purposes Property taxes and special assessments levied for debt service Sales taxes Franchise taxes Expanded lottery tax Grants and contributions Gain on assets Investment earnings Transfers Miscellaneous 5,297,243 2,232,035 1,963,992 5,936,007 2,468,889 10,458,935 1,579, , ,400 27,293 56, ,596 4,018,920 2,405,287 3,284,543 5,691 '144 2,817,237 9,850,819 1,728, , ,691 37, , ,706, , , ,149 92,328 (1,218,797) 10,583, ,650 4,124,760 (3,525) 93,330 (1,241,525) 16,004,128 3,058,922 2,084,399 5,936,007 2,468,889 10,458,935 1,579, , , , ,621 (1 '162,480) 212,596 14,602,428 3,232,937 7,409,303 5,691 '144 2,817,237 9,850,819 1,728, , ,691 (3,525) 131,300 (1 '117,952) Total revenue Program expenses: General government Public safety Public works Culture and recreation Community services Capital projects Indirect depreciation Interest on long-term debt Water Wastewater Solid waste Drainage 31, ,658,108 6,412,662 5,104,459 9,863,443 1,236,892 8,091,726 3,004, ,826,623 8,408,399 2,450,634 10,311,154 1,091, ,567 7,812,276 2,497,681 10, ,383,284 5,998,875 1,786, ,035 14, ,428,696 4,969,105 1,717, ,645,908 2,658,108 6,412,662 5,104,459 9,863,443 1,236,892 8,091,726 3,004,893 3,383,284 5,998,875 1,786, , ,826,623 8,408,399 2,450,634 10,311,154 1,091, ,567 7,812,276 2,497,681 3,428,696 4,969,105 1,717, Total expenses 36,372,183 35,608, ,012,845 Increase (decrease) in net assets ) ) ) ) ) The charges for services increased from 2011 to The operation of the special events center for 12 months compared to 10 months increased the charges for services at the special events center. The recreation, golf course, and other public buildings and grounds charges for services increased considerably. The franchise taxes decreased because the gas and electric are variable depending mostly on the weather, and the telephone franchise tax is decreasing because of the downturn in the number of land lines. The sales tax increased 6.17%, the expanded lottery tax increased 3.52%. The most notable changes in the program expenses were: the public safety decreased because several positions were vacant in 2012, compared to fully staffed in 2011 and capital equipment purchases made in 2011 that were not in 2012; and the public works expenses increased because of capital improvements at the airport. Governmental Activities The most significant governmental activities are general government, public safety, public works, culture and recreation and community services. The main sources of revenue are property taxes, sales tax, franchise fees, charges for services, other governmental revenue and taxes, and operating grants and contributions. Total governmental revenues for the year were 31,013,049, and total expenses were 36,372,183. The percentage decrease 1n revenue was 1.07%, while the total increase in expense was 2.1 0%. The following charts reflect a comparison among all the governmental sources of revenue and expense categories for the years ended December 31, 2012, 2011, 2010, 2009 and 2008 based on the information included in the government-wide financial statements. 7

44 THE CITY AS A WHOLE (CONTINUED) Governmental Activities (continued) Governmental Activities -Revenues Charges Operating Grants Capital Grants Taxes and Contributions IIEI2008 D !12012 I Miscellaneous Governmental Activities -Expenses 6,0... t: - Q) ~ E Q) t: t:... Q) Q) (!) > 0 (!) "0 t: t: 0 ro:.j:j... Q) ::J Q) "' () - Q) Gil:.~ tj) t: Q) ::J () E ~ 0(/) u 1 El2oos EJ2oos o 201 o 2011 ~

45 THE CITY AS A WHOLE (CONTINUED) Business-Type Activities The business-type activities of the City are the water, wastewater, solid waste, and drainage utilities. These activities derive most of their revenue from charges for services. Total business-type program revenues are 11,654,179 and operating expenses are 11,479,010. The charts below compare program revenues and changes in net assets for the years ended December 31, 2012, 2011, 2010, 2009 and 2008 based on the information included in the government-wide financial statements. Business-Type Activities- Program Revenues 10,000,000 5,000,000 0 Water Wastewater Solid Waste I B1] 2008 G 2009 [)3 2010!Bl2011 1m 2012 I Drainage Business Type Activities - Change in Net Assets before Transfers 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000, t4-'-=""---""""" -1,000,000 ~~~~-~~ E!l~i5i5:E Water Wastewater Solid Waste Drainage jm2ooa o2009 r;:;j201o !

46 THE CITY'S FUND BALANCES Governmental Activities As the City completed the year, the governmental funds reported a combined fund balance of 20,336,608, as reflected in the Balance Sheet - Governmental Funds. This balance represents an increase of 1,389,386 (7.34%) from last year's ending balance. This increase in fund balance is primarily due to a concerted effort to increase the fund balances to a level that would cover future replacement costs as well as a target of 15-25% of current budgeted expenses in the general fund to be able to fund operations at all times, especially if an emergency situation would exist. A comparison of fund balances based on information included in the fund financial statements is presented below: Governmental Fund Balances 45,000, 30,000, 25,000, 20,000, 15,000, 10,000, 5,000, General Sales Tax Debt Service ja2oos o 2009 o 201 o rn 2011 o 2012 I Other Governmental Funds Following is an analysis of General Fund and Sales Tax Fund revenue and expenditures compared to the previous year: The percentage of revenue that funded the General Fund in 2012 is sales tax at 35.90%, property tax at 29.35%, franchise fees at 12.25%, licenses, charges and rentals at 12.35%, fines at 8.18% with other revenues representing the remainder of the funding. General Fund revenue increased from 2011 by 0.94%. Property tax collections remain very stable. The chart below lists the percentage of property tax collected compared to the amount that was levied. Year %of Property Tax Collected compared to the amount Levied 96.73% % 96.27% % 96.56% %of Property Tax Collected plus Delinquent amount compared to the amount Levied 99.49% % 98.5% % 99.34% 10

47 THE CITY'S FUND BALANCES (CONTINUED) Governmental Activities (continued) The Sales Tax Fund is funded primarily by sales tax and partially by user fees and charges. The overall revenue in the sales tax fund increased from 2011 by 8.55% because of an increase of sales tax collections. Governmental Activities -Revenues 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 0 Ill Q) X nl 1- iii... c Q) E c... Q) > 0 ~ Q)... c "C c ~ Ill nl Ill Q) - Ill Ill nl c Q)... Q) C) c 0... Q) - nl -l.c 0::: u "C Ill nl ::s c e Ill;!:! Q) Q) c't: u..~... c Ill Q) C) E c u; E Q) nl ~w Ill ::s 0 Q) c ~ Q) 0 Ill ~ 11:E2oos o2oo m i112o121 Governmental Activities- Expenditures 45,000,000 40,000,000 35,000,000 ~ ~~ ~ 30,000,000 25,000,000 20,000,000 15,000,000 ~ r.::-exh ~ 10,000,000 5,000,000 0-JL!i~~~~ -c: - a.> ~ E a.> c:,_ c: a.> a.> (.!) > 0 (.!).!:! z. - a.>.c... a. ::J en "' (.) (/) =~.c,_ ::J 0 a.?;: "C c: c: 0 n:s~,_ a.> "' a.> ::J,_ - (.) a.> 8o:: []2010 rr:j2011 lm20121 ~(/) c: a.> ::J (.) E ~ o en u a.> (.).E a.> en -.c a.> 0 11

48 BUDGETARY HIGHLIGHTS The governmental funds included in the published budget are the General Fund, Special Liability, Library, Library Employee Benefits, Building, Sales Tax, Convention and Visitors, Special Streets and Highways, Special Park and Recreation, Special Alcohol and Drug, Alcohol and Drug Safety Action, All 4 Fun, and GO Bond and Interest Funds. Budgeted business-type funds are as follows: Water, Wastewater, Solid Waste and Drainage Utility Funds. The internal service fund is the Vehicle Maintenance Fund. The statutes allow for the governing body to increase the originally adopted budget for previously unbudgeted increases in revenue other than ad valorem property taxes. Budgets were amended for the following funds: Original budget Amended budget Convention & Visitors Special Park & Recreation Roof & Vehicle Insurance Repairs All For Fun Wastewater Vehicle Maintenance 763,148 90,000 30,000 6,405, , ,000 98, ,000 35,000 7,055, ,790 The following charts show expenditures by category compared with the published budget for the current year. 8,000 7,000 6,000 5,000 4,000 General Fund Comparison to Budget 2012 j rill Budget II Actual I 8,000,0 7,000,0 6,000,0 5,000,0 Enterprise Funds Comparison to Budget Q; :EB(/) C1l C1l 0 C1l : ;: ens; Q)... (/) C1l ::: 011 Budget!!! Actual I Q) C) C1l c " 0 12

49 CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets The City has invested million in capital assets (net of depreciation). Approximately 63% of this investment is related to governmental activities and includes infrastructure, buildings, equipment and land. Governmental capital assets decreased by approximately 6%, while capital assets held for business-type activities have increased 2.11% from the previous year. Capital assets held by the City at the end of the current and previous year is summarized as follows: Capital Assets (Net of Depreciation, in Thousands) Governmental activities Business-t~Qe activities Total Land Buildings and 5,582 5,582 1,527 1,527 7,109 7,109 improvements 47,934 49,376 24,456 4,824 72,390 54,200 Machinery and equipment 11,915 12,628 1,306 1,611 13,221 14,239 Infrastructure 51,422 57,107 38,345 35,870 89,767 92,977 Water rights 3,161 3,223 3,161 3,223 Construction in progress , ,203 Totals 117,521 ~ 124,967 ~ 70,442 ~ 68,984 ~ 187,963 ~ 193,951 The City of Dodge City has a five-year capital improvement program, which includes the street program, and a five year municipal equipment replacement program. In each program, capital improvements are completed annually, equipment is scheduled for replacement, and street improvements are completed annually. The additions to the capital assets in the governmental funds are a result of improvements scheduled during the year. Vehicles were replaced according to the schedule in the Police, Parks and Recreation and Public Works Departments. A new City Trolley was purchased in the Convention and Visitors Department. Street improvements added include: reconstruction of 14 1 h Avenue from Wyatt Earp to Spruce; and the construction of Gary Avenue from Tanglewood N 737' to Steamboat Drive, both in Candletree Addition #5, a new development to the City of Dodge City. The aircraft parking ramp at the airport was complete. Other capital additions include the Wright Park parking lot and improvements to Dodge City Raceway Park. Capital additions for the business-type activities included: waterline extensions to Estancia Addition, Dodge City Extended Stay Hotel, Curtis Machine, Western State Bank Expo Center and to Candletree Addition #5. Also, the Water Reclamation Plant including interceptors, reuse line and a pump station were added. Additional information about the City's capital assets is presented in Note F of the financial statements. Long-Term Liabilities At the end of the current year, the City had long-term liabilities related to governmental activities of 61,449,723. This includes 20,785,050 in general obligation bonds, 630,000 temporary notes, 232,938 in capital lease obligations, 307,500 in notes payable, 834,235 in compensated absences, and 38,660,000 in revenue bonds. 13

50 CAPITAL ASSET AND DEBT ADMINISTRATION (CONTINUED) Long-Term Liabilities (continued) The total amount of debt related to business-type activities at the end of the current year was 43,847,401, which was a decrease of 114,555 from the previous year. The most significant change was the issuance of 20,379,950 in general obligation bonds to pay off revenue bonds, a water loan and temporary notes. The debt position of the City is summarized below and is more fully analyzed in Note I of the financial statements. Long-Term Obligations Governmental activities Business-tyQe activities Total General obligation bonds 20,785,050 19,340,000 20,379,950-41,165,000 19,340,000 Capital lease obligations 232, , , ,207 Notes payable 307, , , ,500 Compensated absences 834, , , , , ,755 Revenue bonds 38,660,000 39,365,000 15,110,000 38,660,000 54,475,000 Other obligations ,340,729 28,725,765 23,970,729 32,155,765 Totals 6:1 449 Z23 63,594,27: Z,4Qj 43 96:1 956 :105 29Z :124 :1 QZ,556 22Z RELEVANT CURRENT ECONOMIC FACTORS, DECISIONS AND CONDITIONS Expenses, such as employee costs, utilities, and commodities continue to increase. The use type taxes including the sales tax, transient guest tax and expanded lottery tax, increased by 7.2%. This continues to be more than average. Other revenue sources have remained stable. The City continues to maintain quality services. The General Fund fund balance increased from The City of Dodge City has applied for and received a STAR Bond designation from the State of Kansas. This will assist in attracting retail development to Dodge City. This will entail a retail district on the west part of town as well as the historic downtown district. The City continues to work on the Main Street project which may increase the viability of the downtown district. The City continues to work on several housing projects to improve the number and quality of the housing stock in Dodge City and authorizes incentives when necessary. Because of wind farm development in Ford County and existing business growth, the community continues to see growth. Two new motels are currently either under construction or in the development stages. The City of Dodge City continues its efforts to be the entertainment capital of Southwest Kansas. Because of the %% sales tax authorized in 1997, the four projects on the ballot have been completed, are operational and have proved successful. These projects are: a motor sport race track; a softball/baseball complex and other athletic fields in the community; the air conditioning of the Civic Center; and a special events center. The City continues to enhance the original projects and has added onto these facilities with additional sports fields to appeal to all types of sports venues. With the addition of the State of Kansas's first destination casino which has been operational since December of 2009, the area west of Dodge City continues to grow. The Special Events Center is located adjacent to the casino, and a hotel opened in early 2011 at the same location. This whole area continues to be an entertainment district for Dodge City and Southwest Kansas. As Dodge City and Ford County continues to grow, the City and its partners are working on the downtown area, the housing and recruitment of retail and industry to expand on what we have and to diversify the tourism and agriculture industry. 14

51 CONTACTING THE CITY'S FINANCIAL MANAGEMENT This financial report is designed to provide various interested parties with a general overview of the City's finances and to show the City's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the City Clerk and Finance Officer, 806 Second Avenue, Dodge City, Kansas The separately issued financial statements of the component units may be obtained from administrative offices as follows: Dodge City Public Library 1001 Second Avenue Dodge City, KS Dodge City/Ford County Development Corporation 311 W. Spruce Dodge City, KS Dodge City Housing Authority 407 E. Bend Dodge City, KS

52 BASIC FINANCIAL STATEMENTS

53 CITY OF DODGE CITY, KANSAS STATEMENT OF NET POSITION December 31,2012 Primary government Governmental Business-type Component activities activities Total units ASSETS Cash and cash equivalents 6,806,800 6,736,939 13,543, ,927 Investments 573,516 Property taxes receivable 7,006,276 7,006,276 Receivables, net 1,636, ,866 2,255, ,867 Due from other governments 322, ,155 Inventories 72, , ,669 27,433 Notes receivable 175,695 Prepaid insurance 8,092 Restricted cash and investments 13,486, ,748 14,198,820 Capital assets, net 117,521,050 70,442, ,963,108 9,845,519 Other noncurrent assets 1,325, ,724 1,831,975 Total assets 148,176,685 79,491, ,668,436 11,720,049 LIABILITIES Accounts payable 1,132, ,299 1,782, ,376 Salaries and benefits payable 152,284 27, ,525 Accrued interest payable 415, , , ,611 Other accrued liabilities 907, ,373 52,594 Deferred revenue 7,271 Compensated absences payable 833, , , ,823 Noncurrent liabilities: Due within one year 2,983,783 2,567,150 5,550,933 Due in more than one year 59,020,213 41,153, ,173, ,000 Total liabilities 64,537,509 45,940, ,478,486 1,634,675 DEFERRED INFLOWS OF RESOURCES Property taxes 7,006,278 7,006,278 Deferred gain on refunding 157, , ,548 Contractual obligations 385, ,157 Total deferred inflows of resources 7,548, ,268 7,899,983 NET POSITION Invested in capital assets, net of related debt 57,448,166 26,721,379 84,169,545 9,083,519 Restricted (expendable): Debt service 5,274,267 5,274,267 Construction 935, ,569 Projects 7,303,653 7,303,653 Housing Authority 50,953 Prospects and housing 92,149 Unrestricted 5,128,806 6,478,127 11,606, ,753 Total net position 76,090,461 33,199, ,289,967 10,085,374 The accompanying notes are an integral part of the basic financial statements. 16

54 CITY OF DODGE CITY, KANSAS STATEMENT OF ACTIVITIES Year ended December 31, 2012 Functions/programs Expenses Charges for services Program revenue Operating grants and contributions Capital grants and contributions Primary government: Governmental activities: General government Public safety Public works Culture and recreation Community services Indirect depreciation Interest on long-term debt 2,658,108 6,412,662 5,104,459 9,863,443 1,236,892 8,091,726 3,004,893 1,049,810 1,309, ,079 2,629, ,083 72,057 14, , ,451 1,033,116 1, ,651 1,766,680 81,151 Total governmental activities 36,372,183 5,297,243 2,232,035 1,963,992 Business-type activities: Water Wastewater Solid waste Drainage 3,383,284 5,998,875 1,786, ,035 4,404,287 4,332,215 1,769, , , , ,880 10,527 Total business-type activities 11,479,010 10,706, , ,407 Total primary government 47,851,193 16,004,128 3,058,922 2,084,399 Component units 3,659, , , ,625 General revenues: Taxes: Property taxes, levied for general purposes Property taxes and special assessments, levied for debt service Sales taxes Franchise taxes Expanded lottery taxes Grants and contributions not restricted to specific programs Gain on assets Investment earnings Transfers Miscellaneous Total general revenues, special items, and transfers Change in net assets Net position - beginning Net position - ending The accompanying notes are an integral part of the basic financial statements. 17

55 Changes in net assets Primary government Governmental Business-type activities activities Total Component units (1,534,731) (1,534,731) (4, 973, 807) (4,973,807) (2, 148,580) (2, 148,580) (7,027,483) (7' 027,483) (97,693) (97,693) (8,091,726) (8,091,726) (3,004,893) (3,004,893) (26,878,913) (26,878,913) 1,269,069 1,269,069 (977,959) (977,959) (6,742) (6,742) (109,199) (109,199) 175, ,169 (26,878,913) 175,169 (26,703,744) (1,472,634) 5,936,007 5,936,007 2,468,889 2,468,889 10,458,935 10,458,935 1,579,834 1,579, , , , , , ,149 27,293 92, ,621 56,317 (1,218,797) (1,162,480) 212, ,596 21,519,779 (1,021,320) 20,498,459 (5,359, 134) (846, 151) (6,205,285) 81,449,595 34,045, ,495,252 76,090,461 33,199, ,289,967 7,772 1 '162,480 22,343 1 '192,595 (280,039).10,365,413 10,085,374

56 CITY OF DODGE CITY, KANSAS BALANCESHEET-GOVERNMENTALFUNDS December 31, 2012 General Sales tax ASSETS Cash and investments 1,152,518 Property taxes receivable 4,121,437 Sales taxes receivable 418,552 Due from other governments Other receivables 385,276 Due from other funds 69,741 Inventories 39,422 Restricted cash and investments 418, ,652,007 Total assets 6,186,946 4,071,183 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable 439,433 Payroll liabilities 136,100 Due to other funds Total liabilities 575,533 5,122 2,122 7,244 Deferred inflows of resources: Property tax 4,121,437 Contractual obligations Revolving loans Total deferred inflows of resources: 4,121,437 Fund balances: Nonspendable: Endowment Inventory 39,422 Long-term receivables Restricted: Debt service Capital projects Grants Committed: Projects Assigned: Encumbrances Other capital expenditures Community service and promotion Other purposes Designated for subsequent year's expenditures 704,975 Unassigned 745,579 Total fund balances 1,489,976 Total liabilities, deferred inflows of resources and fund balances 6,186,946 4,063,939 4,063,939 4,071 '183 The accompanying notes are an integral part of the basic financial statements. 18

57 GO bond and interest Special events center revenue bonds Other governmental funds Total governmental funds 1,112,859 1,061,874 4,212,393 9,582,316 1,771, , ,741 22, ,024 10,734,834 7,006, , , ,641 69,741 62,095 9,527,298 2,174,733 4,212,393 12,713,972 29,359, ,481 12,724 69,741 1 '123, ,946 69, ,946. 1,343,723 1,112,859 1,771, , ,461 7,006, , ,461 1,112,859 2,444,600 7,678, , , ,000 39, ,416 1,061,874 4,212, ,911 2,005 5,274, ,911 2,005 4,063,939 28,323 5,176, ,072 1,366,156 2,040,377 (281,583) 28,323 5,176, ,072 1,366,156 2,745, ,996 1,061,874 4,212,393 9,508,426 20,336,608 2,174,733 4,212,393 12,713,972 29,359,227

58 CITY OF DODGE CITY, KANSAS RECONCILIATION OF THE BALANCE SHEET OF THE GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS December 31, 2012 Total fund balances on the balance sheet 20,336,608 Amounts reported for governmental activities in the statement of net assets are different because of the following: Capital assets used in governmental activities are not financial resources and therefore are not reported in the fund financial statements. Other long-term assets are not available to pay for current-period expenditures and therefore are not reported in the fund financial statements or they are reported as deferred. Certain liabilities are not required to be accrued in the fund financial statements. Only the current portion of compensated absences is shown as an expenditure in the fund financial statements. Economic development revolving loans are considered deferred revenue in the fund financial statements. Long-term liabilities, including bonds payable and deferred gain on refunding, are not due and payable in the current period and therefore are not reported in the fund financial statements. Internal service funds are used by management to charge the costs of certain activities, such as vehicle maintenance, to individual funds. The assets and liabilities of the internal service fund are included in governmental activities in the statement of net position. Net position of governmental activities 117,521,050 1,325,251 (415,398) (833,342) 287,461 (62, 161,276) 30,107 76,090,461 19

59 CITY OF DODGE CITY, KANSAS STATEMENT OF REVENUE, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS Year ended December 31, 2012 General Sales tax Revenue: Taxes 9,998,142 5,827,170 Intergovernmental 185,098 Licenses, fees and permits 244,451 Charges for services 1,163,406 65,297 Rentals 185,790 5,149 Fines and forfeitures 1,055,582 Investment earnings 5,238 3,632 Miscellaneous 65,680 7,900 Total revenue 12,903,387 5,909,148 Expenditures: Current: General government 1,478,209 Public safety 7,627,305 Public works 1,406,990 Culture and recreation 2,624,559 1,325,192 Community services 426,355!Jeht service: Principal Interest and commissions Total expenditures 13,563,418 1,325,192 Excess (deficiency) of revenue over expenditures (660,031) 4,583,956 Other financing sources (uses): Bond issue proceeds Payment to refund bond escrow Transfers in 1,464,953 50,000 Transfers out (221,362) (4,705,529) Transfers to component units Total other financing sources and uses 1,243,591 (4,655,529) Net change in fund balances 583,560 (71,573) Fund balances, beginning of year 906,416 4,135,512 Fund balances, end of year 1,489,976 4,063,939 The accompanying notes are an integral part of the basic financial statements. 20

60 Special events Other Total GO bond center governmental governmental and interest revenue bonds funds funds 2,468,889 2,149,464 20,443,665 4,648,395 4,833, ,451 2,577,575 3,806, ,939 1,055, ,123 27, , ,782 2,468, ,643,759 30,925, ,216 1,083,508 2,718, ,248 8,191,553 4,622,358 6,029, ,873,270 6,823,321 1,830,345 2,256,700 1,895, ,000 2,600, ,788 1,749,741 2,258,529 2,561,004 2,455,041 10,973,729 30,878,384 (92, 115) (2,454,7 41) (1,329,970) 47,099 16,060,117 16,060,117 (14,774, 147) (14,774, 147) 300,000 2,491,247 3,635,161 7,941,361 (1,104,670) (691,003) (6,722,564) (1,162,480) (1 '162,480) 481,300 2,491,247 1,781,678 1,342, ,185 36, ,708 1,389, ,689 4,175,887 9,056,718 18,947,222 1,061,874 4,212,393 9,508,426 20,336,608

61 CITY OF DODGE CITY, KANSAS RECONCILIATION OF THE STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCES OF THE GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES Year ended December 31, 2012 Net change in fund balances, total governmental funds 1,389,386 Amounts reported for governmental activities in the statement of activities are different because of the following: Capital assets: 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 as depreciation expense. This is the amount by which depreciation expense exceeded capital outlays in the current period. Long-term liabilities: Long-term liabilities are reported in the statement of net assets. This is the amount by which repayments exceeded proceeds. Bond issue costs are included in expenditures in the fund financial statements. Amortization of deferred bond issue costs is an expense in the statement of activities. Accrued interest is an expense in the statement of activities. Capital lease payments are recorded as expenditures in the fund financial statements. Other: Principal received on economic development revolving loans provides current financial resources to governmental funds, and loans made are included in expenditures. This is the amount by which principal repayments exceeded loans made. Net change in inventory. Only the current portion of compensated absences is shown as an expenditure in the fund financial statements. Internal service funds are used by management to charge the cost of certain activities, such vehicle maintenance, to individual funds. The net revenue (expense) of the internal service fund is reported with governmental activities. Rounding. Change in net position of governmental activities (7,378,843) 632, ,216 (83,120) (31,744) 16,324 (50,072) (5,688) (17,535) 12,184 2 (5,359,134) 21

62 CITY OF DODGE CITY, KANSAS STATEMENT OF NET POSITION PROPRIETARY FUNDS December 31,2012 Business-type activities Enterprise funds Water Wastewater ASSETS Current assets: Cash and cash equivalents Receivables, net Inventories Total current assets Noncurrent assets: Restricted cash and cash equivalents Capital assets: Land Buildings and improvements Furniture and equipment Utility systems Water rights Construction in progress Less accumulated depreciation and amortization Deferred bond issue costs 5,797,354 51, , , ,416 6,466, , ,736 54, ,435 1 '157,257 5,017,848 31,045,980 2,020,574 1,782,160 23,895,090 25,558,401 3,542,614 1,647,359 (10,743,631) (15,927,791) 166, ,740 Total noncurrent assets Total assets LIABILITIES Current liabilities: Accounts payable Payroll liabilities Accrued interest payable GO bonds payable Revenue bonds payable Loan payable Total current liabilities Noncurrent liabilities: GO bonds payable Revenue bonds payable Loan payable Deferred gain on bond refunding Bond premium Compensated absences payable Total noncurrent liabilities Total liabilities 24,909,650 31,376, ,472 13,017 92, , ,660 10,534, , ,987 29, '115,982 11,978,642 45,657,118 46,025, ,040 4, , ,500 1,335,000 2,772,914 8,613,500 22,005, , ,386 25,795 31,351,798 34,124,712 22

63 Solid waste Business-type activities Enterprise funds Drainage utility Total Governmental activities Internal service fund 525,164 94, ,399 11,336 6,736, , ,416 30,740 10, , ,735 7,830,221 40, ,748 18,200 64,804 2,573,552 (2,256,336) 4,865 1,108,277 (418,600) 1,526,892 36,128,632 6,381,151 50;561,768 3,542,614 1,647,359 (29,346,358) 506,724 65,524 (59,091) 400, ,542 71,661,530 6,433 1,019,918 1,069,277 79,491,751 ' 47,331 63,009 9,349 44, ,299 27, , , ,500 1,335,000 9,453 1,338 72,358 45,420 3;753,352 10,791 69,797 1,316 10,534,300 8,613,500 22,005, , , ,723 8,508 69,797 1,316 42,538,893 8, ,155 46,736 46,292,245 19,299

64 CITY OF DODGE CITY, KANSAS STATEMENT OF NET POSITION PROPRIETARY FUNDS (CONTINUED) December 31, 2012 Business-type activities Enterprise funds Water Wastewater NET POSITION Invested in capital assets, net of related debt Unrestricted Total net position 12,943,980 12,682,637 6,453,958 (781,373) 19,397,938 11,901,264 Total liabilities and net position 31,376,580 46,025,976 The accompanying notes are an integral part of the basic financial statements. 23

65 Solid waste Business-type activities Enterprise funds Drainage utility Total Governmental activities Internal service fund 400, , , ,999 26,721,379 6,478,127 6,434 21, ,763 1,022,541 33,199,506 28,032 1,019,918 1,069,277 79,491,751 47,331

66 CITY OF DODGE CITY, KANSAS STATEMENT OF REVENUE, EXPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS Year ended December 31, 2012 Business-type activities Enterprise funds Water Wastewater Operating revenue: Charges for services Operating expenses: Personal services Contractual services Repairs and maintenance Other supplies and expenses Capital outlay Other expense Depreciation Total operating expense Operating income (loss) Nonoperating revenue (expense): Operating grants Interest and investment revenue Interest expense Total nonoperating revenue (expense) Income (loss) before other revenue, expenses and transfers Other revenue, expenses and transfers: Capital grants and donations Contributed capital, net Gain (loss) on disposal of assets Transfers in Transfers out Change in net assets Total net position beginning of year Total net position end of year 4,404,287 4,332, , , ,110 2,638,333 95,091 39, ,602 42,319 16,163 5,366 47,054 33, I ,367 2,728,696 4,048,616 1,675, , , ,821 16,939 74,419 (654,588) (1 '950,259) (389,583) (1,297,019) 1,286,008 (1,013,420) 109, , ,939 (1,399,939) (362,747) (8,779) (516,348) 19,406,717 12,417,612 19,397,938 11,901,264 The accompanying notes are an integral part of the basic financial statements. 24

67 Business-type activities Governmental Enterprise funds activities Drainage Internal Solid waste utility Total service fund 1,769, ,836 10,706, , ,330 53,394 2,239, , , ,048 4,106,771 5,384 50, ,598 30, ,456 12, , ,002 23,856 1,201 46,586 6, , ,585 37,763 1,679,905 3,710 1,786, ,035 8,874, ,646 (17,269) (109,199) 1,832,722 12, , ,328 (2,604,847) (1,685,632) (16,651) (108,847) 147,090 12,185 10,527 10, , , ,942 (170,053) (36,000) (1,968,739) (176,177) (144,847) (846, 151) 12,185 1,053,940 1,167,388 34,045,657 15, ,763 1,022,541 33,199,506 28,032

68 CITY OF DODGE CITY, KANSAS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS Year ended December 31, 2012 Business-type activities Enterprise funds Water Wastewater Cash flows from operating activities: Receipts from customers Payments for goods and services Payments to employees Net cash provided (used) by operating activities Cash flows from noncapital financing activities: Operating grants Operating subsidies from other funds Operating subsidies to other funds Net cash provided (used) by noncapital financing activities Cash flows from capital and related financing activities: Capital grants and contributions Proceeds of capital debt Purchases of capital assets Principal paid on capital debt Interest paid on capital debt Bond issuance costs Net cash provided (used) by capital and related financing activities Cash flows from investing activities: Interest and dividends Net increase (decrease) in cash and cash equivalents Balances, beginning of year Balances, end of year 4,428,408 4,390,614 (1,255,033) (2,460,401) (811,449) (474,004) 2,361,926 1,456, , , ,939 (1,399,939) (362,747) (1,151,870) 966,013 11,509,991 12,785,899 (203,921) (3, 140,293) (12,125,747) (11,915,188) (476,212) (1,053,403) (86,792) (144,533) (1,382,681) (3,467,518) 5,200 54,138 (167,425) (991 '158) 6,623,515 1,096,192 6,456, ,034 Cash and cash equivalents Restricted cash and cash equivalents Total balance, end of year 5,797,354 51, ,736 54,012 6,456, ,034 25

69 Business-type activities Governmental Enterprise funds activities Drainage Internal Solid waste utility Total service fund 1,771, ,826 10,791, ,831 (702,513) (219,179) (4,637, 126) (183,165) (899,829) (53,059) (2,238,341) (109,409) 169,235 (71,412) 3,915,958 18, , ,942 (170,053) (36,000) (1,968,739) (170,053) (36,000) (391,910) 10,527 10,527 24,295,890 (62,309) (35,000) (3,441,523) (24,040,935) (1,529,615) (231,325) (51,782) (35,000) (4,936,981) ,309 (51,981) (142,060) (1,352,624) 18, , ,459 8,802,311 12, , ,399 7,449,687 30, , ,399 6,736,939 30, , , ,399 7,449,687 30,740

70 CITY OF DODGE CITY, KANSAS STATEMENT OF CASH FLOWS (CONTINUED) PROPRIETARY FUNDS Year ended December 31, 2012 Business-type activities Enterprise funds Reconciliation of operating income to net cash provided by operating activities: Operating income Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation expense Change in assets and liabilities: Receivables, net Inventories Accounts and other payables Net cash provided (used) by operating activities Water 1,675, '190 24,121 (43,762) 34,786 2,361,926 Wastewater 283, ,367 58, ,844 1,456,209 The accompanying notes are an integral part of the financial statements. 26

71 Solid waste Business-type activities Enterprise funds Drainage utility Total Governmental activities Internal service fund (17,269) (109,199) 1,832,722 12, ,585 37,763 1,679,905 3,710 2,030 24,889 (1 0) 34 84,540 (43,762) 362,553 2,367 (5) 169,235 (71,412) 3,915,958 18,257

72 CITY OF DODGE CITY, KANSAS STATEMENT OF NET POSITION MAJOR COMPONENT UNITS December 31, 2012 Dodge City- Ford County Dodge City Dodge City Development Housing Public Library Corporation Authority Total ASSETS Cash and cash equivalents 397, , , ,927 Investments 573, ,516 Accounts receivable, net 211, ,867 Inventory 27,433 27,433 Notes receivable 116,493 59, ,695 Prepaid expense 8,092 8,092 Capital assets, net 988,659 1,059,927 7,796,933 9,845,519 Total assets 1,386,632 1,466,341 8,867,076 11,720,049 LIABILITIES Accounts payable 25,147 4, , ,376 Accrued interest payable 556, ,611 Compensated absences payable 68,023 21,652 22, ,823 Deposits and deferred revenue 7,271 7,271 Other accrued liabilities 52,594 52,594 Long-term liabilities: Due in more than one year 762, ,000 Total liabilities 93,170 1,344, ,943 1,634,675 NET POSITION Invested in capital assets, net of related debt 988, ,927 7,796,933 9,083,519 Restricted: Housing Authority 50,953 50,953 Temporarily restricted 92,149 92,149 Unrestricted 304,803 (268,297) 822, ,753 Total net position 1,293, ,779 8,670,133 10,085,374 Total liabilities and net position 1,386,632 1,466,341 8,867,076 11,720,049 The accompanying notes are an integral part of the basic financial statements. 27

73 CITY OF DODGE CITY, KANSAS STATEMENT OF ACTIVITIES MAJOR COMPONENT UNITS Year ended December 31, 2012 Expenses Charges for services Program revenues Operating grants and contributions Capital grants and contributions Dodge City Public Library Culture and recreation 1,172,937 27,752 Depreciation 85,041 59,370 5,721 Total Dodge City Public Library 1,257,978 27,752 Dodge City-Ford County Development Corporation Community services 381,375 79,605 Depreciation 3,677 59, ,778 5,721 5,250 Total Dodge City-Ford County Development Corporation 385,052 79, ,778 5,250 Dodge City Housing Authority Operating expenses 1,547, ,876 Depreciation 468, , ,654 Total Dodge City Housing Authority 2,016, , , ,654 Total component units 3,659, , , ,625 General revenues: Investment earnings Transfer from primary government Miscellaneous Total general revenues Change in net assets Net position - beginning Net position - ending The accompanying notes are an integral part of the basic financial statements. 28

74 Dodge City Public Library Changes in net assets Dodge City Ford County Development Corporation Dodge City Housing Authority Totals (1,080,094) (85,041) (1,165,135) (1,080,094) (85,041) (1 '165, 135) 2,258 (3,677) 2,258 (3,677) (1,419) (1,419) 162,487 (468,567) 162,487 (468,567) (306,080) (306,080) (1,165,135) (1,419) (306,080) (1,4 72,634) '162,480 3,685 1 '162 6,063 18,658 7,772 1,162,480 22,343 1 '166,712 1,162 24,721 1 '192,595 1,577 1,291,885 (257) 122,036 (281,359) 8,951,492 (280,039) 10,365,413 1,293, ,779 8,670,133 10,085,374

75 CITY OF DODGE CITY, KANSAS BUDGETARY COMPARISON STATEMENT GENERAL FUND Year ended December 31,2012 Variance with final budget Budgeted amounts Actual amounts positive Original Final (budgetary basis) (negative) Budgetary fund balance, beginning of year 704, ,975 18,787 (686,188) Resources (inflows): Taxes 9,755,762 9,755,762 10,039, ,581 Intergovernmental 110, , ,098 74,798 Licenses, fees and permits 202, , ,451 41,551 Charges for services 929, ,300 1,163, ,106 Rentals 64,000 64, , ,790 Fines and forfeitures 1,135,500 1,135,500 1,033,226 (102,274) Investment earnings 20,000 20,000 5,238 (14,762) Miscellaneous 5,000 5,000 84,683 79,683 Transfers from other funds 1,668,797 1,668,797 1,464,953 (203,844) Amounts available for appropriation 14,596,534 14,596,534 14,424,975 (171,559) Charges to appropriations (outflows): General government 2,592,905 2,592,905 1,480,668 1,112,237 Public safety 7,604,676 7,604,676 7,678,905 (74,229). Public works 1,419,353 1,419,353 1,446,745 (27,392) Culture and recreation 2,399,490 2,399,490 2,675,240 (275,750) Community services 410, , ,690 (36,580) Transfers to other funds 170, ,000 50, ,000 Total charges to appropriations 14,596,534 14,596,534 13,778, ,286 Budgetary fund balance, end of year 646, ,727 The accompanying notes are an integral part of the basic financial statements. 29

76 CITY OF DODGE CITY, KANSAS BUDGETARY COMPARISON STATEMENT SALES TAX FUND Year ended December 31, 2012 Variance with final budget Budgeted amounts Actual amounts positive Original Final (budgetary basis) (negative) Budgetary fund balance, beginning of year 5,221,864 5,221,864 3,722,996 (1,498,868) Resources (inflows): Taxes 5,348,500 5,348,500 5,795, ,107 Charges for services 94,900 94,900 65,297 (29,603) Rentals 5,149 5,149 Investment earnings 20,000 20,000 3,632 (16,368) Miscellaneous 8,041 8,041 Transfers from other funds 50,000 50,000 50,000 Amounts available for appropriation 10,735,264 10,735,264 9,650,722 (1,084,542) Charges to appropriations (outflows): Culture and recreation 2,976,425 2,976,425 1,300,429 1,675,996 Transfers to other funds 3,205,000 3,205,000 4,705,529 (1,500,529) Total charges to appropriations 6,181,425 6,181,425 6,005, ,467 Budgetary fund balance, end of year 4,553,839 4,553,839 3,644,764 (909,075) The accompanying notes are an integral part of the basic financial statements. 30

77 CITY OF DODGE CITY, KANSAS BUDGETARY COMPARISON STATEMENT BUDGET TO GAAP RECONCILIATION Year ended December 31,2012 General fund Sales tax fund Sources/inflows of resources: Actual amounts available for appropriation from the budgetary comparison statement Differences, budget to GAAP: The fund balance at the beginning of the year is a budgetary resource, but is not a current-year revenue for financial reporting purposes. Current year sales tax and other receivable amounts are not a budgetary resource, but they are revenues for financial reporting purposes. Prior year sales tax and other receivable amounts are a budgetary resource, but they are not revenues for financial reporting purposes. Transfers from other funds are inflows of budgetary resources, but are not revenues for financial reporting purposes. 14,424,975 (18,787) 803,828 (841,676) (1,464,953) 9,650,722 (3,722,996) 419,176 (387,754) (50,000) Total revenue as reported on the statement of revenue, expenditures, and changes in fund balances, governmental funds 12,903,387 5,909,148 Uses/outflows of resources: Actual amounts of charges to appropriations from the budgetary comparison statement Differences, budget to GAAP: Prior year encumbrances are not included as a budgetary outflow. Transfers to other funds are outflows of budgetary resources, but are not expenditures for financial reporting purposes. Certain transfers were reclassified to expenditures for budgetary purposes. Inventory purchases are included as a budgetary outflow, but are reported as expense when the inventory is sold for financial reporting purposes. Rounding 13,778,248 12,219 (50,000) (171,362) (5,688) 1 6,005,958 24,763 (4,705,529) Total expenditures as reported on the statement of revenue, expenditures, and changes in fund balances, governmental funds 13,563,418 1,325,192 The accompanying notes are an integral part of the basic financial statements. 31

78 NOTES TO FINANCIAL STATEMENTS

79 CITY OF DODGE CITY, KANSAS NOTES TO FINANCIAL STATEMENTS December 31, 2012 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Dodge City was incorporated under the laws of the State of Kansas and operates under a City Manager-Commission form of government. The City's major operations include police and fire protection, water, wastewater, solid waste and drainage utility services, airport and recreational facilities. The City's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (statements and interpretations). Governments are also required to follow the pronouncements of the Financial Accounting Standards Board (FASB) issued through November 30, 1989 (when applicable) that do not conflict with or contradict GASB pronouncements. Although the City has the option to apply FASB pronouncements issued after that date to its business-type activities, the City has chosen not to do so. The more significant accounting policies established in GAAP and used by the City is discussed below. 1. Financial reporting entity These financial statements present the City of Dodge City (the primary government) and its component units. As defined by GASB Statement No. 14 and clarified by GASB Statement No. 39, component units are legally separate entities that are included in the City's reporting entity because of the significance of their operating or financial relationships with the City. Component units. In conformity with generally accepted accounting principles, the financial statements of component units have been included in the financial reporting entity as discretely presented component units. Discretely presented component units. The component units column in the government-wide financial statements includes the financial data of the City's major component units. These units are reported in a separate column to emphasize that they are legally separate from the City. Dodge City Public Library: The members of the governing board of the Public Library are appointed by the City Commissioners. The Public Library is fiscally dependent on the City because the budget is approved by the City Commissioners. In addition, the Public Library is prohibited from issuing bonded debt without the approval of the City Commission. Dodge City - Ford County Development Corporation: Two members of the Corporation's board of directors are appointed by the City Commissioners. The Corporation is fiscally dependent on the City because all employees of the Corporation are paid by the City and are accountable to the City Manager and Commissioners. 32

80 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 1. Financial reporting entity (continued) Dodge City Housing Authority: The members of the governing board of the Housing Authority are appointed by the City Commission. Although the City does not have the authority to approve or modify the Housing Authority's operational and capital budgets, and the Housing Authority has the authority to issue bonded debt, the City is fiscally responsible for the Housing Authority since it was created as an agent of the City. The Housing Authority uses the accrual basis of accounting and consists of one enterprise fund. The Housing Authority has a fiscal year ending September 30, and the financial data included in the discrete presentation are as of and for the year ended September 30, Complete financial statements of each of the individual major component units can be obtained directly from their administrative offices. Administrative Offices: Dodge City Public Library 1001 Second Avenue Dodge City, Kansas Dodge City- Ford County Development Corporation 311 W. Spruce Dodge City, Kansas Dodge City Housing Authority 407 E. Bend Dodge City, Kansas Basic financial statements - government-wide statements The City's basic financial statements include both government-wide (reporting the City as a whole) and fund financial statements (reporting the City's major funds). Both the government-wide and fund financial statements categorize primary activities as either governmental or business-type. The City's general government, public safety, public works, culture and recreation and community services functions are classified as governmental activities. The water, wastewater, solid waste and drainage utility services are classified as businesstype activities. In the government-wide Statement of Net Position, both the governmental and business-type activities columns (a) are presented on a consolidated basis by column, and (b) are reported on a full accrual, economic resource basis which recognizes all long-term assets and receivables as well as long-term debt and obligations. The City's net position is reported in three parts: invested in capital assets, net of related debt; restricted net position; and unrestricted net position. Restricted net position includes those restricted for debt service, construction and sales tax projects. The City first utilizes restricted resources to finance qualifying activities. 33

81 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2. Basic financial statements- government-wide statements (continued) The government-wide Statement of Activities reports both the gross and net cost of each of the City's governmental functions and business-type activities. The functions are also supported by general government revenues (property taxes and certain intergovernmental revenues). The Statement of Activities reduces gross expenses (including depreciation) by related program revenues, operating and capital grants. Program revenues must be directly associated with the governmental function or business-type activity. Governmental charges for services include licenses, fees and permits, rentals, fines and forfeitures, and charges for recreational activities. Business-type charges (operating revenue) include charges for utility services. Operating grants include operating-specific and discretionary (either operating or capital) grants while the capital grants column reflects capital-specific grants. All internal activity has been eliminated. The net costs (by governmental function or business-type activity) are normally covered by general government revenues such as property taxes, intergovernmental revenues, and interest income. The City does not allocate indirect costs. The direct costs of General Fund services provided such as finance, personnel, purchasing, legal, technology management, etc. are included in the governmental functions categories. This government-wide focus is on the sustainability of the City as an entity and the change in the City's net position resulting from the current year's activities. 3. Basic financial statements -fund financial statements The financial transactions of the City are reported in individual funds in the fund financial statements. Each fund is accounted for by providing a separate set of self-balancing accounts that comprises its assets, liabilities, reserves, fund equity, revenues and expenditures/expenses. The various funds are reported by generic classification within the financial statements. The following funds are used by the City: a. Governmental Funds: The focus of the governmental funds' measurement in the fund statements is upon determination of financial position and changes in financial position (sources, uses, and balances of current financial resources) rather than upon net income. The following is a description of the governmental funds of the City. General fund is the general operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund. Special revenue funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. Debt service funds are established for the purpose of accumulating resources for the payment of interest and principal on long-term debt other than that payable from enterprise funds. Capital projects funds are used to account for major capital expenditures not financed by enterprise funds. 34

82 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3. Basic financial statements- fund financial statements (continued) b. Proprietary Funds: The focus of proprietary fund measurement is upon determination of operating income, changes in net position, financial position, and cash flows. The generally accepted accounting principles applicable are those similar to businesses in the private sector. The following is a description of the proprietary funds of the City. Enterprise funds are required to be used to account for operations for which a fee is charged to external users for goods or services and the activity (a) is financed with debt that is solely secured by a pledge of the net revenues, (b) has third party requirements that the cost of providing services, including capital costs, be recovered with fees and charges or (c) establishes fees and charges based on a pricing policy designed to recover similar costs. Operating revenues include charges for services; non-operating revenues include investment income, operating grants and contributions. Internal service funds are used to account for the financing of goods or services provided by an activity to other departments or funds of the City on a cost-reimbursement basis. c. Fiduciary Funds: Fiduciary funds are used to report assets held in a trustee or agency capacity for others and therefore are not available to support City programs. The reporting focus is on net assets and changes in net assets. The emphasis in fund financial statements is on the major funds in either the governmental or business-type activities categories. Nonmajor funds by category are summarized into a single column. GASB Statement No. 34 sets forth the minimum criteria (percentage of the assets, liabilities, revenues or expenditures/expenses of either fund category or the governmental and enterprise combined) for the determination of major funds. The City may electively add funds as major funds. The nonmajor funds are combined in one column in the fund financial statements. Major governmental funds are the General, Sales Tax and GO Bond and Interest Funds. The major business-type funds are the Water and Wastewater Funds. The City has elected to include the Special Events Center Revenue Bonds, Solid Waste and Drainage Utility Funds as major funds, which either had debt outstanding or specific community focus. The City's internal service fund is presented in the proprietary funds financial statements. Because the principal users of the internal services are the City's governmental activities, the financial information of the internal service fund is consolidated into the governmental column when presented in the governmentwide financial statements. The administrative overhead component of these programs is not eliminated, but is included in direct expenses. To the extent possible, the cost of these services is reported in the appropriate governmental functional activity (general government, public safety, public works, etc.). Internal services are provided through the Vehicle Maintenance Fund. 35

83 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 4. Measurement focus and basis of accounting Measurement focus is a term used to describe "which" transactions are recorded within the various financial statements. Basis of accounting refers to "when" transactions are recorded regardless of the measurement focus applied. Measurement Focus On the government-wide Statement of Net Position and the Statement of Activities, both governmental and business-type activities are presented using the economic resources measurement focus as defined in item b. below. In the fund financial statements, the "current financial resources" measurement focus or the "economic resources" measurement focus is used as appropriate: a. All governmental funds utilize a "current financial resources" measurement focus. Only current financial assets, deferred inflows of resources, liabilities and deferred outflows of resources are generally included on their balance sheets. Their operating statements present sources and uses of available spendable financial resources during a given period. These funds use fund balance as their measure of available spendable financial resources at the end of the period. b. The proprietary funds utilize an "economic resources" measurement focus. The accounting objectives of this measurement focus are the determination of operating income, changes i.n net position (or cost recovery), financial position, and cash flows. All assets and liabilities (whether current or noncurrent) associated with their activities are reported. Proprietary fund equity is classified as net position. Basis of Accounting In the government-wide Statement of Net Position and Statement of Activities, both governmental and business-type activities are presented using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place. In the fund financial statements, governmental funds are presented on the modified accrual basis of accounting. Under this modified accrual basis of accounting, revenues are recognized when "measurable and available." Measurable means knowing or being able to reasonably estimate the amount. Available means collectible within the current period or soon enough thereafter to pay current liabilities. The City considers revenues to be available if they are expected to be collected within 60 days of the end of the year. Expenditures (including capital outlay) are recorded when the related fund liability is incurred, except for general obligation bond principal and interest which are reported when due. All proprietary funds utilize the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. 36

84 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 5. Encumbrances Encumbrances represent commitments related to unperformed contracts for goods or services. Encumbrance accounting, under which purchase orders, contracts and other commitments for the expenditure of resources are recorded to reserve that portion of the applicable appropriation, is used in the governmental funds. For budgetary purposes, appropriations lapse at fiscal year-end, except for the portion related to encumbered amounts. Encumbrances outstanding at yearend are reported as reservations of fund balances and do not constitute expenditures or liabilities because the commitment will be honored during the subsequent year. 6. Budgetary control Kansas statutes require that an annual operating budget be legally adopted for the general fund, special revenue funds (unless specifically exempted by statute), debt service funds and enterprise funds. The statutes provide for the following sequence and timetable in the adoption of the legal annual operating budget: a. Preparation of the budget for the succeeding calendar year on or before August 1 5 t. b. Publication in local newspaper on or before August 5th of the proposed budget and notice of public hearing on the budget. c. Public hearing on or before August 15 1 h, but at least ten days after publication of notice of hearing. d. Adoption of the final budget on or before August 25 1 h. The statutes allow for the governing body to increase the originally adopted budget for previously unbudgeted increases in revenue other than ad valorem property taxes. To do this, a notice of public hearing to amend the budget must be published in the local newspaper. At least ten days after publication the hearing may be held and the governing body may amend the budget at that time. Budgets were amended for the following funds: Convention & Visitors Special Park & Recreation Roof & Vehicle Insurance Repairs All for Fun Wastewater Vehicle Maintenance Original budget 763,148 90,000 30,000 6,405, ,790 Amended budget 800,000 98, ,000 35,000 7,055, ,790 The statutes permit transferring budgeted amounts between line items within an individual fund. However, such statutes prohibit expenditures in excess of the total amount of the adopted budget of expenditures of individual funds. Budget comparison statements are presented for the General Fund and major special revenue funds showing actual receipts and expenditures compared to legally budgeted receipts and expenditures. 37

85 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 6. Budgetary control (continued) All legal annual operating budgets are prepared using the statutory basis of accounting, in which revenues are recognized when cash is received and expenditures include disbursements, accounts payable, and encumbrances, with disbursements being adjusted for prior year's accounts payable and encumbrances. Encumbrances are commitments by the municipality for future payments and are supported by a document evidencing the commitment, such as a purchase order or contract. Any unused budgeted expenditure authority lapses at year-end. A legal operating budget is not required for state and federal grant funds, donation funds, reserve funds, capital projects funds, agency funds and the following special revenue funds: Special Revenue: Building Sales Tax Organizations Special Law Enforcement Trust Economic Development Revolving Hoover Trust Roof Insurance Repairs Medical Insurance Reserve Capital Equipment Reserve Underage Alcohol Abuse DARE Special Events Center SMPC Trust. Municipal Band Spending in funds which are not subject to the legal annual operating budget requirement is controlled by federal regulations, other statutes, or by the use of internal spending limits established by the governing body. 7. Pension plan Substantially all full-time employees are members of the State of Kansas Public Employees' Retirement System (KPERS) or the Kansas Police and Firemen's Retirement System (KP&F), both of which are cost-sharing multiple-employer state-wide pension plans. The City's policy is to fund all pension costs accrued; such costs to be funded are determined annually by the system's actuary. 8. Section 125 plan The City offers a section 125 flexible benefit plan to employees electing to participate. It is used for health insurance premiums, other medical costs and child care costs. The plan is administered by the health insurance provider. 9. Health savings account The City offers eligible employees a health savings account administered by Fidelity State Bank. It is optional for employees to participate in the City's high deductible health plan. The City's match for the HSA is 500 for family and 250 for single. 38

86 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 10. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. 11. Financial statement amounts a. Pooled cash To facilitate better management of the City's cash resources, excess cash is combined in pooled operating accounts. Each fund's portion of total cash is based on its equity in the pooled cash amount. Cash in excess of current operating rieeds is invested on a pooled investment basis and earnings thereon are distributed to the appropriate funds based on the average monthly balance of cash and temporary investments included in the combined pool of cash and temporary investments. b. Investments and restricted cash Investments consist of time deposits, certificates of deposit, the State Municipal Investment Pool and repurchase agreements. The investment pool is administered by a board consisting of the State Treasurer and four additional members appointed by the Governor of the State of Kansas. Investments are reported at fair value (which is the same as cost) in the statement of net position. Unrealized gains and losses are included in the change in net position. Enterprise funds and sales tax revenue bond project funds, based on certain bond covenants, are required to establish and maintain a prescribed amount of resources (consisting of cash and temporary investments) that can be used only to service outstanding debt. These amounts are restricted cash. Cash in capital projects funds and the Sales Tax Fund is restricted for the corresponding project. c. Cash and cash equivalents The City has defined cash and cash equivalents to include cash on hand, demand deposits, and all highly liquid investments, including restricted assets, with a maturity of three months or less when purchased. d. Receivables In the government-wide statements, receivables consist of all revenues earned at year-end and not yet received. Major receivable balances for the governmental activities include trade accounts receivable for miscellaneous charges, and receivables from other governments for grant funding. Business-type activities report utility service charges as accounts receivable. An allowance for doubtful receivables is not considered necessary because receivables are written off when they become uncollectible. 39

87 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 11. Financial statement amounts (continued) d. Receivables (continued) The determination of assessed valuation and the collections of property taxes for all political subdivisions in the State of Kansas is the responsibility of the various counties. The County Appraiser's Office annually determines assessed valuation and the County Clerk allocates the annual assessment to the taxing units. Taxes are levied by November 1, and a lien for all taxes attaches on that same date until the taxes are paid. One-half of the property taxes is due December 20 and distributed by January 20 and the second half is due May 10 and distributed by June 5. Consequently, current year property taxes receivable are not available as a resource that can be used to finance the current year operations of the City. Accruals of uncollected current year property taxes have been deferred and are not reflected in revenue. It is not practicable to apportion delinquent taxes held by the County Treasurer at the end of the year and, further, the amounts thereof are not material in relation to the financial statements taken as a whole. In applying GASB Statement No. 33 to grant revenues, the provider recognizes liabilities and expenses and the recipient recognizes receivables and revenue when the applicable eligibility requirements, including time requirements, are met. Resources transmitted before the eligibility requirements are met are reported as advances by the provider and deferred revenue by the recipient. Subsidies and grants to proprietary funds, which finance either capital or current operations, are reported as nonoperating revenue. e. Inventories Inventories in the general fund consist of merchandise held for resale and are carried at the lower of cost (first-in, first-out) or market. Inventories in the proprietary funds consist of expendable supplies held for the City's use and are carried at the lower of cost (first-in, first-out) or market. f. Capital assets Capital assets purchased or acquired with an original cost of 1,000 or more are reported at historical cost or estimated historical cost. Contributed assets are reported at fair value as of the date received. Additions, improvements and other capital outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. Depreciation/amortization on all assets is provided on the straight-line basis over the following estimated useful lives: Buildings and improvements Furniture and equipment Utility systems General infrastructure Water rights years 5-10 years years years 50 years 40

88 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 12. Deferred bond issue costs Deferred bond issue costs are being amortized on the straight-line basis over the respective lives of the bonds. 13. Deferred outflows of resources In addition to assets, the statement of position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. 14. Deferred inflows of resources In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to the future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The City has nonexchange revenue transactions where a receivable has been recorded because property taxes were levied, but the resources cannot be used until a future period. In addition, the City has a deferred gain on refunding. A deferred gain on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the life of the refunded or refunding debt. The City also has contractual obligations reported in the government-wide statement of net position. The contractual obligations will be met in the subsequent period. On the modified accrual basis of accounting, the City has recorded revolving loan receivables where the related revenue is unavailable. Unavailable revenues have been reported as deferred inflows of resources on the governmental fund balance sheet. 15. Compensated absences The City's policies regarding vacation permit an employee to accumulate a maximum of 20 days vacation. These amounts are paid to the employee upon retirement or if the employee left on good standing. A maximum accumulation of 120 days of sick leave is allowed. Upon retirement or termination, 25% of the accumulated sick leave is paid to employees in good standing and with twelve continuous months of service. The City has a sick leave bank whereby employees can transfer excess sick leave to a bank to be used by employees who are on extended sick leave and have exhausted their own sick leave accumulation. The sick leave bank is administered by a committee of City employees. All employees are given credit for holidays worked, which is then accumulated for additional time off. This holiday time must be taken within the same year in which earned or the time is lost. The liabilities for accrued vacation, sick leave and holiday time have been recorded in the respective funds, representing the City's commitment to fund such costs from future operations. The liabilities are based on current salary costs and the vested portion of accumulated benefits. 41

89 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 16. Government-wide and proprietary fund net position Government-wide and proprietary fund net position is divided into three components: a. Invested in capital assets, net of related debt- consist of the historical cost of capital assets less accumulated depreciation and less any debt that remains outstanding that was used to finance those assets. b. Restricted net position - consist of net position that is restricted by creditors, by state enabling legislation, by grantors, and by other contributors. c. Unrestricted net position - all other net position is reported under this category. 17. Governmental fund balances In the governmental fund financial statements, fund balances are classified as follows: d. Nonspendable- Amounts that cannot be spent either because they are in a nonspendable form or because they are legally or contractually required to be maintained intact. e. Restricted - Amounts that can be spent only for specific purposes due to City resolutions, state or federal laws, or externally imposed conditions by grantors and creditors. f. Committed - Amounts that can be used only for specific purposes determined by a formal action by City Commissioners resolution. g. Assigned - Amounts that are designated by the City Commissioners or management for a particular purpose but are not spendable until there is formal approval. h. Unassigned- All amounts not included in other spendable classifications. 18. Special assessments Projects financed in part by special assessments are financed through issuance of general obligation bonds of the City and are retired from the bond and interest fund. Special assessments paid prior to the issuance of bonds are recorded as revenue in the appropriate project fund. Special assessments received after the issuance of bonds are recorded as revenue in the bond and interest fund or the appropriate capital project fund. 19. lnterfund activity lnterfund activity is reported as loans, reimbursements or transfers. Loans are reported as interfund receivables and payables and are subject to elimination upon consolidation. Reimbursements occur when one fund incurs a cost, charges the appropriate benefiting fund and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers between governmental or proprietary funds are netted as part of the reconciliation to the government-wide financial statements. 42

90 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 20. Other post employment benefits As provided by K.S.A , the City allows retirees to participate in the group health insurance plan. While each retiree pays the full amount of the applicable premium, conceptually, the City is subsidizing the retirees because each participant is charged a level of premium regardless of age. However, the cost of this subsidy has not been quantified in these financial statements, because it is not considered material. Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), the City makes health care benefits available to eligible former employees and eligible dependents. Certain requirements are outlined by the federal government for this coverage. The premium is paid in full by the insured. There is no cost to the City under this program. B. COMPLIANCE WITH KANSAS LAW References made herein to the statutes are not intended as interpretations of law, but are offered for consideration to the Director of Accounts and Reports, Kansas Department of Administration, and interpretation by the legal representatives of the City. The budget law provided by K.S.A prohibits the expenditure of funds in excess of that allowed by budget. Budgeted and actual expenditures for the year ended December 31, 2012 are as follows: Fund Budget Actual Variance General 14,596,534 13,778, ,286 Special Liability 865, , ,348 Library 905, ,394 Library Employee Benefits 257, ,086 Sales Tax 6,181,425 6,005, ,467 Convention and Visitors 800, ,113 70,887 Special Streets and Highways 734, , ,406 Special Park and Recreation 98,000 91,019 6,981 Special Alcohol and Drug 141, ,249 19,751 Alcohol and Drug Safety Action 78,000 3,842 74,158 All 4 Fun 35,000 33,398 1,602 Development & Growth 800, , ,484 GO Bond and Interest 2,814,650 2,090, ,977 Water 4,089,986 4,549,181 (459,195) Wastewater 7,055,750 6,128, ,955 Solid Waste 1,847,223 1,859,047 (11,824) Drainage Utility 566,420 60, ,280 Vehicle Maintenance 310, ,207 18,583 43

91 B. COMPLIANCE WITH KANSAS LAW (CONTINUED) The cash basis law provided by K.S.A prohibits the creation of indebtedness in excess of available monies in a fund. Although certain special revenue federal grant funds overspent their cash balances, accordmg to K.S.A , the City is not prohibited from financing the federal share of a local program from current funds if available. Funds in the category are as follows: FAA Grant Ramp Expansion DJ-BX Grant 2010 COPS Grant 2010 DJ-BX Grant 2012 Mobility Manager Minibus Grant CDBG Housing Grant 268, ,448 5,236 29,097 29, C. DEPOSITS AND INVESTMENTS Policy. The City does not have a formal policy for bank account deposits; however it does follow state statutes. K.S.A establishes the depositories which may be used by the City. The statute requires banks eligible to hold the City's funds to have a main or branch bank in the county in which the City is located, or in an adjoining county if such institution has been designated as an official depository, and the banks to provide an acceptable rate of return on funds. In addition, K.S.A requires the City's deposits in financial institutions to be entirely covered by federal depository insurance, by a corporate surety bond, or by collateral held under a jointcustody receipt issued by a bank within the State of Kansas, the Federal Reserve Bank of Kansas City, or the Federal Home Loan Bank of Topeka. The investment policy of the City includes money market accounts and certificates of deposit which are considered deposits for financial accounting purposes. It also includes financial instruments such as U.S. Government obligations, money markets and the State Municipal Investment Pool. This policy requires the City to follow state statutes for investments. Statutes name the types of investments allowed and also require depository security coverage and that securities be titled in the name of the municipality. K.S.A limits the City's investment of idle funds to time deposits, open accounts, and certificates of deposit with allowable financial institutions; U.S. government securities; temporary notes; no-fund warrants; repurchase agreements; and the Kansas Municipal Investment Pool. Additionally, K.S.A (a)(6) authorizes the City to invest proceeds of bonds in obligations of the Federal National Mortgage Association, Federal Home Loan Banks, or the Federal Home Loan Mortgage Corporation. State statutes place no limit on the amount the City may invest in any one issuer as long as the investments are adequately secured under K.S.A and Custodial credit risk - deposits. Custodial credit risk is the risk that, in the event of a bank failure, the City's deposits may not be returned to it. At year-end the carrying amount of the City's deposits, including certificates of deposit, was 12,164,711. The bank balance was 12,583,798. Of the bank balance, 2,837,691 was covered by FDIC insurance, 9,7 46,107 was collateralized by pledged securities held under joint custody receipts issued by a third-party bank in the City's name. 44

92 C. DEPOSITS AND INVESTMENTS (CONTINUED) Investments. maturities. As of December 31, 2012, the City had the following investments and Investment Type Fair Value Maturity Rating Kansas Municipal Investment Pool Escrow Accounts - Dreyfus Money Market Funds- UMB 6,389,463 9,148, (See below) N/A N/A AAAf AAAm AAAm 15,582,345 At December 31, 2012, the City had invested 6,389,463 in the State's Municipal Investment Pool. The Municipal Investment Pool is under the oversight of the Pooled Money Investment Board. The board is comprised of the State Treasurer and four additional members appointed by the State Governor. The board reports annually to the Kansas legislature. State pooled monies may be invested in direct obligations of, or obligations that are insured as to principal and interest, by the U.S. government or any agency thereof, with maturities up to four years. No more than ten percent of those funds may be invested in mortgage-backed securities. In addition, the State pool may invest in repurchase agreements with Kansas banks or with primary government securities dealers. Separately issued financial statements of the Municipal Investment Pool may be obtained from the Pooled Money Investment Board, 900 S.W. Jackson, Suite 209, Topeka, Kansas Credit quality risk. Investment quality ratings given above are per Standard & Poor's, and they are as of December 31, Concentration of credit risk. Investment types and percents at cost are as follows: Kansas Municipal Investment Pool41% and Dreyfus escrow accounts 59%). Interest Rate Risk. The City's investment policy does not limit investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. D. RECEIVABLES Receivables at December 31, 2012 consist of the following: Governmental Business-type activities activities Total Miscellaneous charges receivable 463, , ,098 Water charges receivable 171, ,516 Wastewater charges receivable 167, ,328 Solid waste charges receivable 91,768 91,768 Drainage utility charges receivable 11,112 11,112 Loans receivable 285, ,685 Sales tax receivable 837, ,104 Expanded lottery tax receivable ,083 Net receivables 1,636, ,866 2,255,694 45

93 E. LOANS RECEIVABLE Loans receivable of the Economic Development Revolving Fund are as follows: In the City issued and revolving loans to two local companies from funds paid in retirement of original Community Development Block Grant revolving loans. In was added to the loan. The loans at six percent are to be repaid over a period of eleven years. At December 31 I 2012 the loan balances were and respectively. In the City issued a revolving loan to a local company from funds paid in retirement of original Community Development Block Grant revolving loans. The loan at six percent is to be repaid over a period of nine years. At December 31 I the loan balance was In the City issued a revolving loan to a local company from funds paid in retirement of original Community Development Block Grant revolving loans. The loan at six percent is to be repaid over a period of seven years. At December the loan balance was In the City issued a revolving loan to a local company from funds paid in retirement of original Community Development Block Grant revolving loans. The loan at six percent is to be repaid over a period of seven years. At December 31 I 2012 the loan balance was In 2011 I the City issued a revolving loan to a local company from funds paid in retirement of original Community Development Block Grant revolving loans. The loan at six percent is to be repaid over a period of seven years. At December 31 I 2012 the loan balance was F. CAPITAL ASSETS A summary of changes in property and equipment of primary government follows: Primarl:' government Beginning Ending balance Increases Decreases balance Governmental activities: Land 5,582,267 5,582,267 Buildings and improvements 58,340,982 21,455 17,220 58,345,217 Machinery and equipment 21,249, , ,238 21,712,090 Infrastructure 219,936,401 2,406, ,342,434 Construction in progress ,621, Total capital assets at historical cost 305,383,314 5,379,366 2,113, ,649,594 Less accumulated depreciation for: Buildings and improvements 8,964, ,463 7,608 10,410,747 Machinery and equipment 8,622,146 1,625, ,792 9,796,852 Infrastructure 162,829,219 8,091, ,920,945 Total accumulated depreciation ,128,544 Governmental activities capital assets, net ~ 124,967,Q57 ~ (5,791,32:1} ~1,654,686 ~1 H,521,Q5Q 46

94 F. CAPITAL ASSETS (CONTINUED) Prima[Y government Beginning Ending balance Increases Decreases balance Business-type activities: Land 1,526,892 1,526,892 Buildings and improvements 16,162,009 19,966,623 36,128,632 Machinery and equipment 6,463, , ,119 6,381,149 Infrastructure 47,128,240 3,433,528 50,561,768 Water rights 3,542,614 3,542,614 Construction in progress 21,929,357 2,568,862 22,850, Total capital assets at historical cost 96,752,346 26,180,046 23,143,979 99,788,414 Less accumulated depreciation/ amortization for: Buildings and improvements 11,338, ,577 (3,666) 11,672,292 Machinery and equipment 4,852, , ,696 5,075,021 Infrastructure 11,257, ,978 12,216,977 Water rights 320,039 62, ,066 Total accumulated depreciation 27,768,481 1,679, ,030 29,346,356 Business-type activities capital assets, net 68,983,865 24, , ,442,058 Depreciation and amortization expense was charged to functions as follows: Governmental activities: General government Public safety Public works Culture and recreation Community services Indirect depreciation Internal service Total governmental activities Business-type activities: Water Wastewater Solid waste Drainage Total business-type activities 50, , ,380 2,530,512 28,263 8,091, '170, ' , , ,905 A summary of changes in property and equipment of material governmental component units follows: Beginning Ending Dodge City- Public Libra[Y' balance Increases Decreases balance Governmental activities: Culture and recreation: Land 338, ,171 Buildings and improvements 1,845,688 1,845,688 Furniture and equipment Total capital assets at historical cost 2,738, ,761,249 Less accumulated depreciation for: Buildings and improvements 1,278,529 51,957 1,330,486 Furniture and equipment Total accumulated depreciation Governmental activities capital assets, net 1,047,583 (58,317) ,659 47

95 F. CAPITAL ASSETS (CONTINUED) Beginning Ending DeveloQment CorQoration balance Increases Decreases balance Governmental activities: Community services: Industrial park land and improvements 1,053,282 1,053,282 Furniture and equipment ,115,790 3,340 1,119,130 Less accumulated depreciation for furniture and equipment Governmental activities capital assets, net 1,0602QA Gill} 1 059,927 The industrial park land and improvements represent lots at the industrial park which are held for sale and are carried at cost. The cost includes improvements to the land to provide roads and utility access. These improvements were financed with funds from a Community Development Block Grant which flowed through the City of Dodge City, Kansas, and they are not being depreciated. Beginning Ending Housing Authority balance Increases Decreases balance Governmental activities: Community services: Land 363, ,865 Buildings and equipment 13,556, ,553 14,331,398 Construction in progress ,822,163 1,318, ,353 15,367,017 Less accumulated depreciation for buildings and equipment ,570,084 Governmental activities capital assets, net 7 Z2Q Q ~ 773, ,Z96,933 G. INTERFUND RECEIVABLES AND PAYABLES lnterfund balances are used when one fund has an obligation to transfer funds to another. The following is a summary of interfund receivables and payables at December 31, 2012: Amount Due to Due from 2,489 General Fund FAA Grant Ramp Expansion 928 General Fund DJ-BX Grant ,448 General Fund COPS Grant ,236 General Fund DJ-BX Grant ,097 General Fund Mobility Manager 27,392 General Fund Minibus General Fund CDBG Housing 69,741 The General Fund made advances to grant funds that operate on a reimbursement basis that will be repaid when the reimbursement is received. 48

96 H. INTERFUND TRANSACTIONS During the course of normal operations, the City has numerous transactions between funds including expenditures and transfers of resources to provide services, construct assets and service debt. The governmental and proprietary funds financial statements generally reflect such transactions as transfers. The internal service funds record charges for service to City departments as operating revenue. All City funds record these payments to the internal service fund as operating expenses. lnterfund transfers are made either for operating purposes or to transfer residual equity balances. A summary of interfund transfers for 2012 is as follows: Transfers: General General General General Building Sales Tax Sales Tax Sales Tax Sales Tax Sales Tax All4 Fun AARF Building Development and Growth GO Bond & Interest GO Bond & Interest Convention and Visitors Water Water Wastewater Solid Waste Solid Waste Drainage All4 Fun Sales Tax Fund Municipal Band Capital Equipment Capital Improvement ST Depreciation and Replacement SEC Revenue Bond Fund Special Events Center Fund Sales Tax Organizations General General General GO Bond and Interest Temp Notes 2012 Candletree GO 2012 Bonds General General Wastewater General General Water General A summary of transfers to component units follows: Amount 32,862 50,000 18, , , ,000 2,491, , , ,000 30,000 6, , , ,000 60, , , , , ,691,303 Statutory authority K.S.A a K.S.A. Contract K.S.A a K.S.A g K.S.A.12-1,118 K.S.A K.S.A K.S.A K.S.A K.S.A K.S.A. Contract Residual Equity K.S.A. 12-1,118 Resolution No Resolution No K.S.A d K.S.A d K.S.A d K.S.A d K.S.A d K.S.A d K.S.A d From Library Fund Library Employee Benefits Fund To Dodge City Public Library Dodge City Public Library Amount 905, ,086 1,

97 I. LONG-TERM LIABILITIES Long-term obligations The City's long-term liabilities are segregated between amounts to be repaid from governmental activities and amounts to be repaid from business-type activities. Debt Debt outstanding Retirements outstanding Janua'1' 1, and December 31 Interest 201 Additions reqa)!ments 2012 exqense Governmental activities To be paid w1th tax levies: General obligation bonds 19,340,000 14,105,050 12,660,000 20,785,050 1,083,172 Temporary notes 3,430, ,000 3,430, ,000 37,411 Caftital lease obligations 307,207 74, ,938 6,881 No e payable 337,500 30, ,500 Compensated absences 815,266 54,944 36, ,342 To be paid with sales tax revenue: Revenue bonds 39,365, ,660, ,594,973 14,789,994 16,936,137 61,448,830 2,875,367 Business-ty1;1e activities To be paid with utility revenues: General obligation bonds 20,379,950 20,379,950 Revenue bonds 15,110,000 15,110,000-1,256,350 Loans 23,710,765 3,545,898 3,915,934 23,340, ,908 Temporary notes 5,015,000-5,015, ,210 Compensated absences ,723 43,961,956 23,929,125 24,043,679 43,847,400 2,326, ,556,929 38,1j9,jj j6 j 05, ,20j,835 Added and deleted amounts for compensated absences do not include the current cost as such amounts are not readily determinable. Governmental activities General obligation bonds: General obligation bonds are serial bonds to be retired through calendar year At December 31, 2012 the bonds consist of the following: Interest Maturity Bonds rates dates outstanding Refunding and internal improvements, issued September 1, 2004 in the amount of 2,830, % to 3.63% ,000 Internal improvements, issued August 1, 2005 in the amount of 6,515, % to 4.00% ,000 Internal improvements, issued December 15, 2007 in the amount of 9,250, % to 3.85% ,000 Internal improvements, issued December 1, 2008 in the amount of 1,155, % to 4.25% ,000 Internal improvements, issued October 7, 2009 in the amount of 6,280, % to 4.25% ,395,000 Internal improvements, issued August 1, 2012 in the amount of 14,105, % to 4.00% ,105, ~ 20,785,000

98 I. LONG-TERM LIABILITIES (CONTINUED) Governmental activities (continued) Principal and interest payments of general obligation bonds required to be made in the following years are: Principal Interest Total due due due ,112, ,272 2,927, ,850, ,325 2,672, ,925, ,194 2,566, ,641, ,465 2,208, ,572, ,815 2,075, ,327,500 1,576,144 9,903, ,564, ,052 2,960, , ,951 ~ 20,785,050 ~ 5,379,268 ~ 26,164,318 The amount of long-term debt that can be incurred by the City is limited by K.S.A Total outstanding bonded indebtedness during a year can be no greater than 30% of the assessed value of taxable tangible property as certified to the county clerk on the preceding August 25. As of December 31, 2012, the amount of outstanding bonded indebtedness was equal to 16.65% of property assessments as of July 1, Capital leases: The following is a description of capital lease obligations of the City: Interest rates Maturity date Outstanding balance Fire Truck, dated May 20, 2011, in the original amount of 388, % Assets recorded under capital leases were 388,357 and corresponding accumulated depreciation at December 31, 2012 was 46,206. Payments for the fire truck are made from the Capital Equipment Reserve Fund. The following is a schedule of future minimum lease payments under capital leases, together with the net present value of the minimum lease payments as of December 31, Year ending December 31, Amount , , ,450 Less: Amount representing interest 10,512 Present value of lease payments 232,938 51

99 I. LONG-TERM LIABILITIES (CONTINUED) Governmental activities (continued) Capital leases: (continued) For purposes of comparing actual expenditures to budget, only the amounts actually due in the current period are included in accordance with K.S.A b. Note payable: The City entered into an agreement during 2006 to purchase 500,000 of property and equipment, at zero percent interest, with title deeded to the City upon execut1on of the agreement. The agreement contains a reconveyance option commencing January 1, 2007 and expiring December 31, The City has the absolute and unconditional right to reconvey the property and equipment back to the seller during the option period. If the City elects to exercise the reconveyance option, it will provide written notice to the seller within 30 days. The seller will retain all payments received prior to the reconveyance and all payments due at the time of such reconveyance. The following is a schedule of future minimum payments as of December 31, 2012: , , ,500 Revenue bonds: Revenue bonds to be paid from sales tax revenue consist of the following: Interest rates Maturity dates Bonds outstanding Series 2009 sales tax projects 4.10% to 5.0% ,660,000 The aggregate annual principal and interest payments of revenue bonds required to be made in the following years are: Principal due Interest due Total due , , , ,000 1,020,000 6,365,000 8,980,000 12,560,000 6,300,000 1,727,690 1,703,840 1,678,115 1,650,440 1,620,815 7,412,220 5,796,740 3,272, ,000 2,492,690 2,528,840 2,568,115 2,605,440 2,640,815 13,777,220 14,776,740 15,832,457 6,620,000 38,660,000 25,182,317 63,842,317 The revenue bond ordinance for the above bonds provides for deposits to the principal and interest account each year to provide for the payment of principal and interest on the bonds as they become due and payable. 52

100 I. LONG-TERM LIABILITIES (CONTINUED) Governmental activities (continued) Temporary notes: The City issued temporary notes Series on December 3, 2012, for improvements. The original principal is 630,000 at a rate of 1.00%, maturing December 1, Principal and interest payments required to be made in the following years are: Principal due Interest due Total due ,000 12,303 ='= =~6=="4 2='±' 3==0~3 Business-type activities General obligation bonds: General obligation bonds, secured by revenues derived from the operations of the applicable enterprise fund types, consist of the following: Interest. rates Series 2012-A waterworks and waterworks utility system refunding bonds 2.00% to 4.00% Series 2012-B refunding and improvement bonds 2.00% to 4.00% Maturity dates Bonds outstanding 13,200,000 7,179,950 20,379,950 The aggregate annual following years are: principal and interest payments required to be made in the Series Series 2012-A 2012-B Interest due Total due , , , , , , ,020, , ,060, , ,765,000 2,287, ,535,000 1,455, ,569, , , , , ,725 1,637, , ,953,960 1,951,243 1,943,859 1,943,825 1,941,625 9,690,403 4,492,180 1,733,478 ~ 13,200,000 ~ 7,179,950 ~ 5,270,623 ~ 25,650,573 General obligation bond ordinances for the above bonds provide for deposits to principal and interest accounts each year to provide for the payment of principal and mterest on the bonds as they become due and payable. Loans: The City approved a loan agreement effective September 22, 2009, with the State of Kansas Department of Health and Environment for a water reclamation facility in the amount of 29,532,000. The interest rate is 2.83% per annum. The loan repayment schedule will be established upon completion of the project with semi-annual payments over a twenty year period. Accumulated advances on the loan at December 31, 2012 were 23,340,

101 I. LONG-TERM LIABILITIES (CONTINUED) Sales tax projects revenue bond disclosures Insurance is carried through St. Paul Travelers Insurance Company on the Special Events Center in the amount of 33,000,000 with an additional 4,000,000 for personal property effective January 1, 2012 through January 1, The premium for this coverage was 44,550 plus 5,400 for personal property. Balance sheets of the Series 2009 Sales Tax Revenue Bonds are the Special Events Center Revenue Bond Fund on page eighteen and Special Events Center Project Fund on page sixty two. Statement of revenue, expenditures, and changes in fund balance of the Series 2009 Sales Tax Revenue Bonds are the Special Events Center Revenue Bond Fund on page twenty and Special Events Center Project Fund on page sixty eight. The City complied with Rebate Covenants outlined in Section 1202 of Resolution The City completed the disclosure requirements outlined in Section 1301 of Resolution Waterworks and wastewater utility system refunding bond disclosures Insurance is carried through St. Paul Travelers Insurance Company on the Wastewater Treatment Plant in the amount of 4,811,382 and the Water Reclamation Facility in the amount of 16,000,000 with an additional 1,000,000 for personal property effective January 1, 2012 through January 1, The premium for this coverage was 6,495 on the plant and 21,600 on the Facility plus 1,350 for personal property. Balance sheets of the Water and Wastewater Funds are on page twenty two. Statement of revenue, expenditures, and. changes in net assets of the Water and Wastewater Funds are on page twenty four. There were no scheduled principal and interest payments on the series 2012-A general obligation bonds in The water and wastewater systems had 8,106 and 7,664 customer at the beginning of the year and 8,137 and 7,738 customers at the end of the year, respectively. J. BOND DEFEASANCE On August 1, 2012, the City issued 34,485,000 of general obligation refunding and improvement bonds with interest rates ranging between 2.00% and 4.00%. The City issued the bonds for improvements and to advance refund 28,27 4,729 of outstanding debt with a 3.45% to 4.625% interest rate. The refunding proceeds were deposited with an Escrow Agent to provide for all future debt service on the refunded portion of the callable debt. As a result, the refunded bonds are considered defeased, and the City has removed the liability from its accounts. The advance refunding reduced total debt service payments over the next 20 years by 3,630,091. This results in an economic gain (difference between the present values of the debt service payments on the old and new debt) of 2,704,

102 K. LONG-TERM DEBT- COMPONENT UNITS Development Corporation - note payable The note payable is due to a private company. It is payable upon the sale of the land and industrial park improvements with no set termination date. Upon the sale of any property, seventy-five percent of the net sales price of the first 50,000 and all net sales price over 50,000 is payable for interest accumulated to that date and then as a reduction to principal. If at termination, the Organization elects not to pay the principal and interest due, all land and industrial park improvements will be transferred to the lender. Interest is computed annually from July 1 through June 30 using the New York prime rate on June 30 of the prior year. Interest compounds as of June 30 of each year. Accrued interest on the note plus the amount of the note payable has been limited to a prior year estimated fair value of the property. During 2012 no additional interest was accrued on the note. No appraisal of the property has been done in order to assess whether the accrued interest recorded plus the related debt accurately reflect the Organization's liability on this property. L. CONDUIT DEBT OBLIGATIONS From time to time, the City has issued Industrial Revenue Bonds to provide financial assistance to private-sector entities for the acquisition and construction of industrial and commercial facilities deemed to be in the public interest. The bonds are secured by the property financed and are payable solely from payments received on the underlying mortgage loans. Upon repayment of the bonds, ownership of the acquired facilities transfers to the private-sector entity served by the bond issuance. Neither the City, the State, nor any political subdivision thereof is obligated in any manner for repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of December 31, 2012, there were series of Industrial Revenue Bonds outstanding, with an aggregate principal amount payable of 113,961,827. M. SPECIAL OBLIGATION BONDS The City approved a designated zone of the City as a Rural Housing Incentive District. The District is designated to reduce housing construction costs incurred by contractors through incentives that are passed on to home buyers making housing more affordable. On September 15, 2011, the City issued 550,000 of special obligation bonds. The repayment of these bonds will be repaid with ad valorem taxes pledged as special assessments. The City is not obligated in any manner for repayment of the bonds. Accordingly, the debt service transactions have been accounted for in an agency fund and the bonds are not reported as liabilities in the accompanying financial statements. N. DEFINED BENEFIT PENSION PLAN Plan description. The City of Dodge City contributes to the Kansas Public Employees Retirement System (KPERS) and the Kansas Police and Firemen's Retirement System (KP&F). Both are cost-sharing multiple-employer defined benefit pension plans as provided by K.S.A , et seq. KPERS and KP&F provide retirement benefits, life insurance, disability income benefits, and death benefits. Kansas law establishes and amends benefit provisions. KPERS and KP&F issue a publicly available financial report that includes financial statements and required supplementary information. Those reports may be obtained by writing to KPERS (611 S. Kansas, Suite 100, Topeka, KS ) or by calling

103 N. DEFINED BENEFIT PENSION PLAN (CONTINUED) Funding Policy. K.S.A establishes the KPERS member-employee contribution rate at 4% of covered salary. K.S.A establishes KP&F memberemployee contribution rate at 7% of covered salary. The employer collects and remits member-employee contributions according to the provisions of section 414(h) of the Internal Revenue Code. State law provides that the employer contribution rates be determined annually based on the results of an annual actuarial valuation. KPERS and KP&F are funded on an actuarial reserve basis. State law sets a limitation on annual increases in the contribution rates. The KPERS employer rate established for the year, 2012 is 8.34%. The City of Dodge City's employer contributions to KPERS for the years ending December31, 2012, 2011, and 2010 were 474,983, 424,380, and 377,892, respectively, equal to the required contributions for each year. The KP&F employer rate established for fiscal years beginning in 2012 is 16.54%. Employers participating in KP&F also make contributions to amortize the liability for past service costs, if any, which is determined separately for each participating employer. The City of Dodge City's contributions to KP&F for the years ending December 31, 2012, 2011, and 2010 were 756,525, 722,579, and 666,444, respectively, equal to the required contributions for each year. The Dodge City Public Library, the Dodge City- Ford County Development Corporation and the Dodge City Housing Authority all participate in KPERS. The actuarially determined contribution requirements of these component units were met. 0. RISK MANAGEMENT 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; natural disasters; and medical needs of employees. The City participates in a public entity risk pool to cover worker's compensation claims. The City purchases commercial insurance to cover property, liability and medical needs of employees. There have been no significant reductions in coverage from the prior year. Settled claims have not exceeded coverage in any of the past three years. P. CONTINGENCIES The City receives significant financial assistance from numerous federal and state governmental agencies in the form of grants and state pass-through aid. The disbursement of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreements and are subject to audit. Any disallowed claims resulting from such audits could become a liability of the General Fund or other applicable funds. However, in the opinion of management, any such disallowed claims will not have a material effect on any of the financial statements of the City at December 31, Q. JOINT VENTURES On January 1, 1993, the City of Dodge City, Kansas, entered into a joint venture with Ford County, Kansas, for the operation of a communications center. By joint resolution the Dodge City/Ford County Emergency Communications Board was created to operate the Dodge City/Ford County Communications Department. The Board consists of equal membership of City and County personnel. The department provides emergency communications for City and County agencies and is physically located in the Ford County Government Center. The budgeted operating expenditures are shared equally by the two governments. The joint venture assets of 35,099 are fully depreciated. 56

104 Q. JOINT VENTURES (CONTINUED) On July 21, 1997, the City of Dodge City, Kansas entered into a joint venture with Ford County, Kansas, for the construction and operation of certain public projects. On June 10, 1997, the voters of Dodge City and of Ford County approved a one-half percent city-wide and a one-half percent county-wide retailer's sales tax to finance these projects. The projects included but were not limited to the following: airconditioning at the Civic Center building; an outdoor motor sports complex; field sport facilities, including a baseball/softball complex and additional soccer facilities and renovation of existing facilities; and a special events center. All City sales tax revenues for these projects are deposited into the Sales Tax Fund. County sales tax revenues which are designated for Ford County and the City of Dodge City are transferred to the City and deposited into the same fund. All expenditures from the Sales Tax Fund are subject to approval of the City Commission. All real estate acquired for the projects is titled to the City. The interlocal agreement was amended on August 10, The agreement created a Community Facilities Advisory Board (CFAB) to serve as the project review and advisory committee. There are seven members on the Board: one City Commissioner, one County Commissioner, four at-large members and the Chairperson of the Board of Directors of the Dodge City/Ford County Development Corporation or his designee. On November 18, 2010, the City of Dodge City, Kansas entered into a joint venture with Venuworks of Dodge City, LLC. The agreement calls for Venuworks to operate and manage the Special Events Center and the Civic Center. The City retains title and ownership of the Centers. Venuworks receives a flat monthly management fee plus variable management fees for food and beverage sales, contractually obligated incomes and fulfillment fees. Variable commissions are capped on an annual basis. R. CHANGE IN ACCOUNTING PRINCIPLE During the year, the City adopted GASB Statement No. 65, Items Previously Recognized as Assets and Liabilities. The objective of this statement is to establish standards that reclassify certain items that were previously reported as assets and liabilities and instead to reclassify them as deferred inflows of resources, deferred outflows of resources, or as outflows of resources. As a result of implementing this statement, the following assets and liabilities have been reclassified: Item New Classification Amount Property tax billed, but levied for the next year's budget (previously reported as a liability) Contractual obligations recorded as revenue in governmental funds not collected within 60 days of year end (previously reported as a liability) Revolving loans recorded as revenue in governmental funds not collected within 60 days of year end (previously reported as a liability) Deferred inflow of resources 7,006,278 Deferred inflow of resources 385,157 Deferred inflow of resources 287,461 S. SUBSEQUENT EVENTS Management has evaluated subsequent events through August 23, 2013, the date on which the financial statements were available to be used. Management's evaluation concluded that there are no subsequent events that are required to be recognized or disclosed in these financial statements. 57