COMPREHENSIVE ANNUAL FINANCIAL REPORT City of McGregor, Texas. Year ended September 30, 2014

Transcription

1 COMPREHENSIVE ANNUAL FINANCIAL REPORT City of McGregor, Texas Year ended September 30, 2014

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3 CITY OF MCGREGOR, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2014 TABLE OF CONTENTS INTRODUCTORY SECTION (UNAUDITED) Letter of Transmittal... 1 GFOA Certificate of Achievement... 5 Organizational Chart... 6 List of Elected and Appointed Officials... 7 FINANCIAL SECTION Report of Independent Auditors... 8 MANAGEMENT DISCUSSION AND ANALYSIS (UNAUDITED) BASIC FINANCIAL STATEMENTS Government-wide Financial Statements Statement of Net Position Statement of Activities Fund Financial Statements Governmental Fund Financial Statements Balance Sheet Governmental Funds Reconciliation of Balance Sheet Governmental Funds to the Statement of Net Position Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds Reconciliation of Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds to the Statement of Activities Statement of Revenues, Expenditures, and Changes in Fund Balances Proprietary Fund Financial Statements Statement of Net Position - Proprietary Funds Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds Statement of Cash Flows - Proprietary Funds Notes to the Financial Statements REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) Budget and Actual General Fund Schedule of Funding Progress - TMRS Retirement System... 56

4 CITY OF MCGREGOR, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2014 TABLE OF CONTENTS (CONTINUED) COMBINING FINANCIAL STATEMENTS Nonmajor Governmental Funds Combining Balance Sheet Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Budgetary Comparison Schedule Debt Service Fund OTHER INFORMATION SECTION Report of Internal Control Over Financial Reporting and on Compliance based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards STATISTICAL SECTION Table 1 - Net Assets by Component Table 2 - Changes in Net Assets Table 3 - Fund Balances of Governmental Funds Table 4 - Changes in Fund Balances of Governmental Funds Table 5 - Tax Revenues by Source - Governmental Funds Table 6 - Assessed Value and Estimated Actual Value of Taxable Property Table 7 - Direct and Overlapping Property Tax Rates Table 8 - Principal Property Tax Payers Table 9 - Property Tax Levies and Collections Table 10 - Direct and Overlapping Sales Tax Rates Table 11 - Ratios of Outstanding Debt by Type Table 12 - Ratios of General Bonded Debt Outstanding Table 13 - Direct and Overlapping Governmental Activities Debt Table 14 - Legal Debt Margin Table 15 - Demographic and Economic Statistics Table 16 - Principal Employers Table 17 - Full-time Equivalent City Government Employees by Function Table 18 - Operating Indicators by Function/Program Table 19 - Capital Asset Statistics by Function/Program... 81

5 INTRODUCTORY SECTION

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12 CITY OF MCGREGOR Organization Chart City Council City Attorney City Manager City Judge City Secretary Administrative Services Community Services Development Services Emergt:'ncy Services Financial Municipal Services Administration Airport Economic Development Human Resources Information Services (Contract) Parks & Recreation Community Development Building Inspections Code Enforcement ng Fire (Voltmtecr) EMS (Volunteer) Utility Billing & Collection Rachael Arms

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15 Michael G. Vail, CPA Chris E. Knauth, CPA Charles T. Gregg, CPA Don E. Graves, CPA Pamela C. Moore, CPA Courtney N. Cooper, CPA Members: American Institute of CPAs Texas Society of CPAs To the Honorable Mayor and City Council City of Mcgregor, Texas Report on the Financial Statements INDEPENDENT AUDITOR S REPORT We have audited the accompanying financial statements of the governmental activities, the businesstype activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of City of Mcgregor, Texas, as of and for the year ended September 30, 2014, and the related notes to the financial statements, which collectively comprise the City s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions Gateway Blvd., Suite 212 Richardson, TX (972) East Highway 199 P.O. Box 1859 Springtown, TX (817)

16 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Mcgregor, Texas, as of September 30, 2014, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. 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 for the general fund, and Schedule of Funding Progress TMRS Retirement System on pages and be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Mcgregor, Texas s basic financial statements. The introductory section, combining nonmajor fund financial statements, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining nonmajor fund financial statements on pages and budgetary comparison schedules for Debt Service Funds on page 59 are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections on pages 1-7 have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.

17 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 30, 2015, on our consideration of the City of McGregor Texas internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reports and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Governments Auditing Standards in considering City of McGregor Texas internal control over financial reporting and compliance. Richardson, Texas March 30, 2015

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19 FINANCIAL SECTION

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21 City of McGregor, Texas Management s Discussion and Analysis Year Ended September 30, 2014 As management of The City of McGregor, (City) we offer readers of the City s financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended September 30, Financial Highlights The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $19,861,053 (net assets). Governmental net assets decreased by $7863,439. This change in net assets is attributed to an increase in infrastructure assets. At the close of the fiscal year, the City s governmental funds reported combined ending fund balances of $4,609,380 an increase of $3,004,196 in comparison with the prior year. Of the combined ending balances, $1,185,459 is unassigned in the general fund, $56,835 is restricted in the general debt service fund, $2,974,397 is restricted in the capital projects fund, $87,221 and $305,467 restricted is in other governmental funds. At the end of the current fiscal year, unassigned fund balance in the general fund was $1,185,459 or 29.9% percent of total general fund expenditures. In total, the City s bonded debt increased $3,209,900. Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to The City s basic financial statements. The City of McGregor s basic financial statements are comprised of three components: 1) Government-wide Financial Statements 2) Fund Financial Statements, and 3) Notes to the Financial Statements The basic financial statements present two different views of the City through the use of government-wide statements and fund financial statements. In addition to the basic financial statements this report contains other supplementary information that will enhance the reader s understanding of the financial condition of the City. Basic Financial Statements The first two statements (pages 25-27) in the basic financial statements are the Government-Wide Financial Statements. They provide both short and long-term information about the City s financial status. The next statements (pages 28-34) are Fund Financial Statements. These statements focus on the activities of the invidividual components within the City government. These statements are more detailed that the government-wide statements. The two sections in the Fund Financial Statements are 1) the Governmental Fund financial statements and 2) the Proprietary Fund financial statements. Following the Fund Financial Statements, are the notes beginning on page 35. The notes to the financial statements explain in more detail the data contained within the statements. After the notes section, the 11

22 City of McGregor, Texas Management s Discussion and Analysis Year Ended September 30, 2014 Required Supplementary Information (pages 54-56) is provided to show additional financial and economic details about the City. Government-Wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the finances of the City of McGregor, in a manner similar to a private-sector business. The government-wide statements provide short and long-term information about the City s financial status as a whole. The Statement of Net Assets presents information on all of the City of McGregor s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of The City of McGregor is improving or deteriorating. The Statement of Net Assets combines and consolidates governemental funds current financial resources (short-term spendable resources) with capital assets and long-term obligations. In order to assess the overall health or financial condition of the City, other non-financial factors should be taken into consideration, such as changes in the City s property tax base and the condition of the City s infrastructure. The Statement of Activities presents information on how the City s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (businesstype activities). The governmental activities of the City include general government, public safety, municipal services (public works), community development, parks and recreation. The business-type activities of the City include the water, sewer, airport and Rachael Arms Apartments funds. The government-wide financial statements include not only the City itself (known as the primary government), but also a legally separate McGregor Economic Development Corporation (MEDC) for which the City is financially accountable. Financial information for the MEDC is presented as a discrete component and is not included with the primary government. The MEDC is presented in a separate column in the government-wide financial statements. The MEDC government-wide financial statements can be found in the pages that follow this discussion. Complete financial statements of the MEDC may be obtained at the City s administrative offices. The government-wide financial statements are on pages of this report. Fund Financial Statements The fund financial statements provide a more detailed look at the City s most significant funds. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. Some funds are required to be established by state law or bond covenants. The City of McGregor, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into two categories: governmental funds and proprietary funds. 12

23 City of McGregor, Texas Management s Discussion and Analysis Year Ended September 30, 2014 Governmental Funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. Most of the City s basic services are accounted for in governmental funds. These funds focus on how assets can readily be converted into cash flow in and out, and what monies are left at year-end that will be available for spending in the following year. Governmental funds are reported using an accounting method called modified accrual accounting which provdies a short-term spending focus. As a result, the governmental fund financial statements give the reader a detailed short-term view that helps him/her determine if there are more or less financial resources available to finance the City s programs Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental fund balance sheet and the governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City of McGregor maintains three major governmental funds and four nonmajor governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balances for the major general fund, debt service fund, and capital projects fund. The nonmajor funds are summarized in the other governmental funds column. The nonmajor funds combining schedules are included in the Combining and Individual Statements and Schedules section of this report. The City of McGregor adopts an annual appropriated budget for the general fund, nonmajor special revenue funds and utility operating funds. A budgetary comparison statement has been provided for the general fund to demonstrate compliance with this budget. This comparison can be found in the Fund Statements section of this report. The Notes to the Financial Statements, including Note 2, Budgetary Information is an integrated part of this statement. The Governmental Fund financial statements can be found on pages of this report. Proprietary funds The City charges customers for the services it provides. These services are generally reported in the proprietary funds. Proprietary funds are reported in the same way all activities are reported in the Statement of Net Position and the Statement of Activiites. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The City of McGregor maintains four enterprise or proprietary funds: 1) water, 2) sewer, 3) municipal airport and 4) Rachael Arms Apartments funds. 13

24 City of McGregor, Texas Management s Discussion and Analysis Year Ended September 30, 2014 The proprietary fund financial statements provide information for the water, sewer, municipal airport and Rachael Arms Apartments enterprise funds, all of which are major funds of the City of McGregor. The basic proprietary fund financial statements can be found on pages of this report. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. More detailed information on long-term debt activity and capital asset activity is presented in the relevant disclosures in the notes to the financial statements. The notes to the financial statements can be found on the pages immediately following the financial statements. Other Information In addition to the basic financial statements and accompanying notes, this report presents certain required supplementary information concerning the CIty's bud etary comparison information for the General Fund and progress in funding its obligation to provide pension benefits to its employees. Accounting Changes The following statements for the Governmental Accounting Standards Board (GASB) were effective for the City in the fiscal year ending September 30, 2013: The GASB has issued Statement No. 61, The Financial Rporting Entity: Omnibus, an amendment of GASB Statements No. 14 and No. 34. This statement modifies existing requirements for the assessment of potential component units in determining what should be included in the financial reporting entity, the display of component units (blending vs discrete) presentation, and certain disclosure requirements. The requirements of this statement are effective for financial statements for period beginning after June 15, The GASB has issued Statement No. 62, Codification of Accounting and Financial Rporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. This Statement codifies into GASB accounting and financial reporting standards the legacy standards from the private-sector. The requirements of this Statement are effective for financial statements for periods beginning after Decemeber 15, GASB Statement 63, Financial Reporting of Deferred Outlfows of Resources, Deferred Inflows of Revenues, and Net Position was issued in June 2011 to improve financial reporting by standardizing the presentation of deferred outflows of resources and deferred inflows of resources and their effects on a government s net position. GASB Statement 65, Items Previously Reported as Assets and Liabilities improves financial reporting by clarifying the appropriate use of the elements deferred outflows of resources and deferred inflows of resources to ensure consistency in financial reporting. Government wide Finanacial Anaylysis Net assets may serve over time as a useful indicator of a government's financial position. In the case of the City, assets exceeded liabilities $19,861,053 at the close of the most recent fiscal year. 14

25 City of McGregor, Texas Management s Discussion and Analysis Year Ended September 30, 2014 The largest portion (73%) of the City s net assets reflects its investment in capital assets. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. The following table is a comparative summary of net assets as of September 30, 2014 and September 30, 2013: Governmental Activities Current and other assets Capital assets, net of accumulated depreciation Total assets Long-term liabilities outstanding Other liabilities Total liabilities Business-type Activities Total $9,099,052 $2,363,486 $17,186,161 $1,898,774 $26,285,213 $4,262,260 8,604,320 11,940,909 (3,481,495) 11,940,850 5,122,825 23,881,759 $17,703,372 $14,304,395 $13,704,666 $13,839,624 $31,408,038 $28,144,019 8,988,919 5,328, , ,494 9,237,849 5,583,854 1,174,054 1,198, ,890 2,044,816 1,692,944 3,242,885 10,162,973 6,526, ,820 2,300,310 10,930,793 8,826, ,568 31,133 39,186 39,186 1,038,754 70,319 Deferred Inflows of Resources Unearned revenues Total inflows of resources Total Liabilities and Deferred Inflows 999,568 31,133 39,186 39,186 1,038,754 70,319 11,162,541 6,557, ,006 2,339,496 11,969,547 8,897,058 Net assets Invested in capital assets, net of related debt 2,232,702 6,587,315 12,253,701 11,898,065 14,486,403 18,485,380 Restricted for Special Purpose 392, , , ,721 Restricted for Capital Projects 2,949, ,890 2,949, ,890 56,835 33,283 56,835 33,283 1,331, , ,959 (397,943) 1,975,138 71,681 $ 6,963,393 $ 7,746,833 $12,897,660 $11,500,122 $19,861,053 $19,246,955 Restricted for Debt Service Unrestricted Total net assets 15

26 City of McGregor, Texas Management s Discussion and Analysis Year Ended September 30, 2014 Governmental Activities Governmental activities decreased net assets before transfers by $215,392 and business-type activities increased net assets before transfers by $829,491 for a net increase in total net assets of $614,099. Key elements of this City wide increase are shown in the following table: CHANGES IN NET ASSETS Governmental Activities 2014 Business-type Activities Total Revenues Program revenues Charges for services Operating grants and contributions Capital grants and contributions $ 405,758 - $ 1,434,506 $ 3,729,483 $ 3,679,579 $ 4,135,241 $ 5,114,085 (201,491) (201,491) ,951 17,562 36,551 General revenues Property taxes Sales taxes Hotel-Motel taxes Franchise Taxes Interest Land leases Sale of Assets Miscellaneous 1,556,572 1,492, ,556,572 1,492, , , , ,952 30,659 12, ,659 12, , , , ,920 47,736 3, ,130 4, , ,647-87,665 57, , , ,106 3,894,072 4,363,162 4,003,277 3,735,108 7,897,349 8,004,819 1,071, , ,071, ,519 Community services 376, , , ,337 Development services 182, , , ,406 1,840,992 Total revenues Expenses Administrative services Emergency services 1,417,876 1,840, ,417,876 Financial services 171, , , ,412 Municipal services 823,860 1,310, ,860 1,310,704 Airport , , , ,332 Apartments , , , ,312 Sewer utilities , , , ,034 Water utilities - - 2,082,947 1,917,337 2,082,947 1,917,337 65, , , ,061 Total expenses Increase (decrease) in net assets before transfers 4,109,464 4,804,431 3,173,786 3,118,015 7,283,250 7,922,446 (215,392) (441,269) 829, ,093 (215,392) (441,269) Net transfers (568,047) (767,173) 568, ,340 - (20,833) Increase (decrease) in net assets (783,439) (1,208,442) 1,397,538 1,363, , ,991 Net assets-beginning 7,746,832 8,955,276 11,500,122 10,136,690 7,746,832 8,955,276 Interest on debt service 16

27 City of McGregor, Texas Management s Discussion and Analysis Year Ended September 30, 2014 Net assets-ending $ 6,963,393 $ 7,746,833 $ 12,897,660 $ 11,500,122 $ 19,861,053 $ 19,246,955 The $614,099 increase in net assets for the City reflects the degree in which ongoing revenues have exceeded expenses and the transfers from CIP to finished asset. Key factors in the decrease in net assets of the governmental type activities were a decrease in revenue of $469,100 with expenses also down $694,967. Business-type expenses increased $55,771, and business type revenues increased by $268,169 mainly due to a donation of $267,400 received by the wastewater fund. Revenues by source governmental activities Property taxes, sales taxes, and land leases provide 77.6% of the revenues for the governmental activities. The pie chart on page 18 provides a graphic representation of the City s governmental revenues by source. Administrative services, Emergency services and Municpal services constitute 80.6% of the expenses for the governmental activities. The bar chart on page 19 depicts the graphic representation of the City s expenses and any directly related revenues by source. Revenues by source business-type activities Charges for services account for 93.16% of the revenues for business-type activities. The pie chart found on page 20 provides a graphic representation of the City s business-type revenues by source. Expenses and program revenues business-type activities are shown in the bar chart on page 21 with Water Fund and Sewer Fund making up 89.6% of total. Business-type activities increased the City s net assets before contributions and transfers by $562,

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32 City of McGregor, Texas Management s Discussion and Analysis Year Ended September 30, 2014 Financial Analysis of the City s Funds The City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds The focus of the City s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government s net resources available for spending at the end of the fiscal year. At the end of the current fiscal year, the City s governmental funds reported combined ending fund balances of $4,609,380 an increase of $3,004,196 in comparison with the prior year. Approximately 28% of this total amount, or $1,272,681, constitutes unassigned fund balance, which is available for spending at the City s discretion. The remainder of fund balance is restricted to indicate it is not available for unassigned new spending because it has already been restricted as follows: 1) restricted for debt service: $ 72,342, 2) restricted for capital projects $2,974,397, 3) restricted for hotel/ motel fund use: $40,652, 4) restricted for court technology: $26,632, 5) restricted for municipal court building security: $18,745, 4) and restricted for cemetery $203,932. The general fund is the chief operating fund of the City. At the end of the current fiscal year, the unassigned fund balance of the general fund was $1,185,459. As a measure of the general fund s liquidity, it may be useful to compare unreserved fund balance to total general fund expenditures. Unreserved fund balance represents 29.9% of total general fund expenditures. The fund balance of the general fund increased $203,034 during the current fiscal year. A key factor in this increase was sales tax, property tax and adminstrative fee revenue growth. Proprietary Funds The City s proprietary funds provide the same type of information found in the government-wide statements, but in more detail. Unrestricted net assets of the water, sewer, airport and Rachael Arms Apartments funds at the end of the current fiscal year amounted to $643,959. Net assets increased $1,397,538 from the prior year. The increase was due primarily to Water and Waste Water expansion. Other factors regarding the finances were addressed in the discussion of the City s business-type activities. General Fund Budgetary Highlights Actual General Fund revenues exceeded budgeted revenues by $438,462 in the current fiscal year. This was the result of sales tax revenue exceeding budgeted amount by $213,679, an additional $42,456 was received for service fees, $11,885 in additional franchise fees, $ 83,131 more in property taxes, and $60,349 in additional park and recreation fees, and various other small overages. 22

33 City of McGregor, Texas Management s Discussion and Analysis Year Ended September 30, 2014 General fund expenditures fell within the final budgeted amount. Capital Asset and Debt Administration Capital Assets The City of McGregor s investment in capital assets for its governmental and business-type activities as of September 30, 2014 amounts to $25,541,551 (net of accumulated depreciation). This investment in capital assets includes land, buildings and improvements, machinery and equipment, water and sewer system, and construction in progress. Governmental activities Land 3,500,111 3,500,111 Construction in progress Business-type activities Total , ,458 4,187,569 4,187,569 3,331,214 1,536,127 3,331,214 1,536,127 Buildings and improvements 5,529,479 5,747, , ,479 5,781,095 6,015,851 Machinery & equipment 1,217, , , ,448 1,352, , , ,641 35,002 44, , ,086 1,633,956 1,685,040 1,633,956 1,685,040 Intangible assets Infrastructure Airport infrastructure 4,430,955 4,557,754 4,430,955 4,557,754 Water & Sewer system 4,566,517 4,726,134 4,566,517 4,726,134 13,437,118 11,940,845 25,541,549 23,881,753 Total 12,104,431 11,940,908 Additional information on the City s capital assets can be found in note 4.A.4 of this report. Long-term Debt At the end of the 2014 fiscal year, the City had total bonded debt outstanding of $9,871,729. All debt service payments were made in 2014 and new debt was issued (Series $930,000 and Series 2014 for $2,955,000). Consequently, the overall increase in outstanding debt was $ 4,499,119. Additional information on the City s long-term debt can be found in note 4.B.1,2,3 and 4.D. of this report. 23

34 City of McGregor, Texas Management s Discussion and Analysis Year Ended September 30, 2014 Economic Factors and Next Year s Program of Services (Budget) and Rates Growth in tax base net taxable values for the FY budget year increased from $243,002,799 in FY to $254,577,898 in FY 13-14, for a net increase of $11,575,099, or 4.7%. Included in the increase was the value of new improvements and new personal property of $ 1,788,890. The overall property tax rate was increased by , from in FY to in FY Growth in the tax base valuation and the increase in the overall property tax rate resulted in an 18.6% increase in the overall tax levy, from $1,288,362 in FY to $1,527,467 in FY The FY adopted General Fund budget includes a 13% increase in expenditures from the FY adopted budget. The increase was mainly due to Capital Outlay requirements in the General Fund. In total, the City s adopted FY general fund budget includes a beginning fund balance of $1,177,290 and a projected ending fund balance of $1,200,466. Component Unit The government-wide financial statements for the McGregor Economic Development Corporation (MEDC), a component unit of the City of McGregor, are included in this report. Separate financial statements including fund statements for the MEDC are available at the City s administrative offices. Component Unit Financial Highlights The assets of the MEDC exceeded its liabilities by $598,819 at September 30, Net assets decreased $101,291 in comparison with the prior year. The decrease in net assets is primarily attributed to the $267,400 sewer connection at the Industrial Park. Requests for Information This financial report is designed to provide a general overview of the City s finances for all those with an interest in the City of McGregor s finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Director of Finance, 302 S. Madison, PO Box 192, McGregor, Texas,

35 BASIC FINANCIAL STATEMENTS

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37 City of McGregor, Texas Statement of Net Assets September 30, 2014 Primary Government Governmental Activities Business-type Activities Totals Component Units ASSETS Cash $ 3,745,685 $ 951,930 $ 4,697,615 $ 534,220 Receivable 408, , ,874 65,339 Internal balances 1,444,862 (1,444,862) - - Airport - 6,053,907 6,053,907 - Construction in progress - 3,331,214 3,331,214 - Land 3,500, ,458 4,187,569 - Water and sewer system - 8,427,198 8,427,198 - Other capital assets 16,036,777 1,467,387 17,504,164 - Accumulated depreciation (7,432,457) (6,530,046) (13,962,503) - Total capital assets 12,104,431 13,437,118 25,541,549 - Total assets 17,703,372 13,454,666 31,158, ,559 LIABILITIES Current liabilities: Accounts payable and other current liabilities 173,884 79, , Customer deposits - 174, ,596 - Acrued interest payable 24,408-24,408 - Due within one year: 975,762 14, ,387 - Due in more than one year 8,988, ,931 9,237,850 - Total liabilities 10,162, ,820 10,680, DEFERRED INFLOWS OF RESOURCES Unearned revenues 577,006 39, ,192 - Total deferred inflows of resources 577,006 39, ,192 - Total liabilities and deferred inflows of resources 10,739, ,006 11,296, NET POSITION Net investment in capital assets 2,232,702 12,253,701 14,486,403 - Restricted for capital projects 2,949,988-2,949,988 - Restricted for debt service 56,835-56,835 - Restricted for special purpose 392, ,689 - Unrestricted 1,331, ,959 1,975, ,819 Total net position $ 6,963,393 $ 12,897,660 $ 19,861,053 $ 598,819 The accompanying notes are an integral part of this statement. 25

38 City of McGregor, Texas Statement of Activities For the Year Ended September 30, 2014 Program Revenues Functions/programs Primary government: Governmental activities: Expenses Charges for Services Operating Grants and Contributions Capital Grants and Contributions Administrative services $ 1,071,192 $ 173,656 $ - $ - Community services 376, , Development services 182,845 14, Emergency services 1,417,876 52, Financial services 171, Municipal services 823,860 58,814-36,551 Interest on long-term debt 65, Total governmental activities 4,109, ,758-36,551 Business-type activities: Water fund 2,082,947 2,235, Wastewater 606,388 1,078, ,400 Airport 280, , Rachael Arms apartments 204, , Total business-type activities 3,173,786 3,729, ,400 Total Primary Government $ 7,283,250 $ 4,135,241 $ - $ 303,951 Component unit: Economic Development Corporation 441, Total Component Unit $ 441,632 $ - $ - $ - General revenues: Property taxes Sales taxes Hotel-motel taxes Franchise taxes Interest Land lease Miscellaneous Transfers in (out) Total general revenues and transfers Change in net assets Net assets - beginning Net assets - ending The accompanying notes are an integral part of this statement. 26

39 Net (Expense) Revenue and Changes in Net Assets Primary Government Component Unit Governmental Activities Business-type Activities Totals Component Unit $ (897,536) $ - $ (897,536) $ - (270,636) - (270,636) - (168,432) - (168,432) - (1,365,155) - (1,365,155) - (171,062) - (171,062) - (728,495) - (728,495) - (65,839) - (65,839) (3,667,155) , , , , (60,897) (60,897) - - (7,332) (7,332) , ,097 - (3,666,507) 823,097 (2,844,058) - (441,632) - - (441,632) $ (441,632) $ - $ - $ (441,632) 1,556,572-1,556, , , ,996 30,659-30, , ,585-47,736 6,394 54, , ,647-57,885-57,885 7,499 (568,047) 568, ,883, ,441 3,458, ,341 (783,439) 1,397, ,094 (101,291) 7,746,832 11,500,122 19,246, ,110 $ 6,963,393 $ 12,897,660 $ 19,861,053 $ 598,819 The accompanying notes are an integral part of this statement. 27

40 McGregor, TX Balance Sheet Governmental Funds September 30, 2014 Current assets: Cash and cash equivalents Property taxes receivables Sales tax receivables GENERAL FUND GENERAL DEBT SERVICE CAPITAL PROJECTS FUND OTHER GOVERNMENTAL FUNDS Total Governmental Funds $ 256,480 $ 47,277 $ 3,008,510 $ 433,419 $ 3,745,686 73,790 29, , , ,678 Due from other funds 1,444, ,444,862 Other Receivables (net of allow ance) 162, , ,815 Total Current assets: 2,068,426 76,388 3,008, ,618 5,598,942 Total assets 2,068,426 76,388 3,008, ,618 5,598,942 LIABILITIES AND FUND BALANCES Current liabilities: Accounts payable and other current liabilities 86,843-34,113 52, ,885 Total Current liabilities: 86,843-34, ,885 Total liabilities 86,843-34,113 52, ,885 DEFERRED INFLOWS OF RESOURCES Deferred revenues 796,124 19, ,677 Total deferred inflow s of resources 796,124 19, ,677 Total liabilities and deferred inflow s of resources 882,967 19,553 34,113 52, ,562 Fund balances: Restricted - 56,835 2,974, ,468 3,336,700 Unassigned 1,185, ,221 1,272,680 Total fund balances 1,185,459 56,835 2,974, ,689 4,609,380 Total liabilities and fund balances $ 2,068,426 $ 76,388 $ 3,008,510 $ 445,618 $ 5,598,942 The accompanying notes are an integral part of this statement. 28

41 McGregor, TX Reconciliation of the Balance Sheet To the Statement of Net Position September 30, 2014 Fund balances of governmental funds $ 4,609,380 Amounts reported for governmental activities in the statement of net are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 12,104,431 Long-term liabilities, including bonds payable, leases payable, and compensated absences are not due and payable in the current period and therefore are not reported in the funds. (9,964,681) Revenues earned but not available w ithin sixty days of the year end are not recognized as revenue in the fund financial statements 214,263 Net position of governmental activities $ 6,963,393 The accompanying notes are an integral part of this statement. 29

42 McGregor, TX Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Year Ended September 30, 2014 REVENUES Property taxes Sales taxes Franchise taxes Permits and fees Fines/forfeitures Service fees Administrative fees Leases/rentals Recreation fees Donations Interest earnings Land leases Miscellaneous income Hotel-Motel Tax Grant Reimbusement Total revenues GENERAL FUND GENERAL DEBT SERVICE CAPITAL PROJECTS FUND OTHER GOVERNMENTAL FUNDS Total Governmental Funds $ 1,071,167 $ 485,404 $ - $ - $ 1,556, , , , ,585 37, , , , , , ,456 52, , , , ,117 1, ,058 47, , ,058 45, ,179 57, ,659 30, ,551-36,551 3,463, ,546 36,970 91,380 4,077,963 EXPENDITURES Current: Administrative services Community services Development services Emergency services Financial services Municipal services Debt service: Principal Retirement Interest Administrative charges 863, , , , , , , ,844 1,324, ,555 1,340, , , , , ,293 64, , , ,225 13,673 67, , , ,985-71,985 Capital outlay: - Administrative services 2, ,720 Development services 8, ,023 Emergency serivces 578, ,096 Municipal services 126, ,000 Total expenditures Excess (deficiency) of revenues over expenditures 3,967, ,108 71, ,424 5,107,229 (504,645) 9,438 (35,015) (499,044) (1,029,266) OTHER FINANCINGSOURCES (USES) Debt Proceeds Transfers out Transfers in 618,936-3,982,573-4,601,509 - (1,127,787) (1,127,787) 93, , ,740 Total other financing sources and uses 712,678-2,854, ,998 4,033,462 Net Change in fund balances 208,033 9,438 2,819,771 (33,046) 3,004,196 Fund balances -- beginning 977,426 47, , ,735 1,605,184 Fund balances -- ending $ 1,185,459 $ 56,835 $ 2,974,397 $ 392,689 $ 4,609,380 The accompanying notes are an integral part of this statement. 30

43 McGregor, TX Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities For the Year Ended September 30, 2014 Net change in fund balances --total governmental funds $ 3,004,196 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. 163,523 The issuance of long-term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term debt and related items. (3,795,199) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. Change in net position of governmental activities ($ (155,959) 783,439) The accompanying notes are an integral part of this statement. 31

44 McGregor, TX Statement of Net Position Proprietary Funds September 30, 2014 Business-type Activities - Enterprise Funds Total MUNICIPAL RACHAEL ARMS Proprietary WATER FUND WASTEWATER AIRPORT APARTMENTS Funds ASSETS Current assets: Cash and cash equivalents $ 400 $ - $ 359,742 $ 591,788 $ 951,930 Receivables (net of allow ance for uncollectibles) 311, ,641 17,666 35, ,480 Total Current assets: 312, , , ,177 1,462,410 Noncurrent assets: Land 46,170 80, ,527 1, ,458 CIP 2,210, , ,363-3,331,214 Other Capital Assets 240, , , ,887 1,467,387 Infrastructure 5,340,946 3,086,252 6,053,907-14,481,105 Less: accumulated depreciation (3,233,641) (1,009,773) (2,162,939) (123,693) (6,530,046) Total Noncurrent assets: 4,604,837 3,051,844 5,737,505 42,932 13,437,118 Total assets 4,917,021 3,197,485 6,114, ,109 14,899,528 LIABILITIES AND FUND BALANCES Current liabilities: Accounts payable and other current liabilities 44,558 22,345 2,036 10,729 79,668 Customer and tenant deposits 151,681-8,115 14, ,596 Compensated absences - current 8,746 3,998 1, ,625 Due to other funds 593, , ,444,862 Total Current liabilities: 798, ,584 11,411 26,150 1,713,751 Non current liabilities: Bonds and notes payable , ,540 Compensated absences 3, ,481 Total Non current liabilities: 3, , ,931 Total liabilities 802, , ,861 26,150 1,962,682 DEFERRED INFLOWS OF RESOURCES Deferred hangar rent ,186-39,186 Total deferred inflow s of resources ,186-39,186 Total liabilities and deferred inflow s of resources 802, , ,047 26,150 2,001,868 NET POSITION Net investment in capital assets 4,114,451 2,319,384 5,819,866-12,253,701 Unrestricted , ,959 Total net position $ 4,114,451 $ 2,319,384 $ 5,819,866 $ 643,959 $ 12,897,660 The accompanying notes are an integral part of this statement. 32

45 McGregor, TX Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds For the Year Ended September 30, 2014 Business-type Activities - Enterprise Funds Total MUNICIPAL RACHAEL ARMS Proprietary WATER FUND WASTEWATER AIRPORT APARTMENTS Funds Operating revenues: Service fees $ 1,120 $ - $ - $ - $ 1,120 Leases/rentals - - 1,200-1,200 Water sales 1,831, ,831,241 Sew er charges - 1,036, ,036,193 Solid w aste 337, ,690 Hangar rent , ,071 Land leases ,303-28,303 Flow age fees ,613-13,613 Apartment rent , ,735 Penalties and late charges 53,572 28,809-1,461 83,842 Tap fees 11,350 13, ,350 Miscellaneous income ,246 6,593 45,124 Total Operating Revenues 2,235,258 1,078, , ,789 3,729,482 Operating expenses: Salaries and benefits 410, ,353 54,020 55, ,459 Supplies and maintenance 241, ,381 34,781 27, ,176 Contractual services 1,236,964 94,624 26,295 22,739 1,380,622 Utilities 69,476 45,561 7,142 92, ,392 Depreciation 123,903 78, ,178 6, ,222 Total operating expenses 2,082, , , ,122 3,161,871 Operating Income (loss) 152, ,615 (48,983) (7,333) 567,611 Nonoperating revenues (expenses): Donations - 267, ,400 Miscellenous expenses - - (6,541) - (6,541) Interest revenue - - 1,021-1,021 Total non operating revenue(expenses) - 267,400 (5,520) - 261,880 Income (loss) beforecontributions and transfers 152, ,015 (54,503) (7,333) 829,491 Transfers in 1,037,559 90, ,127,787 Transfers out (241,478) (318,263) - - (559,741) Change in net position 948, ,980 (54,503) (7,333) 1,397,537 Total net position -- beginning 3,166,058 1,808,404 5,874, ,292 11,500,123 Total net position -- ending $ 4,114,451 $ 2,319,384 $ 5,819,866 $ 643,959 $ 12,897,660 The accompanying notes are an integral part of this statement. 33