CITY OF BEACON, NEW YORK FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2015

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1 FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED

2 TABLE OF CONTENTS DESCRIPTION PAGE(S) REPORTS: Independent Auditors' Report Independent Auditors 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 Management s Discussion and Analysis (un-audited) For The Year Ended December 31, BASIC FINANCIAL STATEMENTS: Government-Wide Financial Statements: Statement of Net Position as of December 31, Statement of Activities For The Year Ended December 31, Fund Financial Statements: Balance Sheet Governmental Funds as of December 31, Reconciliation of Governmental Funds Balance Sheet To The Statement of Net Position as of December 31, Statements of Revenues, Expenditures and Changes In Fund Balances- Governmental Funds For the Year Ended December 31,

3 TABLE OF CONTENTS (CONT D.) Reconciliation of the Statements of Revenues, Expenditures and Changes in Fund Balance of Governmental Funds to the Statement of Activities For the Year Ended December 31, Statement of Net Position Proprietary Funds as of December 31, Statements of Revenues, Expenses and Changes in Net Position Proprietary Funds For the Year Ended December 31, Statement of Cash Flows Proprietary Funds For the Year Ended December 31, Statement of Fiduciary Net Position Fiduciary Funds as of December 31, Statement of Changes in Fiduciary Net Position Fiduciary Funds For the Year Ended December 31, Notes to the Financial Statements REQUIRED SUPPLEMENTAL INFORMATION: Exhibit I Combined Statements of Revenues, Expenditures and Encumbrances Budget and Actual - General Fund For the Year Ended December 31, Exhibit II Other Post-Employment Benefits Plan Schedule of Funding Progress -December 31, Exhibit III Schedule of Proportionate Share of the Net Pension Liability For the Year Ended December 31, Exhibit IV Schedule of Pension Contributions For the Year Ended December 31, OTHER SUPPLEMENTAL INFORMATION: Exhibit V Schedule of Findings, Recommendations and Responses

4 INDEPENDENT AUDITORS' REPORT Honorable Mayor Randy Casale Members of the City Council City of Beacon, New York One Municipal Plaza Beacon, New York We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Beacon, New York, as of and for the year ended December 31, 2015, 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. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. 1

5 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 opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Beacon, New York, as of December 31, 2015, 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. Emphasis of Matter Regarding Change in Accounting Principle As described in Note N to the financial statements, in 2015, the City adopted new accounting guidance, GASB Statement No. 68, Accounting and Financial Reporting for Pensions, an amendment of GASB Statement 2. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis, budgetary comparison information, Other Post- Employment Benefit Plan Schedule of Funding Progress, Schedule of Proportionate Share of the Net Pension Liability, and the Schedule of Pension Contributions, 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 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. 2

6 Merger Sedore & Company, CPA s, P.C. merged with Vanacore, DeBenedictus, DiGovanni & Weddell, LLP effective July 1, Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated August 18, 2016, on our consideration of City of Beacon, New York s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Beacon, New York s internal control over financial reporting and compliance. Prior Period Adjustment It was noted in the current year audit that the liability for long-term debt was understated. See Note Q to the Financial Statements for detail. Vanacore, DeBenedictus, DiGovanni & Weddell, CPA s Limited Liability Partnership Poughkeepsie, New York August 18,

7 INDEPENDENT AUDITORS 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 Honorable Mayor Randy Casale Members of the City Council City of Beacon, New York One Municipal Plaza Beacon, New York We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Beacon, New York, as of and for the year ended December 31, 2015, and the related notes to the financial statements, which collectively comprise City of Beacon, New York s basic financial statements, and have issued our report thereon dated August 18, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City of Beacon, New York s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of Beacon, New York s internal control. Accordingly, we do not express an opinion on the effectiveness of the City of Beacon, New York s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. 4

8 Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of Beacon, New York s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We have reported certain other matters, Finding 1, which we are bringing to the attention of management. City of Beacon, New York, Response to findings The City of Beacon, New York s response to the findings identified in our audit is described in the accompanying schedule of findings, recommendations and responses. The City of Beacon, New York s response was not subjected to the auditing procedures applied in the audit of the financial statements and accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Vanacore, DeBenedictus, DiGovanni & Weddell, CPA s Limited Liability Partnership Poughkeepsie, New York August 18,

9 CITY OF BEACON New York Office of the City Administrator Anthony J. Ruggiero, M.P.A City Administrator Management s Discussion and Analysis Required Supplemental Information For the Year Ended December 31, 2015 (Cont d.) Un-audited In the Statement of Net Assets and the Statement of Activities, we divide the City into two kinds of activities: Governmental activities Most of the City s basic services are reported here, including the police, fire, public works, and parks departments, and general administration. Property taxes, franchise fees, and state and federal grants finance most of these activities. Business-type activities The City charges a fee to customers to help it cover all or most of the cost of certain services it provides. The City s water and sewer system are reported here. Reporting the City s Most Significant Funds Our analysis of the City s major funds begins on page 12. The fund financial statements begin on page 23 and provide detailed information about the most significant funds not the City as a whole. Some funds are required to be established by State law. However, the City Council established other funds to show that it is meeting legal responsibilities for using certain grants, and other money (like grants received from the U.S. Department of Housing and Urban Development). The City s two kinds of funds governmental and proprietary use different accounting approaches. Governmental funds Most of the City s basic services are reported in governmental funds, which focus on how money flows into and out of those funds and 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 readily be 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 you determine whether there are more or fewer financial resources that can be spent in the near future to finance the City s programs. We describe the relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds in reconciliation at the bottom of the fund financial statements. One Municipal Plaza, Suite One, Beacon, New York ARUGGIERO@CITYOFBEACON.ORG 7

10 CITY OF BEACON New York Office of the City Administrator Anthony J. Ruggiero, M.P.A City Administrator Management s Discussion and Analysis Required Supplemental Information For the Year Ended December 31, 2015 (Cont d.) Un-audited Proprietary funds When the City charges customers for the services it provides, these services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the Statement of Net Assets and the Statement of Activities. In fact, the City s enterprise funds (a component of proprietary funds) are the same as the business-type activities we report in the government-wide statements, but provide more detail and additional information, such as cash flows, for proprietary funds. The City as Trustee The City is the Trustee for its firemen s service award program. It is also responsible for other assets in an agency capacity. All of the City s fiduciary activities are reported in separate Statements of Fiduciary Net Assets and Changes in Fiduciary Net Assets on pages 30 and 31. We exclude these activities from the City s other financial statements because the City cannot use these assets to finance its operations. The City is responsible for ensuring that the assets reported in these funds are used for their intended purposes. One Municipal Plaza, Suite One, Beacon, New York ARUGGIERO@CITYOFBEACON.ORG 8

11 CITY OF BEACON New York Office of the City Administrator Anthony J. Ruggiero, M.P.A City Administrator Management s Discussion and Analysis Required Supplemental Information For the Year Ended December 31, 2015 (Cont d.) Un-audited FINANCIAL HIGHLIGHTS Governmental Activities Change Cash and investments $ 21,229,980 $ 21,422,848 $ (192,868) Receivables 2,626,205 3,885,360 (1,259,155) Internal balances (6,184,400) (7,642,314) 1,457,914 Prepaid expenses 42, ,008 (431,863) Fixed assets 44,574,649 39,221,887 5,352,762 Total Assets 62,288,579 57,361,789 4,926,790 Deferred Outflow of Resources 1,371,215-1,371,215 Total Assets & Deferred Outflow of Resources $ 63,659,794 $ 57,361,789 $ 6,298,005 Accounts payable and other accrued liabilities $ 8,270,744 $ 6,761,044 $ 1,509,700 Bonds payable 24,271,824 24,002, ,600 Postemployment benefits obligation 14,315,603 12,072,900 2,242,703 Share of Net Pension Liability 622, ,209 Total liabilities 47,480,380 42,836,168 4,644,212 Deferred Inflow of Resources 6,936,047 6,593, ,471 Invested in Capital Assets, net of related debt 20,321,088 15,282,626 5,038,462 Restricted for community development 131, ,979 17,004 Unrestricted (deficit) (11,209,704) (7,465,560) (3,744,144) Total net assets 9,243,367 7,932,045 1,311,322 Total liabilities and net assets $ 63,659,794 $ 57,361,789 $ 6,298,005 One Municipal Plaza, Suite One, Beacon, New York ARUGGIERO@CITYOFBEACON.ORG 9

12 CITY OF BEACON New York Office of the City Administrator Anthony J. Ruggiero, M.P.A City Administrator Management s Discussion and Analysis Required Supplemental Information For the Year Ended December 31, 2015 (Cont d.) Un-audited Governmental Activities Change Program Revenues Charges for services $ 1,642,511 $ 1,414,557 $ 227,954 Grants and contributions 1,920,649 1,186, ,531 General revenues Property taxes 10,610,895 10,330, ,594 Other taxes 5,006,754 5,631,478 (624,724) Unrestricted grants and contributions 1,552,648 1,540,678 11,970 Interest earnings 23,194 24,652 (1,458) Other revenues 1,185,592 1,151,131 34,461 Total revenues 21,942,243 21,278, ,328 Expenses General government support 2,828,500 2,535, ,687 Public safety 10,637,994 10,457, ,728 Transportation 4,036,057 4,378,433 (342,376) Culture and recreation 660, , ,611 Home and community service 3,106,246 3,350,535 (244,289) Interest on long-term debt 849, , ,998 Total expenses 22,118,750 21,518, ,359 Excess (deficiency) before special items and transfers (176,507) (239,476) 62,969 Transfers 598,000 (10,762) 608,762 Increase (decrease) in net assets $ 421,493 $ (250,238) $ 671,731 One Municipal Plaza, Suite One, Beacon, New York ARUGGIERO@CITYOFBEACON.ORG 10

13 CITY OF BEACON New York Office of the City Administrator Anthony J. Ruggiero, M.P.A City Administrator GOVERNMENTAL ACTIVITIES Management s Discussion and Analysis Required Supplemental Information For the Year Ended December 31, 2015 (Cont d.) Un-audited The City s Governmental Activities Statement of Net Position reflects an overall increase of approximately $6.2 million in assets and $4.6 million increase in liabilities. The changes that caused this are discussed below. Currently, the City has $27 million in Bond anticipation notes (BANs) outstanding. Of the notes, $13 million are for General Fund purposes and $14 million of these notes were issued for water and sewer purposes. These projects are individually accounted for in the City s Capital projects fund until completed and then transferred to the appropriate fund as fixed assets. For financial statement purposes water and sewer related BANs are reclassed from the Capital projects fund (included in the Governmental Activities) to the Water and Sewer funds (Business-Type Activities) with the use of internal balances. The Governmental Activities shows a cash balance $21 million. This is a combination of General Fund Cash of $9.5 million and Capital projects cash of $11.3 million. The Capital cash is a result of unspent monies for projects currently underway. General fund related projects (roads, sidewalks, buildings, highway & public safety equipment) made with the BAN are reflected in the increase to fixed asset of $5.3 million which is net of depreciation. The City added $2.9 million in road and sidewalk improvements, $2.3 million or work towards a new DPW facility and 500K for a municipal parking lot. Other additions to assets were public safety equipment budgeted for in operations and also obtained thorough state and federal grants. Bonds payable increased $269K as a result of $2 million in new debt issued and $818K of principal payments on short-term debt. Annual long-term debt principal payments amounted to $1.4 million. The liabilities also showed an increase of more than $2.2 million in the post-employment benefits obligation. This change is primarily due to the fact that there is an annual increase in our obligation and it remains unfunded at this point. New York State General Municipal Law Article 2 does not currently permit funding to be used against OPEB obligations. One Municipal Plaza, Suite One, Beacon, New York ARUGGIERO@CITYOFBEACON.ORG 11

14 CITY OF BEACON New York Office of the City Administrator Anthony J. Ruggiero, M.P.A City Administrator GOVERNMENTAL ACTIVITIES (Continued) Management s Discussion and Analysis Required Supplemental Information For the Year Ended December 31, 2015 (Cont d.) Un-audited GENERAL FUND The City s General Fund accounts for the general operations of the City. It is used to account for all financial resources except those that are required to be accounted for in another fund. Overall in 2015, the General Fund revenues decreased by $336,625 and expenses increased by $525,727 which included an extra debt service payment of $500,000. With the adoption of the 2015 budget, the City appropriated $400,000 of the fund balance and increased the tax levy $183,876 and managed to stay under the 2% tax cap. Due to conservative budget practices, unanticipated revenues and conservative spending in all departments allowed the City to end the year with a surplus of $1,790,703. The City $920K of the current surplus to fund its current year Capital needs. Specific results to note were revenues received in excess of budget: $94,956 in additional sales tax (growth) from Dutchess County. $320,878 more in tax interest, back tax collection and installment agreements. $369,433 in net gain on sales of foreclosed properties. $73,350 in increased Fines & Forfeited bail and $45,525 in parking tickets. $95,646 in additional Mortgage Tax receipts. $61,983 in additional Planning application Fees. The City saved in almost every department budget across the board and only spent 93% of its expense budget. Included in this was a significant drop in the pension costs (244K) due tier 6. The City also saved: $78,958 due to the decreased cost of gas and diesel. $47,345 in Fire Overtime. $57,503 in Detective salaries due to attrition. $124,258 in unused Contingency. One Municipal Plaza, Suite One, Beacon, New York ARUGGIERO@CITYOFBEACON.ORG 12

15 CITY OF BEACON New York Office of the City Administrator Anthony J. Ruggiero, M.P.A City Administrator GOVERNMENTAL ACTIVITIES (Continued) GENERAL FUND (Continued) Management s Discussion and Analysis Required Supplemental Information For the Year Ended December 31, 2015 (Cont d.) Un-audited Below are graphs of the General Fund s revenues and expenses to illustrate the sources and uses of the operating fund. Specific amounts can be found on page 25 of the financial statements. One Municipal Plaza, Suite One, Beacon, New York ARUGGIERO@CITYOFBEACON.ORG 13

16 CITY OF BEACON New York Office of the City Administrator Anthony J. Ruggiero, M.P.A City Administrator GOVERNMENTAL ACTIVITIES (Continued) GENERAL FUND (Continued) Management s Discussion and Analysis Required Supplemental Information For the Year Ended December 31, 2015 (Cont d.) Un-audited One Municipal Plaza, Suite One, Beacon, New York ARUGGIERO@CITYOFBEACON.ORG 14

17 CITY OF BEACON New York Office of the City Administrator Anthony J. Ruggiero, M.P.A City Administrator CAPITAL PROJECTS FUND Management s Discussion and Analysis Required Supplemental Information For the Year Ended December 31, 2015 (Cont d.) Un-audited Starting in 2011 and continuing through 2015, the City has had several major projects underway. These projects are accounted for in the Capital Projects Fund and have been primarily financed through the use of short-term bond anticipation notes (BANs). Currently, the City has 1 note outstanding in the amount of $27,071,127. $13,012,782 is General related and $14,048,345 is Water and Sewer related. In 2015, the City spent $3.7 million various roads, sidewalks and building upgrades and parking lots. $2.7 million was expended on the DPW Garage construction. $36K on water improvements and $1.5 million on sewer plant improvements and I&I issues. One Municipal Plaza, Suite One, Beacon, New York ARUGGIERO@CITYOFBEACON.ORG 15

18 CITY OF BEACON New York Office of the City Administrator Anthony J. Ruggiero, M.P.A City Administrator Management s Discussion and Analysis Required Supplemental Information For the Year Ended December 31, 2015 (Cont d.) Un-audited PROPRIETARY FUNDS Water and Sewer Funds of the City are considered to be Proprietary Funds (Business-type). Below is an analysis to show the 2015 versus 2014 balances and operations. Business-type Activities Change Cash and investments $ 1,036,818 $ 1,642,054 $ (605,236) Receivables 3,756,839 2,772, ,541 Internal balances 6,184,400 7,642,314 (1,457,914) Prepaid expenses - 53,399 (53,399) Fixed assets 20,131,410 19,125,036 1,006,374 Total Assets 31,109,467 31,235,101 (125,634) Deferred Outflow of Resources 226, ,372 Total Assets & Deferred Outflow of Resources $ 31,335,839 $ 31,235,101 $ 100,738 Accounts payable and other accrued liabilities $ 817,944 $ 883,454 (65,510) Bonds payable 18,259,304 19,984,914 (1,725,610) Post employment benefits liability 2,712,400 2,378, ,688 Share of Net Pension Liability 146, ,592 Total liabilities 21,936,240 23,247,080 (1,310,840) Deferred Inflow of Resources 206, ,808 2,588 Invested in Capital Assets, net of related debt 9,607,087 6,875,103 2,731,984 Unrestricted net assets (413,884) 909,110 (1,322,994) Total net assets 9,193,203 7,784,213 1,408,990 Total liabilities and net assets $ 31,335,839 $ 31,031,293 $ 100,738 One Municipal Plaza, Suite One, Beacon, New York ARUGGIERO@CITYOFBEACON.ORG 16

19 CITY OF BEACON New York Office of the City Administrator Anthony J. Ruggiero, M.P.A City Administrator PROPRIETARY FUNDS (Continued) Management s Discussion and Analysis Required Supplemental Information For the Year Ended December 31, 2015 (Cont d.) Un-audited The City Water & Sewer Funds (Business-type activities) show a decrease of $125K in assets. This accounts for the significant decrease in internal balances of $1.4 million from 2015 to 2014 due to the issuance of short-term notes financed in the capital project and reclassed in the Water and Sewer fund as explained previously on pg. 10. Receivables also increased significantly due to the 2 quarters of water and sewer billing being owed at year end from the Town of Fishkill and NYS Department of Corrections. Fixed Assets increased significantly due mainly to Sewer infrastructure improvements. Business-type Activities Change Program Revenues Charges for services $ 7,293,739 $ 6,700,712 $ 593,027 General revenues Investment earnings 55,174 61,111 (5,937) Total revenues 7,348,913 6,761, ,090 Expenses Water 2,915,359 2,337, ,213 Sewer 2,628,795 2,408, ,043 Total expenses 5,544,154 4,745, ,256 Excess (deficiency) before special items and transfers 1,804,759 2,015,925 (211,166) Transfers (598,000) 10,762 (608,762) Increase (decrease) in net assets $ 1,206,759 $ 2,026,687 $ (211,166) One Municipal Plaza, Suite One, Beacon, New York ARUGGIERO@CITYOFBEACON.ORG 17

20 CITY OF BEACON New York Office of the City Administrator Anthony J. Ruggiero, M.P.A City Administrator PROPRIETARY FUNDS (Continued) Management s Discussion and Analysis Required Supplemental Information For the Year Ended December 31, 2015 (Cont d.) Un-audited Liabilities decrease $1.3 million mainly due to pay-downs of short and long-term debt. The post-employment benefits obligation is increasing annually but due to New York State law at this point, it remains unfunded. The Water Fund shows a change/gain in net position of approximately $532k. As these financial statements are on a full accrual basis, expenses such as post-employment benefits as described above, compensated absences (unused but earned employee leave time) and depreciation on fixed assets are calculated in. For 2015, post-employment benefit cost amounted to $257,664, and depreciation expense amounted to $324,352. The Sewer Fund shows a change/gain in net position of approximately $1.27 million. As noted with the Water Fund above these financial statements are on a full accrual basis as described above, expenses such as post-employment benefits amounting to $76,024 and depreciation on fixed assets of $452,006 are calculated in that figure. ACTIVITIES REGARDING CAPITAL ASSETS The City has $8,141,941 of construction in progress as of December 31, Most of this pertains to road reconstruction, DPW facility construction, and water and sewer main improvements. Some road and bridge construction and Sewer I&I was deemed completed in 2015 therefore 10.4 million was moved from construction in progress to infrastructure this year. LONG TERM DEBT Total long term serial bond debt as of December 31, 2015 was $15,460,000. $11,246,992 of this balance is General Fund debt. The water and sewer portions of the debt amount to $1,902,892 and $2,310,116 respectively. Water and sewer debt is paid by the water and sewer customers. The General Fund paid $1,892,762 in long-term debt service in The Water and Sewer Funds paid $733,802 and $392,334 respectively in long term debt service. One Municipal Plaza, Suite One, Beacon, New York ARUGGIERO@CITYOFBEACON.ORG 18

21 CITY OF BEACON New York Office of the City Administrator Anthony J. Ruggiero, M.P.A City Administrator SIGNIFICANT ECONOMIC FACTORS Management s Discussion and Analysis Required Supplemental Information For the Year Ended December 31, 2015 (Cont d.) Un-audited Despite the worldwide fiscal recession, the City of Beacon enjoys continuing development interest in a variety of areas of the community. Some of the current projects are described below: The City approved construction for an 11 room hotel on Main Street that will be open in The City approved construction and renovation of 2 other hotels. 1 hotel on East Main St. has 27 rooms and a C/O was issued and is open for business. The other hotel is on Main Street and has 12 rooms and will open in The city has approved and issued permits for: 13K sq. ft. renovation on East Main St., a new Brewery, a new Restaurant, 6 luxury condominiums with sales prices in excess of $1 million as well as a development of 50 new residential units in Mason Circle. C/O s have been issued for 5 of the luxury apartments and Mason Circle. Projects without C/O s are currently under construction and it is anticipated in late 2017 will received their C/O s. The City reached approval for the conversion of the former St. Francis Hospital into an affordable Senior Housing complex. The project known as Highland Meadows will consist of 68 dwelling units comprised of 53 one-bedroom and 15 two-bedroom units ranging from 925 to 100 square feet each. This project is under construction and is anticipated to open in the Fall of They City has also reach approval but has issued building permits on several other projects including 25 Condos on 1 East Main street and 78 market rate apartments on Leonard. In addition, Land use approvals are in place for 115 additional residential dwelling units with building permits to follow. The City has just completed construction of a brand new 30,000 sq. ft. energy efficient Highway Facility. The last highway facility was over 100 years old and this was the first construction project for the City in 20 years. After 7 years of recession and downward spirals of property assessments, the City is currently on an upward swing with property prices and assessments on the rise. The City of Beacon continues to enjoy a strong real estate market for both residential and commercial. Following the national trend, people are moving back to the City to enjoy our services, shopping, nightlife and walkable nature of the City. One Municipal Plaza, Suite One, Beacon, New York ARUGGIERO@CITYOFBEACON.ORG 19

22 STATEMENT OF NET POSITION GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES TOTAL ASSETS Current Assets: Cash and cash equivalents $ 21,229,980 $ 1,036,818 $ 22,266,798 Receivables (net of allowance for doubtful accounts of $142,770) 2,008,433 3,756,839 5,765,272 Internal balances (6,184,400) 6,184,400 - Prepaid expenses 42,145-42,145 Total current assets 17,096,158 10,978,057 28,074,215 Non-current assets: Long-term receivables 617, ,772 Capital assets: Land 10,538,141 1,061,955 11,600,096 Infrastructure, net of depreciation 21,277,272 15,153,478 36,430,750 Buildings, machinery and equipment, net of depreciation 5,266,061 3,267,211 8,533,272 Construction in progress 7,493, ,766 8,141,941 Total capital assets 44,574,649 20,131,410 64,706,059 Total assets 62,288,579 31,109,467 93,398,046 Deferred ouflow of resources 1,371, ,372 1,597,587 Total assets and deferred outflow of resources $ 63,659,794 $ 31,335,839 $ 94,995,633 LIABILITIES Current liabilities: Accounts payable $ 2,943,620 $ 348,708 $ 3,292,328 Accrued liabilities 808, ,145 1,055,757 Due to other governments 2,249,254-2,249,254 Notes Payable 13,012,782 14,058,345 27,071,127 Current portion of long-term liabilities: Compensated absence liability 146,221 33, ,694 Landfill remediation liability 8,000-8,000 Bonds payable - non capital 45,456-45,456 Bonds payable - capital 1,058, ,428 2,013,795 Total current liabilities 20,272,312 15,643,099 35,915,411 Non-current liabilities: Judgments and claims 60,000-60,000 Compensated absence liability 1,967, ,618 2,155,655 Landfill remediation liability 88,000-88,000 Bonds payable - non capital 289, ,660 Bonds payable - capital 9,865,559 3,245,531 13,111,090 Postemployment benefits obligation 14,315,603 2,712,400 17,028,003 Share of Net Pension Liability 622, , ,801 Total non-current liabilities 27,208,068 6,293,141 33,501,209 Total liabilities 47,480,380 21,936,240 69,416,620 Deferred inflow of resources 6,936, ,396 7,142,443 NET POSITION Invested in Capital Assets, net of related debt 20,321,088 9,607,087 29,928,175 Restricted for: Community development projects 131, ,983 Unrestricted (deficit) (11,209,704) (413,884) (11,623,588) Total net position 9,243,367 9,193,203 18,436,570 Total liabilities and net position $ 63,659,794 $ 31,335,839 $ 94,995,633 See independent auditors' report. 20

23 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED OPERATING CHARGES GRANTS AND FUNCTIONS/PROGRAMS EXPENSES FOR SERVICES CONTRIBUTIONS Governmental Activities: General government support $ 2,828,500 $ 391,001 $ 31,943 Public safety 10,637, , ,396 Transportation 4,036, ,375 - Culture and recreation 660, ,427 - Home and community service 3,106, ,564 22,496 Interest on long-term debt 849, Total governmental activities 22,118,750 1,642, ,835 Business-type activites: Water 2,915,359 3,442,082 - Sewer 2,628,795 3,851,657 - Total business-type activities 5,544,154 7,293,739 - Total $ 27,662,904 $ 8,936,250 $ 180,835 See independent auditors' report. 21

24 NET (EXPENSE) REVENUE AND CHANGES IN NET POSITION CAPITAL BUSINESS- GRANTS AND GOVERNMENTAL TYPE CONTRIBUTIONS ACTIVITIES ACTIVITIES TOTAL $ - $ (2,405,556) $ - $ (2,405,556) 72,286 (9,929,168) - (9,929,168) 1,324,535 (2,374,147) - (2,374,147) - (419,040) - (419,040) 342,993 (2,578,193) - (2,578,193) - (849,486) - (849,486) 1,739,814 (18,555,590) - (18,555,590) , , ,222,862 1,222, ,749,585 1,749,585 $ 1,739,814 (18,555,590) 1,749,585 (16,806,005) General revenues Taxes: Real property taxes 10,199,622-10,199,622 Real property tax related items 583, ,951 Sales tax distribution 4,253,642-4,253,642 Mortgage tax 350, ,646 Utility taxes 161, ,436 Franchise taxes 241, ,030 Payments from other governments 182, ,871 Grants and contributions not restricted to specific programs 1,552,648-1,552,648 Unrestricted investment earnings 23,194 46,017 69,211 Miscellaneous 453, ,706 Interfund transfers 598,000 (598,000) - Special items-gain (Loss) on sale of property and compensation for loss 549,015 9, ,172 Total general revenues, special items and transfers 19,149,761 (542,826) 18,606,935 Change in net position 594,171 1,206,759 1,800,930 Net position - January 1, ,932,045 7,784,213 15,716,258 Implementation of GASB 68 Adjustment 213,659 (39,277) 174,382 Prior Period Adjustment (Note Q) 503, , ,000 Net position - January 1, 2015, Restated 8,649,196 7,986,444 16,635,640 Net position - December 31, 2015 $ 9,243,367 $ 9,193,203 $ 18,436,570 See independent auditors' report. 22

25 BALANCE SHEET GOVERNMENTAL FUNDS ASSETS CAPITAL NON-MAJOR TOTAL GENERAL PROJECTS GOVERNMENTAL GOVERNMENTAL FUND FUND FUND FUNDS Cash and cash equivalents $ 12,140,943 $ 8,730,083 $ 358,954 $ 21,229,980 Receivables: Taxes, net of $142,770 allowance for doubtful accounts 1,710, ,710,546 Other 85, ,812 Mortgage loans receivable - - 9,267 9,267 Due from other funds 1,102, ,750-1,926,204 Due from other governments 183, ,255 State and federal receivable 76, , ,324 Prepaid expenses 330, ,280 Total assets $ 15,629,938 $ 10,114,509 $ 368,221 $ 26,112,668 LIABILITIES AND FUND EQUITY LIABILITIES Accounts payable $ 539,645 $ 2,403,975 $ - $ 2,943,620 Accrued expenses 197, ,291 Retainage payable - 332, ,863 Bond anticipation notes payable - 13,012,782-13,012,782 Due to other funds 1,132,312 10,845,251-11,977,563 Due to other governments 2,176,216 73,038-2,249,254 Other liabilities 5, ,674 Total liabilities 4,051,138 26,667,909-30,719,047 DEFERRED INFLOW OF RESOURCES 1,843, ,302 9,265 2,270,446 FUND EQUITY Fund balance (deficit): Non-spendable 330, ,280 Restricted - debt service 1, ,623 Restricted - miscellaneous 11, ,217 Restricted - community development 131, , ,939 Committed - encumbrances 66,297 1,741,811-1,808,108 Assigned 247, ,500 Unassigned 8,946,021 (18,712,513) - (9,766,492) Total fund equity 9,734,921 (16,970,702) 358,956 (6,876,825) Total liabilities and fund equity $ 15,629,938 $ 10,114,509 $ 368,221 $ 26,112,668 See independent auditors' report. 23

26 RECONCILIATION OF GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION Total fund equity for governmental funds $ (6,876,825) Total net position reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. 44,574,649 Long-term liabilities, including compensated absence liability, judgement and claims, landfill remediation liability, bonds payable and post employment benefits and share of retirement system liability are not due and payable in the current period and therefore are not reported in the fund (29,234,913) Certain uncollected revenues/receivables are deferred in the funds, but are fully accrued for governmental activity purposes. (240,873) Deferred Outflows and Inflow are not recorded in the funds 1,298,284 Accrued interest and service award liabilities are not recorded in the funds (276,955) Total net position of governmental activities $ 9,243,367 See independent auditors' report. 24

27 STATEMENTS OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED CAPITAL GENERAL PROJECTS NON-MAJOR TOTAL FUND FUND FUND FUNDS REVENUES Real property taxes $ 10,235,207 $ - $ - $ 10,235,207 Real property taxes items 583, ,951 Non property taxes items 4,656, ,656,108 Departmental income 1,061,531 63,000 12,376 1,136,907 Intergovernmental charges 56, ,397 Use of money and property 15,550 7, ,195 Licenses and permits 309, ,841 Fines and forfeitures 218, ,599 Sale of property and compensation for loss 549, ,015 Miscellaneous local sources 42, , ,633 Interfund revenues 426, ,030 State aid 2,048, ,941-3,018,704 Federal aid 72, , , ,919 Total revenues 20,276,124 1,551, ,424 22,150,506 EXPENDITURES General government support 2,159, ,064-2,501,653 Public safety 6,965,111 76,420-7,041,531 Transportation 1,854,974 6,777,363-8,632,337 Economic assistance & opportunity Culture and recreation 381, ,161 Home and community services 1,133,488 1,763,880 24,000 2,921,368 Employee benefits 3,178, ,178,453 Debt service 2,639, ,639,967 Total expenditures 18,312,743 8,959,727 24,000 27,296,470 Excess of revenues over (expenditures) 1,963,381 (7,407,769) 298,424 (5,145,964) Other financing sources (uses): BANs Redeemed from Appropriations - 1,311,010-1,311,010 Operating transfers in - 1,827,738-1,827,738 Operating transfers out (920,000) - (309,738) (1,229,738) Total other financing sources (uses) (920,000) 3,138,748 (309,738) 1,909,010 Excess (deficiency) of revenue and other sources over expenditures and other uses 1,043,381 (4,269,021) (11,314) (3,236,954) Fund Balance, January 1, ,691,540 (12,701,681) 370,270 (3,639,871) Fund Balance, December 31, 2015 $ 9,734,921 $ (16,970,702) $ 358,956 $ (6,876,825) See independent auditors' report. 25

28 RECONCILIATION OF THE STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED Net change in fund equities - total government funds $ (3,236,954) The change in net position reported for governmental activities in the statement of activities is different because: Governmental funds report all capital outlays as expenditures. However, in the statement of activities, the cost of certain 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. 5,352,762 Bonds proceeds are reported on the financing sources in governmental funds and thus contribute to the change in fund balance. In the statement of net position, however, issuing debt increases long-term liabilities and does not affect the statement of activities. Similarly, repayment of principal is an expenditure in the governmental funds but reduces the liability in the statement of net position. Repayments: Serial bond principal 1,415,792 1,415,792 Deferred capital grant revenue amortized (53,719) Some expenses reported in the statement of activities, such as accrued interest, compensated absences, service award, landfill liabilities and postemployment benefits do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. (3,046,230) Reduction in retirement expense as a result of implmenting GASB #68 174,280 Revenues in the statement of activities that do not provide current financial resources are not reported in the governmental funds. (11,760) Net change in net position of governmental activities $ 594,171 See independent auditors' report. 26

29 STATEMENT OF NET POSITION PROPRIETARY FUNDS ASSETS WATER SEWER TOTAL FUND FUND FUNDS Current Assets: Cash and cash equivalents $ 118,193 $ 918,625 $ 1,036,818 Receivables: Charges for services 1,977,834 1,515,573 3,493,407 Due from other governments 19,268-19,268 Other - 244, ,163 Internal balances 2,931,684 3,252,717 6,184,401 Prepaid expenses Total current assets 5,046,979 5,931,078 10,978,057 Capital assets: Land 993,722 68,233 1,061,955 Infrastructure, net of depreciation 6,090,037 9,063,441 15,153,478 Buildings, machinery and equipment, net of depreciation 1,339,217 1,927,994 3,267,211 Construction in progress 127, , ,766 Total capital assets 8,550,713 11,580,697 20,131,410 Deferred Outflow of Resources Deferred Outflow of Resources 93, , ,372 Total assets and deferred outflow of resources $ 13,691,522 $ 17,644,317 $ 31,335,839 LIABILITIES AND NET POSITION LIABILITIES Current liabilities: Accounts payable $ 181,325 $ 167,383 $ 348,708 Accrued expenses 123, , ,145 Notes payable 4,823,500 9,234,845 14,058,345 Current portion of bonds payable 654, , ,428 Total current liabilities 5,782,141 9,827,485 15,609,626 Non-current liabilities: Compensated absence liability 122,252 99, ,091 Bonds payable 1,223,213 2,022,318 3,245,531 Postemployment benefits obligation 1,249,116 1,463,284 2,712,400 Share of Net Pension Liability 60,762 85, ,592 Total non-current liabilities 2,655,343 3,671,271 6,326,614 Total liabilities 8,437,484 13,498,756 21,936,240 Deferred Inflow of Resources Deferred Inflow of Resources 147,796 58, ,396 NET POSITION Invested in Capital Assets, net of related debt 3,794,476 5,812,611 9,607,087 Unrestricted (deficit) 1,311,766 (1,725,650) (413,884) Total net position 5,106,242 4,086,961 9,193,203 Total liabilities, deferred inflow of resources and net position $ 13,691,522 $ 17,644,317 $ 31,335,839 See independent auditors' report. 27

30 STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED WATER SEWER TOTAL FUND FUND FUNDS OPERATING REVENUES Charges for services and other fees $ 3,442,082 $ 3,851,657 $ 7,293,739 Total operating revenues 3,442,082 3,851,657 7,293,739 OPERATING EXPENSES Personal services 478, ,241 1,225,644 Administrative expense 501, , ,787 Maintenance, operations and contractual services 539,919 (434,375) 105,544 Employee benefits 660, ,739 1,374,362 Depreciation 324, , ,358 Total operating expenses 2,504,319 1,772,376 4,276,695 NET OPERATING INCOME 937,763 2,079,281 3,017,044 NON-OPERATING REVENUES (EXPENSES) Sale of property - 9,157 9,157 Investment income 5,962 40,055 46,017 Interest expense (411,040) (856,419) (1,267,459) Total nonoperating revenues (expenses) (405,078) (807,207) (1,212,285) INCOME BEFORE TRANSFERS 532,685 1,272,074 1,804,759 TRANSFERS IN (OUT) (58,000) (540,000) (598,000) CHANGE IN NET POSITION 474, ,074 1,206,759 Net Position, January 1, ,481,615 3,302,598 7,784,213 Implementation of GASB 68 Adjustment (16,281) (22,996) (39,277) Prior Period Adjustment (Note Q) 166,223 75, ,508 Net Position, January 1, 2015, restated 4,631,557 3,354,887 7,986,444 Net Position, December 31, 2015 $ 5,106,242 $ 4,086,961 $ 9,193,203 See independent auditors' report. 28

31 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED WATER SEWER TOTAL FUND FUND FUNDS Cash Flows From Operating Activities: Cash received from users $ 2,666,891 $ 3,642,308 $ 6,309,199 Cash paid for employees and employee benefits (963,172) (1,279,330) (2,242,502) Cash paid for operating expenses (1,073,915) 60,465 (1,013,450) Net Cash Flows Provided by Operating Activities 629,804 2,423,443 3,053,247 Cash Flows Noncapital Financing Activities: Advances from (payments to) other funds 216,119 (349,116) (132,997) Net Cash Provided by Noncapital Financing Activities 216,119 (349,116) (132,997) Cash Flows From Capital and Related Financing Activities: Purchase of capital assets (135,764) (1,646,968) (1,782,732) Interest payments for bonded indebtedness (411,040) (856,419) (1,267,459) Principal payments for bonded indebtedness (388,758) (141,711) (530,469) Net Cash (Used) by Capital and Related Financing Activities (935,562) (2,645,098) (3,580,660) Cash Flows From Investing Activities: Investment income 5,962 40,055 46,017 Sale of Property - 9,157 9,157 Net Cash Provided by Investing Activities 5,962 49,212 55,174 Net (Decrease) Increase in Cash and Cash Equivalents (83,677) (521,559) (605,236) Cash and Cash Equivalents at January 1, ,870 1,440,184 1,642,054 Cash and Cash Equivalents at December 31, 2015 $ 118,193 $ 918,625 $ 1,036,818 Reconciliation of operating income to net cash provided by operating activities: Operating income $ 937,763 $ 2,079,281 $ 3,017,044 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 324, , ,358 Changes in assets and liabilities: (Increase) Decrease in receivables (775,191) (209,349) (984,540) (Increase) Decrease in prepaid expenses 22,795 30,604 53,399 Increase (Decrease) in accounts payable 132,669 9, ,592 Increase (Decrease) in accrued expenses (94,608) 11,870 (82,738) Increase (Decrease) in compensated absences (142,572) 19,796 (122,776) Increase (Decrease) in net share of pension liability 60,762 85, ,592 Increase (Decrease) in post employment benefits obligation 257,664 76, ,688 (Increase) Decrease in Deferred Outflows (93,830) (132,542) Total Adjustments (307,959) 344,162 36,203 Net Cash Provided by Operating Activities $ 629,804 $ 2,423,443 $ 3,053,247 See independent auditors' report. 29