CITY OF NORWALK, CONNECTICUT

Transcription

1 CITY OF NORWALK, CONNECTICUT COMPREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED JUNE 30, 2017 DEPARTMENT OF FINANCE 125 EAST AVENUE NORWALK, CONNECTICUT

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3 CITY OF NORWALK, CONNECTICUT COMPREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED JUNE 30, 2017 PREPARED BY THE FINANCE DEPARTMENT DIRECTOR OF FINANCE COMPTROLLER ROBERT O. BARRON FREDERIC J. GILDEN

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5 Contents I. Introductory Section - unaudited Letter of Transmittal GFOA Certificate of Achievement Organizational Charts Norwalk City Government Department of Finance Principal City Officials i-v vi vii viii ix II. Financial Section Independent Auditor s Report 1-2 Management s Discussion and Analysis - unaudited 3-11 Basic Financial Statements Government-Wide Financial Statements: Statement of net position 13 Statement of activities 14 Fund Financial Statements: Balance sheet governmental funds 15 Statement of revenues, expenditures and changes in fund balances governmental funds 16 Reconciliation of the statement of revenues, expenditures and changes in fund balances of governmental funds to the statement of activities 17 Statement of net position proprietary funds 18 Statement of revenues, expenses and changes in net position -proprietary funds 19 Statement of cash flows proprietary funds 20 Statement of fiduciary net position fiduciary funds 21 Statement of changes in fiduciary net position fiduciary funds 22 Notes to financial statements 23-69

6 Contents II. Financial Section (Continued) Required Supplementary Information - unaudited Schedule of investment returns city defined benefit plans/opeb plan 71 Schedule of employer contributions city defined benefit plans Schedule of changes in the city s net pension liability and related ratios Schedules of funding progress and employer contributions OPEB plan 76 Schedule of contributions OPEB plan 77 Schedule of changes in the city s OPEB liability and related ratios 78 Schedule of the city s proportionate share of the net pension liability teachers retirement plan 79 Schedule of general fund revenues budgetary basis budget and actual 80 Schedule of general fund expenditures, encumbrances and transfers out budgetary basis budget and actual Note to required supplementary information Combining and Individual Fund Financial Statements and Other Schedules Nonmajor Governmental Funds Combining balance sheet 87 Combining statement of revenues, expenditures and changes in fund balances 88 Nonmajor Internal Service Funds Combining statement of net position 89 Combining statement of revenues, expenses and changes in net position (deficit) 90 Combining statement of cash flows 91 Fiduciary Funds Combining statement of changes in assets and liabilities - agency funds Capital Assets Used in the Operation of Governmental Funds Net of accumulated depreciation 95 Schedule by function and activity - net of depreciation 96

7 Contents II. Financial Section (Continued) Other Schedules Balance sheet by account general fund 97 Schedule of revenues, expenditures and changes in fund balance by account general fund 98 Schedule of property taxes levied, collected and outstanding general fund Schedule of capital project fund tax collectors activity - sewer assessment Schedule of long-term bonded debt III. Statistical Section - Unaudited Net position by component 109 Changes in net position Governmental activities tax revenues by source 112 Fund balance of governmental funds 113 Changes in fund balances of governmental funds 114 General governmental tax revenues by source 115 Assessed value and estimated value of taxable property 116 Direct governments 117 Principal property taxpayers 118 Property tax levies and collections 119 Ratios of total direct debt 120 Ratios of total net direct debt 121 Ratios of total overall net debt 122 Direct and overlapping governmental activities debt 123 Legal debt margin information Demographic and economic statistics 126 Principal employers 127 Budget full-time employees 128 Operating indicators by function 129 Capital asset statistics by function 130

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9 Introductory Section

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11 CITY OF NORWALK, CONNECTICUT Robert Barron, Director of Finance P: F: East Avenue, PO BOX 5125 Norwalk, CT LETTER OF TRANSMITTAL December 22, 2017 Harry W. Rilling, Mayor Members of the Common Council Members of the Board of Estimate and Taxation Citizens of the City of Norwalk: I am pleased to transmit the Comprehensive Annual Financial Report (CAFR) of the City of Norwalk for the fiscal year ended June 30, State law requires that every general purpose local government publish within six months of the close of each fiscal year a complete set of audited financial statements. This report is published to fulfill that requirement for the fiscal year ended June 30, Management assumes full responsibility for the completeness and reliability of the information contained in this report, based upon a comprehensive framework of internal control that it has established for this purpose. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements. RSM US LLP has issued an unmodified ( clean ) opinion on the City of Norwalk s financial statements for the year ended June 30, The independent auditor s report is located at the front of the financial section of this report. Management s discussion and analysis (MD&A) immediately follows the independent auditor s report and provides a narrative introduction, overview, and analysis of the basic financial statements. MD&A complements this letter of transmittal and should be read in conjunction with it. i

12 PROFILE OF THE CITY Norwalk was first settled in 1640 and is the sixth largest city in Connecticut with a population of 88,438. The City is located in Fairfield County in the Southwestern part of the state along the Long Island Sound. Including a number of islands, the City covers square miles. Per capita income in the county remains among the highest in the nation. While preserving its suburban character, the City is a significant commercial, industrial and service center. Many corporations, including the Governmental Accounting Standards Board and the Financial Accounting Standards Board, have chosen to locate their headquarters in Norwalk. The City has also developed a tourist market centered on its outstanding harbor, islands, National Registry Mansions, museums and a Maritime Aquarium comprised of a nautical museum, aquarium and IMAX theater. The City provides a full range of municipal services, including education, police and fire protection, public works and sanitation, health and social services, planning and development, and recreational/cultural services. A listing of City offices and further information about the City may be found on the City s official web site: The City employs over 600 full-time employees which provide the above municipal services. FACTORS AFFECTING FINANCIAL CONDITION Norwalk is strategically located with significant retail, corporate and tourism offerings in southern Connecticut. The City hosts many regional and corporate headquarters, but no one employer accounts for more than 3.0% of the total jobs or more than 2.9% of the City s total grand list. This diversity among employment sectors and industries creates great resilience for the City in economic downturns. The development of the City s budget occurs within the larger context of the economic and fiscal climate. This climate affects both the revenues available to support the City budget, and the expenditure pressures faced by the City. The national economy s recovery and its positive impact on the City s grand list is expected to take some time. Additionally, Connecticut s economic growth has been lagging the nation and is expected to be modest in the near-term. The adverse impact of the recession on the Connecticut and Norwalk economies is still evident. The Connecticut Department of Labor, in its October 2017, release of Labor Force Data, reported that 82,000 people are unemployed statewide at a rate of 4.3% and 1,894 people are unemployed in Norwalk at a rate of 3.8%. The state s slow recovery has also had a material impact on taxes collected by the State of Connecticut. The state s long-term budget challenges are placing pressure for net budget reductions to municipalities in future years. Because of significant development in the City and low reliance on state aid, Norwalk is in a better situation than most municipalities in the state that have had to raise property taxes or cut services to deal with cuts in state aid. Fortunately, Norwalk s primary source of revenue the property tax at 88.7% of total revenue is not as susceptible to fluctuation as state aid during a recession. Of all the types of taxes, property taxes are the least susceptible to fluctuation. In good economic times, property tax revenues grow more slowly than income or sales taxes; but in a bad economy, property taxes are also the least likely to contract. This is especially true in the State of Connecticut, where real property is reassessed once every five years. ii

13 MAJOR DEVELOPMENT INITIATIVES The City of Norwalk is well positioned to be a leader in attracting new businesses and investment to the City. The City works together with applicants to expedite permitting and to ensure that needed infrastructure improvements are in place to accommodate new development and to mitigate any adverse impacts. These large-scale mixed-use developments are bringing new housing, jobs and retail to the City making Norwalk a destination for residents and travelers alike. Below is a list of significant activity in the City of Norwalk in the past 12 months that has been completed or is currently under way: The SoNo Collection, a Class A regional mall, is under construction in Norwalk at the intersection of I-95 and Highway 7. The mall will open in 2019 and will include 700,000 square feet of retail stores and public space. Bloomingdale s and Nordstrom will anchor the development. General Growth Properties, Inc., is the developer of this 12-acre parcel. Crius Energy relocated its headquarters from Stamford to Norwalk after securing $8 million in state funding. Crius expects to add 225 jobs in the next ten years to bring its workforce to a total of 425. Crius is occupying 48,000 square feet at 535 Connecticut Avenue. Phase I (80 units) of the Washington Village/South Norwalk Choice Neighborhoods Transformation Plan is nearing completion with Phase II (80 units) to begin in The entire development will have 273 mixed-income units and will transform the existing 136 distressed public housing units into an economically diverse development by blending them with 67 workforce and 70 market rate units. SoNo 50, an office building on Washington Street in downtown South Norwalk owned by Capital Equities Group, continues with a multi-million dollar renovation of the exterior grounds, building facade and interiors. Renovations to the exterior, lobby and WiFi cafe are complete. A fitness center is also being added as a tenant amenity. The 190,000 square foot office building is well positioned near the SoNo train station and commercial district. Inspira Marketing moved into a renovated 13,650 square foot office, doubling its footprint. Chase Bank anchors the ground level. Carter Validus, a commercial real estate investment company from Tampa, Florida, purchased the 115,000 square foot data center located at Norden Park for $57 million as part of its data center investment focus. The property is leased by CyrusOne. DiScala & Company will build a new 4-story 40-unit apartment building at 1 Bates Court in the South Norwalk Transit Oriented District adjacent to the South Norwalk train station. Dick s Sporting Goods opened its 12th Connecticut store on Connecticut Avenue in March FactSet, with headquarters located at 601 Merritt 7, announced plans to add 1,000 workers bringing their global workforce to 8,400. Datto, Inc., with its headquarters located at Merritt 7, announced plans to add 200 high-tech jobs to their offices bringing their global workforce to 700 employees. Four Norwalk companies were included on the 2016 Inc. Magazine 5,000 fastest-growing private companies in America, including e-touches (#2665), Inspira Marketing (#3038), Irving Levin Associates (#3863) and Christopher Peacock Homes (#4434). iii

14 Hearst Connecticut Media Group consolidated several of its offices into 30,250 square feet at 301 Merritt 7. This lease marked the largest 1st quarter lease in central Fairfield County for Omega Engineering moved its headquarters from Stamford to River Park on Connecticut Avenue bringing 120 jobs to Norwalk. Zillion Group, a health sector software company located at 501 Merritt 7 raised $28 million in private equity for its expansion. Brightview Senior Living LLC of Baltimore, Maryland began leasing units at their second Connecticut community, Brightview on New Canaan, in Norwalk. The Norwalk community consists of 90 assisted living apartments. Brightview operates 35 communities in eight states. RELEVANT FINANCIAL POLICIES The city develops long-term operating and capital plans annually. The operating plan includes major drivers of expenses and revenues, such as: payroll, pension, insurance, and the debt service associated with its 5-year capital plan, along with municipal funding from the State of Connecticut. The 5- year capital plan is made for infrastructure improvements and other capital projects and is financed through the issuance of bonds for a period not to exceed the useful life of the project. Medical insurance costs for both current and retired employees and contributions to pension plans are two significant costs in the city s budget. The city has made significant progress in controlling these costs by reducing retirement benefits for new hires and increasing pension contributions for all employees. Also, all of the city s employees will have been moved to the state s fully insured medical insurance by the end of the fiscal year. The Board of Education employees moved in October of 2017 and the city employees will move in January of This move from a selfinsured program to the state s fully insured program will bring stability to the expenses along with a significant forecasted reduction in costs. AWARDS AND ACKNOWLEDGEMENTS The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Norwalk for its Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, The Certificate of Achievement is a prestigious national award recognizing conformity with the highest standards for presentation of state and local government financial reports. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized comprehensive annual financial report, whose contents conform to the programs standards. The CAFR must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. The City of Norwalk has received a Certificate of Achievement for the last 26 consecutive years (fiscal years ending 1991 through 2016). We believe this current report continues to conform to the Certificate of Achievement program requirements, and are submitting it to the GFOA for next year s Certificate of Achievement consideration. iv

15 The preparation of this report could not have been accomplished without the hard work and dedication of the Comptroller s department staff and the members of other departments who assisted in its compilation. Their invaluable assistance made the preparation of this report an easier task. I would also like to thank RSM US LLP our independent auditors, for their guidance and many helpful comments and suggestions both during the preparation of this report and throughout the year. And finally, special acknowledgment and appreciation goes to those who have contributed to the progressive and financially sound operations of the city; that tribute, belongs to all city officials, city staff, and the community. Respectfully Submitted, Robert O. Barron Director of Finance v

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17 CITY OF NORWALK GOVERNMENT ORGANIZATION VOTERS Board of Education Treasurer Registrar of Voters Common Council Mayor Town Clerk Board of Selectmen Sheriff Constables Superintendent of Schools SOLELY APPOINTS SOLELY APPOINTS Maritime Aquarium Authority Board of Ethics Housing Authority Code Enforcement Administration Building Board of Appeals Western CT Council of Governments Water Quality Committee Housing Partnership Norwalk Advisory Commission on Arts & Culture Board of Estimate & Taxation Alarm Appeals Board Tree Advisory Committee Fair Housing Advisory Committee Norwalk Facilities Construction Commission Oak Hills Park Authority Harbor Mgmt. Commission Board of Assessment Appeals Zoning Board of Appeals Parking Authority Board of Health Pension Board Land Use & Building Mgmt. Transit District Fair Rent Commission Planning Commission Historical Commission Shellfish Commission* Conservation Commission Water Pollution Control Authority Corporation Counsel* Public Works* City Clerk Information Technology Youth Services Finance Director* Health Department Code Enforcement Recreation & Parks Personnel & Labor Relations* Police Commission* Fire Commission* Human Relations and Fair Rent Commissions Library Board Zoning Commission Redevelopment Agency Combined Dispatch Police Chief Fire Chief Director of Human Relations & Fair Rent Library Director Director of Planning & Zoning Executive Director All Boards, Commissions and Department Heads are chosen by the Mayor and require Common Council approval unless otherwise noted * These Department Heads, Boards and Commissions are solely appointed by the Mayor vii

18 FINANCE DEPARTMENT DIRECTOR OF FINANCE Chief Financial Officer Fiscal Policy Administration Administration of the Divisions Listed Below TAX ASSESSOR TAX COLLECTOR ACCOUNTING & TREASURY MANAGEMENT & BUDGETS PURCHASING INFORMATION TECHNOLOGY Property Tax Treasury & Operating Central Financial & Operational Assessment Billing Cash Management Budget Purchasing Systems Grand List Tax Accounts Capital Telephone Services Technological Preparation Collections Payable Budget Billing & Administration Advancements Motor Vehicle Back Tax Accounts Risk Document Departmental Assessment Collections Receivable Management Handling Support Board of Liens & Payroll & Financial Mail Infrastructure Tax Review Foreclosures Accounting Forecasting Operations Design & Support Coordinate Pension Internal Research & Revaluation Claims Committee Fund Audits Information Technical Standards & Business Continuity External Policy E-Government Audit Management Procurement Innovation/Web Services Telephone Infrastructure viii

19 CITY OF NORWALK ELECTED and APPOINTED OFFICIALS AS OF JUNE 30, 2017 PRINCIPAL CITY OFFICALS OFFICE NAMES SELECTION/TERM Mayor Harry W. Rilling Elected 2 Years Director of Finance Robert O. Barron Appointed Indefinite Superintendent of Schools Steven Adamowski Appointed Indefinite Corporation Counsel Mario Coppola Appointed 2 Years MEMBERS OF COMMON COUNCIL John Igneri Council President John Kydes Majority Leader Michelle Maggio Minority Leader Bruce I. Kimmel Michael R. Corsello Eloisa M. Melendez Douglas E. Hempstead Thomas P. Livingston Steven Serasis Richard R. Bonnenfant Shannon O'Toole Giandurco Travis L. Simms Michael DePalma Nicholas P. Sacchinelli Phaedrel L. Bowman MEMBERS OF THE BOARD OF ESTIMATE & TAXATION Greg Burnett Chairman James K. Page Edwin Camacho James Feigenbaum Anne Yang Dwyer ix

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21 Financial Section

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23 Independent Auditor s Report To the Mayor and Members of the Common Council City of Norwalk, Connecticut Report on the Financial Statements 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 Norwalk, Connecticut (the City) as of and for the fiscal year ended June 30, 2017, and the related notes thereto which collectively comprise the City s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of June 30, 2017, 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. 1

24 Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management Discussion and Analysis, the pension and OPEB related schedules as listed in the table of contents, and budgetary comparison information on 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. Supplementary and Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City s basic financial statements. The combining and individual fund financial statements and other schedules and the introductory and statistical sections are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund financial statements and other schedules are the responsibility of management and were derived from and relates 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 fund financial statements and other schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections, as listed in the table of contents, have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 22, 2017 on our consideration of the City s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely 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 the effectiveness of the City s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City s internal control over financial reporting and compliance. New Haven, Connecticut December 22,

25 MANAGEMENT S DISCUSSION AND ANALYSIS Unaudited For the Year Ended June 30, 2017 The City of Norwalk s (City) discussion and analysis is designed to (a) assist the reader in focusing on significant financial issues, (b) provide an overview of the city s financial activity, (c) identify changes in the city s financial position (its ability to address the next and subsequent year challenges), (d) identify any material deviations from the financial plan (the approved budget), and (e) identify individual fund issues or concerns. Since the Management s Discussion and Analysis (MD&A) is designed to focus on the current years activities, resulting changes and currently known facts, please read it in conjunction with the transmittal letter and the city s financial statements. FINANCIAL HIGHLIGHTS The City s Government-wide Statement of Net Position, which is reported using an economic resource measurement focus and a full accrual basis of accounting, reports an ending net position of $372.1 million, an increase of $0.3 million or 0.1% over the prior year fiscal year. The City s Governmental Funds Balance Sheet, which is reported using a current financial resources measurement focus and the modified accrual basis of accounting, had a combined ending fund balance of $70.6 million, an $11.7 million or 19.9% increase over the prior year. This increase in fund balance is due to a $9.2 million increase in assets and a $2.5 million decrease liabilities, as follows: increases of $4.8 million in cash, $3.1 million in investments, $2.4 million in property tax receivables offset by a net decrease of $1.1 million in other receivables and inventories and prepaids; along with a $1.2 million decrease in accounts payables and a net decrease in other liabilities of $1.3 million. The City s General Fund (the primary operating fund) reports a total fund balance of $55.6 million, an increase of $4.5 million or 8.8% over the prior fiscal year. This total fund balance is made up of the following categories: Nonspendable at $0.1 million made up of inventory and prepaids; Committed at $1.3 million for the Board of Education; Assigned at $2.9 million made up of city ($2.3 million) and Board of Education ($0.6 million) encumbrances and approved surplus carryover; and Unassigned (commonly referred to as the rainy day fund) at $51.1 million. The resulting unassigned fund balance is 13.6% of total revenues, pursuant to accounting principles generally accepted in the United States of America (GAAP), up from 13.3% in the prior year. The City of Norwalk had its Aaa/AAA bond rating reaffirmed with a stable outlook by the three major rating agencies, Moody s Investors Service, S&P Global Ratings, and Fitch Ratings in Moody s reports, The Aaa rating reflects the city s healthy financial position and improving fund balance, supported by comprehensive fiscal policies, conservative management practices, as well as manageable debt and pension burdens. The rating further considers the city s strategically positioned local economy and stable sizeable tax base supported by a significant development pipeline. Standard and Poor s reports, We view the city s management as very strong, with strong financial policies and practices under our FMA methodology, indicating financial practices are strong, well embedded, and likely sustainable. The agency goes on to say, Norwalk s budgetary performance is strong, in our opinion and that, we are unlikely to revise the rating during our two-year outlook period. Fitch Ratings reports, the city will continue to maintain strong reserve levels throughout an economic cycle given its historically stable revenue performance, superior level of inherent budget flexibility, and demonstrated commitment to maintaining sound reserves within policy levels Also that, the rating is sensitive to shifts in the city s strong financial management practices and maintenance of fundamental financial flexibility. 3

26 The City's four defined benefit pension plans (Employees, Police, Firefighters, and Food Services) incurred a combined increase in net position of $32.7 million, or 8.6%. The increase consisted of employer/employee contributions totaling $16.0 million, a net investment gain of $46.9 million due to a net appreciation in fair value of assets, and benefit and administration costs of $30.0 million. The city contributed 100% of the actuarially determined contribution (formerly referred to as the ARC) and has achieved a current combined funding level of 78.4% while further reducing its discount rate to 7.375%. The city created an Other Post-Employment Benefits (OPEB) trust effective July 1, 2007 and as of June 30, 2017 the market value of assets held in trust was $73.2 million. The July 1, 2016 OPEB valuation, as required under Government Accounting Standards Board Statement (GASB) Statement No. 45, performed for the city and its Board of Education employees reported a $264.7 million total liability. As part of that valuation, the city employed a 7.5% discount rate. Net position for all trust funds under management totaled $483.8 million as of June 30, USING THIS ANNUAL REPORT The financial statement s focus is on both the city as a whole (government-wide) and on the major individual funds. Both perspectives (government-wide and fund) allow the user to address relevant questions and enhance the city s accountability. The report presents a comparative analysis of government-wide data. Government-Wide Financial Statements The government-wide financial statements (pages 13 14) are designed to be corporate-like in that all governmental and business-type activities are consolidated into columns which add to a total for the primary government. The focus of the Statement of Net Position is designed to be similar to corporate bottom line results for the City and its governmental activities. This statement combines and consolidates governmental fund current financial resources (short-term spendable resources) with capital assets and long term obligations. The Statement of Activities (page 14) is focused on both the gross and net cost of various activities (including governmental and business-type) which are supported by the government s general tax and other revenues. This is intended to summarize and simplify the user s analysis of cost of various governmental services. Governmental Activities reflects the city s basic services, including education, police and fire protection, public works, health and welfare, and recreational/cultural services. Property taxes, federal, state and other grants, charges for services and investment income finance the majority of these services. Business-type activities encompass the Parking Authority and Water Pollution Control Authority. They are reported here as the City charges a fee to customers to help cover all or most of the cost of operations. Fund Financial Statements Traditional users of governmental financial statements will find the fund financial statements presentation more familiar. The focus is on major funds, rather than fund types. The governmental major funds (pages 15 16) are presented on a sources and uses of liquid resources basis (modified accrual). This is the manner in which the financial plan is typically developed. The flow and availability of liquid resources is a clear and appropriate focus to analyze governmental type operations. Funds are established for various purposes and the fund financial statement allows the demonstration of sources and uses and/or budgeting compliance associated therewith. 4

27 The Governmental Funds total column requires a reconciliation because of the different measurement focus, current financial resources versus total economic resources (pages 15 and 17). The flow of current financial resources will reflect bond proceeds and inter-fund transfers as other financial sources as well as capital expenditures and bond principal payments as expenditures. The reconciliation will eliminate these transactions and incorporate the capital assets and long-term obligation (bonds and others) into the Governmental Activities column in the government-wide statements. The fund financial statements also allow the government to address its Fiduciary (Trust) Funds (pages 21 22) summarized by type (trust, private purpose trusts and agency). While these funds represent trust responsibilities of the government, these assets are restricted in purpose and do not represent discretionary assets of the government. Therefore, these assets are not presented as part of the government-wide financial statements. Infrastructure Assets The City has implemented GASB Statement No. 34 including reporting of all capitalized infrastructure owned by the City. This statement requires that these assets be valued and reported within the Governmental column of the government-wide statements. Additionally, the government must elect to either (a) depreciate these assets over their estimated useful life or (b) develop a system of asset management designed to maintain the service delivery potential to near perpetuity. The City has elected to depreciate these assets which should assist financial statement users in evaluating a local government and its performance over time. GOVERNMENT-WIDE STATEMENT Summary Net Position Table 1 Summary Statement of Net Position (In Thousands) Governmental Business-Type Total Activities Activities Government Current and other assets $ 174,376 $ 164,701 $ 20,288 $ 20,129 $ 194,664 $ 184,830 Capital assets 552, , , , , ,157 Total assets 726, , , , , ,987 Deferred pension expense 28,363 55, ,363 55,276 Deferred charge on refundings 4,324 4, ,324 4,324 Total deferred outflows of resources 32,687 59, ,687 59,600 Current and other liabilities 84,813 84,360 8,432 7,869 93,245 92,229 Noncurrent liabilities 392, ,781 35,895 40, , ,086 Total liabilities 477, ,141 44,327 48, , ,315 Deferred pension credit 7,671 3, ,671 3,590 Advance tax collections 13,238 16, ,238 16,324 Total deferred inflows of resources 20,909 19, ,909 19,914 Net position: Net investment in capital assets 331, , ,273 94, , ,663 Restricted 1, , Unrestricted (72,752) (62,909) 12,311 13,659 (60,441) (49,250) Total net position $ 260,755 $ 264,113 $ 112,584 $ 107,691 $ 373,339 $ 371,804 For more detailed information see the Statement of Net Position (page 13). 5

28 Impacts There are six transactions that affect the comparability of the Statement of Net Position summary presentation. 1. Net Results of Activities which will impact (increase/decrease) current assets and unrestricted net position. 2. Borrowing for Capital which will increase current assets and long-term debt. 3. Spending Borrowed Proceeds on New Capital which will reduce current assets and increase capital assets. There is a second impact, an increase in invested in capital assets and an increase in related net debt, which will not change the invested in capital assets, net of debt. 4. Spending of Non-borrowed Current Assets on New Capital which will (a) reduce current assets and increase capital assets and (b) will reduce unrestricted net position and increase invested in capital assets, net of debt. 5. Principal Payment on Debt which will (a) reduce current assets and reduce long-term debt and (b) reduce unrestricted net position and increase invested in capital assets, net of debt. 6. Reduction of Capital Assets through Depreciation which will reduce capital assets and invested in capital assets, net of debt. Current Impacts The City s net position, the difference between assets, deferred outflows and liabilities and deferred inflows, are one way to measure the City s financial health, or financial position. Over time, increases or decreases in the City s net position are one indicator of whether its financial health is improving or deteriorating. Other impacts for governmental activities were the issuance of $22.0 million of new debt and the construction on major capital projects this year as well as the $3.0 million increase in property taxes collected due to an increase in the mill rate. The other major impacts were $29.5 million of principal on debt paid this year and $13.8 million of depreciation on capital assets. The change in net position in business-type activities was consistent as enterprise activities continued being able to collect revenues and control expenses. 6

29 Summary of Changes in Net Position The following schedule compares the revenues and expenses for the current fiscal year: Table 2 Summary Statement of Activities (In Thousands) Governmental Business-Type Total Activities Activities Government Revenues Program Revenues: Charge for services $ 17,162 $ 16,125 $ 23,783 $ 22,420 $ 40,945 $ 38,545 Operating grants and contributions 76,028 59, ,028 59,181 Capital grants and contributions 3,012 5, ,363 5,946 General Revenues: General property, taxes and assessments 304, , , ,370 Interest income (expense) 388 1, ,283 Miscellaneous 2,842 2, ,842 2,074 Other general revenues 8,576 6, ,576 6,516 Total revenues 412, ,102 24,162 22, , ,915 Expenses Program Activities Primary Government: Governmental Activities: General government 19,709 20, ,709 20,261 Education 279, , , ,069 Public safety 56,058 59, ,058 59,504 Health and welfare 7,491 6, ,491 6,276 Public Works 29,555 29, ,555 29,791 Recreation, arts and cultural 15,544 14, ,544 14,932 Debt service 7,367 7, ,367 7, , , , ,270 Business-Type Activities: Parking Authority - - 6,692 6,134 6,692 6,134 Water Pollution Control Authority ,577 13,085 12,577 13, ,269 19,219 19,269 19,219 Total expenses 415, ,270 19,269 19, , ,489 Increase in net position (3,358) (7,168) 4,893 3,594 1,535 (3,574) Net Position, beginning 264, , , , , ,378 Net Position, ending $ 260,755 $ 264,113 $ 112,584 $ 107,691 $ 373,339 $ 371,804 7

30 Impacts There are five basic impacts on revenues and expenses as reflected below: Revenues: Economic Condition which can reflect a declining, stable or growing economic environment and has a substantial impact on property tax revenue as well as public spending habits for building permits, and elective user fees. Changing Patterns in Intergovernmental and Grant Revenue (both recurring and nonrecurring) certain recurring revenues may experience significant changes periodically while nonrecurring (or one-time) grants are less predictable and often distorting in their impact on year to year comparisons. Market Impacts on Investment Income the City s investment portfolio includes Federal Agency paper which is effected by market conditions. Expenses: Increase in Insurance changes in healthcare costs and changes in the insurance marketplace can have a material effect on these expenses. Salary Increases (cost of living, merit and market adjustment) the ability to attract and retain human and intellectual resources requires the City to pay competitive salaries with the marketplace. Current Impacts The major revenue impact in governmental activities was due to an increase in the mill rate and a greater than budgeted tax collection rate. A major impact on expenses was due to the continued reduction of the pension rate of return that increased pension liabilities by $11.9 million. Major impacts in revenue and expenses in business-type activities included both the Water Pollution Control Authority and Parking Authority being able to collect revenues and control expenses. General Fund: Comparing Fiscal Year 2017 to Fiscal Year 2016 Original Budget to Final Budget THE CITY FUNDS As of the year-end, the General Fund, as presented on the Schedule of General Fund Revenues and Schedule of General Fund Expenditures, Encumbrances and Transfers Out in required supplementary information (pages 80-83), reported no significant change in revenues. The $1.5 million expenditure budget changes were in one main area, at the end of FY , $3.7 million was reported as Committed or Assigned Fund Balance. This balance was comprised primarily of education items which were reserved for use in the following FY

31 Final Budget to Actual Results As of the year-end, the General Fund, as presented on the Schedule of General Fund Revenues and Schedule of General Fund Expenditures, Encumbrances and Transfers Out in required supplementary information (pages 80-83), has achieved positive results due to total revenues being greater than plan by $0.1 million and total expenditures being less than plan by $7.9 million. The $2.0 million lower than budgeted state aid and other grants along with a $0.7 million lower than budgeted interest on investments was totally offset by a $2.2 million greater than planned property tax collections and $0.6 million greater than planned permits and fees. The less than planned expenditures were made up of a $2.5 million contingency that was unspent due primarily to unsettled contracts most of which are reserved for use in FYE 2018; $2.3 million worth of unspent Board of Education appropriations most of which are reserved for use in FYE 2018; $1.2 million unspent wages due to vacancies in many city departments; $0.7 million of unspent tax revaluation appropriations; and $1.2 million of other miscellaneous unspent appropriations. Capital Projects Fund: Comparing Fiscal Year 2017 to Fiscal Year 2016 As of the year-end, the Capital Projects Fund, as presented on the Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds (page 16), major impacts were Intergovernmental Revenues for redevelopment and public works projects from the state, issuance of bonds, and expenditures mainly for redevelopment, parks and public works projects. Water Pollution Control Authority: Comparing Fiscal Year 2017 to Fiscal Year 2016 As of the year-end, the Water Pollution Control, as presented on the Statement of Revenues, Expenses, and Changes in Net Position (page 19), reported fund net position of $92.6 million which is $4.5 million more than the beginning of the year ($88.1 million). There were no major impacts. Parking Authority: Comparing Fiscal Year 2017 to Fiscal Year 2016 As of the year-end, the Parking Authority, as presented on the Statement of Revenues, Expenses, and Changes in Net Position (page 19), reported a fund net position of $20.0 million which is $0.4 million more than the beginning of the year ($19.6 million). There were no major impacts. Nonmajor Governmental Funds: Insurance Fund Net Position Reduction Plan As of the year-end, the Insurance Fund, as presented on the Statement of Revenues, Expenses, and Changes in Fund Net Position (page 90), major impacts include a reduction of $0.9 million in net position. A reduction plan was implemented in this FY because the Net Position of the Insurance Fund was 31.1% of Operating Expenses at the end of FY The target of Net Position being 20% of Operating Expenses and a planned 5-year drawdown on this balance was established. The plan includes reserves for each of the six components of the Insurance Fund which are health benefits, workers compensation, and LAP (liability, auto, and property) for each the city and its Board of Education. These balances will then be reviewed each year prior to further reductions. By the end of FY , the second year of the planned reductions, the Insurance Fund s Net Position is $15.5 million or 30.0% of Operating Expenses. 9

32 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets: As of year-end, the city had $688.8 million invested in a variety of capital assets, as reflected in the following schedule: Table 3 Capital Assets at Year-End (Net of Depreciation) (In Thousands) Governmental Business-Type Activities Activities Total Land $ 23,682 $ 4,839 $ 28,521 Land Improvements 16, ,030 Machinery and Equipment 16, ,014 Buildings and Improvements 259, , ,118 Infrastructure 235,741 15, ,125 Total $ 552,185 $ 136,623 $ 688,808 Table 4 Change in Capital Assets (In Thousands) Governmental Business-Type Activities Activities Total Beginning balance $ 539,421 $ 135,735 $ 675,156 Additions 26,553 4,729 31,282 Depreciation (13,789) (3,841) (17,630) Total $ 552,185 $ 136,623 $ 688,808 Major capital activity during the year was for a various capital improvements. Capital assets are presented in more detail in Note 5. 10

33 Debt Outstanding: As of year-end, the city had $260,898 million in debt (bonds, notes, etc.) outstanding compared to the $257,373 million last year, a 1.4% net increase (considering new borrowing and debt retirement). The following summarizes outstanding debt which is presented in more detail in Note 6. During the year the city issued $22.0 million in new general obligation bonds to finance school and infrastructure improvements. The city has an AAA bond rating from Fitch Investors Service and Standard and Poor s. The Moody s Investors Services rating is Aaa. Table 5 Outstanding Debt, at Year-End (In Thousands) Governmental Activities Governmental General obligation bonds $ 219,805 $ 211, , ,909 Business-Type Parking Authority-general obligation bonds 7,932 8,114 Water Pollution Control Authority - general obligation bonds and Clean Water Fund notes 33,161 37,350 41,093 45,464 Total $ 260,898 $ 257,373 ECONOMIC FACTORS Norwalk has 89.4% of its total revenue coming from property taxes, a very stable source of revenue. The City also benefits from a diverse commercial, retail, and residential tax base. Together, these benefits provide some insulation from the adverse impact of domestic and global economic downturns. Evidence of this strength is provided by its low unemployment rate relative to the rest of Connecticut and the United States. The Connecticut Department of Labor reports the following labor statistics in its October 2017 report: an unemployment rate (not seasonally adjusted) for the City of Norwalk to be 3.8%; the State of Connecticut, 4.3%; and the United States, 3.9%. REQUEST FOR INFORMATION The City s financial statements are designed to present users (citizens, taxpayers, customers, investors and creditors) with a general overview of the city s finances and to demonstrate the city s accountability. If you have questions about the report or need additional financial information, contact the city s Finance Director on the 2nd floor of City Hall, 125 East Avenue, PO Box 5125, Norwalk, Connecticut

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35 Basic Financial Statements

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37 Statement of Net Position June 30, 2017 Assets Governmental Business-Type Activities Activities Total Cash and cash equivalents $ 61,897,678 $ 4,124,585 $ 66,022,263 Investments 65,633,131 10,068,802 75,701,933 Receivables, net of allowances for collection losses: Property taxes, net 5,459,594-5,459,594 Charges, net - 268, ,165 Accounts, net 1,468,206 30,739 1,498,945 Federal and state governments 1,527,155-1,527,155 Inventories and prepaids 814,344 1,063,331 1,877,675 Advances to taxing districts 9,703,732-9,703,732 Restricted cash 27,872,732 4,732,685 32,605,417 Capital assets, not being depreciated 23,681,897 4,838,762 28,520,659 Capital assets, net of accumulated depreciation 528,502, ,784, ,286,805 Total assets 726,561, ,911, ,472,343 Deferred outflows of resources: Deferred pension expense 28,362,755-28,362,755 Deferred charge on bond refundings 4,323,930-4,323,930 Total deferred outflows of resources 32,686,685-32,686,685 Liabilities Accounts payable and accruals 44,282,140 2,044,579 46,326,719 Unearned revenue 3,847,297 1,200,230 5,047,527 Long-term liabilities: Advances to taxing districts 9,703,732-9,703,732 Due within one year 36,683,729 5,187,343 41,871,072 Due in more than one year 383,067,396 35,894, ,962,176 Total liabilities 477,584,294 44,326, ,911,226 Deferred inflows of resources: Deferred pension credit 7,671,268-7,671,268 Advance property tax collections 13,237,551-13,237,551 Total deferred inflows of resources 20,908,819-20,908,819 Commitments and contingencies Net position: Net investment in capital assets 331,786, ,273, ,059,981 Restricted: General government 285, ,346 Public safety 43,263-43,263 Health and welfare 108, ,745 Public works Education 1,281,359-1,281,359 Community grants 2,637-2,637 Unrestricted (72,753,161) 12,310,813 (60,442,348) Total net position $ 260,754,670 $ 112,584,313 $ 373,338,983 See notes to financial statements. 13