ST. LOUIS DEVELOPMENT CORPORATION (A COMPONENT UNIT OF THE CITY OF ST. LOUIS)

Transcription

1 ST. LOUIS DEVELOPMENT CORPORATION (A COMPONENT UNIT OF THE CITY OF ST. LOUIS) FINANCIAL STATEMENTS, REQUIRED SUPPLEMENTAL INFORMATION, ADDITIONAL INFORMATION, AND INDEPENDENT AUDITORS' REPORT WITH ACCOMPANYING SINGLE AUDIT, AND UNIFORM GUIDANCE REPORTS FOR THE YEAR ENDED JUNE 30, 2016

2 (A Component Unit of the City of St. Louis) CONTENTS MANAGEMENT DISCUSSION AND ANALYSIS... i - iv INDEPENDENT AUDITORS' REPORT FINANCIAL STATEMENTS Statement of Net Position..... Statement of Activities.... Balance Sheet - Governmental Funds.... Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position.... Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds.... Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities.... Statement of Net Position - Proprietary Fund.... Statement of Revenues, Expenses, and Changes in Net Position - Proprietary Fund.... Statement of Cash Flows - Proprietary Fund..... Notes to Financial Statements..... ADDITIONAL INFORMATION Governmental Activities - Special Revenue Fund: Combining Statement of Net Position..... Combining Statement of Revenues, Expenses, and Changes in Net Position.... Statement of Net Position- LCRA Governmental and Proprietary Fund- Garage..... Statement of Revenues, Expenses, and Changes in Net Position- LCRA Governmental and Proprietary Fund - Garage..... Schedule of Expenditures of Federal Awards..... Notes to Schedule of Expenditures of Federal Awards.... ADDITIONAL INDEPENDENT AUDITORS' REPORTS 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.... Independent Auditors' Report on Compliance for Each Major Program and on Internal Control over Compliance Required by the Uniform Guidance..... Schedule of Findings and Questioned Costs.... Summary Schedule of Prior Audit Findings

3 MANAGEMENT DISCUSSION AND ANALYSIS For The Year Ended June 30, 2016 The attached financial reports present the financial position of the St. Louis Development Corporation (SLDC) for the fiscal year ended June 30, 2016 (FYI 6). The report reflects the financial position of SLDC in combination with the seven asset holding development entities under its operating umbrella. The six development entities include the Land Clearance for Redevelopment Authority (LCRA), the Planned Industrial Expansion Authority (PIEA), the Industrial Development Authority (IDA), the Land Reutilization Authority (LRA), the Port Authority (PORT), the Local Development Company (LDC) and LCRA Holdings Corporation (LCRAH). SLDC, although an established not for profit entity, is considered governmental in nature because of the degree of control exerted by the local governmental unit. Financial statement reports included are: 1) Statement of Net Position 2) Statement of Activities 3) Balance Sheet-Governmental Funds 4) Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 5) Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds 6) Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 7) Statement of Net Position - Proprietary Fund 8) Statement of Revenues, Expenses, and Changes in Net Position-Proprietary Fund 9) Statement of Cash Flows - Proprietary Fund Following the financial statements are Notes to the Financial Statements (pages 13 through 32) which give general organizational information as well as supporting detail for some of the financial data contained in the nine financial statements. Following the Notes is a section entitled Additional Information (pages 33 through 39) which shows the Combining Statement of Net Position and the Combining Statement of Revenues, Expenses, and Changes in Net Position for each asset holding entity under the SLDC umbrella as it relates to governmental activities and a combined government and business statement for LCRA including a Statement of Net Position and Statement of Revenues, Expenses, and Changes in Net Position. The Additional Information section also includes a Schedule of Expenditures of Federal Awards along with accompanying notes. Following the Additional Inform:ation section is a section for the Auditors' Reports and opinions regarding the expenditures of federal funds (pages 40 through 45). These are required federal filings under the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards for entities that expend more than $750,000 in federal funds during the fiscal year. The financial statements include a STATEMENT OF ACTIVITIES that breaks out financial data by function. In the case of SLDC these functions are broken down into two categories, Governmental and Business. The entire Business function of SLDC relates to the operation of the St. Louis Centre Parking Facilities. This function is considered business because the intermediate and long-range plans are to continue to operate the parking facilities as a source of revenue. All other SLDC functions are considered governmental in nature. The STATEMENT OF ACTIVITIES combines net revenue from functions with other revenue and, along with Beginning Net Position, arrives at the Ending Net Position reported on the STATEMENT OF NET POSITION.

4 MANAGEMENT DISCUSSION AND ANALYSIS For The Year Ended June 30, 2016 (Continued) The statement titled BALANCE SHEET - GOVERNMENTAL FUNDS and the corresponding STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES report only on government activity deemed to be "current activity" (expected to be collected and/or paid within one year). RECONCILIATION STATEMENTS immediately follow the BALANCE SHEET - GOVERNMENTAL FUNDS and STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GOVERNMENT AL FUNDS which reconciles both governmental funds statements to the STATEMENT OF NET POSITION and STATEMENT OF ACTIVITIES (which shows both the current and long term financial picture) for the governmental classification. Overall there was a decrease in Net Position (Fund Balance) of SLDC and its reporting entities from the prior year as outlined below: Comparative Statement of Net Position (in millions of dollars and rounded) Total Governmental Business-Type Percentage Activities Activities Total Change FY15 FY16 FY15 FY16 FY15 FY Current and Other Assets $32.4 $46.2 $ 1.4 $ 1.5 $33.8 $ % Capital Assets %) Total Assets % Long-term Debt Outstanding l 63.4% Other Liabilities _QJ_ % - Total Liabilities % Net Position Net investment in capital assets ( 2.4%) Unrestricted Ll _Ll_ ( 12.9 %) Total Net Position $22.8 $21.3 $ 2.9 $ 3.0 $25.7 $24.3 ( 5.4%) Total assets increased 20.6% ($13.2 million) and total liabilities increased 38.0% ($14.6 million) resulting in a decrease in total net position of5.4% ($1.4 million). Total assets increased $13.2 million. Within the asset category, Property Held for Development increased $16.1 million related to property acquisitions of the LCRAH in the area selected for the proposed new National Geospatial Agency (NGA) West facility. LCRAH is in the process of assembling a tract of land of approximately 100 acres in North St. Louis for the new NGA facility. All expenditures related to this assembly have been booked as Property Held for Development. Other asset categories had a net decrease of $2.5 million. Total liabilities increased $14.8 million, primarily due to the LCRAH debt incurred in purchasing property in the NGA area. It is the expectation that this debt is short term in nature and will be retired with LCRA long term bonds, secured by the State of Missouri and the City of St. Louis. It is also the expectation that the property acquired will be transferred to the NGA for a minimal amount. 11

5 MANAGEMENT DISCUSSION AND ANALYSIS For The Year Ended June 30, 2016 (Continued) The increase in assets of $13.2 million and the increase in liabilities of $14.6 million resulted in a decrease in net position of $1.4 million. The following table shows the changes in net position derived from operations. Comparative Statement of Changes in Net Position (in millions of dollars and rounded) Total Governmental Business-Type Percentage Activities Activities Total Change FY15 FY16 FY15 FY16 FY15 FY Revenues Program Revenue Federal Grants $ 2.9 $ 3.0 $ - $ - $ 2.9 $ % Other Governmental % Other Operating -1.J. 7.7 _L % Total Revenues _L % Expense Development Cost % Other Operating _M 7.6 _LQ _LQ ( 9.8%) Total Expense _LQ _LQ % Transfers in (out) _(Q,_fil % Increase (Decrease) in Net Position ($ 2.6) ($ 1.4) $ 0.3 $ 0.0 ($ 2.3) ($ 1.4) 39.1% The schedule shows an increase in total revenue of 15.7% ($5.1 million) and an increase in total expense of 12.1 % ($4.2 million). As a result, there was a 31.9% ($0.9 million) improvement in operating results in FY16 compared to FY15. The overall $1.4 million loss contained over $1.0 million in the noncash items of depreciation and amortization. The increase in revenue of $5.1 million was attributed to a combination of things, but primarily a $4.8 million increase in other governmental revenue related to state development tax credits for projects such as Cortex, Arch River, and Forest Park. Expenses increased $4.2 million with $4.8 million attributable to the increase in state development tax credit projects netted against the elimination of a $0.6 million real estate loss incurred in FY15, but not FY16. iii

6 MANAGEMENT DISCUSSION AND ANALYSIS For The Year Ended June 30, 2016 (Continued) The following chart shows capital asset activity for both the Governmental Activities and Business-Type Activities. Government activities decreased $0.3 million due to normal depreciation on leasehold improvements. Business-Type Activities decreased $0.4 million due to capital improvements made at the LCRA Parking Facility less normal depreciation. Comparative Statement of Capital Assets (net of depreciation, in millions of dollars and rounded) Total Governmental Business-Type Percentage Activities Activities Total Change FY15 FY16 FY15 FY16 FY15 FY Land $ - $ - $ 7.4 $ 7.4 $ 7.4 $ % Buildings and Improvements ( 3.1%) Total $19.2 $18.9 $11.1 $10.7 $30.3 $29.6 ( 2.3%) Below is a chart showing changes in long-term debt for FY16. The increase in Governmental Activity debt of $14.7 million is due to borrowings of LCRAH related to the NGA project previously mentioned. Business-Type Activity debt decreased $0.3 million due to regular scheduled amortization. Comparative Statement of Outstanding Debt (in millions of dollars and rounded) Governmental Activities Business-Type Activities Total Total Percentage Change Notes & Bank Lines of Credit (Backed by parking fee revenues) $ - $ $9.5 $9.2 $ 9.5 (Backed by SLDC entities) Total $13.2 $27.9 $9.5 $9.2 $22.7 $ $37.1 ( 3.2%) 111.4% 63.4% Overall the financial condition of SLDC remains stable with assets of $77.3 million and liabilities of $53.0 million resulting in a net position of $24.3 million. The assets do, however, contain $25.0 million in Property Held for Development which is valued at cost, net of allowance for impairment. SLDC strives to recover its investment in these properties when they are sold for redevelopment purposes. If disposition proceeds are less than the investment, the value of net assets will decrease accordingly. This is the largest factor affecting SLDC's financial position. Certain amounts in prior year financial statements have been reclassified for comparative purposes to conform with the presentation in the current year financial statements. iv

7 Independent Auditors' Report Board of Directors St. Louis Development Corporation St. Louis, Missouri Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities and the business-type activities of St. Louis Development Corporation, a component unit of the City of St. Louis, as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise St. Louis Development Corporation'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 opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. (314) fax (314) '" Sunset Office Drive, Suite St. Louis, MO '" stcpa@stcpa.com

8 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 and the business-type activities of St. Louis Development Corporation as of June 30, 2016, and the respective changes in net position and, where applicable, cash flows thereof, for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages i - iv 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. St. Louis Development Corporation has not presented Budgetary Comparison Schedules that accounting principles generally accepted in the United States of America has detennined is necessary to supplement, although not required to be part of, the basic financial statements. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise St. Louis Development Corporation's basic financial statements. The accompanying additional information on pages 33 through 39 and additional independent auditors' reports on pages 40 through 45 are presented for purposes of additional analysis and are not a required part of the financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the financial statements. The combining and individual major fund financial statements and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual major fund financial statements and the schedule of expenditures of federal awards are fairly stated in all material respects in relation to the basic financial statements as a whole. (2)

9 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 12, 2016, on our consideration of St. Louis Development Corporation'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 St. Louis Development Corporation's internal control over financial reporting and compliance. St. Louis, Missouri December 12, 2016 (3)

10 FINANCIAL STATEMENTS

11 STATEMENT OF NET POSITION June 30, 2016 Governmental Activities ASSETS Cash, cash equivalents, and investments Unrestricted $ 6,030,606 Held in escrow by the City of St. Louis ( 407,892) Notes and loans receivable, current 1,332,255 Other receivables 1,719,979 Prepaid expenses 302,539 Internal balances 198,200 Due from other governmental agencies 3,687,765 Notes and loans receivable, non-current, net of allowance 8,375,000 Property held for development, net of allowance for impairment 24,998,085 Capital assets Land Other capital assets, net of accumulated depreciation 18,937,834 Total Assets $ 65,174,371 Business- Type Activities Total $ 1,335,409 $ 7,366,015 ( 407,892) 1,332, ,951 1,978,930 96, ,718 ( 198,200) 3,687,765 8,375,000 24,998,085 7,375,774 7,375,774 3,318,306 22,256,140 $ 12,186,419 $ 77,360,790 LIABILITIES Accounts payable and accrued expenses $ 2,414,660 Bank lines of credit 17,075,591 Due to other governmental agencies, current 967,787 Notes payable, current portion 2,098,493 Other liabilities, current portion 1,824,635 Due to other governmental agencies, non-current 3,888,995 Notes payable, non-current 8,768,781 Other liabilities, non-current 6,754,766 Total Liabilities 43,793,708 $ 13,024 $ 2,427,684 17,075, , ,116 2,344,609 1,824,635 3,888,995 8,965,981 17,734,762 6,754,766 9,225,121 53,018,829 NET POSITION Net investment in capital assets 15,161,013 Unrestricted 6,219,650 Total Net Position $ 21,380,663 1,481,983 16,642,996 1,479,315 7,698,965 $ 2,961,298 $ 24,341,961 See accompanying notes to financial statements (4)

12 STATEMENT OF ACTIVITIES For the Year Ended June 30, 2016 Functions/Program Expenses Program Revenues Operating Capital Charges for Grants and Grants and Service Contributions Contributions Net (Expense) Revenue and Changes in Net Position Business- Governmental Type Activities Activities Total Governmental Activities: Development Business-Type Activities: Parking $ 37,462,073 1,574,702 $ 7,520,284 $ 27,779,750 $ 2,234,795 ($ 2,162,039) $ ($ 2,162,039) 660, ,093 Total Activities $ 39,036,775 $ 9,755,079 $ 27,779,750 $ ( 2,162,039) 660,093 ( 1,501,946) Other Revenue: Investment return Other financing sources Transfers in (out) Total Other Revenue Change in Net Position Net Position - Beginning Net Position - Ending 121, , ,000 ( 600,000) 721,012 ( 599,080) 121,932 ( 1,441,027) 61,013 ( 1,380,014) 22,821,690 2,900,285 25,721,975 $ 21,380,663 $ 2,961,298 $ 24,341,961 See accompanying notes to financial statements (5)

13 BALANCE SHEET- GOVERNMENTAL FUNDS June 30, 2016 ASSETS ASSETS Cash, cash equivalents, and investments Unrestricted Held in escrow by the City of St. Louis Internal Balances Notes and loans receivable, net Other receivables Due from other governmental agencies Total Assets Special Revenue $ 6,030,606 ( 407,892) 198,200 1,332,255 1,719,979 3,687,765 $ 12,560,913 LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable and accrued expenses Due to other governmental agencies Notes payable Other liabilities Total Liabilities $ 2,414, ,787 2,098,493 1,824,635 7,305,575 FUND BALANCES Assigned Unassigned Total Fund Balances 8,767,252 ( 3,511,914) 5,255,338 Total Liabilities and Fund Balances $ 12,560,913 See accompanying notes to financial statements (6)

14 RECONCILIATION OF THE GOVERNMENT AL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION For the Year Ended June 30, 2016 Total Fund Balances - Governmental Funds $ 5,255,338 Amounts 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 as assets in governmental funds. The cost of the assets is $24,150,792 and the accumulated depreciation is $5,212,958. Notes and loans receivable will not be collected this year therefore are not available to pay for current period expenditures and, therefore, are deferred in the funds. Property held for development is not expected to be sold during the current period. The cost of the assets are $34,084,905 and the allowance for impairment is $9,086,820. Prepaid expenses and other assets are not financial resources, and therefore are not included in the funds. 18,937,834 8,375,000 24,998, ,539 Long-term liabilities, including notes payable and other liabilities are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-term liabilities at year end consist of: Due to other governmental agencies Notes payable Bank Lines of Credit Other liabilities $ 3,888,995 8,768,781 17,075,591 6,754,766 ( 36,488,133) Total Net Position - Governmental Activities $ 21,380,663 See accompanying notes to financial statements (7)

15 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS For the Year Ended June 30, 2016 REVENUES Intergovernmental - CDBG Other governmental Program non-governmental Rental Land sales proceeds Parking Development fees Interest income Other Total Revenues EXPENDITURES Development costs: Site improvements and construction Property acquisition and real estate Consulting and other Grants and contracts Salaries and other Property and maintenance Capital outlays Debt service - interest expense Total Expenditures Deficiency of Revenues over Expenditures Special Revenue $ 3,033,714 24,746,036 2,572,146 1,750, , ,331 1,955, ,012 60,089 35,421,046 1,260, ,372 2,342,847 26,010,721 5,211,833 1,470, , ,912 37,131,470 1,710,424) OTHER FINANCING SOURCES (USES) Transfers in - proprietary fund Net proceeds from borrowings on lines of credit Proceeds from issued notes payable Principal payments ofretired notes payable Change in note payable term Purchases of property held for development Change in other liabilities term Excess other liabilities retired over those issued Excess due to other governmental agencies issued over retired Change in due to other governmental agencies terms ( ( 600,000 14,743, , ,206) 2,362,636 16,108,155) 529, ,864) 130,394 3,758,601 Total Other Financing Sources, Net Change in Fund Balance FUND BALANCES, Beginning FUND BALANCES, Ending $ 5,419,776 3,709,352 1,545,986 5,255,338 See accompanying notes to financial statements (8)

16 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the Year Ended June 30, 2016 Changes in Fund Balances - Total Governmental Funds $ 3,709,352 Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report capital outlays as expenditures. However, in the Statement of Activities, the cost of those assets is allocated over the estimated useful lives and reported as depreciation expense. This is the difference between depreciation expense of $600,000 and expenditure for capital outlay of$313,128 for Amounts paid for invoices applicable to a future period are not reported as expenditures in the governmental Statement of Activities. The proceeds of debt issuance provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the Statement of Net Position. Repayment of debt principal is an expenditure in the governmental funds, but the repayment reduces longterm liabilities in the Statement of Net Position. This is the sum of debt proceeds of $15,082,204, the change in note payable term of $2,362,636, and principal repayments of $329,206. Governmental funds report the purchases and sales of property held for development as other sources and uses of revenue. However, in the Statement of Activities, the cost of this property was originally reported and capitalized under governmental activities based on management's intent of ultimate disposition of the property. This is the cost of purchases of property held for development of$16,108,155. The proceeds from other liabilities and due to other governmental agencies provide current financial resources to governmental funds, but issuing other liabilities and debt to other governmental agencies increases long-term liabilities in the Statement of Net Position. This is the amount of the excess of other liabilities retired over those issued of $605,864 less the change in term of due to other liabilities of $529,166, and excess of due to other governmental agencies issued over retired amounts of $130,394 less the change in term of due to other governmental agencies of$3,758,601. Change in Net Position - Governmental Activities ( 286,872) ( 43,731) ( 17,115,634) 16,108,155 ( 3,812,297) ($ 1,441,027) See accompanying notes to financial statements (9)

17 STATEMENT OF NET POSITION - PROPRIETARY FUND For the Year Ended June 30, 2016 CURRENT ASSETS Cash and cash equivalents Unrestricted Other receivables Prepaid expenses Internal balances ASSETS Parking $ 1,335, ,951 96,179 ( 198,200) Total Current Assets 1,492,339 NON-CURRENT ASSETS Capital assets Land Buildings and equipment Less accumulated depreciation 7,375,774 17,835,411 ( 14,517, 105) Total Non-Current Assets 10,694,080 Total Assets $ 12,186,419 LIABILITIES AND NET POSITION LIABILITIES Accounts payable and accrued expenses Note payable, current Note payable, non-current Total Liabilities $ 13, ,116 8,965,981 9,225,121 NET POSITION Net investment in capital assets Unrestricted Total Net Position 1,481,983 1,479,315 $ 2,961,298 See accompanying notes to financial statements (10)

18 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION - PROPRIETARY FUND For the Year Ended June 30, 2016 OPERATING REVENUES Parking fees Parking $ 2,234,795 OPERA TING EXPENSES Personal services Materials and supplies Contractual services Maintenance and security Utilities Insurance Other Depreciation 288,940 32,455 13, ,587 91, ,438 3, ,964 Total Operating Expenses 1,123,813 Income From Operations 1,110,982 NON-OPERA TING REVENUES (EXPENSES) Interest income Interest expense ( ,889) Total Non-Operating Expenses ( 449,969) TRANSFERS Excess of Revenues Over Expenses ( 661, ,000) Changes in Net Position NET POSITION, Beginning 61,013 2,900,285 NET POSITION, Ending $ 2,961,298 See accompanying notes to financial statements (11)

19 STATEMENT OF CASH FLOWS - PROPRIETARY FUND For the Year Ended June 30, 2016 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from parking fees Cash used in operations Net Change in Cash from Operating Activities Parking $ 2,191,930 ( 634,268) 1,557,662 CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES Operating transfer ( 600,000) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Interest paid on notes payable Payments on notes payable Purchases of capital assets Net Change in Cash from Capital and Related Financing Activities ( 450,889) ( 256,444) ( 28,525) ( 735,858) CASH FLOWS FROM INVESTING ACTIVITIES Interest income Net Change in Cash and Cash Equivalents CASH AND CASH EQUIVALENTS, Beginning of year CASH AND CASH EQUIVALENTS, End of year ,724 1,112,685 $ 1,335,409 RECONCILIATION OF OPERATING INCOME TO NET CHANGE IN CASH FROM OPERATING ACTIVITIES: CASH FLOWS FROM OPERATING ACTIVITIES Operating Income Adjustments to reconcile income from operations to net cash provided by operating activities: Depreciation (Increase) decrease in assets: Other receivables Prepaid expenses Increase (decrease) in liabilities: Internal balances Accounts payable and accrued expenses $ 1,110, ,964 ( 42,865) ( 7,305) 90,886 Net Change in Cash from Operating Activities $ 1,557,662 See accompanying notes to financial statements (12)

20 NOTES TO FINANCIAL STATEMENTS June 30, 2016 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization St. Louis Development Corporation ("SLDC") was organized in 1988 to improve the efficiency and effectiveness of the economic development activities of the City of St. Louis, Missouri (the "City"). SLDC combines the staffs of seven independent development agencies for the purpose of coordinating administrative services for all agencies. The agencies are the Land Clearance for Redevelopment Authority ("LCRA"), the LCRA Holdings Corporation ("LCRAH"), the Local Development Company ("LDC"), the Planned Industrial Expansion Authority ("PIEA"), the St. Louis Industrial Development Authority ("IDA"), the Land Reutilization Authority ("LRA"), and the St. Louis Port Authority ("Port"). The SLDC board consists of the board chairpersons from the seven development agencies plus one individual, who serves as chairman, appointed by the Mayor of the City and two representatives from the Board of Alderpersons from the City. The City exercises significant oversight responsibilities for SLDC operations as discussed below. Accordingly, SLDC is considered a component unit of the City for financial reporting purposes. The accounting policies and financial reporting practices of SLDC conform to accounting principles generally accepted in the United States of America applicable to governmental entities. The accounting and reporting framework and the more significant accounting principles and practices of SLDC are discussed in subsequent sections of this note. The remainder of the notes is organized to provide explanation, including required disclosures, of the Organization's financial activities for the fiscal year ending June 30, The following is a summary of the more significant policies: Reporting Entity General Description SLDC's financial statements include all material governmental activities, organizations, and functions for which, in the opinion of management, SLDC exercises significant oversight responsibility. This determination was based on the evaluation by management of the substance of the relationship to each potential agency unit in light of the following criteria: financial interdependency; the control exercised by SLDC in selection of the governing authority and designation of management; SLDC's ability to significantly influence operations; and SLDC' s accountability for fiscal matters. Accordingly, the following entities are included in the accompanying basic financial statements: St. Louis Development Corporation Fund (SLDCF) The SLDCF functions as an administration fund which pays all SLDC general operating expenses. This fund also receives special grants for development purposes. The accounting for these grants is self-contained within SLDCF. (13)

21 NOTES TO FINANCIAL STATEMENTS June 30, 2016 (Continued) A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Reporting Entity (Continued) General Description (Continued) Land Clearance for Redevelopment Authority (LCRA) The LCRA was established in 1952 pursuant to Chapter 99 of the Missouri Revised Statutes. LCRA has power in areas designated by the legislative body of the City, to assemble, buy, develop, or sell property. It can also make recommendations for real estate tax abatement, on behalf of developers, to the legislative body of the City. LCRA has the authority to issue bonds to assist in public and private development, and to contract for various public infrastructure improvements which support development projects. The LCRA can be used to assist in residential, commercial, or industrial development. LCRA Holdings Corporation (LCRAH) LCRAH was established in 2015 for the purpose of forming a nonprofit corporation under the provisions of the Missouri Nonprofit Corporation Act, Chapter 355 of the Revised Statutes of Missouri. The Corporation is organized, and shall be operated exclusively for charitable purposes within the meaning of Section 501(c) (3) of the Internal Revenue Code of The charitable purposes include lessening the burdens of government of LCRA and the City of St. Louis, Missouri by acquiring, clearing, and preparing property to be used in economic development activities undertaken by LCRA and/or the City. Local Development Company (LDC) The LDC is a private not-for-profit corporation established in 1976 to conform to the guidelines of the Small Business Administration Local Development Company Lending Programs. In general, LDC provides lending services to the small business community within the City. Using small business lending programs, available at the federal, state, and local level, LDC works with small businesses to structure and package loans more attractively than conventional financing. LDC assisted loans generally are long-term, have lower equity requirements, and in some cases, provide below market rates of interest. Planned Industrial Expansion Authority (PIEA) The PIEA was established in 1967 pursuant to Chapter 100 of the Missouri Revised Statutes. The PIEA functions are similar to the LCRA but focuses primarily in industrial areas. Industrial Development Authority (IDA) The IDA was established in 1979 pursuant to Chapter 349 of the Missouri Revised Statutes. ID A issues tax-exempt development revenue bonds for long-term financing of development projects. (14)

22 NOTES TO FINANCIAL STATEMENTS June 30, 2016 (Continued) A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Reporting Entity (Continued) General Description (Continued) Land Reutilization Authority (LRA) The LRA was established in 1971 pursuant to Chapter 92 of the Missouri Revised Statutes. LRA takes title to donated property and tax delinquent property not purchased at the City Sheriffs sale. The LRA is responsible for the marketing and maintenance of its inventory and is supported by the sale of property. St. Louis Port Authority (Port Authority) The Port Authority was established in 1975 pursuant to Chapter 68 of the Missouri Revised Statutes. The Port Authority has broad powers to conduct port operations in an area designated as the St. Louis Port District. The Port Authority is responsible for mooring leases of City owned property, including the docks and facilities of the St. Louis Terminal. The Port Authority is also responsible for monitoring and coordinating development within the St. Louis Port District and for coordinating river related activities. On July 29, 2013, the Business Development Section ofsldc was split off and merged with the St. Louis County Economic Council to form a new entity, the St. Louis Economic Development Partnership. The new entity provides business development services for both St. Louis City and St. Louis County. A principal reason for the creation of the Partnership was to provide a more unified and regional approach to business attraction and development. The two Boards serviced by the Business Development Section (IDA and LDC) will continue to meet and be housed at the SLDC home office. Under the agreement, SLDC provides funding for the SLDC personnel transferred to the Partnership. Government-Wide and Fund Financial Statements Government-Wide Financial Statements The government-wide financial statements include the statement of net position and the statement of activities. These statements report financial information for SLDC as a whole. The statement of activities reports the expenses of a given function offset by program revenues directly connected with the functional program. A function is an assembly of similar activities and may include portions of a fund or summarize more than one fund to capture the expenses and program revenues associated with a distinct functional activity. Program revenues include: (1) charges for services which report fees and other charges to users of SLDC's services; (2) operating grants and contributions which finance annual operating activities including restricted investment income; and (3) capital grants and contributions which fund the acquisition, construction, or rehabilitation of capital assets. These revenues are subject to externally imposed restrictions to these program uses. Other revenue sources not properly included with program revenues are reported as general revenues. (15)

23 NOTES TO FINANCIAL STATEMENTS June 30, 2016 (Continued) A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Reporting Entity (Continued) Fund Financial Statements Fund financial statements are provided for governmental and proprietary funds. All SLDC funds are considered major funds. These major individual governmental and enterprise funds are reported in separate columns. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The financial statements of SLDC are prepared in accordance with generally accepted accounting principles (GAAP). SLDC's reporting entity applies all relevant Governmental Accounting Standards Board (GASB) pronouncements. The government-wide and proprietary funds apply Financial Accounting Standards Board (F ASB) pronouncements and Accounting Principles Board (APB) opinions issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements, in which case, GASB prevails. The government-wide statements report using the economic resources measurement focus and the accrual basis of accounting generally including the reclassification or elimination of internal activity (between or within funds). Proprietary fund financial statements report using this same focus and basis of accounting although internal activity is not eliminated in these statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants are recognized when grantor eligibility requirements are met. Governmental fund financial statements report using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized when they are both measurable and available. Available means collectible within the current period or soon enough thereafter to pay current liabilities. Expenditures are recorded when the related fund liability is incurred. Major revenue sources susceptible to accrual include intergovernmental revenues and investment income. In general, other revenues are recognized when cash is received. Operating income reported in proprietary fund financial statements includes revenues and expenses related to the primary, continuing operations of the fund. Principal operating revenues for the proprietary fund are parking fee charges to customers for services. Principal operating expenses are the costs of providing goods or services and include administrative expenses and depreciation of capital assets. Other revenues and expenses are classified as non-operating in the financial statements. When both restricted and unrestricted resources are available for use, it is SLDC' s policy to use restricted resources first, then unrestricted resources as needed. (16)

24 NOTES TO FINANCIAL STATEMENTS June 30, 2016 (Continued) A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fund Types and Major Funds Governmental Funds SLDC reports only one major governmental fund which is the Development Fund. The Development Fund was established to account for SLDC's development projects, primarily funded with Community Development Block Grants and passed through from the Community Development Administration of the City of St. Louis (CDA). Proprietary Funds SLDC has only one major enterprise fund which is the LCRA Parking Fund. This fund accounts for the operating activities of SLDC' s parking facilities. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results may differ from those estimates. Cash and Investments - Held in Escrow by the City Certain monies related to Port and LRA, maintained by the City, are classified as Held in Escrow by the City of St. Louis. At June 30, 2016 SLDC shows cash amounts due to the City of $407,892. Financial Instruments The carrying amount of cash and investments, notes and loan receivables, accounts payable and accrued expenses approximates fair value due to the short-term maturities of these instruments. In addition, SLDC believes that the carrying amount of notes payable approximates its fair market value due to the relative similarity of the effective interest rates as compared to current market rates. Due From/Due To Other Governmental Agencies Amounts due from and to any agencies that disburse governmental grant monies to various SLDC entities are classified as Due From or Due To Other Governmental Agencies. Primary disbursing agencies are currently the City Community Development Administration (CDA) and Economic Development Administration (EDA). (17)

25 NOTES TO FINANCIAL ST A TEMENTS June 30, 2016 (Continued) A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Capital Assets and Depreciation SLDC's property, plant, equipment, and infrastructure with useful lives of more than one year are stated at historical cost and comprehensively reported in the government-wide financial statements. Historically, SLDC has maintained infrastructure asset records consistent with all other capital assets. Proprietary capital asset expenditures are also reported in their respective fund financial statements. SLDC generally capitalizes assets with cost of $2,500 or more as purchase and construction outlays occur. The costs of normal maintenance and repairs that do not add to the asset value or materially extend useful lives are not capitalized. Capital assets are depreciated using the straight-line method. When capital assets are disposed, the cost and applicable accumulated depreciation are removed from the respective accounts, and the resulting gain or loss is recorded in operations. Estimated useful lives, in years, for depreciable assets are generally treated as follows: Buildings and structures Improvements other than buildings (infrastructure) Furniture, fixtures, and equipment 40 years 3-25 years 3-10 years Capitalization of Interest Interest incurred during the construction period relating to the construction of capital assets and property held for development is capitalized. Compensated Absences SLDC grants vacation to all full-time employees based on years of continuous service. Compensatory time is also granted to certain employees for hours worked in excess of a normal work week. Vacation benefits are allowed to accumulate and carry over, with limitations, into the next calendar year and will be paid to employees upon resignation, retirement or death. Sick leave benefits for all employees do not vest and, accordingly, they are recorded as expenditures when paid. The accrued benefit liability related to the compensated absences has been recorded as a liability on the statement of net position as it is expected to be paid with available expendable resources. Investments Investments are stated at cost, which approximates fair market value, and consist primarily of U.S. government backed short-term securities. Transfers and Payments Transfers and payments within the reporting entity are substantially for the purposes of subsidizing operating functions, funding capital projects and asset acquisitions, or maintaining debt service on a routine basis. (18)

26 NOTES TO FINANCIAL STATEMENTS June 30, 2016 (Continued) A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Transfers and Payments (Continued) The government-wide statement of activities eliminates transfers as reported within the segregated governmental and business-type activities columns. Only transfers between the two columns (activities) appear in this statement. The business-type activity fund transferred $600,000 to the governmental activities fund during the year ended June 30, Additionally, during the year ended June 30, 2016, SLDC made no transfers tothecityofst. Louis. Transactions related to these payments would be reflected in the statement of activities as other governmental income and as salaries, administrative, property, and program expenses. Long-Term Debt and Deferred Debt Expense In the government-wide and proprietary financial statements, outstanding debt is reported as liabilities. Net Position In the government-wide financial statements, net position is reported in three components - net investment in capital assets, restricted, and unrestricted. Net investment in capital assets consists of capital assets, net of accumulated depreciation, and reduced by the outstanding balance of any bonds or notes issued to acquire, construct, or improve those assets. Net position is reported as restricted when there are limitations imposed on their use either by the enabling legislation adopted by the Organization or through external restrictions imposed by creditors, grantors, or laws or regulations of other governments. Net position amounts reported as unrestricted do not meet the definition of either of the first two categories of net assets. (19)

27 NOTES TO FINANCIAL STATEMENTS June 30, 2016 (Continued) A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fund Balance Classification The governmental fund financial statements present fund balances based on classifications that comprise a hierarchy that is based primarily on the extent to which SLDC is bound to honor constraints on the specific purposes for which amounts in respective governmental funds can be spent. The classifications used in the governmental fund financial statements are as follows: N onspendable - This classification includes amounts that cannot be spent because they are either (a) not in spendable form or (b) are legally or contractually required to be maintained intact. SLDC did not have any nonspendable resources as of June 30, Restricted- This classification includes amounts for which constraints have been placed on the use of the resources either (a) externally imposed by creditors (such as through a debt covenant), grantors, contributors, or laws or regulations of other governments, or (b) imposed by law through constitutional provisions or enabling legislation. SLDC did not have any restricted resources as of June 30, Committed - This classification includes amounts that can be used only for specific purposes pursuant to constraints imposed by formal action of the Board of Directors. These amounts cannot be used for any other purpose unless the Board of Directors removes or changes the specified use by taking the same type of action (resolution) that was employed when the funds were initially committed. This classification also includes contractual obligations to the extent that existing resources have been specifically committed for use in satisfying those contractual requirements. SLDC did not have any committed resources as of June 30, Assigned - This classification includes amounts that are constrained by SLDC' s intent to be used for a specific purpose but are neither restricted nor committed. This intent can be expressed by the Board of Directors or through the Board of Directors delegating this responsibility to the Executive Director through the budgetary process. SLDC considers positive fund balances of individual entities to be assigned balances. The balance is made up by the following entities: St. Louis Development Corporation Fund Local Development Company Land Clearance for Redevelopment Authority St. Louis Port Authority Planned Industrial Expansion Authority $5,896,835 1,257, , , ,501 $8,767,252 (20)

28 NOTES TO FINANCIAL STATEMENTS June 30, 2016 (Continued) A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fund Balance Classification (Continued) Unassigned-This classification includes negative residual fund balance of the remaining entities. The balance is made up by the following entities: LCRA Holdings Corporation Land Reutilization Authority Industrial Development Authority ($1,563,309) ( 1,403,552) ( 545,053) ($3,511,914) SLDC would typically use restricted fund balances first, followed by Committed resources, and then Assigned resources, as appropriate opportunities arise, but reserves the right to selectively spend Unassigned resources first to defer the use of these other classified funds. Income Taxes SLDC has been granted exemption from federal and state income taxes under Section 501(c)(4) of the Internal Revenue Code. SLDC files an information return, IRS Form 990. Tax years 2012 and later remain subject to examination. LDC is exempt from federal and state income taxes under Section 501(c)(6) of the Internal Revenue Code. LDC files an information return, IRS Form 990. Tax years 2012 and later remain subject to examination. LCRAH is exempt from federal and state income taxes under Section 501(c)(3) of the Internal Revenue Code. LCRAH files an information return, IRS Form 990. Cash and Cash Equivalents Cash and cash equivalents are defined as all highly liquid investments (including restricted assets) with a maturity of three months or less when purchased. Allowance for Doubtful Accounts Notes and loans receivable are shown net of an allowance for doubtful accounts of $5,800,000. Reclassification Certain amounts in prior year financial statements have been reclassified for comparative purposes to conform with the presentation in the current-year financial statements. (21)

29 NOTES TO FINANCIAL STATEMENTS June 30, 2016 (Continued) A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Subsequent Events In preparing these financial statements, SLDC has evaluated events and transactions for potential recognition or disclosure through December 12, 2016 the date the financial statements were available to be issued. B. CASH AND INVESTMENTS At June 30, 2016, the carrying amount ofsldc's cash deposits (including amounts held in escrow by the City) was $6,076,451 and the bank balance was $7,354,548. Of the bank balance, $3,318, 126 was covered by federal depository insurance, $4,036,422 was covered by collateral held by the pledging institution's trust department or agent in SLDC's name. At June 30, 2016, the market value of investments approximated the carrying value of$881,672. State statutes and SLDC investment policies authorize the deposit of funds in financial institutions and trust companies or the investment of funds in obligations of the United States Government or any agency or instrumentality thereof; bonds of the State of Missouri, the City of St. Louis, or any city within the state with a population of 400,000 inhabitants or more; or time certificates of deposit; provided however, that no such investment shall be purchased at a price in excess of par. In addition, SLDC may enter into repurchase agreements maturing and becoming payable within 90 days secured by United States Treasury obligations or obligations of United States Government agencies or instrumentalities of any maturity as provided by law. SLDC funds in the form of cash on deposit or time certificates of deposit are required to be insured or collateralized by authorized investments held in SLDC's name. C. NOTES AND LOANS RECEIVABLE Notes and loans receivable consist principally of small business loans made to facilitate business growth. The commercial loans are primarily financed utilizing funds provided by the Community Development Administration of the City of St. Louis, Economic Development Administration, Environmental Protection Agency, and the State of Missouri. The proceeds from any repayment of these loans are generally payable back to the funding source, or re-loaned in accordance with the lending program. Grantor funds received for these lending programs are recorded as a liability and categorized as due to other governmental agencies. (22)

30 NOTES TO FINANCIAL STATEMENTS June 30, 2016 (Continued) C. NOTES AND LOANS RECEIVABLE (Continued) The following is a summary of changes in notes and loans receivable: Governmental Activities LCRA LDC PIEA Balance, June 30, 2015 $9,800,000 4,629,489 1,000,000 Issued Collected $ $ 1,180,400 1,102,634 Balance, June 30, 2016 $9,800,000 4,707,255 1,000,000 15,629,489 15,507,255 Less: Allowance for doubtful accounts ( } ( ) Notes and Loans Receivable, Net $2.fl22.:182 $1 l SQ :!QQ $] l Q2 f!j:l $2.:ZQ:Z 2~~ The following is a summary of changes in notes and loans receivable as of June 30, 2016: Receivable in less than one year Receivable in one to five years $ 1,332,255 14,375,000 15,507,255 Less: Allowance for doubtful accounts (5,800,000) Notes and Loans Receivable, Net $ 9,707,255 (23)

31 D. CAPITAL ASSETS Changes in Capital Assets St. Louis Development Corporation NOTES TO FINANCIAL STATEMENTS June 30, 2016 (Continued) The following is a summary of changes in capital assets for the period ended June 30, 2016: Governmental Activities Capital Assets Not Being Depreciated Construction in Progress Other Capital Assets Leasehold improvements Equipment Total other capital assets at historical cost Less accumulated depreciation for: Leasehold improvements Equipment Total accumulated depreciation Governmental Activities Capital Assets, Net Business-Type Activities Capital Assets Not Being Depreciated Land Other Capital Assets Parking facilities Less accumulated depreciation for: Parking facilities Business-type Activities Capital Assets, Net Balance, June 30, 2015 Additions Deductions $ 369,830 $ 313,128 $ 22,754, ,467,834 3,900,000) ( 600,000) 712,958) ( 4,612,958) ( 600,000) $19:224:706 {$ 286:8722 $ $ 7,375,774 $ $ 17,806,886 28,525 ( 14,111,141) ( 405,964) $11,071,519 ($ 377,439) $ Balance, June 30, 2016 $ 682,958 22,754, ,467,834 ( 4,500,000) ( 712,958) 5,212,958) $18:937:834 $ 7,375,774 17,835,411 ( 14,517,105) $10,694,080 Depreciation expense was charged to functions as follows: Governmental Activities $600,000 Business-Type Activities $405,964 (24)

32 NOTES TO FINANCIAL STATEMENTS June 30, 2016 (Continued) E. PROPERTY HELD FOR DEVELOPMENT Property held for development consists primarily of land and property held for sale or other development purposes. This land and property is reported in the statement of net position under Governmental Activities based on management's intent of ultimate disposition of the property. Proceeds received upon the sale of most of these properties will revert back to the funding source. A reserve for impairment has been established on these properties. During the year ended June 30, 2016, $100,889 of interest cost was incurred and included in additions to property held for development. Changes in Property held for development The following is a summary of changes in property held for development for the period ended June 30, 2016: Governmental Activities Property Held for Development Balance, June 30, 2015 Additions $17,676,750 $16,408,155 Balance, June 30, Deductions 2016 $ $34,084,905 Less: allowance for impairment ( 8,786,8202 { 300,000} { 9,086,820) Property Held For Development, Net $ 8,889,930 $16,108,155 $ $24,998,085 F. EMPLOYEES RETIREMENT PLAN AND TRUST The St. Louis Development Corporation Employees Retirement Plan and Trust ("SLDC Plan") became effective January 1, Required year ended June 30, 2016 contributions of $275, 733, which amount to 9% of current covered payroll, were made by SLDC. For the year ended June 30, 2016, SLDC's current covered payroll was $3,063,700 and total payroll amounted to $3,535,944. Employees are not required to contribute to the SLDC Plan; however, they can contribute up to 5-112% of their monthly compensation if they so elect. In order to be eligible under the SLDC Plan, the participant must be a full-time employee, have attained the age of 18, and completed at least six months of active service. The employees vest at a rate of 33% per annum with full vesting occurring after the end of their third year of service. The SLDC Plan does not hold any employer or related party securities. All plan investments are self-directed by the respective plan participants, within the limitations of the plan. G. BOND ISSUES FACILITATED BY SLDC IDA, PIEA, and LCRA (Authorities) facilitate the issuance of tax-exempt bonds for various private enterprises and government agencies. After bonds are sold, the proceeds are typically used to purchase real estate or fund capital improvements for the respective entity. Since the entity is responsible for the repayment of the bonds, no liability is established on the Authorities' books. Therefore, transactions related to the leases and the related bond liability are not presented in the basic financial statements. (25)

33 H. LONG-TERM DEBT Changes in Long-Term Debt St. Louis Development Corporation NOTES TO FINANCIAL STATEMENTS June 30, 2016 (Continued) The following is a summary of changes in long-term debt for the year ended June 30, 2016: Balance Balance Due July 1, June 30, Within 2015 Issued Retired 2016 One Year Governmental Activities Due to other governmental agencies $ 4,726,388 $ 979,983 $ 849,589 $ 4,856,782 $ 967,787 Bank Lines of Credit 2,434,774 14,743, ,140 17,075,591 Notes payable 10,755, , ,066 10,867,274 2,098,493 Other liabilities 9,185,265 3,011,383 3,617,247 8,579,401 1,824,635 Total Governmental Activities 27,101,520 19,073,570 4,796,042 41,379,048 4,890,915 Business-Tl:l!e Activities Note Payable: Enterprise fund - parking , ,116 Total Business-Type Activities 9,468, ,444 9,212, ,116 Total Long-Term Debt $36,570,061 $19,073,570 $ 5,052,486 $50,591,145 $5,137,031 Small Business Administration Loan Programs (SBA) The LDC provides the local management support for administering the Small Business Administration's (SBA) 504 Urban Revitalization loan programs. Under the 504 program loans, a bank contributes 50 percent of the total loan package, the SBA contributes 40 percent, and the borrower is responsible for the remaining 10 percent. The bank and SBA portion of the loans are made without recourse to LDC, and in the event of default, those parties would seek recovery only from the collateral pledged. The 504 loan payments are received monthly by a servicing agent and are remitted semiannually to SBA. The Organization has no direct control over these 504 loans. Under the terms of SBA's Authorization and Debenture Guaranty, LDC is contingently liable to SBA for these 504 loans in the event default by the borrower is caused by fraud, gross negligence, or by payments held by LDC. The outstanding balance for these loans as of June 30, 2016 was $5,555,832. No liability has been recorded for such loans by SLDC. (26)

34 H. LONG-TERM DEBT (Continued) St. Louis Development Corporation NOTES TO FINANCIAL STATEMENTS June 30, 2016 (Continued) Notes Payable and Bank Lines of Credit (Governmental Activities) Notes payable and banks lines of credit, governmental activities, balances at June 30, 2016 consist of the following: Note payable to Pulaski Bank, N.A. Principal is due April Borrower will pay this loan in 3 regular payments of principal and interest and one irregular last payment for all principal and accrued interest not yet paid. Interest accrues at a nominal annual interest rate of 3.40%. This loan is unsecured. Note payable to Enterprise Bank and Trust. Principal is due March Borrower will pay this loan in 5 regular payments of $19,314 and one irregular last payment for all principal and accrued interest not yet paid. Interest accrues at a fixed annual interest rate of 4.62%. This is a secured renewal loan. This note payable is collateralized by deeds of trust on various properties. Note payable to the Missouri Development Finance Board. Interest is due monthly and the entire principal is due December Interest rate adjusted annually on December 1 to the average yield on United States Treasury Securities plus 2 percentage points. The security is pledged by the developer. Bank line of credit payable to Pulaski Bank, N.A. Borrower may borrow the maximum principal sum of $10,000,000. This line of credit shall bear interest on the from time to time aggregate unpaid principal amount at the fixed rate of 3.50% per annum. Principal and accrued unpaid interest is due in This note is secured and guarantied. Bank line of credit payable to Pulaski Bank, N.A. St. Louis Municipal Finance Corporation has assigned this note to LCRA Holdings Corporation. Borrower may borrow the maximum principal sum of $13,000,000. This line of credit shall bear interest on the from time to time aggregate unpaid principal amount at the fixed rate of 4.25% per annum. Principal and accrued unpaid interest is due in The note payable is collateralized by the National Geospatial-Intelligence Agency site. Bank line of credit payable to Pulaski Bank, N.A. Principal balance and accrued unpaid interest is due February Interest accrues at 4.00% per annum. Borrower will pay regular monthly payments of all accrued unpaid interest due as of each payment date. The note is collateralized by a tax credit purchase agreement. $ 338,247 1,752,206 5,000,000 5,017,771 9,726,186 2,331,634 (27)

35 H. LONG-TERM DEBT (Continued) St. Louis Development Corporation NOTES TO FINANCIAL STATEMENTS June 30, 2016 (Continued) Notes Payable and Bank Lines of Credit (Governmental Activities) (Continued) Note payable to Pulaski Bank. Borrower will pay 60 quarterly principal and interest payments of $86,702 beginning October 28, Interest is calculated at 1.025% quarterly interest rate. The note payable is collateralized by the assignment of the lease payments received by the St. Louis Port Authority. The maturity date of the loan is September 28, ,776,821 Notes Payable and Bank Lines of Credit, Governmental Activities $27,942,865 Maturities on notes payable and bank lines of credit, governmental activities are as follows: Year Ending June 30, Principal Interest 2017 $ 2,098,493 $ 1,029, , , ,543, , ,220, , , , ,461,500 7,032,158 $27,942,865 $11,488,910 (28)

36 H. LONG-TERM DEBT (Continued) St. Louis Development Corporation NOTES TO FINANCIAL STATEMENTS June 30, 2016 (Continued) Note Payable (Business-Type Activities) Note payable, business-type activities, at June 30, 2016, consists of a note payable to Stifel Bank and Trust due November Interest is due monthly at a rate of 5%. The note payable is collateralized by deeds of trust on various properties and assignment of all rents. The note payable balance at June 30, 2016 is $9,212,097. Maturities on the note payable, business-type activities, is as follows: Year Ending June 30, Other Liabilities Principal 246, , ,320 8,434,774 $9,212,097 Interest 461, , , ,403 $1,487,701 Amounts recorded as other liabilities consist of funds that have been received by SLDC but have not been spent at June 30, They include funds received in advance for various development projects, and proceeds from notes and loans receivable that have been put into a revolving loan program for small business development. Other items included are security deposits and unearned revenue. Classification of these amounts as current or non-current is based on management's estimate of when the funds will be spent or when the outstanding loans will be repaid. Due to Other Governmental Agencies Amounts recorded as due to other governmental agencies consist of amounts due to federal, state, local, and other pass through governmental agencies. These are notes and loans receivable for small business development and land that is being held for redevelopment. Amounts which are expected to be paid within one year are classified as current and amounts expected to be paid after one year are non-current. Classification as current and non-current is based on management's estimate of when these notes and loans will be paid back to SLDC, or when the land held for redevelopment is expected to be sold. (29)

37 I. COMMITMENTS St. Louis Development Corporation NOTES TO FINANCIAL STATEMENTS June 30, 2016 (Continued) SLDC leases property and office space under the following operating lease agreements: During the year ended June 30, 2011, SLDC signed a sub-lease agreement with the City of St. Louis, Missouri that commenced March 1, 2012 until June 30, 2031 with rental payments of $620,000 per year for the first 10 years and variable amounts for the remaining ten years. SLDC also has sublease agreements with Community Development Agency (CDA), Affordable Housing Commission (AHC), and Planning and Urban Design Development Agency (PDA) and in effect through June 30, Future minimum base rents under the terms of the lease agreements, net of sublease rents anticipated from CDA and PDA as of June 30, 2016 are as follows: $ 335, , , ,840 $1,677,100 Additionally, at June 30, 2016, Port was committed through a twenty-five year operating lease with the City which requires annual rental payments of $1 for property at the City terminal site. Under the lease agreement, Port shall make improvements to the leased premises and award subleases for all or a portion of the leased premises. Sublease revenue is retained by Port for use at the terminal site. LC RAH entered into an agreement with the City of St. Louis to facilitate the acquisition and development of property for future use. As of June 30, 2016, LCRAH has incurred debt of $14,743,957 (see Note H.) and capitalized $16,307,266 of land and site improvements recorded as property held for development related to this project. (30)

38 J. CONTRACTS AND AGREEMENTS St. Louis Development Corporation NOTES TO FINANCIAL STATEMENTS June 30, 2016 (Continued) SLDC has entered into various cooperative agreements with CDA as a subrecipient/ administrator of the Community Development Block Grant programs. The purpose of these grants and contracts is to provide support for economic development in the City. Revenues from these contracts amounted to $3,033,714 during the year ended June 30, SLDC has received eight allocation awards of New Markets Tax Credit ("NMTC") investment authority pursuant to Section 45D of the Internal Revenue Code: a Round 2, $52 million allocation received in 2005, a Round 6, $45 million allocation received in October 2008, a Round 7, $65 million allocation received in October 2009, a Round 8, $21 million allocation received in February 2011, a Round 9, $50 million allocation received in February 2012, a Round 10, $30 million allocation received in April 2013, a Round 12, $45 million allocation received in June 2015 and a Round 13, $75 million allocation awarded in 2016 from the Department of the Treasury's Community Development Financial Institutions Fund ("CDFI"). The NMTC program allows investors to receive a federal tax credit against its federal income taxes in exchange for making a qualified entity investment in a qualified active low-income community business ("QALICB"). In order to qualify for the program, various federal and local requirements must be complied with. SLDC was required to create Community Development Entities ("CDE") so as to demonstrate its mission of serving low-income residents and its accountability to the lowincome community. The NMTC program requires NMTCs be transferred to the QALICB's by for-profit partnerships or corporations for federal tax purposes. To comply with this provision, SLDC created 60 subsidiary CDEs - St. Louis New Markets Tax Credit Fund, LLC I through XL and with the intent that each project to be allocated would be assigned its own CDE. All of SLDC's first 6 allocations have been fully deployed into 37 projects. The Round 12 allocation still has all $14 million available; however, two transactions totaling $9 million are currently in underwriting and expected to close within the next 2 months. The recently awarded Round 13 allocation will not be available to allocate until February 2017 and will be incumbent on SLDC and the CDFI Fund entering into an Allocation Agreement. K. URBAN DEVELOPMENT ACTION GRANT (UDAG) SLDC is a servicing agent ofudag funds provided by CDA. Loans from CDA for UDAG funds are made without recourse to developers. In the event of default, CDA would seek recovery only from collateral pledged or absorb the losses. Any repayments received on these loans are refundable to the CDA. (31)

39 L. CONTINGENCIES St. Louis Development Corporation NOTES TO FINANCIAL STATEMENTS June 30, 2016 (Continued) In connection with Federal grant programs, SLDC is obligated to administer the related programs and spend the grant monies in accordance with regulatory restrictions, and is subject to audit by the grantor agencies. In cases of noncompliance, the agencies involved may require SLDC to refund program monies. During the year ended June 30, 2016, LCRA entered into an agreement with the City of St. Louis, Department of Human Services, and the Affordable Housing Commission to rehabilitate a building located at 13th and Biddle, St. Louis MO known as Biddle House. LCRA shall receive 12 annual installments of$200,000 from the Affordable Housing Commission to be used for the purpose of repaying the financing previously secured by LCRA for the rehabilitation of the project. As of June 30, 2016, $931,317 has been recorded as an other receivables related to the project. As of June 30, 2016, $338,247 has been recorded as a corresponding note payable and $593,070 has been recorded as accounts payable. In the normal course of its operations, certain lawsuits and legal actions are pending against SLDC. In the opinion of SLDC officials and legal counsel, these items are not expected to have a material effect, individually or in the aggregate, upon the net position or the results of operations of SLDC. In addition, certain properties held for development may be subject to future environmental remediation costs. In the opinion of SLDC officials, these costs would not have a material adverse effect upon the financial position or the results of operations of SLDC. (32)

40 ADDITIONAL INFORMATION

41 COMBINING STATEMENT OF NET POSITION GOVERNMENT AL ACTIVITIES - SPECIAL REVENUE FUND June 30, 2016 ASSETS Cash, cash equivalents, and investments - unrestricted $ Cash held in escrow by City of St. Louis Receivables, net of allowances: Notes and loans Other Prepaid expenses Internal balances Due from other governmental agencies Property held for development (net of allowance for impairment of$9,086,820) Capital assets, net SLDCF 1,057,105 1,453 51,709 5,334, ,658 LCRA LDC PIEA IDA LRA $ 931,402 $ 2,289,832 $ 486,412 $ 69,545 $ 210,435 11,968 5,000,000 4,707,255 1,237, ,864 18,960 5, ,118 2,972,642 60,288 10,638 85,402 26,483 2,694, ,859, , ,520 LC RAH PORT Eliminations Total $ 302 $ 985,573 $ $ 6,030,606 ( 419,860) ( 407,892) 9,707, ,457 1,719, ,539 8,291,777) 198,200 3,687,765 16,307,266 24,998,085 18,937,834 18,937,834 Total Assets $ 7,437,449 $ 20,714,332 $ 7,057,870 $ 1,189,590 $ 154,947 $ 622,388 $ 16,307,568 $ 19,982,004 ($ 8,291,777) $ 65,174,371 LIABILITIES AND NET POSITION Liabilities Accounts payable and accrued expenses $ Bank lines of credit Internal balances Due to other governmental agencies Notes payable Other liabilities 863, ,977 6,335,033 $ 1,282,803 $ 28,168 $ $ $ 26,459 2,331,634 3,809, , , ,000 1,627,843 67,787 4,788,995 7,090, ,635 2,090,567 $ $ 213,302 $ $ 2,414,660 14,743,957 17,075,591 1,563,611 8,291,777) 4,856,782 3,776,821 10,867,274 29,166 8,579,401 Total Liabilities 7,323,938 14,707,037 7,205, , ,000 1,654,302 16,307,568 4,019,289 8,291,777) 43,793,708 Net Position - Unrestricted Net investment in capital assets Unrestricted 113,511 6,007, ,141) 1,021, ,053) 1,031,914) 15,161,013 15,161, ,702 6,219,650 Total Net Position 113,511 6,007, ,141) 1,021, ,053) 1,031,914) 15,962,715 21,380,663 Total Liabilities and Net Position $ 7,437,449 $ 20,714,332 $ 7,057,870 $ 154,947 $ 622,388 $ 16,307,568 $ 19,982,004 {$ 8,291,777) See independent auditors' report on additional information (33)

42 COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION GOVERNMENT AL ACTIVITIES - SPECIAL REVENUE FUND For the Year Ended June 30, 2016 REVENUES Intergovernmental - CDBG Other governmental Program non-governmental Rental Land sales proceeds Parking Development fees Interest income Other SLDCF LCRA LDC PIEA IDA $ 2,465,410 $ 16,667 $ 544,540 $ $ 465,274 24,271,758 5,852 2,287, , ,717 13, , , ,031 1,176,648 71, ,912 3, , ,753 7,337 LRA $ 7,097 3,152 28, ,836 1, ,999 LC RAH PORT Total $ $ $ 3,033,714 24,746,036 2,572,146 1,348,539 1,750, ,836 12, ,331 1,955, ,012 60,089 Total Revenues 6,209,398 25,999, ,387 13, , ,572 1,361,906 35,421,046 EXPENDITURES Development costs: Site improvements and construction Property acquisition & real estate expenses (refunds) Consulting and other Grants and contracts Salaries and other expenses Property maintenance and expenses Debt service - interest Depreciation 1,205,243 54,817 15,300) 2,037, , ,242 24,273, ,649 5,952 5,204,266 50, , ,728 5,513 ll, , ,672 10,343 2, ,943 1,260, , ,317 2,342,847 26,010,721 5,255, ,027 1,470,597 ll6, , , ,000 Total Expenditures 9,4ll,919 25,055, ,162 17,532 1,248,362 (DEFICIENCY) EXCESS OF REVENUES OVER EXPENDITURES ( 3,202,521) 944,234 50,225 4,130) 108,077 50,456) 113,544 2,041,027) OTHER FINANCING SOURCES (USES) Transfers 3,155, ,000) 50,000) 50,000) 400,000) 300,000) 855,405) 600,000 NET POSITION, Beginning of period 160,627 5,963, ,366) 1,075, ,130) 681,458) 16,704,576 22,821,690 NET POSITION, End of period $ 113,511 $ 6,007,295 ~$ 147,141) $ 1,021,250 ($ 545,053) ($ 1,031,914) $ - $ 15,962,715 $ 21,380,663 See independent auditors' report on additional information (34)

43 STATEMENT OF NET POSITION LCRA GOVERNMENT AL AND PROPRIETARY FUND - GARAGE June 30, 2016 ASSETS Cash, cash equivalents, and investments - unrestricted Notes and loans receivable Other receivables Prepaid expenses Internal balances Due from other governmental agencies Capital assets, net Property held for development LCRA $ 931,402 5,000,000 1,237,414 18,960 2,972,642 2,694,612 7,859,302 Proprietary Fund- Garage $ 1,335, ,951 96,179 10,694,080 Total $ 2,266,811 5,000,000 1,496, ,139 2,972,642 2,694,612 10,694,080 7,859,302 Total Assets $ 20,714,332 $ 12,384,619 $ 33,098,951 LIABILITIES Accounts payable and accrued expenses Bank lines of credit Internal balances Due to other governmental agencies Notes payable Other liabilities $ 1,282,803 2,331,634 3,809,725 67,787 7,090, ,635 $ 13,024 ( 198,200) 9,212,097 $ 1,295,827 2,331,634 3,611,525 67,787 16,302, ,635 Total Liabilities 14,707,037 9,026,921 23,733,958 NET POSITION Net investment in capital assets Unrestricted 6,007,295 1,481,983 1,875,715 1,481,983 7,883,010 Total Net Position 6,007,295 3,357,698 9,364,993 Total Liabilities and Net Position $ 20,714,332 $ 12,384,619 $ 33,098,951 See independent auditors' report on additional information (35)

44 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION LCRA GOVERNMENTAL AND PROPRIETARY FUND - GARAGE For the Year Ended June 30, 2016 Proprietary Fund- LCRA Garage Total REVENUES Intergovernmental $ 16,667 $ $ 16,667 Other governmental 24,271,758 24,271,758 Program non-governmental Rental 13,993 13,993 Land sales proceeds 21,000 21,000 Parking 382,978 2,234,795 2,617,773 Development fees 1,176,648 1,176,648 Interest income 116, ,180 Total Revenues 25,999,304 2,235,715 28,235,019 EXPENSES Construction costs 54,817 54,817 Consulting 114, ,373 Site acquisition and real estate (refunds) expenses ( 15,300) ( 15,300) Contractual services 24,273,808 13,068 24,286,876 Personal services and administrative 50, , ,145 Maintenance and security 372, , ,315 Utilities 91,747 91,747 Insurance 108, ,438 Taxes and other 3,614 3,614 Debt service - interest 203, , ,783 Depreciation and amortization 405, ,964 Total Expenses 25,055,070 1,574,702 26,629,772 Change in Net Position 944, ,013 1,605,247 OTHER FINANCING USES Transfers ( 900,000) ( 600,000) ( 1,500,000) NET POSITION, Beginning 5,963,061 2,900,285 NET POSITION, Ending $ 6,007,295 $ 2,961,298 8,863,346 $ 8,968,593 See independent auditors' report on additional information (36)

45 SCHEDULE OF EXPENDITURES OF FEDERAL AW ARDS Year Ended June 30, 2016 Federal Grantor/ Pass-Through Grantor/ Program Title CFDA Number Grant Number Federal Expenditures U.S. Department of Housing and Urban Development Passed-through the City of St. Louis, Missouri Community Development Administration Community Development Block Grant - Entitlement Grants Total U.S. Department of Housing and Urban Development NSP ( $ 300, , ,967 6,705) 3,344 8,459 53, , , , , , , ,416 34,155 3,031,709 * U.S. Environmental Protection Agency Brownfields Assessment and Cleanup Cooperative Agreement BF BF BF BF BF ,852 13,024 9,849 67,736 2,070 Total U.S. Environmental Protection Agency 98,531 See independent auditors' report on additional information (37)

46 SCHEDULE OF EXPENDITURES OF FEDERAL AW ARDS Year Ended June 30, 2016 (Continued) Federal Grantor/ Pass-Through Grantor/ Program Title CFDA Number Grant Number Federal Expenditures U.S. Department of Homeland Security Dept. of Homeland Security GB 262,395 Total U.S. Department of Homeland Security 262,395 U.S. Department of Commerce Economic Adjustments Assistance Total U.S. Department of Commerce d 876, ,229 1,102,024 * Federal Awards $ 4,494,659 * Major Program See independent auditors' report on additional information (38)

47 NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AW ARDS June 30, 2016 A. GENERAL The accompanying Schedule of Expenditures of Federal Awards presents the activity of all federal awards programs of the St. Louis Development Corporation for the year ended June 30, St. Louis Development Corporation's reporting entity is defined in Note A of St. Louis Development Corporation's basic financial statements. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code offederal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations, it is not intended to and does not present the financial position, changes in net position, or cash flows of SLDC. B. BASIS OF ACCOUNTING The accompanying Schedule of Expenditures of Federal Awards is presented using the accrual basis of accounting, which is described in Note A of the St. Louis Development Corporation's basic financial statements. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. C. CALCULATION OF REVOLVING LOAN FUNDS d Balance of RLF loans outstanding $ 1,690,405 $ 42,514 Cash & Investment balance in the RLF 1,521, ,791 Adminstrative expenses paid out of RLF income 3,694-3,215, ,305 Federal Share ofrlf 27.27% 75.00% $ 876,795 $ 225,229 EDA Federal Funding $ 750,000 $ 282,262 Local Match 2,000,323 94,087 $ 2,750,323 $ 376,349 Federal Share of RLF 27.27% 75.00% D. RELATIONSHIP TO BASIC FINANCIAL STATEMENTS Expenditures of Federal Awards included in the basic financial statements of St. Louis Development Corporation are as follows: St. Louis Development Corporation Local Development Company Land Clearance for Redevelopment Authority Land Reutilization Authority Total Expenditures of Federal Awards $2,824,266 1,646,559 16, $4,494,659 (39)

48 ADDITIONAL INDEPENDENT AUDITORS' REPORTS

49 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 Board of Directors St. Louis Development Corporation St. Louis, Missouri 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 and the business-type activities of St. Louis Development Corporation as of and for the year ended June 30, 2016 and the related notes to the financial statements, which collectively comprise St. Louis Development Corporation basic financial statements, and have issued our report thereon dated December 12, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered St. Louis Development Corporation'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 St. Louis Development Corporation's internal control. Accordingly, we do not express an opinion on the effectiveness of St. Louis Development Corporation'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 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. 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. 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. (40) (314) fax (314) Sunset Office Drive, Suite 400 St. Louis, MO stcpa@stcpa.com

50 Compliance and Other Matters As part of obtaining reasonable assurance about whether St. Louis Development Corporation's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, 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. 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 entity'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 entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. St. Louis, Missouri December 12, 2016 (41)

51 INDEPENDENT AUDITORS' REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE Board of Directors St. Louis Development Corporation St. Louis, Missouri Report on Compliance for Each Major Federal Program We have audited St. Louis Development Corporation's compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of SLDC's major federal programs for the year ended June 30, St. Louis Development Corporation's major federal programs are identified in the summary of auditors' results section of the accompanying schedule of findings and questioned costs. Management's Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditors' Responsibility Our responsibility is to express an opinion on compliance for each of St. Louis Development Corporation's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about St. Louis Development Corporation's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of St. Louis Development Corporation's compliance. (314) '"fax (314) '" Sunset Office Drive, Suite 400 '"St. Louis, MO '" stcpa@stcpa.com (42)

52 Opinion on Each Major Federal Program In our opinion, St. Louis Development Corporation complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, Report on Internal Control Over Compliance Management of St. Louis Development Corporation is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered St. Louis Development Corporation's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Organization's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. St. Louis Development Corporation's responses to the findings identified in our audit are described in the accompanying schedule of findings and questioned costs. We did not audit St. Louis Development Corporation's responses and, accordingly, we express no opinion on the responses. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. St. Louis, Missouri December 12, 2016 (43)