Parking Authority of the City of Paterson, NJ

Transcription

1 Parking Authority of the City of Paterson, NJ Financial Statements Years Ended

2 Parking Authority of the City of Paterson, NJ Table of Contents PAGE Management's Discussion and Analysis 1 Independent Auditors' Report 7 Independent Auditors' Report on Internal Control over Financial Reporting 10 and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards Financial Statements Statements of Net Position 12 Statements of Revenue, Expenses and Change in Net Position 13 Statement of Cash Flows 14 Notes to Financial Statements 15 Supplemental Information Schedules of Cash and Cash Equivalents and Restricted Deposits Held by Trustees 35 Schedules of Revenues 36 Schedules of Expenses 37 Schedules of Revenues and Expenses Compared to Budget 39 General Comments and Recommendations 40 Required Supplemental Information Schedules of Authority s Proportionate Share of Net Pension Liability Public Employee Retirement System 41 Schedules of Authority s Contributions - Public Employee Retirement System 42

3 Parking Authority of the City of Paterson, NJ Management s Discussion and Analysis (MD&A) December 31, 2015 Introduction The management of the Parking Authority of the City of Paterson, NJ (the Authority ) offers this overview and analysis of the financial activities of the Authority for the year ended December 31, This document should be read and considered in conjunction with the audited financial statements and the notes thereto, which immediately follow this section, in order to enhance the understanding of the Authority s financial performance. Financial Highlights and Comparative Information The Authority operated within its bond covenants and the more stringent financial policies and guidelines set by the Board. The following are key financial highlights: The Authority implemented two new Governmental Accounting Standards Board ( GASB ) Statements in the current year that significantly changed the current year s presentation. 1) The Authority adopted GASB No. 68, Accounting and Financial Reporting for Pensions, An Amendment of GASB No. 27 during The pronouncement requires the Authority to record its proportional share of the State of New Jersey's net pension liability on the face of its financial statements as of December 31, 2015 and to record related pension expense in accordance with the pronouncement. On November 13, 2015 the New Jersey Department of Treasury's Division of Pensions and Benefits released reporting data pertaining to the Government Standards Accounting Board's Statement No. 68 (GASB 68). The Authority s allocation was included in the data found on the Division of Pension's and Benefit's website at The Allocations were audited by KMPG for accuracy. The Division of Pension and Benefits further noted that GASB reporting requirements solely govern financial reporting, but have no impact on State laws; therefore, the statements do not result in a change to the calculation of statutory assets, liabilities and contribution requirements for State and local employers. Accordingly, per statute, State and local systems are measured separately for the calculation of plan assets, liabilities and contribution requirements. It is important to keep in mind that this reporting requirement will not change the amount of funds local governments must budget for pension payments under existing law. The New Jersey Department of Treasury has communicated this to rating agencies. They have given no indication that GASB 68 disclosures will generally result in credit downgrades. 2) The Authority adopted GASB No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date, during The pronouncement requires the Authority to restate its beginning net position to reflect the beginning balance of the net pension liability recorded in accordance with GASB No. 68. Also, in accordance with GASB No. 71, the Authority restated its Net Position for pension contributions made after the beginning net pension liability measurement date of December 31, 2013 (deferred outflows). 1.

4 Implementation of these standards had a significant impact on the reported financial results of the Authority. Beginning net position at January 1, 2014 was reduced by $3,499,171, which comprised a pension liability addition of $3,365,019, pension expense of $5,019 in 2014, along with pension deferred outflows of $209,826 and pension deferred inflows of $348,997. Financial Highlights Comparative revenues, expenses and changes in net position are summarized below. Refer to the Authority s financial statements for the complete Statement of Activities. Years Ended December 31, Restated Operating Revenues $ 7,527,675 $ 7,361,206 Non-operating Revenues 6,374 6,578 Total Revenues 7,534,049 7,367,784 Operating Expenses 5,906,774 5,686,515 Non-Operating Expenses 1,082,628 1,123,563 Total Expenses 6,989,402 6,810,078 Increase in Net Position $ 544,647 $ 557,706 As of December 31, 2015, the Authority s financial position reflects total assets of $27,801,564 and total liabilities of $25,904,733. The Authority experienced an increase in Net Position of $544,647 for the year ended December 31, 2015, which is less than the increase of $557,706 for the year ended December 31, The decrease is due primarily to the implementation of GASB 68. Overview of Financial Statements This annual report consists of three parts: Management s Discussion and Analysis, Basic Financial Statements and Supplementary Information. The financial statements also include notes that explain information in the financial statements in more detail. The Authority is a self-supporting entity and follows enterprise fund reporting; accordingly, the financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. These financial statements offer short-term and long-term financial information about the activities and operations of the Authority. These statements are presented in a manner similar to a private sector company. The financial statements of the Authority have been prepared in accordance with accounting principles generally accepted in the United States of America as prescribed by Governmental Accounting Standards Board ("GASB"). The objective of these standards is to enhance the understandability and usefulness of the external financial reports issued by Public Authorities. 2.

5 The financial statement presentation consists of a Statement of Net Position, a Statement of Revenue, Expenses, and Changes in Net Position, and a Statement of Cash Flows and accompanying Notes to Financial Statements. These statements provide information on the financial position of the Authority and the financial activity and results of its operations during the year. A description of the statements follows: The Statement of Net Position presents information on all of the Authority s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Authority is improving or deteriorating. The Statements of Revenues, Expenses and Changes in Net Position accounts for all of the Authority s current year revenues and expenses. This statement measures the results of the Authority s operations over the past year and can be used to determine whether the Authority has recovered all of its costs through revenue sources and other charges, operational stability and credit worthiness. The Statement of Cash Flows provides information on the major sources and uses of cash during the year. The Statement of Cash Flows reports cash receipts, cash payments, and net cash provided or used in cash resulting from operating, investing, capital and related financing activities. The Notes to the Financial Statements provide additional informational that is essential to a full understanding of the data provided in the financial statements, such as the Authority s accounting methods and policies. Statements of Net Position (Condensed) December 31, Restated Current Assets $ 5,519,663 $ 5,471,890 Capital Assets, Net 21,759,781 22,238,328 Other Non-Current Assets 522, ,415 Total Assets 27,801,564 28,265,633 Deferred Outflows 786, ,826 Current Liabilities 1,605,678 1,568,919 Non-current Liabilities 24,299,055 24,384,533 Total Liabilities 25,904,733 25,953,452 Deferred Inflows 188, ,997 Net Position $ 2,494,452 $ 2,173,010 The Statement of Net Position presents the financial position of the Authority at the end of its fiscal year. A more detailed Statement of Net Position appears in the Authority s financial statements. 3.

6 Current Assets Current assets as of December 31, 2015 were $5,519,663, and consisted of cash, accounts receivable and prepaid expenses. Current Liabilities Current liabilities totaled $1,605,678 and consist primarily of accounts payable and accrued expenses of $340,896, the current portion of bond interest and principal of $226,256 and $930,000, respectively. Non-Current Liabilities The non-current liabilities consist primarily of bonds payable, net of the current portion. As of December 31, 2015, the non-current portion of the bonds payable was $20,067,033. Capital Assets, Net As part of its mission, the Authority is committed to the development and renewal of its capital assets in order to meet the needs of the people and businesses of the City of Paterson. Assets that are capitalized will be depreciated over their estimated useful lives. Depreciation will be calculated on the straight line basis, with no salvage value. Depreciation expense for the year ended December 31, 2015 was $701,559. A comparative summary of capital assets is as follows: December 31, Land $ 5,427,421 $ 5,373,476 Parking meters 514, ,602 Vehicles 173, ,889 Equipment 1,361,529 1,357,394 Furniture and fixtures 51,892 51,892 Construction in progress 187, ,483 Commercial rental improvements 1,171,367 1,162,421 Parking facilities and improvements 30,072,718 30,028,803 Total Capital assets 38,960,972 38,737,960 Less: Accumulated depreciation 17,201,191 16,499,632 Net Capital Assets $ 21,759,781 $ 22,238,328 4.

7 Statement of Revenues, Expenses and Changes in Net Position The statement of Statement of Revenues, Expenses and Changes in Net Position presents the Authority s results of operations. The Authority also includes supplemental information regarding details of revenue and expenses as it relates to the adopted authority budget. Refer to the Authority s financial statements for the complete listing. Total operating revenues of the Authority for the year ended December 31, 2015 were $7,527,675. Revenue 2015 Off street parking revenue represented 57% of total revenues. Parking contracts, permits and coupons represented 22% of total revenues. Meter collections represented 13% of total revenues and commercial rent from the Public Safety Complex represented 8% of total revenues. Expenses 2015 Total expenses for the year were $6,989,402. Operating expenses totaled $5,906,774 and nonoperating expenses totaled $1,082,628. This resulted in net operating income of $1,620,901. General operating expenses represented 47% of the costs, staff represented 26%, depreciation expense represented 12%, administrative expense represented 13%, and the GASB 68 Pension adjustment represented 2%. Financial Condition Economic Factors that will affect the Future The overall financial position of the Authority was strong at year-end. Net Position of the Authority increased by $544,647 for the year ended December 31, Operating revenue increased by 2%, while operating expenses increased by 4%; this resulted in a significant increase in net position. The Authority is confident that it will be able to continue this trend for 2016 and in future years. The management of the Authority is working diligently to contain costs and for ways to increase revenue. Future Economic Outlook The Authority may continue to expect potential increases in revenue as the result of expansion of metered parking and the increase usage of off-street parking. The Authority is continuing to explore new parking lot locations. Accountability The Authority's mission statement is to provide parking in the City of Paterson. This is accomplished by maintaining parking meters, off-street parking lots, and parking garages throughout the City. The Authority is always responsive to the publics' need in compliance with the applicable laws, rules and regulations and will continue to set and exceed the standards for the provision of parking, while operating the most efficient system and maintaining a cost-effective budget. As a parking authority, the Authority is also guided by or accountable to state government and the applicable rules and regulations that govern the Parking Authority. More specifically, the Authority is accountable to the State of New Jersey, Department of Community Affairs, Division of Local Government Services, and Bureau of Authority Regulation. 5.

8 Contacting the Authority s Financial Management This financial report is designed to provide our customers and clients, New Jersey citizens, and our investors and creditors, with a general overview of the Authority s finances and to demonstrate the Authority s accountability as a self-supporting entity. If you have questions about the report or need additional information, you can contact the Parking Authority of the City of Paterson, NJ, at 125 Broadway, Paterson, NJ or visit our web site at 6.

9 Independent Auditors Report Honorable Members of the Board of Commissioners Parking Authority of the City of Paterson, NJ Paterson, NJ We have audited the accompanying financial statements of the Parking Authority of the City of Paterson, NJ ("the Authority"), which comprise the statements of net position as of December 31, 2015 and 2014, and the related statements of revenues, expenses and changes in net position, and cash flows for the years then ended, and the related notes to the financial statements, which collectively comprise the Authority 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 auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

10 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Parking Authority of the City of Paterson, NJ as of December 31, 2015 and 2014, and the respective changes in its net position and its cash flows for the years 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 management's discussion and analysis, budgetary comparison information, and schedules of authority s proportionate share of net pension liability and schedules of authority s contributions - public employee retirement system on pages 1-6, 39, and 41 and 42 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audits were conducted for the purpose of forming opinions on the financial statements that collectively comprise the Authority's basic financial statements. The schedules of cash and cash equivalents and restricted assets, schedules of revenues, schedules of expenses, schedules of revenues and expenses compared to budget, and schedule of general comments and recommendations are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedules of cash and cash equivalents and restricted deposits held by trustees, schedules of revenues, schedules of expenses, schedules of revenues and expenses compared to budget are the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the above described supplemental information is fairly stated in all material respects in relation to the basic financial statements as a whole. 8.

11 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated April 29, 2016 on our consideration of the Authority's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority's internal control over financial reporting and compliance. Wayne, New Jersey April 29, 2016 Hammond & Burns, LLC 9.

12 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance With Government Auditing Standards Independent Auditors Report Honorable Chairman and Commissioners of The Parking Authority of the City of Paterson, NJ Paterson, NJ 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 Parking Authority of the City of Paterson, NJ (the "Authority"), as of and for the year ended December 31, 2015, and the related notes to the financial statements, which collectively comprise the Authority's basic financial statements, and have issued our report thereon dated April 29, Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the Authority's internal control over financial reporting to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Authority's internal control. Accordingly, we do not express an opinion on the effectiveness of the Authority's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. 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.

13 Compliance and Other Matters As part of obtaining reasonable assurance about whether the Authority's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. 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. Wayne, New Jersey April 29, 2016 Hammond & Burns, LLC 11.

14 Parking Authority of the City of Paterson, NJ Statements of Net Position

15 Parking Authority of the City of Paterson, NJ Statements of Net Position ASSETS (Restated) Current assets Cash and cash equivalents $ 774,946 $ 658,556 Accounts receivable, net 213, ,662 Prepaid assets 24, ,195 Restricted deposits held by Trustees 4,506,998 4,560,477 Total current assets 5,519,663 5,471,890 Noncurrent assets Prepaid financing costs, net 522, ,415 Capital assets, net 21,759,781 22,238,328 Total noncurrent assets 22,281,901 22,793,743 Total assets 27,801,564 28,265,633 Deferred outflow of resources Deferred outflows related to pensions 786, ,826 Total assets and deferred outflow of resources $ 28,588,084 $ 28,475,459 See accompanying notes to financial statements. 12.

16 Parking Authority of the City of Paterson, NJ Statements of Net Position LIABILITIES AND NET POSITION (Restated) Current liabilities Payable from unrestricted assets Accounts payable $ 22,514 $ 49,828 Accrued expenses and payroll taxes 318, ,380 Deferred revenue 25,977 25,977 Compensated absences 82,549 77,886 Payable from restricted assets Current portion of bonds payable 930, ,000 Accrued interest payable 226, ,848 Total current liabilities 1,605,678 1,568,919 Long term liabilities Bonds payable, net of current portion 20,067,033 20,999,867 Security deposits 19,647 19,647 Net pension obligation 4,212,375 3,365,019 Total long term liabilities 24,299,055 24,384,533 Total liabilities 25,904,733 25,953,452 Deferred inflow of resources Deferred inflows related to pensions 188, ,997 NET POSITION Invested in Capital Assets, net of related debt 762, ,461 Restricted for debt service 3,648,282 3,663,316 Restricted for construction 219, ,563 Restricted for City of Paterson 124, ,205 Restricted for renewal and replacement 284, ,915 Unreserved (2,545,793) (2,511,450) Total net position 2,494,452 2,173,010 Total liabilities and net position $ 28,588,084 $ 28,475,459

17 Parking Authority of the City of Paterson, NJ Statements of Revenues, Expenses and Changes in Net Position Years Ended (Restated) Operating Revenues Off street parking revenue $ 4,263,545 $ 4,334,860 On street parking meters 1,010, ,062 Other operating revenue 2,253,131 2,165,284 Total operating revenues 7,527,675 7,361,206 Operating Expenses Administrative expenses 784, ,513 Salaries and wages 1,547,471 1,427,308 General expenses 2,762,823 2,615,898 Depreciation expense 701, ,777 Pension expense, net - GASB 68 adjustment 110,564 5,019 Total operating expenses 5,906,774 5,686,515 Operating income 1,620,901 1,674,691 Non-operating Revenues (Expenses) Interest earned on investments Amortization of bond premium 5,896 5,896 Amortization of bond discounts (3,062) (3,062) Amortization of bond insurance costs (33,294) (33,294) Interest expense on bonds payable (1,046,272) (1,087,207) Total non-operating revenues (expenses) (1,076,254) (1,116,985) Change in Net Position 544, ,706 Net Position, beginning of year 2,173,010 5,114,475 Cumulative change in accounting principle - (3,499,171) Net Position, beginning of year, as restated 2,173,010 1,615,304 Transfer to the City of Paterson (223,205) - Net Position, end of year $ 2,494,452 $ 2,173,010 See accompanying notes to financial statements. 13.

18 Parking Authority of the City of Paterson, NJ Statements of Cash Flows Years Ended (Restated) Cash Flows from Operating Activities Receipts from customers $ 7,455,916 $ 7,469,953 Payments to suppliers (3,487,597) (3,516,717) Payments to employees (1,519,806) (1,424,409) Net Cash Provided by Operating Activities 2,448,513 2,528,827 Cash Flows from Capital and Related Financing Activities Change in restricted deposits held by trustees 53,479 (143,745) Purchase of capital assets (223,011) (615,921) Principal payments on long term debt (885,000) (870,000) Interest paid on long term debt (1,054,864) (1,091,244) Transfer to the City of Paterson (223,205) - Net Cash Used in Financing Activities (2,332,601) (2,720,910) Cash Flows from Investing Activities Interest income Net Change in Cash and Cash Equivalents 116,390 (191,401) Cash and Cash Equivalents, beginning of period 658, ,957 Cash and Cash Equivalents, end of period $ 774,946 $ 658,556 Reconciliation of Income from Operations to Net Cash Provided by Operating Activities Income from Operations $ 1,620,901 $ 1,674,691 Adjustments to reconcile income from operations to net cash provided by operating activities Depreciation 701, ,777 Pension expense, net - GASB 68 adjustment 110,564 5,019 Changes in operating assets and liabilities Accounts receivable (71,759) 82,770 Prepaid expenses 86,897 (97,127) Accounts payable (27,314) (34,179) Accrued expenses and payroll taxes 23,002 4,925 Deferred revenue - 25,977 Compensated absences 4,663 (2,026) Net Cash Provided by Operating Activates $ 2,448,513 $ 2,528,827 See accompanying notes to financial statements. 14.

19 Parking Authority of the City of Paterson, NJ Notes to Financial Statements 1. Organization and Summary of Significant Accounting Policies Reporting Entity The Parking Authority of the City of Paterson, NJ (the "Authority") is a public body organized and existing under the provisions of Parking Authority Law of the State of New Jersey of 1948, New Jersey Statutes Annotated 40:11A. The Authority was created on October 7, 1948 by an ordinance of the Board of Public Works of the City of Paterson to develop, operate, maintain and improve parking facilities within the City of Paterson. Pursuant to the mandates of the "Local Authorities Fiscal Control Law" (N.J.S.A. 40A:5-1 et seq.), the Authority is considered an independent entity, and is required to submit audited financial statements, on an annual basis, to the Division of Local Government Services, Department of Community Affairs, State of New Jersey. Although the Authority's members are appointed by the Governing Body of the Township, the legal form of the Authority is that it is not financially accountable to the Township and no service contract with the City of Paterson exists for specific services to be performed. As a result, the financial statements of the Authority are not included in those of the City of Paterson. The Authority owns and operates twenty parking facilities in the City of Paterson. The Board of Commissioners of the Authority consists of seven members, two of which are appointed by the Mayor of the City of Paterson and five of which are appointed by the City Council of the City of Paterson. As a public body, under existing statute, the Authority is exempt from Federal, State and Local taxes. Basis of Presentation The Authority s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ( GAAP ), as applied to governmental units. The Governmental Accounting Standards Board ("GASB") is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The financial statements of the Authority have been prepared on the accrual basis of accounting and in accordance with GAAP applicable to enterprise funds of local governments. Revenues are recognized when earned and measurable. Expenses are recognized when incurred, if measurable. The accounting policies of the Authority are required to conform to the accounting principles applicable to local authorities, which have been prescribed by the Bureau of Authority Regulation, Division of Local Government Services, Department of Community Affairs, State of New Jersey. The Authority is required to prepare its financial statements in conformity with accounting principles generally accepted in the United States of America. 15.

20 Parking Authority of the City of Paterson, NJ Notes to Financial Statements 1. Organization and Summary of Significant Accounting Policies (continued) Budgetary Data Management prepares a proposed budget, which is presented to the Authority s Board of Commissioners for review and approval. Prior to adoption by the Board of Commissioners, these budgets are reviewed and legally approved by the State of New Jersey, Division of Local Government Services. Description of Net Position The Authority maintains unrestricted and restricted funds to account for its assets, liabilities, revenues, expenses and net position. Unrestricted net position is used to account for the unrestricted revenue sources and expenses in connection with the Authority s operations. Restricted net position is used to account for assets set aside for payment of debt service and capital activity. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the allowance for doubtful accounts, the useful lives of capital assets and depreciation expense. Cash and cash equivalents Cash and cash equivalents consist of cash and highly liquid investments purchased with an original maturity of three months or less. The Authority maintains cash balances at several financial institutions. Revenue Recognition and Receivables Revenues are recognized in the period services are provided. During the normal course of business, the Authority grants unsecured credit to customers whom consist of governmental institutions and commercial users of the Authority s parking facilities. The Authority determines the allowance for doubtful accounts based on management s evaluation of anticipated collectability of outstanding accounts and past collection experience. Management considers receivables at fully collectible. Accordingly, there is no allowance for doubtful accounts. If, in the future, management determines that amounts may be uncollectible, an allowance will be established and operations will be charged when that determination is made. The Authority has not written off any accounts receivable during the years ended. 16.

21 Parking Authority of the City of Paterson, NJ Notes to Financial Statements 1. Organization and Summary of Significant Accounting Policies (continued) Restricted deposits Held by Trustees Restricted deposits held by trustees are recorded in the financial statements at fair value, which is based on quoted market price and consist of cash and cash equivalents. Investment income is recorded on an accrual basis. Realized and unrealized gains and losses are reported in investment income. Capital Assets, Net Capital Assets are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the related assets as follows: Parking meters Vehicles Equipment Furniture and fixtures Commercial rental improvements Parking facilities and improvements 5 Years 5 Years 5-7 Years 10 Years 40 Years Years Expenditures for maintenance and repairs are charged to expense, and renewals and betterments are capitalized. Upon sale or retirement, the cost of the assets and related accumulated depreciation are removed from the accounts, and the resulting gain or loss is included in the financial statements within non-operating revenues. Valuation of Long-Lived Assets The Authority reviews long-lived assets, including property and equipment, for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Management has determined that no assessment was required for the periods presented in these financial statements. Prepaid Financing Costs Bond insurance costs are amortized on a straight-line basis over the term of the related bond. Bond Discount and Premiums Discounts and premiums are amortized on a straight-line basis over the term of the related bond. Advertising The Authority expenses advertising costs as they are incurred. Advertising costs expensed for the year ended was $34,863 and $19,

22 Parking Authority of the City of Paterson, NJ Notes to Financial Statements 1. Organization and Summary of Significant Accounting Policies (continued) Deferred Outflows and Inflows of Resources The Statement of Net Position reports separate sections for deferred outflows of resources and deferred inflows of resources. Deferred outflows of resources, represents a reduction of net position that applies to a future period(s) and will be recognized as an outflow of resources (expense) at that time. Deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and will be recognized as an inflow of resources (revenue) at that time. The Authority is required to report the following as deferred outflows of resources and deferred inflows of resources: Defined Benefit Pension Plans - The difference between expected (actuarial) and actual experience, changes in actuarial assumptions, net difference between projected (actuarial) and actual earnings on pension plan investments, changes in the Authority s proportion of expenses and liabilities to the pension as a whole, differences between the Authority s pension contribution and its proportionate share of contributions, and the Authority s pension contributions subsequent to the pension valuation measurement date. Net Position Net Investment in Capital Assets Net investment in capital assets, consist of capital assets of the projects owned and operated by the Authority less accumulated depreciation and debt associated with the projects. Restricted In accordance with the terms of the various bond resolutions, cash and cash equivalents of all funds required under such bond resolutions are classified as restricted assets. The amounts by which the restricted assets exceed the corresponding liabilities are restrictions of net position, as these excesses are not available for the payment of current operating expenses. Residual amounts are treated according to the appropriate bond resolutions. Unrestricted The unrestricted net position may be designated for specific purposes by management and/or the government board. During fiscal year 2015, the cumulative change in accounting principle for the Authority's net, pension liability that was required to be recorded under GASB Statement No. 68, Accounting and Financial Reporting for Pensions, was also included as a component of restricted net position. 18.

23 2. Cash and Cash Equivalents Parking Authority of the City of Paterson, NJ Notes to Financial Statements Cash and cash equivalents are comprised of the following as of : Cash and money market accounts $ 774,946 $ 658,556 In accordance with GASB Statement No. 40, Deposit and Investment Risk Disclosures, the Authority has assessed the certain risks related to its cash and cash equivalents and restricted deposits held by trustees. Custodial credit risk is the risk that in the event of a bank failure, the authority s deposits may not be returned to it. The Authority does not have a policy for custodial credit risk. Federal depository insurance and New Jersey's Governmental Unit Deposit Protection Act mitigate this risk. As of of the Authority s bank balances of $863,479 and $817,449, $283,318 and $289,549 was covered by Federal depository insurance and $580,157 and $527,900 was covered by New Jersey's Governmental Unit Deposit Protection Act for all governmental units deposits in excess of Federal deposit maximums, respectively. New Jersey statutes permit the deposit of public funds in institutions located in New Jersey, which are insured by the Federal Deposit Insurance Corporation (FDIC), the Savings Association Insurance Fund (SAIF), or by any other agencies of the United States of America that insures deposits or the State of New Jersey Cash Management Fund. New Jersey statutes require public depositories to maintain collateral for deposits of public funds that exceed insurance limits as follows: The market value of the collateral must equal five percent (5%) of the average daily balance of public funds; or If the public funds deposited exceed seventy-five (75%) percent of the capital funds of the depository, the depository must provide collateral having a market value equal to one hundred (100%) percent of the amount exceeding seventy-five (75%) percent. All collateral must be deposited with the Federal Reserve Bank, the Federal Home Loan Bank Board, or a banking institution that is a member of the Federal Reserve System and has capital funds of not less than $25,000,

24 Parking Authority of the City of Paterson, NJ 2. Cash and Cash Equivalents (continued) Notes to Financial Statements New Jersey statutes permit the Authority to purchase the following types of securities: Bonds or other obligations of the United States of America or obligations guaranteed by the United States of America. This includes instruments such as Treasury bills, notes and bonds. Government money market mutual funds. Any federal agency or instrumentality obligation authorized by Congress that matures within 397 days from the date of purchase, and has a fixed rate of interest not dependent on any index or external factors. Bonds or other obligations of the local unit or school districts of which the local unit is a part. Any other obligations with maturities not exceeding 397 days, as permitted by the Division of Investments. Local government investment pools, such as New Jersey CLASS, and the New Jersey Arbitrage Rebate Management Program. New Jersey State Cash Management Fund. Repurchase agreements of fully collateralized securities, subject to special conditions. 3. Restricted Deposits Held by Trustees Restricted deposits held by trustees represent assets held by financial institutions, under the terms of various obligations. The restricted deposits held by trustees under bond indenture agreements are maintained for the following: Bond Reserve Fund 2004 Bonds $ 581,693 $ 581,633 Bond Service Fund 2004 Bonds 689, ,802 Renewal and Replacement Reserve 284, ,915 City Account 124, , Construction Account 183, ,331 Debt Service Reserve Fund 2005 Bonds 1,235,811 1,235,685 Construction Account 2008A Bonds 24,713 24,710 Debt Service Reserve Fund 2008A Bonds 86,722 86,714 Construction Account 2008B Bonds 11,523 11,522 Debt Service Reserve Fund 2008B Bonds 364, ,405 Sub Operating Expense Fund 2008 Bonds 574, ,828 Reserve Account Fund 2008 Bonds 229, ,478 General Fund 115,821 74,249 Total Restricted Deposits Held by Trustees $ 4,506,998 $ 4,560,

25 Parking Authority of the City of Paterson, NJ Notes to Financial Statements 3. Restricted Deposits Held by Trustees (continued) The Authority s restricted deposits held by trustees are subject to various risks. Among these risks are interest rate risk and credit risk. Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. The following table summarizes the maturities of restricted deposits held by trustees as of : 2015 Investment maturities (in years) Investment Type Fair Value Less than 1 1 to 2 More than 2 Money market funds $ 4,506,998 $ 4,506,998 $ - $ Investment maturities (in years) Investment Type Fair Value Less than 1 1 to 2 More than 2 Money market funds $ 4,560,477 $ 4,560,477 $ - $ - Based upon existing investment policies, the Authority is generally not exposed to interest rate risk as investments mature in one year or less or are held to maturity. All current investments or underlying investments are U.S. Treasury bills or certificates of deposit, thereby mitigating credit risk, concentration of credit risk and interest rate risks nor are its deposits and investments exposed to foreign currency risks. 21.

26 Parking Authority of the City of Paterson, NJ Notes to Financial Statements 4. Capital Assets The major classification of capital assets at are as follows: Balance Balance December 31, December 31, 2014 Additions Retirements 2015 Land $ 5,373,476 $ 53,945 $ - $ 5,427,421 Parking meters 502,602 12, ,831 Vehicles 136,889 36, ,720 Equipment 1,357,394 4,135-1,361,529 Furniture and fixtures 51, ,892 Construction in progress 124,483 63, ,494 Commercial rental improvements 1,162,421 8,946-1,171,367 Parking facilities and improvements 30,028,803 43,915-30,072,718 Total Capital assets 38,737, ,012-38,960,972 Less: Accumulated depreciation 16,499, ,559-17,201,191 Net Capital Assets $ 22,238,328 $ (478,547) $ - $ 21,759,781 Balance Balance December 31, December 31, 2013 Additions Retirements 2014 Land $ 5,304,009 $ 69,467 $ - $ 5,373,476 Parking meters 488,372 14, ,602 Vehicles 136, ,889 Equipment 1,355,634 1,760-1,357,394 Furniture and fixtures 46,572 5,320-51,892 Construction in progress 119,533 4, ,483 Commercial rental improvements 951, ,019-1,162,421 Parking facilities and improvements 29,982,400 46,403-30,028,803 Total Capital assets 38,384, ,149-38,737,960 Less: Accumulated depreciation 15,630, ,777-16,499,632 Net Capital Assets $ 22,753,956 $ (515,628) $ - $ 22,238,328 Depreciation expense for years ended was $701,559 and $868,777, respectively. 22.

27 5. Deferred Bond Insurance Costs Parking Authority of the City of Paterson, NJ Notes to Financial Statements The Authority incurred bond insurance costs in relation to the issuance of revenue bonds. These amounts have been capitalized and are being amortized over the life of the bonds. Amortization expense for the years ended totaled $33,294 for both years. 6. Long-Term Debt As of, long-term debt, including capital lease obligations, consists of the following: The Parking Authority of the City of Paterson, NJ Series 2004B Tax Exempt Revenue Refunding Bonds, issued January 15, 2004 in the amount of $2,350,000. Series bonds in the amount of $1,950,000, bearing interest at rates of 2.0% to 4.0%, payable semi-annually, with principal due in various installments annually through Term bond in the amount of $400,000, bearing interest at 3.85%, principal due October 1, The bonds are secured by the Authority's net revenue, as defined in the bond indentures. $ 400,000 $ 590,000 The Parking Authority of the City of Paterson, NJ Series 2004C Tax Exempt Revenue Bonds, issued January 15, 2004 in the amount of $2,495,000. Series bonds in the amount of $1,305,000, bearing interest at rates of 2.0% to 3.625%, payable semiannually, with principal due in various installments annually through Term bonds in the amount of $1,190,000, bearing interest at rates of 4.0% to 4.35%, principal due through October The bonds are secured by the Authority's net revenue, as defined in the bond indentures. 1,190,000 1,315,000 The Passaic County Improvement Authority, Series 2005A Tax Exempt Parking Facility Revenue Bonds, issued May 15, 2005 in the amount of $14,535,000. Series bonds in the amount of $6,600,000, bearing interest at rates of 3.1% to 4.25%, payable semi-annually, with principal due in various installments annually through Term bonds in the amount of $7,935,000, bearing interest at rates of 4.5% to 5.0%, principal due through April The bonds are secured by the Authority's net revenue, as defined in the bond indentures. 12,115,000 12,495,

28 6. Long-Term Debt (continued) Parking Authority of the City of Paterson, NJ Notes to Financial Statements The Passaic County Improvement Authority, Series 2005B Taxable Parking Facility Revenue Bonds, issued May 15, 2005 in the amount of $3,835,000. Series bonds in the amount of $555,000, bearing interest at rates of 4.54% to 5.1%, payable semi-annually, with principal due in various installments annually through Term bonds in the amount of $3,280,000, bearing interest at rates of 5.25% to 5.375%, principal due through April The bonds are secured by the Authority's net revenue, as defined in the bond indentures. $ 3,280,000 $ 3,370,000 The Parking Authority of the City of Paterson, NJ, Series 2008A Taxable Parking Facility Revenue Bonds, issued June 15, 2008 in the amount of $865,000. Series bonds, bearing interest at rates of 5.6% to 7.5%, payable semi-annually, with principal due in various installments annually through The bonds are secured by the Authority's net revenue, as defined in the bond indentures. 355, ,000 The Parking Authority of the City of Paterson, NJ, Series 2008B, Taxable Parking Facility Revenue Bonds, issued June 15, 2008 in the amount of $3,635,000. Series bonds, bearing interest at rates of 6.419% to 7.5%, payable semi-annually, with principal due in various installments annually through The bonds are secured by the Authority's net revenue, as defined in the bond indentures. 3,635,000 3,635,000 20,975,000 21,860,000 Less: Current Portion (930,000) (885,000) Less: Unamortized original issue discount (50,585) (53,647) Add: Unamortized original issue premium 72,618 78,514 Long term debt, net of current portion $ 20,067,033 $ 20,999,

29 6. Long-Term Debt (continued) Parking Authority of the City of Paterson, NJ Year Ending Notes to Financial Statements The following is a schedule of future minimum principal and interest payments on the Authority's long term debt as of December 31, 2015: December 31, Principal Interest Amount 2016 $ 930,000 $ 1,016,570 $ 1,946, , ,399 1,939, , ,217 1,890, , ,666 1,893, , ,394 1,894, ,445,000 3,655,979 9,100, ,455,000 2,074,053 7,529, ,280, ,056 5,974,056 $ 20,975,000 $ 11,193,334 $ 32,168,334 Total interest expense incurred on long-term debt totaled $1,046,272 and $1,087,207 for the years ended, respectively. 7. Pension Plan All eligible employees of the Authority are covered by the Public Employees Retirement System (PERS), a cost-sharing, multiple-employer defined benefit pension plan which has been established by state statute and is administered by the New Jersey Department of Pension and Benefits (Division). According to the State of New Jersey Administrative Code, all obligations of the System will be assumed by the State of New Jersey should the System terminate. The Division issues a publicly available financial report that includes the financial statements and required supplementary information for the Public Employees Retirement System. The reports may be obtained by writing to the Division of Pensions and Benefits, P.O. Box 295, Trenton, New Jersey or can be accessed on the internet at Plan Description PERS was established as of January 1, 1955, under the provisions of NJSA 43:15A to provide retirement, death, disability, and medical benefits to certain qualified members. The Public Employees Retirement system is a cost-sharing, multiple-employer plan. Membership is generally required for substantially all full-time employees of the State or any county, municipality, school district or public agency provided the employee is not a member of another state-administered retirement system or other state or local jurisdiction. 25.