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HomeMy Public PortalAbout2012 AuditMember American Institute of Certified Public Accountants BRUCE D. CULLEY, C.P.A., P.C. 3000 BROOKTREE LANE, SUITE 210 GLADSTONE, MISSOURI 64119 816-453-1040 FAX: 816-453-0721 bruceculley@sbcglobal.net CITY OF PARKVILLE, MISSOURI AUDITED FINANCIAL STATEMENTS Member Missouri Society of Certified Public Accountants FOR THE YEAR ENDED DECEMBER 31, 2012 CITY OF PARKVILLE, MISSOURI TABLE OF CONTENTS Independent Auditor.'s Report ..................................................................................................... 1 - 2 Management's Discussion and Analysis ..................................................................................... 3 - I I Basic Financial Statements Government-wide Financial Statements Statement ofNet Assets .................................................................................................. 12 Statement of Activities ................................................................................................... 13 Fund Financial Statements Governmental Funds Balance Sheet .......................................................................................................... I 4 Reconciliation of the Balance Sheet of the Governmental Funds to the Statement of Net Assets ..................................................................................... 15 Statement of Revenues, Expenditures and Changes in Fund Balances -Governmental Funds ........................................... I 6 -17 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities ................................................................................ I 8 Proprietary Funds Statement of Net Assets ........................................................................................... 19 Statement of Revenues, Expenditures and Changes in Fund Ba!ances .................... 20 Statement of Cash Flows .......................................................................................... 2 I Notes to Basic Financial Statements ..................................................................................... 22 -50 Required Suppleme~tary Information ......................................................................................... 5 I -56 Other Supplementary Information Combining and Individual Fund Statement Schedules Combining Balance Sheet -Nonmajor Governmental Funds ........................................ 57 -58 Combining Statement of Revenues, Expenditures and Changes in Fund Balances -Nonmajor Governmental Funds ............................................................. 59 -60 BRUCE D. CULLEY C.P.A., P.C. 3000 Brooktree Lane, Suite 210 Gladstone, MO. 64119 816-453-1040 Fax: 816-453-0721 INDEPENDENT AUDITOR'S REPORT Honorable Mayor and Board of Aldermen City of Parkville, Missouri I have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Parkville, as of and for the year ended December 31, 2012, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility My responsibility is to express opinions on these financial statements based on my audit. I 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 Iplan 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, I express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of I significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinions. Opinions In my opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Parkville, Missouri, as of December 31, 2012, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementmy l!iformation Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and budgetary comparison information on pages 3 - 11 and 51 -55 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. I 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 my inquiries, the basic financial statements, and other knowledge I obtained during my audit of the basic financial statements. I 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. Gladstone, Missouri August l, 2013 ~----(Aw~ ce Culley Certified Public Account 2 CITY OF PARKVILLE, MISSOURI MANAGEMENT'S DISCUSSION AND ANALYSIS As management of the City of Parkville, we offer readers of the City of Parkville' s financial statements this narrative overview and analysis of the financial activities of the City of Parkville for the fiscal year ended December 31, 2012. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal. Financial Highlights I. The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $7,929,742 (net assets). 2. The government's total net assets increased by $779,720. The net assets increase is found in governmental activities where there is a positive $598,251 net change, and a positive $181,469 change in net assets reported in business-type activities. 3. As of the close of the current fiscal year, the City's governmental funds reported combined ending fund balances of $4,787,911, an increase of $976,934 from the prior year. The receipt of funds from a legal settlement ($1,075,012) and a refund of costs ($80,250) connected with the Highway 9 bridge construction was responsible for the increase. 4. At the end of the current fiscal year, fund balance for the general fund was $542,597, or approximately 14% of total 2012 general fund expenditures. 5. The City's total debt decreased by $468,420, (3.1 %) during the fiscal year. 6. The City expended $176,422 on capital equipment for the City and $548,281 for Brink Myers Road and Brush Creek Sewer including interest that was capitalized. 7. The City refinanced the temporary notes on Brink Myers Road and Brush Creek Sewer adding an additional $145,000 to the temporary notes. 8. The City's proprietary fund showed an increase in net assets of$181,469. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements comprise three components; government-wide financial statements (Pages 12 through 13), fund financial statements (Pages 14 through 18), and notes to the financial statements beginning on Page 22. This report also contains other supplementary information in addition to the basic fmancial statements themselves. 3 Government-wide Financial Statements. The government-wide financial statements (Pages 12 -13) are designed to provide readers with a broad overview of the City's finances, in a manner similar to a private-sector business. The statement of net assets (Page 12) presents information on all of the City's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities (Page 13) presents information showing how the government's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e. g., uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, streets, economic development, and culture and recreation. The business-type activities of the City include sewer service. Fund Financial Statements. A jimd is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into two categories: governmental funds and proprietary funds. Govem111e11tal Funds. Governmental jimds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental fimds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental jimds and governmental activities. 4 The City maintains four individual major or governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund, transportation special revenue fund, capital projects fund, and debt service fund, each of which are considered to be major funds. Data from the other twelve governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report. The City adopts an annual appropriated budget for its general fund. A budgetary comparison statement has been provided for the general fund to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on Pages 14 through 18 of this report. Proprietary F1111ds. The City maintains one type of proprietary fund. Enterprise fimds are used to report the same functions presented as business-type activities in the government­ wide financial statements. The City uses enterprise funds to account for its sewer service operations. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund is a major fund of the City. The basic proprietary fund financial statements can be found on Pages 19 through 21 of this report. Notes to the Financial Statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on Pages 22 through 50 of this report. . Other Information. In addition to the basic financial statements and accompanying notes, this report presents certain required supplemental i1iformation concerning the City's infrastructure reporting. As recommended by American Public Works Association, the modified approach for infrastructure was developed as a compromise to provide an alternative to depreciating eligible infrastructure assets. The basic premise behind the modified approach is that no depreciation is incurred if infrastructure assets are being maintained or preserved at a certain level. The City provides an up-to-date inventory of eligible assets by location, type and physical parameters and performs replicable condition assessments, triennially. Results are summarized using a measurement scale, seen on Pages 52 -53 of this report. Estimated amounts needed to maintain and preserve these assets at the City's established service level are budgeted for annually. The combining and individual fund statements referred to earlier in connection with non­ major or governmental funds are presented on Pages 56 through 60 of this report. 5 Government-wide Financial Analysis As noted earlier, net assets may serve over time as a usefol indicator of a government's financial position. In the case of the City, assets exceeded liabilities by $7,929,742 at the close of the most recent fiscal year. Governmental Activities. Governmental activities increased the City's net assets by $598,251. Business-type Activities. The change in net assets for business-type activities increased net assets by $181,469. The net assets for business-type activities in the current fiscal year are $3,255,446. Financial Analysis of the Government's Funds As noted earlier, the City uses fond accounting to ensure and demonstrate compliance with finance-related legal requirements. Gover11me11tal fimds. The focus of the City's governmental fimds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is usefol in assessing the City's financing requirements. In particular, unreserved fond balances may serve as a usefol measure of a government's net resources available for spending at the end of the fiscal ye·ar. As mentioned earlier in this analysis, at the end of the current fiscal year, the City's governmental fonds reported combined ending fond balances of $4,787,911. Of that, $2,818,583 is non-spendable, restricted or assigned for various purposes. The general fond is the chief operating fond of the City. At the end of the current fiscal year the general fond balance was $542,597. As a measure of the general fond's liquidity, it is usefol to compare both unreserved fond balance to total fond expenditures. Unreserved, undesignated fond balance represents 13 % of total general fond expenditures. The City's fond balance of the general fond decreased by $60,579 during the current fiscal year. The City's 2012 revenues and transfers in from other fonds totaled $4,283,985 which is $387,149 higher than 2011. The City's 2012 expenses and transfers out to other fonds totaled $4,316,256, which is $419,420 higher than the prior year. The debt service fond has a total fond balance of $1,041,538, all of which is reserved for the payment of debt service. There was a net increase in the debt service fond balance of $II 0,599. Expenses in the debt service fond exceeded revenue by $103,40 I. This was offset by transfers to the debt service fond of $214,000. The capital projects fond has a total fond balance of $57,141. There were considerable expenditures on capital projects during the year on Brink Myers Road. The notes payable in connection with Brink Myers Road and Brush Creek Sewer were refinanced during the year. The reason for the decline in fond balance was the increase in capital expenditures. 6 The City uses capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net ofrelated debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Current and CITY OF PARKVILLE, MISSOURI NET ASSETS SUMMARY DECEMBER 31, 2012 AND 2011 Governmental Activities Business~type Activities 2012 2011 2012 2011 Total 2012 2011 Other Assets Capital Assets $ 6,726,871 $ 5,781,039 $ 1,376,562 $ 1,086,971 $ 8,103,433 $ 6,868,010 20, 148,467 27,016,477 15,294,658 15,973,693 3,919,507 4,174,774 19,214,165 Total Assets 22,02 I ,529 2 I, 754, 732 Bonds and Notes Outstanding Other Liabilities Total Liabilities Net Assets 15,415,214 1,932,019 17,347,233 Invested in Capital Asset: I 20,556 Restricted I ,644, I 98 Unrestricted 2,909,542 15,732,015 1,946,672 17,678,687 241,678 1,929,825 1,904,542 5,296,069 1,992,127 48,496 2,040,623 1,927,380 28,338 1,299,728 5,261,745 2,136,721 51,047 2, 187,768 2,038,053 28,338 1,007,586 27,317,598 17,407,341 1,980,515 19,387,856 2,047,936 1,672,536 4,209,270 I 7,868,736 1,997,719 19,866,455 2,279, 731 1,958, 163 2,912,128 Total Net Assets $ 4,674,296 $ 4,076,045 $ 3,255,446 $ 3,073,977 $ 7,929,742 $ 7,150,022 7 CITY OF PARKVILLE STATEMENT OF ACTIVITIES SUMMARY FOR THE YEARS ENDED DECEMBER31, 2012 AND 2011 Governmental Activities Business-txEe Activities Total 2012 2011 2012 2011 2012 2011 Program Revenues Charges for Services $ 558,668 $ 343,913 $ 1,026, 169 $ 947,588 $ 1,584,837 $ 1,291,501 Operating Grants and Contributions 56,650 8,076 56,650 8,076 Capital Grants and Contributions 443,229 446,314 35,998 443,229 482,312 General Revenues Property Taxes 1,378,901 1,314,778 1,378,901 1,314,778 Franchise Taxes 834,696 898,765 834,696 898,765 Sales Taxes 1,461,532 1,549,084 1,461,532 1,549,084 Investment Earnings 57,930 76,726 57,930 76,726 Intergovernmental 58,582 41,992 58,582 41,992 Se\ver Admin Fee 75,000 70,000 75,000 70,000 TlF 419,707 458,121 419,707 458,121 FEMA 217,450 217,450 Other 193,023 133,290 6,611 199,634 133,290 Total Revenues 5,755,368 5,341,059 1,032,780 983,586 6,788,148 6,324,645 Expenses General Government 1,351,454 1,074,457 1,351,454 1,074,457 Public Safety -Police 1,041,953 977,504 1,041,953 977,504 Public Safety -Court 139,918 141,755 139,918 141,755 Public Works 704,036 768,341 704,036 768,341 Culture and Recreation 269,736 243,818 269,736 243,818 Economic Development 294,161 296,799 294,161 296,799 Depreciation 248,436 224,206 248,436 224,206 TlF 415,237 458,028 415,237 458,028 Interest and Fees 315,463 288,257 315,463 288,257 Other Capital Expenditures 348,415 175, 139 348,415 175,139 Other 28,308 28,308 Se\ver 851,311 826,319 851,311 826,319 Total Expenses 5,157,117 4,648,304 851,31 l 826,319 6,008,428 5,474,623 Change in Net Assets 598,251 692,755 181,469 157,267 779,720 850,022 Net Assets, Beginning of Year 4,076,045 3,383,290 3,073,977 2,916,710 7,150,022 6,300,000 Net Assets, End of Year $ 4,674,296 $ 4,076,045 $ 3,255,446 $ 3,073,977 $ 7,929,742 $ 7,150,022 8 Proprietmy Funds. The City's proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. The net assets of the sewer service at the end of the year total $3,255,466. The sewer fund had revenues exceeding expenditures by $181,466 in 2012. This compares favorably with an increase in the net assets of$157,266 in 2011. Capital Asset and Debt Administration Capital Assets. The City's investment in capital assets for its governmental and business­ type activities as of December 31, 2012, totals $19,214,165. The largest capital expenditure was connected with the Brink Myers Road project in the amount of $548,281 which was primarily for sewer improvements. A legal settlement of $1,075,012 was received as reimbursement for the cost of rebuilding a retaining wall. Land City of Parkville, Missouri Capital Assets (Net of Depreciation) Governmental Business-type Activities activities 2012 2012 $ 869,880 $ 59,975 Buildings and Improvements 3,409,393 2,200,209 Machinery and Equipment 327,717 61,995 Infrastructure 3,411,294 1,597,328 Construction in Process 7.276,374 Total $15,294,658 $ 3,919,507 Total 2012 $ 929,855 5,609,602 389,712 5,008,622 7.276.374 $12,214,165 Additional information on the City's capital assets can be found in Note 5 of this report. 9 Long-Term Debt. At the end of the current fiscal year, the City had total debt outstanding of $17,407,340. General Obligation Bonds Certificates of Participation NID Limited Obligation · Temporary Notes Revenue Bonds (SRF) 2004A Capital Leases/ Lease-Purchase Deferred Amounts Total City of Parkville, Missouri Outstanding Debt Governmental Activities Business-type Activities 2012 2011 2012 2011 $2,290,000 $ 2,545,000 $ -$ 5,385,000 5,600,000 7,855,000 7,710,000 1,735,000 1,870,000 Total ?012 $2,290,000 5,385,000 7,855,000 1,735,000 170,018 I 79,613 I 70,018 (114,786) (122,985) 87 108 87 108 (27,678) $15 415.2-14 $15 73? 015 $1992126 $2 136 721 $17 407,14.Q 2011 $ 2,545,000 5,600,000 7,710,000 1,870,000 179,613 (35,877) $1].868 736 The general government indebtedness decreased $316,801 and the business government indebtedness decreased $144,595. Economic Factors and Next Year's Budgets and Rates City of Parkville revenue for 2013 is projected to show modest gains over 2012 as the economy continues its gradual strengthening. The City's Property Tax revenue will increase about 2.0% over 2012. This continues a pattern of fairly stable real estate values coupled with the gradually increasing pace of new construction since 2011. Early 2013, however, is showing a dramatic increase in construction with residential building permits and construction starts jumping to levels not seen since before the recession. At the same time, property values and sales have moved upward with the improving real estate market. This bodes well for City revenue for 2014 and beyond as the tax base continues to grow. Current commercial construction remains minimal; however projects are in planning phases to develop several new commercial properties that should produce additional property and sales tax revenue in future years. The decrease of commercial space vacancies to near zero is additional evidence of a strengthening local economy. Since Franchise taxes correlate with the number of homes and commercial buildings in use, this revenue should keep pace with continued development. While the overall economy has improved, the City's sales tax base has come under pressure from competition from businesses located outside the City, including a large grocery store and expansion of a nearby specialty shopping district. This has reduced sales tax revenue expectations for 2013 by 2 to 3%. For 2013, this has been offset by the jump in building permits with the previously mentioned increase in construction so that overall, the City's General Fund 2013 revenue is expected to exceed the budgeted total by a small margin. As in prior years, the City has budgeted cautiously, holding 2013 revenue and expenditure budgets at near 2012 levels. However, City personnel remain optimistic, expecting overall modest, but positive growth in revenue for 2013. Revenue receipts for the first 6 months of 10 2013 give confidence that the budgetary goals will be met or exceeded. City expenditures are well within levels anticipated in the 2013 budget. Contacting the City's Financial Management This report is designed to provide our citizens, taxpayers, customers and creditors with a general overview of the City's finances and to demonstrate the City's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the City Clerk's office, Parkville, Missouri. 1 I CITY OF PARKVILLE, MISSOURI STATEMENT OF NET ASSETS DECEMBER 31, 2012 Governmental Business-Type Activities Activities Total Assets Cash and Cash Equivalents $ 3,600,561 $ 1,159,346 $ 4,759,907 Restricted Cash and Investments 1,251,606 28,338 1,279,944 Receivables, Net of Allowance for Uncollectibles Taxes 1,585, 722 1,585,722 Accounts 48,650 98,781 147,43 I Deferred Charges I 72,098 90,097 262, 195 Prepaid Items 68,234 68,234 Capital Assets not being Depreciated Land 869,880 59,975 929,855 Construction in Progress 7,276,374 7,276,374 Infrastructure 3,375,563 3,375,563 Capital Assets, Net of Accumulated Depreciation Buildings and Improvements 3,409,393 2,200,209 5,609,602 Machinery and Equipment 327,717 61,995 389,712 Infrastructure 35,731 1,597,328 1,633,059 Total Assets 22,021,529 5,296,069 27,317,598 Liabilities Accounts Payable and Other Current Liabilities 216,862 32,917 249,779 Accrued Interest Payable 101,190 2,094 103,284 Customer Deposits 13,485 13,485 Unearned Revenue 1,550,000 1,550,000 Other 63,967 63,967 Bonds and N ates Due Within One Year 8,346,80 I 150,079 8,496,880 Due in More Than One Year 7,068,413 1,842,048 8,910,461 Total Liabilities I 7,347,233 2,040,623 19,387,856 Net Assets Invested in Capital Assets, Net of Capital Related Debt 120,556 1,927,380 2,047,936 Restricted for Debt Service 1,041,538 28,338 1,069,876 Capital Projects 57,141 57,141 Community Betterment 545,519 545,519 Unrestricted 2,909,542 1,299, 728 4,209,270 Total Net Assets $ 4,674,296 $ 3,255,446 $ 7,929,742 The accompanying notes are an integral part of the financial statements. 12 CITY OF PARKVILLE, MISSOURI STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 3I, 2012 Net (Expense) Revenue and Program Revenues Changes in Net Assets Operating Capital Prirn!!!l:'. Government Charges for Grants and Grants and Governmental Business-type Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Primary government: Governmental Activities General Government $ 1,351,454 $ 233,393 $ 56,650 $ 443,229 $ (618,182) $ $ (618,182) Public Safety -Police 1,041,953 325,275 (716,678) -(716,678) Public Safety -Court 139,918 (139,918) (139,918) Public Works 704,036 (704,036) (704,036) Culture and Recreation 269, 736 -(269,736) (269,736) Economic Development 294,161 (294,161) (294,161) Depreciation 248,436 (248,436) (248,436) TlF 415,237 (415,237) (415,237) Infrastructure 196,150 (196,150) (196,150) Interest and Fees 315,463 (315,463) (315,463) Net Adjustment 28,308 (28,308) (28,308) Other Capital Expenditures 152,265 (152,265) (152,265) Total Governmental Activities 5,157,117 558,668 56,650 443,229 (4,098,570) (4,098,570) Business-type Activities Se\ver 851.311 1.032.780 181,469 181,469 Total Business-type Activities 851,311 1,032,780 181,469 181,469 Total Primary Government $ 6,008,428 $ 1,591,448 $ 56,650 $ 443,229 (4,098,570) 181,469 (3,917,101) General Revenues Property Tax 1,378,901 1,378,901 Franchise Tax 834,696 834,696 Sales Tax 1,461,532 1,461,532 Unrestricted Investment Earnings 57,930 57,930 lntergovcmmenlal 58,582 58,582 Se\Ver Admin Fees 75,000 75,000 TIF 419,707 419,707 FEMA 217,450 217,450 Other 193,023 193,023 Total General Revenues 4,696,821 -4,696,821 Change in Net Assets 598,251 181,469 779,720 Net Assets, Beginning of the Year 4,076,045 3,073,977 7,150,022 Net Assets, End of Year $ 4,674,296 $ 3,255,446 $ 7,929,742 The accompanying notes are an integral part of the financial statements. n CITY OF PARKVILLE, MISSOURI BALANCE SHEET GOVERNMENTAL FUNDS DECEMBER 31, 2012 Transportation Capital Debt Other Total General Special Revenue Projects Service Governmental Governmental Fund Fund Fund Fund Funds Assets Cash and Cash Equivalents $ 55 J,043 $ 574,891 $ (3,970) $ 442,225 $ 2,036,372 Restricted Cash [nvestments 984 61,111 643,992 545,519 Receivables, Net of Allo\vnnce for Uncollectibles Taxes 985,301 600,421 Accounts Receivable J,597 47,053 Prepaid Items 68,234 Total Assets $1,606,175 $ 622,928 $ 57,141 $1,686,638 $ 2,581,891 Liabilities and Fund Balance Liabilities Accounts Payable $ 158,278 $ 52,785 $ $ 400 $ 5,399 Bonds Payable Unearned Revenue 905,300 644,700 Total Liabilities J ,063,578 52,785 645,100 5,399 Fund Balances Nonspendable Prepaids 68,234 Restricted for Capital Projects 570,143 57,141 J,081,527 Debt Service 1,041,538 Community Betterment 545,519 Assigned Capital Purposes Unassigned General Fund 474,363 Special Revenue 949,446 Total Fund Balances 542,597 570,143 57,141 J,041,538 2,576,492 Total Liabilities and Fund Balances $1,606,175 $ 622,928 $ 57,141 $1,686,638 $ 2,581,891 The accompanying notes are an integral part of the financial statements. 14 Funds $ 3,600,561 1,251,606 1,585,722 48,650 68,234 $ 6,554,773 $ 216,862 1,550,000 1,766,862 68,234 1,708,811 1,041,538 545,519 474,363 949,446 4,787,911 $ 6,554,773 CITY OF PARKVILLE, MISSOURI RECONCILIATION OF THE BALANCE SHEET OF THE GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS DECEMBER 31, 2012 Total Fund Balance in Governmental Fund Balance Sheet Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds. (Note 2) Net Assets of Governmental Activities $ 4,787,911 15,294,658 (15,408,273) $ 4,674,296 The accompanying notes are an integral part of the financial statements. 15 CITY OF PARKVILLE, MISSOURI STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS Revenues Taxes Licenses and Pennits Intergovernmental Charges for Services Fines and Fees Special Assessments Investment Earnings Grants TIF Revenue Sewer Service Fees FEMA Legal Settlement Miscellaneous Total Revenues Expenditures Current General Government Public Safety-Police Public Safety -Court Public Works Economic Development Debt Service Principal Interest Other $ FOR THE YEAR ENDED DECEMBER 31, 2012 General Fund 2,686,751 215,897 58,582 17,496 325,275 26,295 3,665 75,000 217,450 170,873 3,797,284 1,281,001 1,051,966 140,325 960,632 314,774 Transportation Special Revenue Fund $ 656,737 $ 120,346 6,470 52,985 80,250 916,788 152,265 Capital Projects Fuod 24 24 95,598 $ Debt Service Fund Other Governmental Funds 331,640 $ - $ 81 322,883 11,063 665,667 470,000 295,018 4,050 14,078 419,707 1,075,012 22,150 1,530,947 66,403 The accompanying notes are an integral part of the financial statements. 16 Total Government Funds 3,675,128 215,897 58,582 17,496 325,356 443,229 57,930 56,650 419,707 75,000 217,450 1,075,012 273,273 6,910,710 1,499,669 1,051,966 140,325 960,632 314,774 470,000 390,616 4,050 CITY OF PARKVILLE, MISSOURI STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2012 Transportation Capital Debt Other General Special Revenue Projects Service Governmental Fund Fund Fund Fund Infrastructure -196,150 - TIF Expense -- Financing Costs 43,373 - Capital Outlay 409,310 - Total Expenditures 3,748,698 348,415 548,281 769,068 Excess (Deficiency) of Revenues Over (Under) Expenditures 48,586 568,373 (548,257) (103,401) Other Financing Sources (Uses) Note Proceeds -Refinancing 4,855,000 Notes Retired -Refinancing ( 4, 710,000) - Other (28,308) --- Transfers In 486,701 236,799 -214,000 Transfers (Out) (567,558) (569,000) - Total Other Financing Sources (109,165) (332,20 I) 145,000 214,000 Net Changes in Fund Balances After Other Financing Sources (60,579) 236,172 (403,257) 110,599 Fund Balance, Beginning of Year 603, 176 333,971 460,398 930,939 Fund Balance, End of Year $ 542,597 $ 570,143 $ 57,141 $ 1,041,538 $ The accompanying notes are an integral part of the financial statements. 17 Funds - 415,237 154,366 636,006 894,941 - 199,058 - 199,058 1,093,999 1,482,493 2,576,492 $ Total Government Funds 196, 150 415,237 43,373 563,676 6,050,468 860,242 4,855,000 (4,710,000) (28,308) 1,136,558 (1,136,558) 116,692 976,934 3,810,977 4,787,911 CITY OF PARKVILLE, MISSOURI RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITillS DECEMBER 31, 2012 Amounts reported for governmental activities in the statement of activities are different because: Net Change in Fund Balances -Total Government Funds Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. The issuance of long-term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts and similar items when debt is first issued, whereas these amounts are deferred and amortized in the Statement of Activities. This is the net amount of bond principal payments and retired certificates of .. . .. Refinancing transaction in which the bond proceeds exceeded the bonds retired reported as increase in the fund balance. Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Legal settlement reported in the Government Fund as income was treated as Refund from the State of Missouri for infrastructure. Change in Net Assets of Governmental Activities The accompanying notes are an integral part of the financial statements. 18 $ 976,934 476,267 470,000 (145,000) (24,688) (1,075,012) (80,250) $ 598,251 Assets Current Assets CITY OF PARKVILLE, MISSOURI STATEMENT OF NET ASSETS PROPRIETARY FUND -SEWER SERVICE DECEMBER 31, 2012 Cash and Cash Equivalents Restricted Cash and Investments Accounts Receivable Total Current Assets Noncurrent Assets Deferred Charges Capital Assets Land Buildings and Improvements Machinery and Equipment Infrastructure Less Accumulated Depreciation Total Capital Assets Total Noncurrent Assets Total Assets Liabilities Current Liabilities Accounts Payable and Other Current Liabilities Accrued Interest Payable Customer Deposits Payable Current Portion of Revenue Bonds Payable Current Portion of Leases Payable Total Current Liabilities Noncurrent Liabilities Revenue Bonds Payable, Net Lease Payable Total Noncurrent Liabilities Total Liabilities Net Assets Restricted Debt Service Invested in Capital Assets, Net of Related Debt Unrestricted Total Net Assets $ 1,159,346 28,338 98,781 1,286,465 90,097 59,975 5,252,588 233,579 2,005,990 (3,632,625) 3,919,507 4,009,604 5,296,069 32,917 2,094 13,485 140,000 10,079 198,575 1,682, 108 159,940 1,842,048 2,040,623 28,338 1,927,380 1,299,728 $ 3,255,446 The accompanying notes are an integral part of the financial statements. 19 CITY OF PARKVILLE, MISSOURI STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES PROPRIETARY FUND -SEWER SERVICE FOR THE YEAR ENDED DECEMBER 31, 2012 Operating Revenues Charges for Sales and Services Sewer Charges Total Operating Revenues Operating Expenses Cost of Sales and Services Depreciation and Amortization Total Operating Expenses Operating Income N onoperating Revenues (Expenses) Interest Revenue Interest Expense Other Income Grant Total Net Nonoperating Revenues Change in Net Assets Total Net Assets, Beginning of Year Total Net Assets, End of Year $ 1,026,169 1,026,169 537,981 279,273 817,254 208,915 6,611 (34,057) (27,446) 181,469 3,073,977 $ 3,255,446 The accompanying notes are an integral part of the financial statements. 20 CITY OF PARKVILLE, MISSOURI STATEMENT OF CASH FLOWS PROPRIETARY FUND -SEWER SERVICE FOR THE YEAR ENDED DECEMBER 31, 2012 Cash Flows from Operating Activities Receipts from Customers Payments to Suppliers Net Cash Provided by Operating Activities Cash Flows from Capital and Related Financing Activities Payments on Leases Payable Acquisition of Capital Assets Grant Income Principal Paid on Capital Debt Interest Paid on Capital Debt Other Net Cash (Used) by Financing Activities Cash Flows from Investing Activities Interest Received Net Cash Provided by Investing Activities Increase in Cash and Cash Equivalents Cash, Beginning of Year Cash, End of Year Reconciliation of Operating Income to Net Cash Provided by Qperating Activities Operating Income Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities Depreciation Expense Changes in Assets and Liabilities Accounts Receivable Accounts Payable Net Cash Provided by Operating Activities $ 1,020,184 (539,720) 480,464 (9,594) (24,006) (135,000) (34,869) 7,590 (195,879) 6,611 6,611 291,196 896,488 $ 1,187,684 $ 208,915 279,273 (5,985) (1,739) $ 480,464 The accompanying notes are an integral part of the financial statements. 21 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2012 NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICms Reporting Entity The City of Parkville, Missouri (the City), is incorporated under the provisions of the State of Missouri as a fourth class city, which operates under an elected Mayor/Board of Aldermen form of government. Govemment-Wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the activities of the government. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and the major individual enterprise fund are reported as separate columns in the fund financial statements. Measurement Focus, Basis of Acco1111ting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year following the year tl1e taxes are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. 22 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS -CONTINUED DECEMBER 31, 2012 NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED Measurement Focus, Basis of Acco1111ting, and Financial Statement Presentatio11- Conti1111ed Govenunental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. A 90-day availability period is used for.revenue recognition for all govenunental fund revenues except property taxes for which a 30-day availability period is used. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. In applying the susceptible to accrual concept to intergovenunental revenues, the legal and contractual requirements of the numerous individual programs are used as guidance. There are, however, essentially two types of these revenues. In one, monies must be expended for the specific purpose or project before any amounts will be paid to the City; therefore, revenues are recognized based upon the expenditures recorded. In the other, monies are virtually unrestricted as to purpose of expenditure and are usually revocable only for failure to comply with prescribed requirements. These resources are reflected as revenues at the time of receipt, or earlier if the susceptible to accrual criteria are met. Property taxes, sales taxes, franchise taxes, interest associated with the current fiscal period, and certain state and federal grants and entitlements are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the City. While property taxes are shown on the balance sheet as current assets of the City, they are not recognized as revenue at year end because statutory provisions prohibit their use until the year for which they were raised and budgeted. Instead, they are offset by deferred revenue accounts. 23 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS-CONTINUED DECEMBER 31, 2012 NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED Measure111e11t Focus, Basis of Acco1111ti11g, a11d Fi11a11cia/ Statement Prese11tatio11 - Co11ti11ued The City reports the following major governmental funds: General Fund -This fund is the City's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. Transportation Special Revenue Fund -This fund is used to account for the sales tax collected for capital improvements and the expenditures for the related items. Capital Projects Fund -This fund accounts for the financing and acquisition and construction of various citywide improvements. Debt Service Fund -This fund accounts for the accumulation of resources for, and the payment of, principal and interest on long-term general obligation debt of governmental funds. Revenue and expenses for each of the several debt service obligations are kept separate and accounted for independently of the other obligations so that funds available for each debt service obligation are used only for that obligation. The City reports the following major proprietary fund: Sewer Service -This fund accounts for the provision of waste and sewer services to t11e general public. All activities necessary to provide such services are accounted for in this fund, including administration, operations, maintenance, financing and related debt service, and billing and collection. As a general rule the effect of inter-fund activity has not been eliminated from the government-wide financial statements. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. 24 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS-CONTINUED DECEMBER 31, 2012 NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED Measurement Focus, Basis of Acco1111ting, and Financial Statement Presentation - Continued Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the sewer fund are charges to customers for sales and services. Operating expenses for the sewer fund include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. Equity Classifications In the city-wide financial statements, equity is classified as net assets and displayed in three components: I. ln".ested in capital assets, net of related debt -Consists of capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction or improvement of these assets. 2. Restricted net assets -Consists of net assets with constraints placed on their use either by (a) external groups such as creditors, grantors, contributors or laws or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislation. 3. Unrestricted net assets -All other net assets that do not meet the definition of"invested in capital assets, net ofrelated debt" or "restricted". 25 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS-CONTINUED DECEMBER 31, 2012 NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED F1111d Balance Classifications The Governmental Accounting Standards Board (GASB) released Statement 54-­ "Fund Balance Reporting and Governmental Fund Type Definitions" (GASB 54) on March 11, 2009, which is effective for the City's fiscal year ending December 31, 2011. This Statement is intended to improve the usefulness of the amounts reported in fund balance by providing more structured classifications. Under GASB 54, fund balance is reported under the following five classifications: 1. Non-spendable Fund Balance -consists of amounts that are not in a spendable form or are required to be maintained intact. 2. Restricted Fund Balance -consists of amounts that can be spent only for the specific purposes stipulated by external resource providers, constitutionally, or through enabling legislation. The Restricted for Debt Service and Restricted for ·Capital Projects balances reflect amounts that are restricted for debt service and construction or other capital outlay projects. 3. Committed Fund Balance -consists of amounts that can be used only for the specific purposes determined by a formal action of the District's highest level of decision-making authority (tl1e Board of Aldermen) and do not lapse at year end. The committed fund balance consists of general board reserves. 4. Assigned Fund Balance -consists of amounts intended for a specific purpose by the Board of Aldermen that has been delegated autl10rity to assign amounts. This fund balance classification reflects funds assigned for capital projects. 5. Unassigned Fund Balance -consists of any remaining fund balance that has not been reported in any other classification. Caslz, Caslz Eq11ivale11ts a11d J11vestme11ts Cash and investments of the individual funds are combined to form a pool which is managed by the Finance Department. Each fund's equity in the pool is included in "cash and cash equivalents" in the financial statements. Investment earnings, including interest income, are allocated to the funds required to accunmlate interest. If a fund is not required to account for its own earnings by law or regulation, the earnings are allocated to the General Fund. 26 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS-CONTINUED DECEMBER 31, 2012 NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED Cash, Cash Equivalents a11d J11vest111e11ts -Continued Missouri state statutes authorize the City, with certain restrictions, to deposit funds in open accounts and certificates of deposit. Missouri state statutes also require that collateral pledged must have fair market value equal to 100% of the funds on deposit, less amounts insured by federal deposit insurance. Collateral securities must be held by the City or a disinterested third party and may include U.S. Government and government agency bonds and securities; general obligation bonds of any of the 50 states; gern;iral obligation bonds of any Missouri county, certain cities, and special districts; and revenue bonds of certain Missouri agencies. Obligations pledged to secure deposits are delivered to the banks' joint custody accounts at the custodial bank. Written custodial agreements are required that provide, among other things, that the collateral be held separate from the assets of the custodial bank. Statement of Cash Flows The City's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. Receivables and Payables All trade accounts receivable are shown net of an allowance for uncollectibles. Management records a trade accounts receivable allowance based on percentages of collection estimated from the aging of accounts receivable. At December 31, 2012, management determined that no allowance was necessary. Governmental funds report unearned revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds unearned revenue is reported as follows: General Fund Property Tax Receivable Debt Service Fund Property Tax Receivable 27 $ 905,300 644.700 $1.550.000 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS-CONTINUED DECEMBER 31, 2012 NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED Property Taxes Property taxes are legally restricted for use in financing operations of the ensuing year. Accordingly, the City defers revenue recognition until the year for which they are to be used. The City's property taxes are levied each November 1 based on the assessed value as of the prior January 1 for all real property and personal property located within the City. Property taxes are billed immediately following the levy date and considered delinquent after December 31 following the levy date. Assessed values are established by county assessors, subject to review by the county's Board of Equalization. The City is permitted by Missouri state statutes to levy taxes up to $1.00 per $100 of assessed valuation for general governmental services other than the payment of principal and interest on long-term debt and in unlimited amounts for the payment of principal and interest on long-term debt. The tax levy per $100 of assessed valuation which supports the 2012 budget was: General Fund General Revenue -Temporary $ 0.4784 0.1759 $ 0.6543 Taxes receivable represent property taxes levied for 2012 and prior years that have not yet been collected. The assessed value of property located within the City totaled $187,449,313. Prepayme11ts Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepayments in both government-wide and fund financial statements. These items are reported in the financial statements using the consumption method. A current asset for the prepaid amounts is recorded at the time of the purchase and the expenditure/expense is reported in the year which services are consumed. At fiscal year end, because prepayments are not available to finance future governmental fund expenditures, the fund balance is considered non-spendable in an amount equal to the carrying value of the asset on the fund financial statements. 28 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS-CONTINUED DECEMBER 31, 2012 NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED Restricted Cash and /11vest111e11ts The City is statutorily required to maintain customer utility deposits separate from City assets. Restricted cash and investments are also set aside for debt service payments and for required debt reserves. Unamortized Bond Iss11a11ce Costs and Bond Premium and Discount On government-wide financial statements, issuance costs are deferred and amortized over the term of the bonds using the straight-line method. Unamortized issuance costs are recorded as a separate line item on the statement of net assets. Bond premiums are deferred and amortized over the term of the bonds using the straight-line method, which approximates the effective interest method. Bond premiums are presented as an addition to the face amount of the bonds. Capital Assets Capital assets, which include property, plant, equipment, infrastructure (e.g., roads, bridges, sidewalks and similar items) and construction in progress are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. As the City is a Phase III government under Governmental Accounting Standards GASB 34, it has elected to exercise its option to forego retroactively reporting governmental infrastructure assets acquired prior to December 31, 2003. Governmental infrastructure assets on the statement of net assets include only roads, bridges, sidewalks and similar items acquired subsequent to December 31, 2003. Capital assets, excluding land, are defined by the City as assets with a cost of more than $2,500 and an estimated useful life of at least one year. All land purchases are capitalized regardless of cost. All purchased capital assets are valued at cost where historical records are available and at an estimated historical cost where no historical records exist. Donated capital assets are valued at their estimated fair market value on the date received. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the life of the asset are not capitalized. 29 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS-CONTINUED DECEMBER 31, 2012 NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED Capital Assets -Continued Major outlays for capital improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of the business-type activities is included as part of the capitalized value of tl1e assets constructed. If the expenditure is depreciable, it will be written off from the time it is put in service. The City defines infrastructure as the basic physical assets that allow the City to function. The assets include the street network, storm drainage network, and pedestrian and vehicle bridges and buildings combined with the site amenities such as parking and landscaped areas used by the City in the conduct of its business. Each major infrastructure network can be divided into subsystems. For example, the street network can be subdivided into pavement, curbs, gutters, sidewalks, land, medians, etc. These networks and subsystems are not delineated in the basic financial statements. Governmerital street and parking lot assets are reported using the modified approach as defined in GASB Statement 34 for infrastructure reporting of these assets. When using tl1e modified approach, only tl10se projects that add efficiency or capacity to street and parking lot assets are capitalized. Street and parking lot assets are not depreciated. Expenditures that preserve those assets are expensed. Capital assets are depreciated using the straight-line method over the following estimated useful lives: Buildings Sewer Plant and Collection System Machinery and Equipment Compensated Absences 20-40 years 20-50 years 5 - 7 years City policies permit full-time employees to accumulate sick pay benefits and vacation time based on the number of years of service. Accumulated vacation payable is accrued when incurred in the government-wide financial statements and proprietary fund statements. In tl1e governmental fund financial statements, a liability is accrued when it has matured, for example, as a result of employee resignations and retirements. 30 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS-CONTINUED DECEMBER 31, 2012 NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED Long-Term Obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs as of the bond issuance date. The face amount of debt issued is reported as a financing source. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 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 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. 31 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS-CONTINUED DECEMBER 31, 2012 NOTE 2 -RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS Expla11atio11 of Certain Differences between the Governmental Fu11d Balance Sheet a11d tile Gover11111e11t-Wide Statement of Net Assets (Page 15) The governmental fund balance sheet includes a reconciliation between fund balance -total governmental funds and net assets of governmental activities as reported in the government-wide statement of net assets. One element of that reconciliation explains that "long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds". The details of this $(15, 708,625) difference are as follows: Bonds Payable Certificates of Participation Payable Neighborhood Improvement District Limited General Obligation Temporary Notes Accrued Interest Payable Compensated Absences Issuance Discount Cost ofissuance Deferred Refunding Difference and Other Net Adjustment to Reduce Fund Balance Net Reconciling Item for Long-term Liabilities (Page 15) $ (2,290,000) (5,385,000) (7,855,000) (101,190) (63,967) 38,938 172,098 75.848 $(] 5.408.273) Explanation of Certain Differences betwee11 the Governmental Fu11d State111e11t of Revenues, Expenditures and Cha11ges i11 Fu11d Balances a11d the Go11er11111e11t-Wide Statement of Activities (Page 18) The governmental fund statement of revenues, expenditures, and changes in fund balances includes a reconciliation between net changes in fund balances -total governmental funds and changes in net assets of governmental activities as reported in the government-wide statement of activities. One element of that reconciliation explains that "Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense." The details of this difference are as follows: 32 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS -CONTINUED DECEMBER 31, 2012 NOTE 2 -RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS-CONTINUED Explanation of Certain Differences between tfte Govemmental Fund Statement of Revenues, Expenditures and Changes ill Fund Balances and tfte Govemment-Wide Statement of Activities (Page 18) -Continued Capital Outlay: Machinery and Equipment Brush Creek Sewer Improvements Depreciation Expense Net Reconciling Item for Capital Outlays/Depreciation (Page 18) $ 176,422 548,281 (248.436) $ 476.?67 Another element of that reconciliation states that "The issuance of long-term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of ,issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities". The details of tlris difference are as follows: Refinancing of General Obligation Bonds New Bond Indebtedness Debt Retired with Refinancing Total Principal Repayments General Obligation Bonds Certificates of Participation Total 33 $(4,855,000) 4.710.000 $ (]45.000) $ 255,000 215.000 $ 470.000 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS-CONTINUED DECEMBER 31, 2012 NOTE 2 -RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS-CONTINUED Expla11atio11 of Certain Differences between the Governmental Fu11d Statement of Revenues, Expenditures and Changes i11 Fu11d Balances and the Government-Wide Statement of Activities (Page 18) -Continued Another element of that reconciliation states that "Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds." The details of this $(6,882) difference are as follows: Compensated Absences Amortization ofissuance Costs Amortization of Deferred Refunding Difference Amortization of Bond Discounts Other Net Reconciling Item Relating to Certain · Expenses (Page 18) NOTE 3 -STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Budgets and Budgetary Accounting $ (4,040) (12,634) (5,417) (2,782) 185 $ (24.688) Missouri statutes require that all political subdivisions of the State prepare an annual budget. Governmental funds required to have legally adopted annual budgets are the general fund, the special revenue funds, and the debt service fund. Legally adopted annual budgets are not required for the capital projects fund and the permanent fund. Annual budgets for all governmental funds are adopted using the modified accrual basis of accounting, further modified by the encumbrance method of accounting, that is, commitments such as purchase orders, contracts and other commitments, m addition to disbursements and accounts payable are recorded as expenditures. Budgeted expenditures cannot exceed budgeted revenues and unencumbered positive fund balances as required by Section 67.010 RSMo. The appropriated budget is prepared by fund, function, and department. State statutes set the legal level of budgetary control at the fund level (i.e., the level at which expenditures may not legally exceed appropriations). Department heads may make transfers of appropriations within their departments. Upon written request, the City Administrator or the Board of Aldermen may by ordinance transfer part or all of any unencumbered appropriated balance from one department to another. 34 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS-CONTINUED DECEMBER 31, 2012 NOTE 3-STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY-CONTINUED Budgets and BudgetlllJ' Accounting-Continued The reported budgetary data represents the final approved budget as adopted by the Board of Aldermen. There were no amendments to the budget in 2012. NOTE 4 -DEPOSITS AND INVESTMENTS As ofDece~ber 31, 2012, the City had the following deposits and inveshuents: US Treasuries and Agency Securities Deposits: Checking and Money Market Reported Amount/ Fair Value $ 855,655 5.184.196 $6.039.851 Reconciliation of Government-wide Statement of Net Assets to total deposits and inveshuents: Cash and Cash Equivalents Restricted Cash and Investments Total Deposits and Investments Interest Rate Risk $4,759,907 1.279.944 $6.039.851 Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an inveshnent. The City does not have a formal inveshnent policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. It is the City's practice to place operating funds in either money market accounts or savings accounts. All longer-term investments are placed in Treasury securities having relatively short maturities. These consist of funds whose use is restricted and are unlikely to be needed prior to maturity (e.g. the Fewson Trust). 35 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS-CONTINUED DECEMBER 31, 2012 NOTE 4 -DEPOSITS AND INVESTMENTS -CONTINUED Credit Risk Missouri statutes prohibit municipalities from investing in derivative, leveraged, or speculative securities. City agents invest funds for restricted debt reserves and unexpended debt proceeds in money market funds. Custodia/ Credit Risk -Deposits In the case of deposits, this is the risk that in the event of a bank failure, the City's deposits may not be returned. As of December 31, 2012, the carrying amount of the City's deposits was less than pledged securities plus federal deposit insurance. It is City practice to require banks to provide collateral equal to any deposited amounts exceeding federal depository insurance limits. Custodial Credit Risk-I11vestme11ts For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. At December 31, 2012, the City's investments were not exposed to custodial credit risk. The State Constitution permits a city, by vote of two-thirds of the voting electorate, to incur general obligation indebtedness for "city purposes" not to exceed I 0% of the assessed value of taxable tangible property and to incur additional general obligation indebtedness not exceeding, in the aggregate, an additional 10% of the assessed value of taxable tangible property for the purpose of acquiring rights-of-way, construction, extending and improving streets and avenues and/or storm sewer systems, and purchasing or construction of waterworks, electric, or other light plants, provided that the total general obligation indebtedness of the city does not exceed 20% of the assessed valuation of taxable property. The City debt limit does not exceed the State Constitution limits. Defensed Debt -Series 2004 In prior years, the City defeased these bonds by placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the liability for the defeased bonds is not included in the City's financial statements. 36 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS -CONTINUED DECEMBER 31, 2012 NOTE 5 -CAPITAL ASSETS Capital asset activity for the year ended December 31, 2012, was as follows: Beginning Ending Balance Increases Decreases Balance Governmental Activities Capital Assets not being Depreciated Land $ 869,880 $ $ $ 869,880 Construction in Progress 7,803,055 548,281 1,075,012 7,276,324 Infrastructure 3,455,903 80,250 3,375,653 Total Capital Assets not being Depreciated 12,128,838 548,281 1,155,262 11,521,857 Capital Assets being Depreciated Buildings and Improvements 4, 153,323 4,153,323 Machinery and Equipment 1,665,609 176,422 1,842,031 Infrastructure 44,663 44,663 Total Capital Assets being Depreciated 5,863,595 176,422 6,040,017 Less Accumulated Depreciation for Buildings and Improvements (653,645) (90,285) (743,930) Machinery and Equipment (J ,357,439) (156,875) (J,514,314) Infrastructure (7,656) (1,276) (8,932) Total Accumulated Depreciation (2,018,740) (248,436) (2,267, 176) Total Capital Assets being Depreciated, Net 3,844,855 (72,014) 3,772,841 Governmental Activities Capital Assets, Net $ 15,973,693 $ 476,267 $ 1,155,262 $15,294,698 Business-type Activities Capital Assets not being Depreciated Land $ 59,975 $ -$ $ 59,975 Total Capital Assets not being Depreciated 59,975 59,975 Capital Assets being Depreciated Buildings and Improvements 4,838,888 4,838,888 Machinery and Equipment 209,573 24,006 233,579 Infrastructure 2,381,388 2,381,388 Total Capital Assets being Depreciated 7,429,849 24,006 7,453,855 Less Accumulated Depreciation for Buildings and Improvements (2,411,881) (226,798) (2,63 8,679) Machinery and Equipment (168,973) (2,611) (171,584) Infrastructure (734, 196) (49,864) (784,060) Total Accumulated Depreciation (3,315,050) (279,273) (3,594,323) Total Capital Assets being Depreciated, Net 4, 114,799 (255,267) 3,859,532 Business-type Activities Capital Assets, Net $ 4,174,774 $ (255,267) $ $ 3,919,507 37 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS -CONTINUED DECEMBER 31, 2012 NOTE 5 -CAPITAL ASSETS -CONTINUED Depreciation expense related to the functions/programs of the primary government is as follows: Governmental Activities General Government Public Safety Public Works Parks Nature Sanctuary Channel 2 Total Depreciation Expense Business-type Activities -Sewer Operations $ 124, 193 53,071 36,524 29,280 2, 116 3,252 $ 248,436 $ 279,273 Construction in Progress consists of costs incurred to construct infrastructure assets (i.e. - streets, curbs, retaining wall, storm drainage network, and similar items) for two development projects: Brink Myers Road and Brush Creek Sewer. Both of these real estate developments are currently owned in part by financial institutions and developers and are at various stages of completion. A retaining wall connected with Brink Myers Road collapsed in 2009. The City received $1,075,012 in 2012 in connection with a legal settlement. The amount received has been deducted from the investment in the project. The City received a refund from the State of Missouri of$80,250 for construction of the Highway 9 bridge. The bridge was constructed in 2011, financed with City and State of Missouri funds. 38 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS -CONTINUED DECEMBER 31, 2012 NOTE 6-LONG-TERM OBLIGATIONS The following is a summary of the debt transactions (bonds, notes and leases) of the City for the year ended December 31, 2012: Governmental Activities: Bonds Payable General Obligation'Bonds Certificates of Participation Neighborhood Improvement District Limited Obligation Temp Notes Less Deferred Amounts for Issue Discounts for Deferred Refunding Difference Governmental Activity Liabilities Business-type Activities: Bonds payable Revenue Bonds (SRF) 2004A Lease Purchase Agreement Plus Deferred Amounts for Issue Premiums Business-type Activity Long-term Liabilities Beginning Balance $ 2,545,000 $ 5,600,000 7,7IO,OOO (41,720) (81,265) Additions 4,855,000 Reductions Ending Balance $ (255,000) $ 2,290,000 $ (215,000) 5,385,000 (4,710,000) 2,782 5,417 7,855,000 (38,938) (75,848) Due Within One Year 265,000 235,000 7,855,000 (2,782) (5,417) $ 15,732,015 $ 4,855,000 $ (5,171,801) $ 15,415,214 $ 8,346,801 $ 1,870,000 $ 179,613 94,133 $ $ 2,143,746 ';:;..$ ____ $ (135,000) $ 1,735,000 $ (9,594) 170,019 (7,025) 87,108 (151,619) $ 1,992,127 $ 140,000 I0,079 150,079 $2,545000 m general obligation debt shown above 1s special assessment debt with governmental commitment. For governmental activities, long-term debt is generally liquidated by the general fund. 39 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS -CONTINUED DECEMBER 31, 2012 NOTE 6 -LONG-TERM OBLIGATIONS -CONTINUED General Obligation Bonds The City issues general obligation bonds to provide funds for the acquisition, construction and renovation of major capital assets. General obligation bonds currently outstanding consist of the following: General Obligation Bonds Governmental Activities Interest Rates Original Issue Series 2010 2.7% to 3.25% $ 2,785,000 Final Maturity Date 3/1/2020 Principal Outstanding Payments/ Refinancing December 31, During 2012 2012 $ 255,000 $ 2,290,000 $ 255,000 $ 2,290,000 On December 23, 2010, the City refinanced the 2001 General Obligation Bonds. The City issued $2, 785,000 of new bonds to retire the old bonds. The interest rates on the bonds vary from 2% to 3.25%. The annual requirements to amortize governmental activities general obligation bonds outstanding as of December 31, 2012, are as follows: 2013 2014 2015 2016 2017 2018 -2020 40 Governmental Activities Principal Interest $ 265,000 $ 56,713 270,000 51,363 275,000 46,256 280,000 40, 700 285,000 33,275 915,000 44,888 $ 2,290,000 $ 273,195 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS-CONTINUED DECEMBER 31, 2012 NOTE 6-LONG-TERM OBLIGATIONS-CONTINUED Certificates of Participatio11 The City issued certificates of participation series 2006 in the original amount of $6,405,000 with interest rates ranging from 3.5% to 4.4% and with a final maturity in 2027. Principal payments are scheduled annually ranging from $75,000 to $490,000. The balance at December 31, 2012, is $5,385,000. Proceeds from the certificates of participation were used for City Hall construction. Rush Creek stabilization, land acquisition and other scheduled capital improvements. The annual requirements to amortize these certificates of participation are as follows: 2013 2014 2015 2016 2017 2018 -2022 2023-2027 Principal $ 235,000 250,000 270,000 290,000 305,000 1,880,000 2.155.000 $5.385.000 Interest $ 224,496 215,097 204,890 193,758 181,781 688,113 257.950 $1.966.085 Neiglzborlzood Jmproveme11t District Limited Obligation Temporary Notes The temporary notes on the Brush Creek Sewer Project were refinanced during the year to refinance the costs of constructing sewer lines for the Brush Creek Sewer Area and other related improvements, including interest and issuance costs. The City also has outstanding temporary notes for the Brink Myers Road Neighborhood Improvement District that were issued to finance the construction of Brink Myers Road, the retaining walI and the extension of electric and water utilities. The notes and interest thereon constitute a valid and Jegaliy binding indebtedness of the City, payable from special assessments on property within the NIDs which is benefited by the improvements. The faith, credit and resources of the City are irrevocably pledged for principal and interest on the notes if the assessments are inadequate to support annual debt payments. Due to the uncertainty of timing of development of property within the NIDs, the City is building its Emergency Reserve Fund to prepare for any possible shortfalls in assessments 41 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS-CONTINUED DECEMBER 31, 2012 NOTE 6 -LONG-TERM OBLIGATIONS -CONTINUED Revenue Bonds (SRF) 2004A The City issued Sewerage System Revenue Bonds Series 2004 in the original amount of $2,750,000 with interest rates ranging from 3.0% to 5.25% and with a final maturity in 2025. Principal payments are scheduled annually ranging from $30,000 to $170,000. The balance at December 31, 2011, is $1, 735,000. Bonds maturing on January I, 2015, and thereafter may be called at the option of the City for redemption and payment prior to maturity in whole or in part on any date with the consent of the bondholder, or on each June I and December I, commencing December I, 2013, at the redemption price of 100% of principal amount of the bonds redeemed, plus accrued interest to the redemption date. Bonds maturing on January I, 2019, January I, 2020, and January l, 2021, are not subject to redemption prior to maturity. Series 2004A (SRF) Sewage System Refunding Revenue Bonds (SRF) are special, limited obligations of the City payable solely from, and secured by a pledge of, the net revenues. The taxing power of the City is not pledged to the payment of the bonds. The bonds do not constitute a general obligation of the City or an indebtedness of the City within the meaning of any constitutional, statutory or charter provision, limitation or restriction. The annual requirements to amortize these bonds outstanding as of December 31, 2012, are as follows: 2013 2014 2015 2016 2017 2018 -2022 2023-2027 42 Principal $ 140,000 140,000 145,000 150,000 150,000 810,000 200.000 $1.735,000 Interest $ 84,978 79,938 72,938 65,688 58,188 170,638 10.350 $ 542.718 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS-CONTINUED DECEMBER 31, 2012 NOTE 6-LONG-TERM OBLIGATIONS-CONTINUED The Sewerage Revenue Bond ordinance requires that the Sewerage System Fund be accounted for in a separate Enterprise Fund. It also requires that, after sufficient current assets have been set aside to operate the system, all remaining monies held in the Sewerage System Fund be segregated and restricted in separate special reserves and accounts. In accordance with the bond ordinance, these bonds are serviced by the Sewerage System Fund operations and are included as a liability of that fund. Restricted assets of the principal and interest account are to be used for payment of current principal and interest on bonds. Restricted assets of debt service are available to pay prinCipal and interest in the event of a deficiency in the principal and interest account. Restricted assets of the depreciation and replacement account are available to operate, maintain, or improve the system, call bonds or for payment of debt service in the event of a deficiency in other restricted assets. Lease Purchase Agreement In July 2003, the City entered into a lease-purchase agreement wherein the City sold its sewer plant for $585,000 and leased it back for a period of twenty-two years. The proceeds from the lease-purchase were used to make certain improvements to the sewer plant property. Under the lease the City will have the full use of the property and will make rental payments, which will apply to the principal and interest under the lease. Required payments under the lease purchase agreement on the sewer plant are as follows: PrinciJlal Interest 2013 $ 10,079 $ 8,377 2014 10,590 7,866 2015 11,126 7,330 2016 11,689 6,767 2017 12,281 6,175 2018 -2022 71,383 20,896 2023 -2027 42 871 3.268 $ 1 :Z0,019 $ 60,6:Z9 43 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS-CONTINUED DECEMBER 31, 2012 NOTE 7 -RISK MANAGEMENT The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; employee injuries and illnesses; natural disasters; and employee health, dental and accident benefits. To protect itself against risks ofloss, the City is a member of Midwest Public Risk of Missouri (MPR), a not­ for-profit corporation consisting of goverrunental entities incorporated in 1984 to acquire insurance for its members. MPR operates as a purchasing pool and is not a joint venture activity of the City. The City has no control over budgeting, financing, management selection, or the governing body. MPR provides both conventional and self-insurance coverage for its members, including medical, dental, property, casualty, general liability, and workers' compensation. The City participates in property, casualty, general liability, and workers' compensation insurance coverage through MPR. MPR manages the cash and investment pool, funded by insurance premiums, on behalf of its members. MPR's investment pool consists of interest-bearing deposits, U.S. Treasury strips, U.S. Goverrunental agency obligations, and collateralized mortgage obligations. In the event that a deficit occurs with respect to any fiscal year of MPR for which the City was a participant at any time during such year, and in the event that MPR determines that an assessment is required in order to provide additional funds for the obligations of MPR for such year, and further, in the event that the City was covered by the types of benefits requiring the assessment during the time period in which the assessment arose, the City is obligated to pay its pro rata share of any such assessment whether or not the City is a member of MPR at the time of such assessment. Management of the City is not aware of any deficit situation in MPR that would require an accrual ofa liability as of December 31, 2012. MPR's financial statements are presented in its Comprehensive Annual Financial Report for the year ended December 31, 2012. There has been no significant change in insurance coverage from the previous fiscal year. Settled claims have not exceeded insurance coverage in any of the past three years. 44 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS -CONTINUED DECEMBER 31, 2012 NOTE 7 -RISK MANAGEMENT -CONTINUED I11vestme11ts -Trust F1111d The City was the recipient of funds from a resident's estate during calendar year 2002. The funds are held by a trustee for the benefit of the City. The trustee of the fund is to distribute one-half of the trust fund income to be used on various city capital projects. The balance of the annual net income is to be reinvested in the principal of the fund. At December 31, 2012, the trust assets had an account balance of$545,515. NOTE 8 -COMMITMENTS AND CONTINGENCIES Litigatio11 The City is a defendant in various lawsuits relating to easements, condemnations and other matters as a result of the ordinary course of City activities. The City's management and legal counsel anticipate that the potential claims against the City not covered by insurance, if any, resulting from such matters would not materially affect the financial position of the City. NOTE 9 -INTER-FUND TRANSACTIONS Inter-fund transfers for the year ended December 31, 2012, consisted of the following: Transfer from Capital Projects Fund $ 187.500 Transfer from Transportation Special Revenue Fund (Net) $ (569.000) Transfer to Debt Service Fund $ 214.000 Transfer to Non-Major Governmental Funds $ 199.058 Transfer to General Fund (Net) $ (31.558) Transfers are used to (I) move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them, (2) move receipts restricted to debt service from the funds collecting the receipts to the debt service fund as debt service payments become due, and (3) use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. 45 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS-CONTINUED DECEMBER 31, 2012 NOTE 10 -PENSION PLAN Pfau Descriptio11 The City participates in the Missouri Local Government Employees Retirement System (LAGERS), an agent multiple-employer public employee retirement system that acts as a common investment and administrative agent for local government entities in Missouri. LAGERS is a defined benefit pension plan, which provides retirement, disability, and death benefits to plan members and beneficiaries. LAGERS was created and is governed by statute, section RSMo. 70.600 -70.755. As such, it is the system's responsibility to administer the law in accordance with the expressed intent of the General Assembly. The plan is qualified under the Internal Revenue Code Section 401(a) and it is tax exempt. The Missouri Local Government Employees Retirement system issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to LAGERS, P.O. Box 1665, Jefferson City, MO 65102 or by calling 1-800-447-4334. F1111dillg Status Full-time employees of the City contribute 4% of their gross pay to the pension plan. The 2012 statutorily required employer contribution rates are 4.1 % (General) and 4.6% (Police) of annual covered payroll. The contribution requirements of plan members are determined by the governing body of the political subdivision. The contribution provisions of the political subdivision are established by state statute. A111111al Pe11sio11 Cost (APC) a11d Net Pe11sio11 Obligatio11 (NPO) The subdivision's annual pension cost and net pension obligation for the current year were as follows: Annual Required Contribution Interest on Net Pension Obligation Adjustment to Annual Required Contribution Annual Pension Cost Actual Contributions Increase (Decrease) in NPO NPO Beginning of Year NPO End of Year 46 $ 61,229 $ 61,229 61.229 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS-CONTINUED DECEMBER 31, 2012 NOTE 10 -PENSION PLAN -CONTINUED The annual required contribution (ARC) was determined as part of the February 28, 2010 and February 28, 2011 annual valuation using the entry age actuarial cost method. The actuarial assumptions included: (a) a rate of return on the investment of present and future assets of 7.25% per year, compounded annually (b) projected salary increases of 3.5% per year, compounded annually, attributable to inflation (c) additional projected salary increases ranging from 0.0% to 6.0% per year, depending on age and division, attributable to seniority/merit, (d) pre-retirement mortality based on the 75% of the RP-2000 Combined Healthy table set back 0 years for men and 0 years for women, and ( e) post-retirement mortality based on 105% of the 1994 Group Annuity Mortality table set back 0 years for men and 0 years for women. The actuarial value of assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a five-year period. The unfunded actuarial accrued liability is being amortized as a level percentage of projected payrolls on a closed basis. The amortization period as of February 28, 2010 the initial actuarial valuation was 27 years for the General division and 27 years for the Police division. The amortization period as of February 28, 2011 was 30 years for the General division and 28 years for the Police division. One-Year Trend lnfonnation Year Annual Percentage Net Ended Pension of APC Pension June 30, Cost (APC) Contributed Obligation 20!0 $ 52,274 !00.0% $ 0 2011 $ 54,957 !00.0% $ 0 2012 $ 61,229 !00.0% $ 0 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Funding Progress (b) [(b-a)/c] (a) Actuarial (b-a) (c) UAALas a Actuarial Actuarial Accrued Un-funded (alb) Annual Percentage of Valuation Value Liability Liability Funded Covered Covered Date of Assets Entry Age (UAAL) Ratio Payi:oll Payi:oll 02-28-10 $ 70,422 $ 274,694 $ 204,272 26% $1,331,420 15o/o 02-28-11 $186,859 $ 415,164 $ 228,205 45% $1,335,830 17% 02-29-12 $288,350 $ 517,839 $ 229,489 56% $1,491,820 15% The above assets and actuarial accrued liability do not include assets and present value of benefits associated with the Benefit Reserve Fund and the Casualty Reserve Fund. The actuarial assumptions were changed in conjunction with the February 28, 2011, annual actuarial valuations. For a complete description of the actuarial assumptions used in the annual valuations, please contact the LAGERS office in Jefferson City. 47 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS-CONTINUED DECEMBER 31, 2012 NOTE 11-DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES ASC Topic 820, Fair Value lvleasurements, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Topic 820 also specifies a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value. Level I Quoted prices in active markets for identical assets or liabilities Level 2 Observable inputs other than Level I prices, such as quoted prices for similar assets or liabilities; quoted prices in active markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the accompanying statement of financial position, as well as the general classification of such instruments pursuant to the valuation hierarchy. I11vest111e11ts Where quoted market prices are available in an active market, securities are classified within Level I of the valuation hierarchy. Level I securities include highly liquid money market funds, U.S. Treasuries and exchange traded equities and mutual funds. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. Level 2 securities include fixed income securities and pooled investments. In certain cases where Level I or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. 48 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS -CONTINUED DECEMBER 31, 2012 NOTE 11 -DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITillS - CONTINUED The following table presents the fair value measurements of assets and liabilities recognized in the accompanying Statement of Financial Position measured at fair value on a recurring basis and level within the FAS 157 fair value hierarchy in which the fair measurements fall at December 31, 2012. Fair Value Measurements Using Government Securities: Trust Fund Constn.iction Escrow Debt Escrow Fair Value $152,639 $ 59,024 $643,992 NOTE12-SUBSEQUENTEVENTS Quoted Prices In Active Markets for Identical Assets (Level I) $152,639 $ 59,024 $643,992 Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level3) On July 30, 2013, both the Brush Creek Sewer Project limited obligation notes and the Brink Myers Road Project limited obligation notes were refinanced as follows: Brush Creek Sewer Brink Myers Road Amount Retired $4,855,000 $3,000,000 Refinance Amount $4,935,000 $3,525,000 Both obligations bear interest at the rate of 2.5% and mature on August 1, 2014. NOTE 13 -UPCOMING ACCOUNTING PRONOUNCEMENTS In November 2010, the Government Auditing Standards Board (GASB,) who establishes standards for government entities, issued Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements. This statement addresses financial reporting related to service concession arrangements which are a type of public-private or public-public partnership. An SCA is an arrangement between a transferor (a government) and an operator (whether a government or 49 CITY OF PARKVILLE, MISSOURI NOTES TO BASIC FINANCIAL STATEMENTS-CONTINUED DECEMBER 31, 2012 NOTE 13 -UPCOMING ACCOUNTING PRONOUNCEMENTS -CONTINUED nongovernment) in which the transferor conveys to an operator the right and relation obligation to provide services through the use of infrastructure or another public asset in exchange for significant consideration and the operator collects and is compensated by fees from third parties. The statement will be effective for the City's 2013 fiscal year. In December 2010, the GASB issued Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICP A Pronouncements. This statement incorporates into GASB literature certain accounting and financial reporting guidance issued on or before November 30, 1989, that is included in F ASB Statements and Interpretations, APB Opinions, and Accounting Research Bulletins of the AI CPA Committee on Accounting Procedure. The statement will be effective for the City's 2013 fiscal year. In June 2011, the GASB issued Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Iriflows of Resources, and Net Position. The statement will be effective for the City's 2013 fiscal year. The statement incorporates deferred outflows of resources and deferred inflows of resources, as defined by GASB Concepts Statement No. 4, into the definitions of the required components of the residual measure of net position, formerly net assets. This statement also provides a new statement of net position format to report all assets, deferred outflows of resources, liabilities, deferred inflows of resources, and net position. Once implemented, this statement will affect the format and reporting of the balance sheet at the government-wide level and also at the fund level. 50 REQUIRED SUPPLEMENT ARY INFORMATION Required supplementary information (RSI) includes financial information and disclosures that are required by the GASB but are not considered a part of the basic financial statements. Such information includes: • Modified Approach to Infrastructure Reporting • Budgetary Comparison Schedule -General Fund 51 CITY OF PARKVILLE, MISSOURI REQUIRED SUPPLEMENTARY INFORMATION DECEMBER 31, 2012 Information needed to support the use of the Modified Approach for Infrastructure Reporting: Street and Parking Lot Assets The street and parking lot condition rating is accomplished every other year or triennially. Every street and parldng lot of Parkville is visually rated for observed structural conditions to determine the level of preservation need. The field rating reflects the condition of the type of street or parking lot being reviewed. It is the City's goal to repair all streets and parking lots rated at a 6.0 or above and to maintain all streets within the City at a service level of 5.0 for each respective type of street or parking lot. A field rating scale has been developed to indicate the overall condition of the observed street or parking lot. 1 Indicates an equivalent of a newly constructed street or parking lot (crack sealing and minor patching) 2 Indicates slight imperfections in the street or parking lot condition (crack sealing, slurry sealing, and/ or patching) 3 Indicates some deterioration has occurred and minor maintenance may be required (street or parking lot needs various repairs to maintain condition; patches; possible milling and overlay) 4 Indicates noticeable deterioration maintenance is required (deterioration is significant and visually noticeable; repair mill and overlay) 5 Indicates significant maintenance is required (considerable cracking, potholes or other fatigue demands repair work and overlay) 6 Indicates serious deficiency (deterioration mandates edge milling, to prevent total base failure, needs overlay) 7 Indicates severe deficiency (severe deterioration needing various repairs) 8 Indicates major failure (some good street is left within a total replacement street or parking lot condition) 9 Indicates nearly total replacement is required (limited salvage of street or parking lot area is possible) 10 Indicates total replacement is required. 52 CITY OF PARKVILLE, MISSOURI REQIBRED SUPPLEMENT ARY INFORMATION -CONTINUED DECEMBER 31, 2012 While the City has goals to maintain these systems at higher levels, minimum acceptable condition levels have been defined as having at least 80 percent of the streets and parking lots at or below a rating of 5. The following table compares the minimum acceptable condition levels with the actual condition levels for the current and prior years. Minimum Fiscal Acceptable Actual Condition Year Condition Level* Level* 2005 80 94 2006 80 94 2007 80 94 2008 80 94 2009 80 94 2010 80 94 2011 80 94 2012 80 94 * Percentage of streets and parking Jots rated a 5 or below The City's goal is to continually improve the condition of its streets and parking Jots. To achieve this goal, it is necessary to perform maintenance activities and replace those assets that can no longer be economically maintained. To maintain the City's streets and parking lots at or above the stated minimum condition level, it is estimated that annual preservation and replacement expenditures must exceed $349,000 annually. A total of$193,150 was spent out of the Capital Improvements Fund. The major expenditures were for an asphalt overlay ($78,114), crack seal project ($8,356), slurry seal project ($46,681) and the curb and sidewalk program ($60,000). The following table compares the estimated expenditures needed to maintain the system at a minimum acceptable condition level with actual amounts spent for the current and prior years. Fiscal Estimated Actual Year Exgenses Exgenses 2005 $ 246,519 $ 241,190 2006 $ 292,227 $ 292,579 2007 $246,819 $ 213,183 2008 $ 256,481 $ 246,886 2009 $ 233,000 $ 233,000 2010 $ 234,000 $190,172 2011 $ 205,000 $171,177 2012 $ 205,000 $ 193,150 53 CITY OF PARKVILLE, MISSOURI NOTES TO REQIBRED SUPPLEMENTARY INFORMATION BUDGET ARY DISCUSSION FOR THE YEAR ENDED DECEMBER 31, 2012 Budgetary Accounting The City prepares its budget for the General Fund and Other funds on the cash basis of accounting. This basis is consistent with the basis of accounting used in presenting the General Fund in the basic financial statements. All unexpended appropriations lapse at year end. Through the budget, the Board of Aldermen sets the direction of the City, allocates its resources and establishes its priorities. The Annual Budget assures the efficient and effective uses of the City's economic resources, as well as establishing that the highest priority objectives are accomplished. The Annual Budget covers the period from January 1, to December 31, and is a vehicle that accurately and openly communicates these priorities to the community, businesses, vendors, employees and other public agencies. Additionally, it establishes the foundation of effective financial planning by providing resource planning, performance measures and controls that permit the evaluation and adjustment of the City's performance. The City's budget is prepared and based on various expenditure categories; personnel, supplies and services, minor capital outlay and capital improvement programs. The first three listed are considered operational in nature or known as recurring costs. Capital improvement projects are asset acquisitions, facilities, systems, and infrastructure improvements typically over $1,000 and/or those items 'outside' of the normal operational budget. These are known as one-time costs. The City collects and records revenue and expenditures within the Governmental Activities. All funding sources are kept separate for both reporting and use of the money. The General Fund is where most City services are funded that are not required to be segregated. The budget process begins as a team effort in January of each year. Then the individual departments use projected revenue assumptions to prioritize and recommend the next fiscal year's objectives. The City Administrator's Office review all budget proposals and revenue assumptions, as well as all current financial obligations before preparing the document that is proposed to the Board of Aldermen. The Board of Aldermen reviews the Proposed Budget and the final adoption of the budget is scheduled for approval in December. 54 CITY OF PARKVILLE, MISSOURI STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -BUDGET AND ACTUAL GENERAL FUND FOR THE YEAR ENDED DECEMBER 31, 2012 Original Variance with and Final Final Budget - Budgeted Actual Positive Amounts Amounts (Negative) Revenues Truces Property $ 1,016,400 $ 1,047,260 $ 30,860 Franchise 825,000 834,696 9,696 Sales 883,000 804,795 (78,205) Intergovernmental 41,300 58,582 17,282 Licenses and Permits 129,300 215,897 86,597 Charges for Services 20,400 17,496 (2,904) Fines and Fees 195,100 325,275 130,175 Investment Earnings 28,000 26,295 (1,705) Grants 3,665 3,665 Sewer Service Fees 75,000 75,000 Miscellaneous 75,500 98,573 23,073 FEMA 185,000 217,450 32,450 Transfer In 514,800 486,701 (28,099) Total Revenues 3,988,800 4,211,685 222,885 Expenditures Current: General Government 1,060,650 1,281,966 (221,316) Public Safety -Police 1,083,200 1,051,966 31,234 Public Safety -Court 146,750 140,325 6,425 Public Works 108,050 101,707 6,343 Community Development 279,700 266,648 13,052 Street 640,000 605,707 34,293 Parks 251, 100 253,337 (2,237) Nature Sanctuary 18,250 17,489 761 Channel 2/Website 36,700 30,637 6,063 Transfer Out 461,500 567,558 (106,058) Total Expenditures 4,085,900 4,317,340 (231,440) Excess of Revenues over Expenditures $ (97, I 00) $ (I 05,655) $ (8,555) The accompanying notes are an integral part of the financial statements. 55 OTHER SUPPLEMENTARY INFORMATION 56 Reserve Funds Assets Cash and Cash Equivalents $ 728,846 Restricted Cash and Investments Other Receivables Total Assets $ 728,846 Liabilities Accounts Payable $ - Fund Balances Unreserved, Reported in: Special Revenue Funds 728,846 Community Bcttennent Total Fund Balances 728,846 Total Liabilities and Fund Balances $ 728,846 CITY OF PARKVILLE, MISSOURI COMBINING BALANCE SHEET NONMAJORGOVERNMENTALFUNDS DECEMBER 31, 2012 ·---·-- Sf!ecial Revenue Municipal Equip Guest Room Nature Park Reserve Tax Sanctu!.!!2'. Donations $ 8,574 $ 310 $ 41,130 $ 70,847 $ 8,574 $ 310 $ 41,130 $ 70,847 $ 5,399 $ -$ -$ - 3,175 310 41,130 70,847 3,175 310 41,130 70,847 $ 8,574 $ 310 $ 41,130 $ 70,847 57 Parkland Court Dedication Recoupment Fees $ 43,361 $ 32,620 - $ 43,361 $ 32,620 $ -$ 43,361 32,620 43,361 32,620 $ 43,361 $ 32,620 Police Training Fees-LET Assets Cash and Cash Equivalents $ 1,081,256 Restricted Cash and Investments Other Receivables Total Assets $ 1,081,256 Liabilities Accounts Payable $ - Fund Balances Unreserved, Reported in Special Revenue Funds 1,081,256 Community Betterment Total Fund Balances 1,081,256 Total Liabilities and Fund Balances $ 1,081,256 CITY OF PARKVILLE, MISSOURI COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS DECEMBER 31, 2012 SQecial Revenue TIF Market Place DeveloEment DeveloEment Other Total $ 17,089 $ 12,233 $ 106 2,036,372 $ 17,089 $ 12,233 $ 106 $ 2,036,372 $ -$ -$ -$ 5,399 17,089 12,233 106 2,030,973 17,089 12,233 106 2,030,973 $ 17,089 $ 12,233 $ 106 $ 2,036,372 58 Total Permanent Nonmajor Fe\\'son Governmental ~ect Funds $ $ 2,036,372 545,519 545,519 $ 545,519 $ 2,581,891 $ -$ 5,399 2,030,973 545,519 545,519 545,519 2,576,492 $ 545,519 $ 2,581,891 CITY OF PARKVILLE, MISSOURI COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2012 S ecial Revenue Reserve Municipal Equip Guest Room Nature Park Parkland Court Funds Reserve Tax Sanctu!!!}'. Donations Dedication Recoupment Fees Revenues Investment Earnings $ -$ -$ $ $ $ TIF Revenue Legal Settlement Miscellaneous 3,001 8,265 1,554 1,905 Total Revenues 3,001 8,265 1,554 1,905 Expenditures Current General Government 20,000 1,668 159 TIF Expense Capital Outlay 154,366 Total Expendilures 154,366 20,000 1,668 159 Excess (Deficiency) of Revenues Over (Under) Expenditures (154,366) (16,999) 6,597 1,395 1,905 Other Financing Sources (Uses) Other Transfers In (Out) 106,058 73,000 20,000 Total Other Financing Sources 106,058 73,000 20,000 Net Change in Fund Balances 106,058 (81,366) 3,001 6,597 1,395 1,905 Fund Balances, Beginning of Year 622,788 84,541 (2,691) 34,533 69,452 43,361 30,715 Fund Balances, End of Year $ 728,846 $ 3,175 $ 310 $ 41,130 $ 70,847 $ 43,361 $ 32,620 59 CITY OF PARKVILLE, MISSOURI COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2012 -Total SEecial Revenue Permanent Nonrnajor Police Training TIF Market Place fe\vson Governmental Fees-LET DcveloEment DeveloEment Other Total ~ect Funds Revenues Investment Earnings $ $ 202 $ 25 $ $ 227 $ 13,851 $ 14,078 TIF Revenue -419,707 419,707 419,707 Legal Settlement 1,075,012 1,075,012 1,075,012 Miscellaneous 7,425 22, 150 22,150 Total Revenues 1,082,437 419,909 25 1,517,096 13,851 1,530,947 Expenditures Current General Government 37, 756 59,583 6,820 66,403 TIF Expense -415,237 415,237 415,237 Capital Outlay 154,366 154,366 Total Expenditures 37,756 415,237 629,186 6,820 636,006 Excess (Deficiency) of Revenues Over (Under) Expenditures 1,044,681 4,672 25 887,910 7,031 894,941 Other Financing Sources (Uses) Other Transfers In (Out) 199,058 199,058 Total Other Financing Sources 199,058 199,058 Net Change in Fund Balances 1,044,681 4,672 25 1,086,968 7,031 1,093,999 Fund Balances, Beginning of Year 36,575 12,417 12,208 106 944,005 538,488 1,482,493 Fund Balances, End of Year $ 1,081,256 $ 17,089 $ 12,233 $ 106 $ 2,030,973 $ 545,519 $ 2,576,492 60