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HomeMy WebLinkAboutCAFR-June-30-2004City of Paducah Paducah, Kentucky Comprehensive Annual Financial Report Year Ended June 30, 2004 Issued by the Finance Department CITY OF PADUCAH, KENTUCKY COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2004 TABLE OF CONTENTS Exhibit No. Palle No. Introductory Section: Letter of Transmittal 1- 9 Organizational Chart 10 Principal Officials 11 GFOA Certificate of Achievement 12 Financial Section: Independent Auditor's Report 13-14 Required Supplementary Information: Management's Discussion and Analysis 15-26 Basic Financial Statements: Government -wide Financial Statements: Statement of Net Assets 1 27-28 Statement of Activities 2 29-30 Fund Financial Statements: Governmental Funds: Balance Sheet 3 31-32 Reconciliation of the Governmental Funds Balance Sheet to Statement of Net Assets 4 33-34 Statement of Revenues, Expenditures and Changes in Fund Balances 5 35-36 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 6 37-38 Proprietary Funds: Statement of Net Assets 7 39 Statement of Revenues, Expenses and Changes in Fund Net Assets 8 40 Statement of Cash Flows 9 41 Fiduciary Funds: Statement of Net Assets 10 42 Statement of Changes in Net Assets 11 43 Component Units Financial Statements: Statement of Net Assets 12 44-45 Statement of Activities 13 46-47 Notes to Financial Statements 48-75 Required Supplementary Information: Pension Trust Fund Schedules A-1 76 Budgetary Comparison Schedule (Budgetary Basis) — General Fund A-2 77-80 Budgetary Comparison Schedule — Note to RSI A-5 81 Supplementary Information: Nonmajor Governmental Funds: Combining Balance Sheet B-1 82-83 Combining Statement of Revenues, Expenditures and Changes in Fund Balances B-2 84-85 Exhibit No. Page No. Supplementary Information: Detail Statement of Revenues, Expenditures, and Changes in Fund Balance — Budget and Actual: Municipal Aid Program Fund B-3 86 Emergency Communication Service Fund B-4 87 Court Awards Fund B-5 88 Small Grant Fund B-6 89 CDBG Fund B-7 90 Hope 3 Implementation Grant Fund B-8 91 Home Grant Fund B-9 92 HUD Revolving Grant Fund B-10 93 Paducah Housing Authority Police Grant Fund B-11 94 Debt Service Fund B-12 95 Nonmajor Proprietary Funds: Combining Statement of Net Assets C-1 96 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets C-2 97 Combining Statement of Cash Flows C-3 98 Internal Service Funds: Combining Statement of Net Assets D-1 99 Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets D-2 100 Combining Statement of Cash Flows D-3 101 Fiduciary Funds: Combining Statement of Net Assets — Pension Trust Funds E-1 102 Combining Statement of Changes in Net Assets — Pension Trust Funds E-2 103 Combining Statement of Net Assets — Private -purpose Trust Funds E-3 104 Combining Statement of Changes in Net Assets — Private -purpose Trust Funds E-4 105 Statement of Changes in Assets and Liabilities — Agency Funds E-5 106 Table No. Page No. Statistical Section: General Government Expenditures by Function 1 107 General Revenue By Source 2 108 Tax Revenue by Source 3 109 Secured Tax Levies and Collections 4 110 Assessed and Estimated Actual Value of Taxable Property 5 111 Property Tax Rates - Direct and Overlapping Governments 6 112 Ratio of Net General Bonded Debt to Assessed Value and Net Bonded Debt Per Capita 7 113 Ratio of Annual Debt Service Expenditures for General Bonded Debt to Total General Expenditures 8 114 Computation of Legal Debt Margin 9 115 Property Value, Construction and Bank Deposits 10 116 Schedule of Sewer Revenue Bond Coverage 11 117 Statistical Section: Demographic Statistics Miscellaneous Statistical Data Principal Taxpayers Computation of Direct and Overlapping Debt Police and Firefighters' Retirement Fund — Revenue by Source Police and Firefighter's Retirement Fund — Expenses by Type Summary of Insurance in Force Single Audit Section: Schedule of Expenditures of Federal Awards Notes to the Schedule of Expenditures of Federal Awards Report on Compliance and on Internal Control __. Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Report on Compliance with Requirements Applicable to each Major Program and Internal Control Over Compliance in Accordance with OMB Circular A-133 Schedule of Findings and Questioned Costs Table No. Page No. 12 118 13 119-120 14 121 15 122 16 123 17 124 18 125 126-127 128 129 130-131 132 CITY OF PADUCAH, KENTUCKY INTRODUCTORY SECTION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 309 2004 c��l of PAD Ucgd a yak �tHnoa ��-� Honorable Mayor and Commissioners City of Paducah Paducah, Kentucky CITY OF PADUCAH Finance Department P.O. Box 2267 Paducah, KY 42002-2267 270-444-8512 September 20, 2004 We are pleased to submit Paducah's Comprehensive Annual Financial Report for the year ended June 30, 2004. Responsibility for the accuracy of the presented data and the completeness and fairness of the presentation, including all disclosures, rests with the City. - The major objective of this report is to describe the City's financial condition and the financial results of its operation in a format designed to be useful to the general public, elected officials, investors and creditors. We believe the data, as presented, is accurate in all material aspects; that it is reported in a. manner designed to present fairly the financial position and results of operations of the various funds. All disclosures necessary to enable the reader to gain maximum understanding of the City's financial activities have been included. This Comprehensive Annual Financial Report consists of four sections as follows: Introductory Section - Contains a list of principal officials, an organizational chart for Paducah and this transmittal letter from the Finance Director. Financial Section - Includes the Management's Discussion and Analysis (MD&A), basic financial statements, required supplementary information, and combining and individual fund statements and schedules, as well as the independent auditor's report on the basic financial statements. The MD&A is a narrative introduction, overview and analysis to accompany the basic financial statements. This letter of transmittal should be read in conjunction with the MD&A, which can be found immediately following the report of the independent auditors. Statistical Section - Includes a number of statistical tables that present various financial, economic, social and demographic data about Paducah for the last ten years. Single Audit Section Section - Includes required data in accordance with the Single Audit Act Amendments of 1996. THE CITY Paducah was established in 1827 by explorer General William Clark and was named after local legendary Chickasaw Indian Chief "Paduke". The City of Paducah is situated on the southern bank of the Ohio River in the north central portion of McCracken County. Paducah is the largest city both in the county and in the Jackson Purchase eight county region. The City has established itself as the cultural, economic, medical and transportation center for not only the Jackson Purchase region but for a large portion of Southern Illinois and portions of Western Tennessee and Southeastern Missouri. Equal Opportunity Employer Industry The Paducah area has moved from the traditional "manufacturing industry" to a "service industry" economy. Multi -state computer services, significant banking corporations, wholesale and retail trade, river -related services, the health care industry and related services are the major employment centers. Traditional manufacturing employment is heavily concentrated in the categories of chemicals, petroleum, coal and rubber, and enriched uranium. Economic Development Activities The Greater Paducah Economic Development Council (GPEDC) coordinates the City's efforts in strengthening and building economic development activities. Representatives of financial institutions, utilities, local government, education and the business community serve as the Board of Directors. In existence since 1987, GPEDC assumes and carries out the responsibility of working with existing industry and business, as well as identifying and recruiting new companies to the City of Paducah. Additionally, GPEDC is responsible for development of long-term strategy for economic development activities and coordinates local entities in the accomplishment of those strategies. Several years ago, the City of Paducah, the State of Kentucky and several federal agencies, in conjunction with business, developed a 650 -acre `Information Age' Park. This park is designed to appeal to firms needing advanced telecommunications and computing capabilities. The Info Park's focal point is centered on the Resource Center, which was designed to coordinate resources of government, business and education. In 1997, the City of Paducah jointly with the County of McCracken acquired the `Industrial Park West of Paducah and McCracken County'. This park contains 218 acres with immediate access to two major railroad lines, Paducah and Louisville and Paducah and Illinois (formerly Illinois Central). The park is located within the southwest quadrant of the I-24/Cairo Road interchange. In FY2004, the Keiler family donated the Columbia and Arcade Theatre buildings valued at $740,000, and a donation of infrastructure for Industrial Park West valued at $1.1 million was received, totaling $1.84 million. Union Planter's Bank donated its former main bank building valued at $675,000 to the City. However, the Union Planter's Bank building is accounted for in a trust that is not included in the government -wide statements. The City converted the former bank building into the City's `Commerce Center', which houses numerous economic and business development -related tenants, including the GPEDC and the Paducah Area Chamber of Commerce. The theater buildings are being actively marketed for resale to further enhance the downtown. Churches And Schools A relatively strong religious base is evident in the community, as demonstrated by the many churches in Paducah. Numerous churches representing many of the major denominations are located within the City. Several area churches offer televised activities as a convenience to those who do not attend church. Elementary and secondary education in Paducah is provided by the Paducah Independent School System, the McCracken County School System, Community Christian Academy, and by the St. Mary's Parochial School System. Higher education is available locally from West Kentucky Community and Technical College (WKCTC), formerly known as Paducah Community College, a two-year institution affiliated with the University of Kentucky's community college system. WKCTC also serves as a site for the University of Kentucky extended campus graduate programs, in addition to a four-year engineering college in conjunction with the University of Kentucky. Medical Facilities Paducah serves as the regional medical center for much of the Jackson Purchase Area of Western Kentucky, a large portion of Southern Illinois, and Northwestern Tennessee. Paducah's medical industry has almost every -2- major medical specialty represented in the physician population. The medical industry, represented by Lourdes Hospital and Western Baptist Hospital, provides over 750 beds for medical needs. The two largest hospitals, together, employ approximately 3,200 persons. - Recreation And Culture Citizens have available a wide range of recreational and cultural activities which cater to diverse tastes. Area residents may choose from fishing on nearby Kentucky and Barkley Lakes to enjoying the performing arts. City parks provide areas for baseball, softball, golf, football, tennis, soccer and picnicking. The Parks Services Department offers a substantial number of activities for people of all ages. The `Dogwood Festival', held in April, highlights the coming of spring in Paducah. Residents are encouraged to spotlight their trees to illuminate a driving tour to celebrate an abundance of dogwood trees. -.- Paducah is the site of the American Quilter Society's National Museum. The museum, dedicated in 1991, is the centerpiece for the quitters' annual convention held in April. The convention attracts an estimated 30,000 visitors to Paducah annually. The `After Dinner Downtown Program', began in May 1997, started out as an experiment to draw people to Paducah's downtown district. From May to September, businesses remain open late on Saturday night while street corner musicians of all types entertain. The `Paducah Summer Festival', started in 1967, is an annual celebration held during the last week in July. Some of the Festival's activities include skydiving, hot air balloon races, a variety of music concerts, and usually concludes with a spectacular riverfront fireworks display. One of Paducah's oldest celebrations is the `8'h of August Emancipation Celebration', which features African American family reunions, or a homecoming. It is a time for African Americans to pay tribute to their heritage and roots, and a time of reconciliation. The `Barbecue on the River' event was started in 1995 as a way for local charities to raise funds. It attracts in excess of 20,000 participants to Paducah's riverfront during the last weekend in September. Over time, this annual event has grown to incorporate other events, including `Arts in Action', `LowerTown Fine Arts Festival', `Marine Industry Day' and `Old Market Days'. The `Festival of Lights', started in 1992, is another annual event. This festival marks the beginning of the winter holiday season, with the official lighting of the trees and buildings in downtown Paducah. The season includes a `Holiday Parade' and features a `Candle Light Christmas Trail'. Paducah has an active symphony and several theater groups. The Paducah Symphony Orchestra stages concerts during the winter season, with the Market House Theater presenting several productions during the -- same time period. The Paducah Live Corporation annually schedules a series of concerts, which brings some of the finest artists to the Paducah stage. In addition, West Kentucky Community and Technical College's `Arts in Focus' series sponsors a variety of professional productions. The most recent addition to the City's cultural lineup is the `Luther F. Carson Four Rivers Center for the Performing Arts'. The Center opened in February 2004, as a regional, multiple -purpose facility with a 1,800 - seat main hall designed to accommodate a wide variety of cultural and educational programs. The McCracken County Public Library offers a large selection of literature, special collections and programs. The West Kentucky Community and Technical College Library supplements this community resource. The combined inventories of the two libraries yield nearly 121,000 titles, 'not counting numerous periodicals and newspapers. -3- THE GOVERNMENT Paducah operates under a City Manager form of government. The Paducah Board of Commissioners is made up of a Mayor and four Commissioners elected at large by the citizens on a non-partisan basis. The Mayor is elected for a four-year term and Commissioners for a two-year term. The Mayor and Commissioners have equal voting powers. The Board of Commissioners sets the policies that govern the City. It appoints advisory citizens groups that help in the decision-making process. The City Manager is appointed by the Board and assists it in formulating objectives, policies and programs. The City Manager is responsible for the day-to-day operation of the City's 325 full-time employees as of June 30, 2004. Department managers are responsible for their respective departments and report directly to the City Manager. REPORTING ENTITY AND ITS SERVICES For financial statement purposes, as required by generally accepted accounting principles, the City's Comprehensive Annual Financial Report includes all City of Paducah financial statements (primary government) and its component units. Component units discussed below are included in the City's reporting entity because of the significance of their operational or financial relationships with the City of Paducah. The following component units have been presented as blended units because the units' governing body is substantially the same as the governing body of the City, or provides services almost entirely to the City of Paducah: the Paducah Public Improvement Corporation, whose sole purpose is to finance long-term debt; and Police and Firefighters' Pension Fund, which was established for the benefit of police and firemen of the City. The following component units have been presented as discrete units to emphasize that they are legally separate from the City. Paducah Water Works, Paducah Power System, and Transit Authority of the City of Paducah are all included in the City's financial statements because of their financial relationship with the City. The City provides a full range of municipal services, including police and fire protection; maintenance of streets and infrastructure; sanitation services; storm sewer services; cultural events and recreation activities. Accounting System The City's accounting system is organized on the basis of separate funds, each of which is considered to be a separate accounting entity. The financial activities of each fund generate a separate set of self -balancing accounts, which comprise its assets, liabilities, fund equity, revenues, and expenditures/expenses. Municipal resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The City's accounting records for the governmental funds and agency funds are maintained on a modified accrual basis, with revenues being recorded when "measurable and available" and expenditures being recorded when the services or goods are received and the liabilities are incurred. Accounting records for the City's proprietary funds and trust funds are maintained on the accrual basis, with revenues recognized when earned and expenses recorded when the liability is incurred or economic asset used. Internal Control In developing and evaluating the City's accounting system, consideration is given to the adequacy of internal controls. Internal controls were designed for Paducah's accounting system to reasonably safeguard its assets against loss from unauthorized use or disposition, check the accuracy of accounting data, promote operational efficiency and encourage adherence to prescribed managerial policies. -4- Budgetary Control Paducah's budget process provides for input from department managers, top management, elected officials and the public to determine what programs and services will be provided for during the upcoming year. Budgetary control is maintained at the departmental level by comparing budgeted expenditures with actual expenditures on a periodic and year-to-date basis. An expenditure, which would result in an overrun of department appropriation, cannot be made until additional funds are appropriated and a budget amendment is approved. Purchase orders which result in an overrun of department appropriations cannot be honored until additional appropriations are made available. Open encumbrances at fiscal year end, if any, are reported as reservations of fund balance. Unencumbered funds at year end roll into the fund balance. GENERAL GOVERNMENT FUNCTIONS General Fund Revenue Based on Fund Financial Statements) Revenue for General Government functions (General Fund) totaled $27,473,810 in fiscal year 2004, an increase of 10.2% (2.7% without building donations, as noted below) over fiscal year 2003. The amount of revenue from various sources, percent of total, and the increase or decrease from last year in dollars and as a percentage are shown in the following tabulation: Increase (Decrease) From FY 2003 FY 2004 Percent Dollar Revenue Sources: Amount of Total Amount Percent -- Taxes $ 5,205,422 19.07/o $ 183,353 3.7% Licenses and permits 18,423,244 67.0% 522,505 2.9% Charges for services 569,320 2.1% (83,471) (12.8)% Grants 635,525 2.3% 43,873 7.4% Interest 118,566 0.4% (51,495) (30.3)% Miscellaneous 2,521,733 9.2% 1,916,938 317.0% TOTAL REVENUE 27.473.810 100.0% $2,531,703 10.2 % The most substantial increase in the revenue categories above in actual dollars is in `Miscellaneous', which - amounted to $1,916,938. The vast majority of the increase was caused by a `one-time' donation of $1.84 million for a building and infrastructure donated to the City. Net of the donations, revenues in the `Miscellaneous' category increased $76,938. See `Economic Development Activities' section on page 2 for additional details regarding the donations. The most substantial increase in the revenue categories, outside of `Miscellaneous', was `Licenses and Permits', which amounted to $522,505. Payroll taxes increased $314,992 or about 3.1 percent, while business license collections increased $92,100 or 2.7 percent over last year. In fiscal year 1994, $7.0 million was received in payroll tax revenues, while fiscal year 2004 revenue was $10.6 million, an average growth rate of 4.3 percent. Payroll tax revenue rate of growth was 3.6 percent for a more recent five-year period, fiscal 1999 to fiscal 2004. The FY2004 payroll tax revenue growth rate is approximately 72 percent of that of the 10 -year historical average. Insurance premium tax collections increased 5.2 percent or $186,900 last year. In fiscal year 1992, $2.28 million was received, and in fiscal year 1999, the revenue hit $3.36 million, giving an average compounded growth rate of 5.7 percent a year. While insurance premium tax revenue was $3.36 million in 1999, it subsequently hit a 7 -year low in 2000 at $2.97 million. In fiscal years 2001 and 2002, the insurance premium tax sustained positive growth but declined 1.1 percent in fiscal 2003. The average growth rate for the insurance premium tax over the past 5 years has stayed slightly below inflation, at 2.9 percent. -5- While overall, `License and Permits' revenue dollars grew the most, the `Interest' category decreased the most dramatically as a percentage of change, 30.3 percent or $51,495. The interest revenue decrease was caused primarily by the steady decline in interest rates over the past several years as investments continue to mature, in addition to the decline in funds available to invest. General Fund Expenditures (Based on Fund Financial Statements) Expenditures for General Fund functions totaled $24,593,416, an increase of 11.5% (3.1% without building donations, as noted below) over fiscal year 2003. Increases and decreases in levels of expenditures by major functions compared to the preceding year are shown in the following tabulation: Increase (Decrease) From FY 2003 FY 2004 Percent Dollar Expenditures: Amount of Total Amount Percent General government $ 3,891,251 15.8% $ (51,780) (1.3)% Public safety 11,750,018 47.8% 472,721 4.2% Public service 5,582,006 22.7% 363,110 7.0% Recreation 1,026,297 4.2% 50,936 5.2% Other 2,343,844 9.5% 1,698,191 263.0% TOTAL EXPENDITURES $24,593,416 10 .0% $2,533,178 11. Expenditures grew 11.5 percent or $2,533,178 (3.1% or $693,178 without building donations) between fiscal year 2003 and fiscal year 2004, as compared to the increase in spending between fiscal year 2002 and fiscal year 2003, of $865,890 or 4.1 percent. The fiscal year 1995 expenditure per capita was $595 and changed to $728 and $838 in fiscal year 2000 and fiscal year 2003, respectively. Per capita expenditures have increased on average 5.3 percent annually since fiscal year 1995. Fiscal year 2004 General Fund expenditures (net of one-time building donations) increased $27 per citizen from the fiscal year 2003 amount of $838. The most substantial increase in the expenditures categories above, in actual dollars, is in `Other', which amounted to $1,698,191. The vast majority of the increase was caused by a `one-time' donation of $1.84 million for a building and infrastructure donated to the City. Net of the donations, expenditures in the `Other' category decreased $141,809. See `Economic Development Activities' section on page 2 for additional details regarding the donations. The fiscal year 2004 budget process played a significant role in identifying spending trends, and that process should be carried over into fiscal year 2005. The fiscal year 2004 expenditures more accurately reflect all costs associated with the departments that benefit from the expenditure. The single largest net change was in `Public Safety' for $472,721. Nearly 95% of the change was due to wage increases ($280,000) and related pension expenses ($172,000). FOP and IAFF wage contracts provided for 3% cost of living adjustment in fiscal year 2004. The State of Kentucky increased the City's pension expense for hazardous -duty employees by 2.23% (a 14% increase) to an 18.51% contribution rate on all wages paid. The next most significant change in terms of dollars and percentage change were in the 'Public Service' category for $363,110 or 7.0% over last year. Public Service expenditures are made up of Public Works, Engineering and Floodwall operational costs. The most substantial increase, in terms of dollars, was in the `Landscape Maintenance' division. ECONOMIC CONDITION The City continues to be actively involved in promoting economic development since new developmental job growth is necessary to ensure the continued stability of the City's tax base. Economic indicators and trends reflect that the area's economy has slowed in recent years but is expected to continue to grow over the near- term. Area employment was down slightly from the prior 12 -month period and was 32,888, a 1.7% decrease. !Q The June 30, 2004, unemployment rate was 4.3% (McCracken County), much better than the federal rate of - 5.6%. The number of active electric and water meters was nearly the same as the prior year. The number of residential construction permits obtained was 268 units of single and multi -family dwellings, up 16% and valued at $17.9 million. The value of commercial construction permits was $23.6 million, down 34% from the prior year. CASH MANAGEMENT Idle cash in the City's various funds, except for pension funds, is invested for terms ranging from overnight to 23 months to maturity depending upon liquidity needs. Independent money managers handle Police and Firefighters' Pension Funds. City deposits/investments are protected by FDIC insurance and pledged U.S Government securities. The amount of interest earned in fiscal year 2004 in the General Fund was $118,566, on rates varying from 1.65% to 3.52%. RISK MANAGEMENT In recent years, attention has been focused on safety in the workplace. Working with the Kentucky League of Cities (KLC) has produced numerous enhancements in worker safety. The City has selected various insurance coverage to mitigate potential risk, with premiums costing more than $904,500 and $905,300 in fiscal year 2004 and fiscal year 2003, respectively, for general liability, public officials liability, auto, law enforcement and workers compensation. PENSION FUND MANAGEMENT The City of Paducah employees are covered by one of three retirement systems: (1) Police and Firefighters' Pension Fund (PFPF); (2) County Employees' Retirement System (CERS); and (3) Appointive Employees' Pension Fund (AEPF). - The PFPF is a single -employer contributory defined benefit plan established by local ordinance under State Statutes. Members contribute 8% of their gross earnings. The investments of this fund are managed by a six - member board of trustees, which utilizes BB&T as money managers. Monthly reports are received, and monthly meetings are held with the money managers to review investment progress and strategy. In the past year, the PFPF had a net asset decrease of $108,421 with net assets valued at $9,352,299 on June 30, 2004. There were 6 active members and 97 retirees and/or beneficiaries in this fund as of June 30, 2004. The most recent actuarial report prepared for the PFPF was as of July 1, 2004. The CERS is a multiple employer cost sharing defined benefit plan administered by Kentucky Retirement System. Effective August 1, 1988, all but 21 active police and firefighters opted to transfer from the present plan to the County Employees' Retirement System. Non -hazardous duty employees contribute 5% while hazardous duty employees contributed 7% until August 1, 1998. Hazardous duty employees contribute 8% effective August 1, 1998, due to a change in state pension law. The City contributed 7.34% for non -hazardous and 18.51% for hazardous duty employees in fiscal year 2004. The AEPF is a single -employer contributory defined benefit plan created by local ordinance under State Statute. While there are no active members in the plan, there are 12 retirees and/or beneficiaries receiving -- benefits from the fund as of June 30, 2004. Retirees are former non -hazardous duty municipal employees who retired prior to the statewide CERS plan. Funding was formerly provided by a special ad valorem tax, with any shortfall to be covered by a transfer from the City's General Fund. The AEPF had a net asset decrease of $3,754 in fiscal year 2004, with net assets valued as of June 30, 2004, of $323,620. -7- SPECIAL REVENUE FUNDS Special revenue funds (Nonmajor Governmental Funds) included in this report are the Municipal Aid Program, Emergency Communication Service Fund, Court Awards Fund, and various Federal and State Grants. Revenues accounted for in these funds are restricted to specific purposes. PROPRIETARY FUNDS The City maintains eight proprietary funds which are: Solid Waste, Wastewater/Stormwater, Civic Center, Telecommunication Information System Authority (TISA) (Business -type Activities); and Fleet Maintenance, Fleet Lease Trust, Insurance and Health Insurance Funds (Internal Service Funds). In fiscal year 1990, the Solid Waste Fund and the Wastewater/Stormwater Fund were reclassified from General Government and established as proprietary funds. The City's fleet operation was broken out as a proprietary fund in fiscal year 1992 in order to more accurately reflect the true cost of the City's vehicle and equipment fleet maintenance program. The Civic Center's operation was converted into a proprietary fund in fiscal year 1993. In fiscal year 1999, the City set up two new funds called Fleet Lease Trust and Health Insurance Funds, in order to more accurately monitor the City's fleet lease program and health, dental and flexible benefits programs, respectively. All these changes were made to better account for the cost of operations. The Wastewater/Stormwater Fund was closed out in fiscal year 2004, since accounts are settled with the Paducah -McCracken County Joint Sewer Authority (JSA). This agency has taken over the planning, financing, operation and maintenance of all county and city sewer systems. DEBT SERVICE FUND This fund is used to account for payment of general obligation indebtedness, which includes debt associated with the Paducah Public Improvement Corporation and the Fifth Third Bank lease for fire department equipment, which was fully paid in fiscal year 2004. In fiscal year 2001, the City issued $9.29 million in notes payable to fund the Julian Carroll Convention Center expansion ($6.0 million) and to assist in the financing of the Luther F. Carson Four Rivers Center (FRC) for the Performing Arts ($3.0 million). According to an interlocal agreement between the City, McCracken County and the Tourism and Convention Commission, principal and interest payments on the bonds are to be made from a 2% transient room tax collected by the County. Any excess principal and interest payments on the bonds are split equally between the City, County and the Tourism and Convention Commission. In fiscal year 2004, the City issued $3.5 million in bonds to fund a variety of capital projects, including park improvements ($1.0 million), downtown infrastructure improvements in conjunction with the FRC ($1.5 million), and City Hall, Police and other City -owned facility improvements ($1.0 million). In fiscal year 2004, the City sold $5.0 million in bonds to construct the Infiniti Media Building in the Paducah Industrial Park West, an economic development project. By interlocal agreement, McCracken County is obligated to an amount equal to 50% of the principal amount of the bonds. After the third year of the life of the bond, the Infiniti Media Company is obligated to make monthly lease payments to the City in an amount nearly equal to the debt service obligation. The total cash outlay requirements for debt service retirement; principal and interest, in fiscal year 2004 were $900,238. INDEPENDENT AUDIT Kentucky Revised Statute 91 A-040 requires an annual audit of each fund of the City by an auditor of public accounts or a certified public accountant. The independent certified public accounting firm of Williams, Williams & Lentz, LLP has conducted this audit and their opinion has been included in this report. The City is also subject to the Single Audit Act Amendments of 1996 reporting requirements. The Single Audit Report is included within this report. -8- CERTIFICATE OF ACHIEVEMENT The Government Finance Officers Association (GFOA) of the United States and Canada awarded a Certificate of Achievement for Excellence in Financial Reporting for fiscal year _ended June 30, 2003. This was the thirteenth year for Paducah to receive this prestigious award. In order to be awarded a Certificate of Achievement for Excellence in Financial Reporting, the City published an easily readable and efficiently organized comprehensive annual financial report, the contents of which conform to program standards. The report satisfied both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement for Excellence in Financial Reporting is valid for a period of one year only. We believe our current report continues to conform to program requirements, and we are submitting it to GFOA to determine its eligibility for another certificate. ACKNOWLEDGMENTS The preparation of this report on a timely basis could not be accomplished without the efficient and dedicated services of the entire staff of the Finance Department. We wish to express our appreciation to all members of the Finance Department who assisted and contributed to its preparation, and special thanks to Williams, Williams & Lentz, LLP. We also thank the Mayor and City Commission for their interest and support in planning and conducting the financial operations of the City in a responsible and progressive manner. Respectfully submitted, r onathan W. Perkins, CPA Finance Director/Treasurer la x ¢ � o � a O U � ZW 0 c� U U � Em U -10- w w t Cd ci. Q Q) t C O O cd on3 o C Q 0 Mayor Mayor Pro tem Commissioner Commissioner Commissioner Personnel Finance Police Chief Fire Chief City Engineer Planning Parks Services Inspections Public Works Information Services City Clerk CITY OF PADUCAH, KENTUCKY PRINCIPAL OFFICIALS BOARD OF COMMISSIONERS CITY MANAGER James Zumwalt William F. Paxton Gerry Montgomery Buz Smith Robert Coleman David Guess Herschel Dungey Jonathan Perkins, C.P.A. Randy Bratton Redell Benton Richard Murphy Thomas Barnett Mark Thompson Joel Scarbrough Interim Greg Mueller Tammy Brock Certificate of Achievement for Excellence in Financial Reporting Presented to City of Paducah, Kentucky For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2003 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. ED _� �/ -A 5L-4&— FF¢ �y'�rr"rj� OF TH UMTED STA (J CANADA CORPORATION SEAL aoS uoCAGO Executive Director -12- CITY OF PADUCAH, KENTUCKY FINANCIAL SECTION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 309 2004 WILLIAMS, WILLIAMS & LENTZ, LLP CERTIFIED PUBLIC ACCOUNTANTS 601 JEFFERSON PADUCAH, KENTUCKY 42001 J. RICHARD WALKER --" JERRY G. SEVERNS MAILING ADDRESS POST OFFICE BOX 2500 ROBERT R. ROBERTSON PADUCAH, KY 42002-2500 C. SUZETTE CRONCH ANNETTE T. RYAN TELEPHONE MICHAEL F. KARNES 270-443-3643 MARK -... Independent Auditor's Report ROGER G. HARRIS ROGER .HARRS FAX J. DAVID BAILEY, III 270-444-0652 G. LEON WILLIAMS, 1926-2004 WEBSITE H. WILLIAM LENTZ w Icpa. Honorable William F. Paxton, Mayor Members of the Board of Commissioners City of Paducah Paducah, Kentucky We have audited the accompanying financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining _ fund information of the City of Paducah, Kentucky (the City), as of and for the year ended June 30, 2004, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Paducah, Kentucky's management. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the following component units: Paducah Water Works, Paducah Power System, and Transit Authority of the City of Paducah, which represent 100 percent of the assets and revenues of the Component Units column. Those financial statements were audited by other auditors whose reports have been furnished to us, and our opinion on the basic financial statements, insofar as it relates to the amounts included for Paducah Water Works, Paducah Power System, and Transit Authority of the City of Paducah, discretely presented component units, is based on the reports of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall basic financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Paducah, Kentucky as of June 30, 2004, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated September 20, 2004, on our consideration of the City's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. -13- The Management's Discussion and Analysis, Pension Trust Fund Schedules, and budgetary comparison information on pages 15 through 26 and 76 through 81, are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Paducah, Kentucky's basic financial statements. The introductory section, combining and individual nonmajor fund financial statements, and statistical tables are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of State, Local Governments, and Non -Profit Organizations, and is also not a required part of the basic financial statements of the City of Paducah, Kentucky. The combining and individual nonmajor fund financial statements and the schedule of expenditures of federal awards have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory section and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. September 20, 2004 -14- CITY OF PADUCAH, KENTUCKY REQUIRED SUPPLEMENTARY INFORMATION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2004 CITY OF PADUCAH, KENTUCKY MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2004 The City of Paducah ("City") offers Management's Discussion and Analysis to provide a narrative overview and analysis of City financial activities for fiscal year ended June 30, 2004. To fully understand the entire scope of the City's financial activities, this information should be read in conjunction with the letter of transmittal (pages 1-9) and the basic financial statements (pages 27-75) provided in this document. The City first implemented Government Accounting Standards Board Statement 34, Basic Financial Statements—and Management's Discussion and Analysis for State and Local Governments, for fiscal year 2003. I. Financial Highlights • Assets exceeded liabilities by $35.6 million at the close of the 2003-2004 fiscal year. Of this amount, $1.6 million (unrestricted net assets) may be used to meet City government's ongoing obligations to citizens and creditors. • Total net assets decreased $1,174,634. • At fiscal year end, City governmental funds reported a combined ending fund balance of $9.8 million. Approximately 55% of this total amount, $5.4 million, is unreserved and available for spending at the City's discretion. Of the $5.4 million, $800,696 is in various special funds, which are earmarked for specific purposes. • At the end of the current fiscal year, unreserved general fund balance was $4.6 million, approximately 16.7% of total general fund expenditures and transfers out. II. Overview of Financial Statements This discussion and analysis serves as an introduction to the City's basic financial statements, which consist of four components: 1) government -wide financial statements, 2) fund financial statements, 3) component unit financial statements, and 4) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements. A. Government -Wide Financial Statements Government -wide financial statements are designed to provide readers with a broad overview of City finances in a manner similar to private -sector business. The Statement of Net Assets presents information on all City assets and liabilities, with the difference between assets and liabilities reported as net assets. Monitoring increases and/or decreases in net assets over time may serve as a useful indicator of whether the financial position of the City is improving, stagnating, or deteriorating. The Statement of Activities presents information showing how the City's net assets changed during the fiscal year. All net asset changes are reported as soon as the underlying event giving rise to the change occurs regardless of the timing of related cash flows. Revenues and expenses are reported in the Statement of Activities for some items that will only result in cash flows in the future (e.g., uncollected taxes and earned but unused vacation leave). Both of the government -wide financial statements distinguish City functions that are primarily supported by taxes and intergovernmental revenues (governmental activities) from other City functions that are intended to recover all or a significant portion of their costs through user fees and charges (business -type activities). City governmental activities include general government, public safety, public service, park and recreation, planning and development, and interest on long-term debt. Business -type activities of the City include Solid Waste, Wastewater, Civic Center and Telecommunication Information System Authority (TISA). (Continued) -15- Government -wide financial statements include not only the City (the primary government), but also a legally separate Paducah Water Works, Paducah Power System and Transit Authority of the City of Paducah (component units) for which the City is financially accountable. Financial information for the component units is reported separately from the financial information presented for the primary government itself. The government -wide financial statements can be found on pages 27-30 of this report. B. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over segregated resources for specific activities or objectives. The City of Paducah, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. City funds can be divided into three categories: 1) Governmental Funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government -wide financial statements. Unlike government -wide financial statements, however, governmental fund financial statements focus on current sources and uses of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. This information may be useful in evaluating a city's near- term financing requirements. The City maintains fourteen (14) individual 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, General Capital Improvements, and Downtown Capital Improvements Funds, all of which are considered to be major funds. Data from the other eleven (11) 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 and individual fund statements elsewhere in this report on pages 82-95. Readers may better understand the long-term impact of the City's near-term financing decisions by comparing the narrow -focus governmental funds financial statements with governmental activities in the government -wide financial statements. Exhibit 4 (pages 33-34) and Exhibit 6 (pages 37-38) provide a reconciliation to ease comparison between the fund financial statements and the government -wide statements. The basic governmental fund financial statements can be found on pages 31-38 of this report. 2) Proprietary Funds. The City maintains two types of proprietary funds: a. Enterprise Funds. Enterprise funds are used to report the same functions presented as business -type activities in the government -wide financial statements and are used to account for operations: • That are financed and operated in a manner similar to private business enterprises where the intent of the governing body is that the costs of providing goods and services to the general public on a continuing basis be financed or recovered primarily through user charges; or • Where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability or other purposes. The City uses four enterprise funds to account for Solid Waste, Civic Center, TISA and Wastewater operations, as well as certain component units that provide electric, water, and public transit. TISA and Civic Center receive subsidy from the General Fund. (Continued) -16- The City's component unit enterprises include the Paducah Water Works, Paducah Power - System and Paducah Transit Authority, which provide water, electric, light and power systems, and public transportation. These component units, each of which has their own board of directors, are also enterprise funds and are shown on pages 44-47. b. Internal Service Funds are used to accumulate and allocate costs internally among the City's various functions. The City uses internal service funds to account for fleet services, fleet replacement, risk management (insurance) and employee health programs. Internal Service Funds have been allocated between governmental activities and business -type activities in the government -wide financial statements based on revenue earned. Proprietary funds provide the same kind of information as government -wide financial statements, but in greater detail. Individual data for the nonmajor proprietary funds is presented in the form of combining statements on pages 96-98 of this report. Individual data for the internal service funds is likewise presented in the form of combining statements on pages 100- 102 of this report. 3) Fiduciary Funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government and are not reflected in government -wide financial statements because those resources are not available to support City programs. Individual data for the City's five (5) fiduciary funds (Appointive Employees' Pension, Police and Firefighters' Retirement, Oak Grove Cemetery Trust, Maintenance and Rehabilitation Trust and Payroll Agency) are presented in the form of combining statements on pages 102-106 of this report. C. Notes to the Financial Statements The notes provide additional information that is essential to fully understanding data provided in the government -wide and fund financial statements. Notes to the financial statements can be found on pages 48-75 of this report. D. Other Information In addition to basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning City funding of its obligation to provide pension benefits to its employees and budgetary comparison schedules for the general and major special revenue funds. The combining statements referred to earlier in connection with nonmajor governmental funds, nonmajor proprietary funds, internal service funds and fiduciary funds are presented immediately following the required supplementary information on pensions and budgetary comparisons. Combining fund statements and schedules can be found on pages 82-106 of this report. III. Government -Wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of the City's financial position. City assets exceeded liabilities by $35.6 million as of June 30, 2004. The largest portion of the City's net assets (82%) reflects its investment in capital assets (i.e., land, buildings, machinery, equipment and infrastructure) less outstanding related debt used to acquire those assets. The City uses these capital assets to provide service to citizens and, as a result, these assets are not available for future spending. The City's capital assets investment is reported net of related debt, but the resources to pay this debt must be provided from other sources since the capital assets cannot be used to liquidate the liabilities. (Continued) -17- An additional portion of City net assets (13%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($1.6 million) may be used to meet the City's ongoing obligations to citizens and creditors. As of June 30, 2004, the City reports positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental and business -type activities. In this second year of implementation of GASB Statement 34, the City is presenting comparative columns in the various comparisons and analyses for the prior year. City of Paducah, Kentucky Net Assets June 30 The following table provides a summary of the City's operations for the years ended June 30, 2004 and 2003. The City first implemented GASB Statement 34, Basic Financial Statements — and Management Discussion and Analysis — for State and Local Governments in fiscal year 2003. Governmental activities decreased the City's net assets by $1,626,943. The primary reason for the decrease was a $3.0 million payment to the Luther F. Carson Four Rivers Center for the Center's building construction fund. Additionally, while most funds' net assets increased, the Municipal Aid Fund's net assets decreased $349,264. Business -type activities increased the City's net assets by $452,309. The following table provides a summary of the City's operations for the years ended June 30, 2004 and June 30, 2003: (Continued) -18- Business -Type Total Governmental Activities Activities Primary Government 2004 2003 2004 2003 2004 2003 Current assets $20,080,043 $19,306,855 $2,205,856 $1,970,437 $22,285,899 $21,277,292 Capital assets 38,764,453 32,412,164 1,463,669 1,425,753 40,228,122 33,837,917 Total assets 58,844,496 51,719,019 3,669,525 3,396.190 62,514,021 55,115,209 Long-term liabilities 17,889,770 9,979,680 14,002 18,671 17,903,772 9,998,351 Other liabilities 8,788.311 7,915,025 212,361 386,666 9,000,672 8,301,691 Total liabilities 26,678,081 17,894,705 226,363 405,337 26,904,444 18,300,042 Net assets: Invested in capital assets, net of related debt 27,826,117 27,955,839 1,463,668 1,425,753 29,289,785 29,381,592 Restricted 4,746,340 4,297,355 - - 4,746,340 4,297,355 Unrestricted (406,042) 1,571,120 1,979,494 1,565,100 1,573,452 3,136,220 TOTAL NET ASSETS32.166.415 33.824.314 $3,443,162 S2 990 853 $35,609,577 36.815.167 A. Analysis of the City's Operations The following table provides a summary of the City's operations for the years ended June 30, 2004 and 2003. The City first implemented GASB Statement 34, Basic Financial Statements — and Management Discussion and Analysis — for State and Local Governments in fiscal year 2003. Governmental activities decreased the City's net assets by $1,626,943. The primary reason for the decrease was a $3.0 million payment to the Luther F. Carson Four Rivers Center for the Center's building construction fund. Additionally, while most funds' net assets increased, the Municipal Aid Fund's net assets decreased $349,264. Business -type activities increased the City's net assets by $452,309. The following table provides a summary of the City's operations for the years ended June 30, 2004 and June 30, 2003: (Continued) -18- City of Paducah, Kentucky Changes in Net Assets For the Years Ended June 30 - - 4,012,168 Governmental Activities Revenues: 2004 2003 Program revenues: Primary Government 2004 Charges for services $ 3,867,699 $ 2,370,110 Operating grants/ $ 3,413,172 $ 7,795,064 contributions 3,290,134 4,176,548 Capital grants/ 4,176,548 24,990 contributions 3,221,637 2,213,757 General revenues: 4,020,156 3,480,606 39,146,752 36,601,486 Property taxes 4,012,168 3,893,211 Franchise tax 244,877 298,251 Telecommunications 123,719 184,166 tax 665,807 751,802 Insurance premium tax 3,767,864 3,580,964 Vehicle tax 493,800 492,077 Bank tax 161,550 169,668 Gross receipts license 821,602 68,964 tax 3,496,438 3,404,338 Employee licenses tax 10,616,223 10,301,231 Other taxes 198,106 181,266 Intergovernmental revenue 871,273 836,132 Unrestricted investment earnings 220,992 325,811 Gain on sale of capital assets (972) 125,714 Total revenues 35,126,596 33,120,880 Expenses: General government 7,969,027 7,396,882 Public safety 13,243,912 12,964,120 Public service 8,618,901 7,376,791 Parks and recreation 1,026,293 975,362 Planning and development 5,330,393 3,108,192 Interest on long-term debt 496,049 428,578 Solid Waste - - Civic Center - - TI SA Total expenses 36,684,575 32,249,925 Increase (decrease) in net assets before transfers (1,557,979) 870,955 Transfer (68,964) 18,666 Change in net assets (1,626,943) 889,621 Adjustment to beginning net assets (30,956) - Net assets, July 1 33,824,314 32,934,693 NET ASSETS, JUNE 30 32.166.415 $ 33.824.314 - - 4,012,168 3,893,211 Total 298,251 Business-Tvue Activities Primary Government 2004 2003 2004 2003 $ 3,927,365 $ 3,413,172 $ 7,795,064 $ 5,783,282 - - 3,290,134 4,176,548 24,990 3,666 3,246,627 2,217,423 - - 4,012,168 3,893,211 - - 244,877 298,251 - - 665,807 751,802 - - 3,767,864 3,580,964 - - 493,800 492,077 - - 161,550 169,668 - - 3,496,438 3,404,338 - - 10,616,223 10,301,231 - - 198,106 181,266 - - 871,273 836,132 32,826 39,530 253,818 365,341 34,975 24,238 33,003 149,952 4,020,156 3,480,606 39,146,752 36,601,486 - - 7,969,027 7,396,882 - - 13,243,912 12,964,120 - - 8,618,901 7,376,791 - - 1,026,293 975,362 - - 5,330,393 3,108,192 - - 496,049 428,578 3,419,464 3,359,731 3,419,464 3,359,731 33,181 46,509 33,181 46,509 184,166 123,719 184,166 123,719 3,636,811 3,529,959 40,321,386 35,779,884 383,345 (49,353) (1,174,634) 821,602 68,964 (18,666) - - 452,309 (68,019) (1,174,634) 821,602 -19- - - (30,956) - 2,990,853 3,058,872 36,815,167 35,993,565 3.443,162 S 2,990,853 35,609,577 $36,815,167 (Continued) B. Governmental Activities $14 o $12 $10 $8 $6 $4 $2 $0 Governmental Activities Expenses and Program Revenues °' -� 0 ani a`"i a" o > a c oon > a a � Vehicle Tax 1% Occul Governmental Activities Intergovernmental Revenue by Source -20- (E911) 2% >ervices Operating s/contributions 9% Capital /contributions 9% Property taxes 12% (Continued) C. Business -Type Activities Business -type activities increased the City's net assets by $452,309, in contrast to the negative position in net assets for Governmental Activities for the year. Business -Type Activities Expenses and Revenues $4.0 c $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 ■ Expenses ■ Revenues Solid Waste Wastewater Civic Center TISA Business -Type Activities Revenue by Source Interest Income Capital grants/contributions 0% 1% Gain on sale of capital assets and transfers l% Charges for services 98% -21- (Continued) IV. Financial Analysis of the City's Funds A. Governmental Funds The focus of the City's governmental funds is to provide information on near-term inflows, outflows and balances of spendable resources. Such information is useful in determining the City's financing requirements. Unreserved fund balance serves as a useful measure of the City's net resources available for spending at the end of the fiscal year. At the end of the fiscal year, the City governmental funds reported combined ending fund balances of $9.8 million. Approximately 55% of this total amount, $5.4 million, is unreserved fund balance, which is available for spending at the government's discretion. Of the $5.4 million, $800,696 is in the debt service fund and various grant funds. The remaining $4.4 million of fund balance is reserved for specific future uses. Governmental Activities Ending Fund Balances Unreserved - other Unreserved - general funds fund 8% 47% Reserved 45% The general fund is the chief operating fund of the City. At the end of the 2003-2004 fiscal year, the general fund unreserved fund balance was $4.6 million. City ordinance requires that an amount not less than 12.5% of the General Fund's budgeted expenditures remain undesignated in the fund balance, or $3.5 million, which leave $1.1 million as truly unreserved. As a measure of general fund liquidity, readers may compare both unreserved fund balance and total fund balance to total general fund expenditures. Unreserved General Fund fund balance represents approximately 16.7% of expenditures and transfers out ($27.8 million). The General Fund fund balance decreased by $284 thousand during the 2003-2004 fiscal year and was the result of expenditures increasing at a more rapid rate than revenues. Key factors contributing to this decrease are: o Economic development incentives, and o State pension plan cost increases. The General Capital Improvements Fund had a fund balance of $738 thousand all of which is reserved. The General Capital Improvements fund balance increased $155 thousand. The Downtown Capital Improvements Fund had a fund balance of $3.1 million all of which is reserved and it has already been committed to the Infinity Media project in Paducah's Industrial Park West. The Downtown Capital Improvements fund balance increased $148 thousand. B. Proprietary Funds The City's proprietary funds provide the same information found in the government -wide financial statements, but in more detail. Unrestricted net assets of the respective proprietary funds are: Solid Waste $1,914,969 Wastewater - Civic Center 21,117 TISA 49,412 (Continued) -22- Combined net asset growth for the four funds was $362 thousand broken down as follows: Solid Waste $345 thousand, Civic Center $3 thousand, and TISA $14 thousand. Other factors concerning the proprietary enterprise funds have been addressed in the discussion of City business -type activities. V. General Fund Budgetary Highlights Differences between the original budget and the final amended budget resulted in a $975,660 decrease in appropriations and can be briefly summarized as follows: Transfers out were also increased $1,126,515. The net increase to appropriations and transfers out was $2,386,525 for the year. Since expenditures and transfers out were slightly more than budgetary estimates, fund balance was reduced more than expected. VI. Capital Asset and Debt Administration A. Capital Assets The City's investment in capital assets for governmental and business -type activities as of June 30, 2004, is $33.4 million (net of accumulated depreciation). This investment in capital assets includes land, buildings and system improvements, machinery and equipment, park facilities, roads, highways, and bridges, and construction in progress. Capital improvements are included in each department budget until improvements are completed. At the end of the fiscal year, completed projects are capitalized in the Government -wide Statements. During fiscal year 2004, projects and equipment expenditures totaled nearly $13.3 million. The largest capital -type projects, in terms of dollars in fiscal year 2004, are shown in the following table: Four Rivers Center capital building fund $3,000,000 Infiniti Media building project 3,400,000 Four Rivers Center parking lot and related infrastructure 1,800,000 Park improvements (including recreation trails) 714,000 Pecan Drive improvements project (row, bridges) 632,000 Streetscape — Phase IV 412,000 GIS project 266,000 River Heritage Museum project 250,000 In the upcoming years, several street, economic development, quality of life and drainage projects will continue and are estimated to cost several million dollars. Capital improvement projects including infrastructure, the continuing airport expansion, police and recreational facility improvements, continued neighborhood revitalization, and street and sidewalk rehabilitation are among the projects to be addressed. (Continued) -23- Appropriations Department Increase Decrease General administration $ - $255,005 Finance - 26,290 Planning 114,915 - Human rights - 3,075 Human resources - 8,800 Inspection - 49,475 Information systems - 29,540 Police - 220,600 Fire - 21,965 Public works - 434,660 Engineering services 14,465 - Recreation - 55,630 Transfers out were also increased $1,126,515. The net increase to appropriations and transfers out was $2,386,525 for the year. Since expenditures and transfers out were slightly more than budgetary estimates, fund balance was reduced more than expected. VI. Capital Asset and Debt Administration A. Capital Assets The City's investment in capital assets for governmental and business -type activities as of June 30, 2004, is $33.4 million (net of accumulated depreciation). This investment in capital assets includes land, buildings and system improvements, machinery and equipment, park facilities, roads, highways, and bridges, and construction in progress. Capital improvements are included in each department budget until improvements are completed. At the end of the fiscal year, completed projects are capitalized in the Government -wide Statements. During fiscal year 2004, projects and equipment expenditures totaled nearly $13.3 million. The largest capital -type projects, in terms of dollars in fiscal year 2004, are shown in the following table: Four Rivers Center capital building fund $3,000,000 Infiniti Media building project 3,400,000 Four Rivers Center parking lot and related infrastructure 1,800,000 Park improvements (including recreation trails) 714,000 Pecan Drive improvements project (row, bridges) 632,000 Streetscape — Phase IV 412,000 GIS project 266,000 River Heritage Museum project 250,000 In the upcoming years, several street, economic development, quality of life and drainage projects will continue and are estimated to cost several million dollars. Capital improvement projects including infrastructure, the continuing airport expansion, police and recreational facility improvements, continued neighborhood revitalization, and street and sidewalk rehabilitation are among the projects to be addressed. (Continued) -23- Land Land improvements Construction in progress Buildings and improvements Infrastructure Equipment Furnishings and fixtures Vehicles 101F RLI City of Paducah, Kentucky Capital Assets (Net of Accumulated Depreciation) June 30 Business -Type Governmental Activities Activities 2004 2003 2004 2003 T-5,420,685 $ 5,084,335 $ 65,908 $ 65,908 53,502 - - - 1,719,363 2,988,191 - - Total Primary Government 2004 2003 $ 5,486,593 $ 5,150,243 53,502 - 1,719,363 2,988,191 3,645,717 3,096,982 194,339 183,855 3,840,056 3,280,837 18,604,571 14,242,704 - - 18,604,571 14,242,704 825,402 1,032,988 288,321 376,358 1,113,723 1,409,346 1,755 5,687 - - 1,755 5,687 1,666,547 1,584,777 915,101 799,632 2,581,648 2,384,409 31.937.54228.035.664 $1,463,669 $33,401,211 $29,461,417 Additional information on City capital assets can be found in Note 3 in the notes to financial statements on pages 60-61. B. Long -Term Debt At year end, the City had $18,793,259 in outstanding bonds, accrued compensated absences and capital leases, compared to $10,622,534 at June 30, 2003 with maturities extending through 2026. During the year, the City's total debt increased by $8,170,725 or 80%, as shown in the following table: General Obligation Bonds: Convention and Performing Arts Center — 2001 Kentucky League of Cities — 2003 Infiniti Media Building — 2004 General Fund accrued compensated absences Paducah Bank — Lowertown property Capital lease — fire equipment TOTALS Governmental Activities 2004 2003 $ 8,620,000 $ 8,850,000 3,381,211 - 5,000,000 - 1, 744,404 1,692,709 47,644 - - 79,825 18.793.25910.622.534 In June 2001, a $9.29 million general obligation bond was added to the City's debt obligation to finance construction of the Luther F. Carson Four Rivers Center for the Performing Arts (approximately $3.0 million) and the expansion of the Julian Carroll Convention Center (approximately $6.0 million). These bonds are required to be fully paid within 25 years from the date of issue and are backed by the full faith and credit of the City. While the City issued these bonds, 50% of the principal amount of the bonds is being issued on behalf of the County of McCracken, Kentucky. McCracken County has issued the City a general obligation note in a principal amount equal to 50% of the principal amount of the bonds. In fiscal year 2004, the City borrowed $3.5 million to fund a variety of capital projects, including park improvements ($1.0 million), downtown infrastructure improvements in conjunction with the FRC ($1.5 million), and City Hall, Police and other City -owned facility improvements ($1.0 million). (Continued) -24- In fiscal year 2004, the City sold $5.0 million in bonds to construct the Infiniti Media Building in the Paducah Industrial Park West, an economic development project. By interlocal agreement, McCracken County is obligated to an amount equal to 50% of the principal amount of the bonds. After the third year of the life of the bond, the Infiniti Media Company is obligated to make monthly lease payments to the City in an amount nearly equal to the debt service obligation. The City's legal debt limit under §158 of the Kentucky Constitution is 10% of total assessed value of taxable property in Paducah; therefore, the debt limit is $149,036,256. The City's latest bond rating by Moody is A2. The City has a low amount of general obligation debt, which explains our large legal debt margin. The City of Paducah, Kentucky, issues and incurs debt in order to fund capital improvement projects, purchase major capital equipment and facilities, and respond to other special funding needs. Less than 3.7% of the General Fund budget is expended for debt service, and thus has minimal impact on current and future operations. Additional information on the City's long-term debt can be found in Note 3 in the notes to financial statements on pages 63-65. VII. Economic Factors and Next Year's Budgets and Rates. A. General Comments. Paducah continued to experience steady -slow -growth in the local economy as compared to the national economy in fiscal year 2004. Paducah continues to experience retail growth in the Kentucky Oaks Mall area and the City's Southside. The downtown area continues to be enhanced with the addition of new retail establishments, further expanding the property tax value base as well as the payroll tax base. Downtown was improved with the opening of the Luther F. Carson Four Rivers Center for the Performing Arts (FRC). The FRC opened in early 2004 at a cost in excess of $35 million. The State of Kentucky contributed $20 million toward the project, with the balance of the cost funded locally by government, tourism taxes and private donations. Four Rivers Behavioral Health Systems Corporate offices moving into the former J C Penney building which had been vacant for years further enhanced downtown. These major additions to the downtown area will significantly increase the flow of commerce and traffic flow. B. Unemployment Rate. The unemployment rate for the City of Paducah (McCracken County) as of June, 2004 was 4.3%. This rate compares favorably to state and federal unemployment rates, 5.4% and 5.6%, respectively. C. Inflationary Trends. Inflationary trends in the City compare favorably to state and national trends. D. Annexation Policy. The City's major long-term concern is revenue for capital projects. Incentive investments in annexation and economic development should enable revenue to increase over the next 5-8 years. Paducah will continue to pursue its annexation efforts as these efforts will insure long-term financial stability for the City in terms of increased property taxes, payroll taxes, and business gross receipts fees through further commercial, industrial, and residential development. City policy will continue to provide annexation incentives that should pay for themselves in the long-term and serve as incentive investments in future revenues to offset the cost of providing services to the newly annexed areas. The policy of balanced and controlled growth will be one of the City's greatest challenges in the next five to ten years. E. Strategic Fleet Acquisition Plan. The City's effort to limit expenditure growth and seek cost savings opportunities assists our effort to insure that funds are available for future capital projects. Paducah implemented the Strategic Fleet Acquisition Plan fiscal year 1998-1999 in an effort to systematically review the City's fleet of vehicles. This plan allows the City to make long-range plans for replacing vehicles at the optimal time to avoid high maintenance costs and take advantage of a higher resale value. (Continued) -25- F. Enterprise Zone. Since its inception, the Paducah Enterprise Zone Program has produced 325 qualified businesses, which have pledged expenditures of $91 million in addition to creating 322 targeted jobs. All the above factors, in addition to current and future needs of the City, were considered when the 2004-2005 Budget for the City of Paducah was prepared. The beginning general fund balance for fiscal year 2004-2005 is $4,642,073. The City has estimated an ending fund balance of $3,400,000, or 12.5% of projected general fund expenditures. At the present time, the City is in good financial condition and no tax increase is planned for fiscal year 2004-2005. VIII. Requests for Information This financial report is designed to provide a general financial overview for those interested in the City of Paducah government finances. Questions or requests for additional financial information may be addressed to Jonathan Perkins, Finance Director, City of Paducah, 500 South 5th Street, Paducah, KY 42003. -26- CITY OF PADUCAH, KENTUCKY BASIC FINANCIAL STATEMENTS GOVERNMENT -WIDE FINANCIAL STATEMENTS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2004 THIS PAGE INTENTIONALLY LEFT BLANK ASSETS Current Assets: Cash and cash equivalents Investments Receivables, net: Note Accounts Grants Interest Property tax Other Internal balances Inventory Prepaid pension obligation Prepaid expenses Other current assets Total current assets Noncurrent Assets: Investments, restricted Notes receivable Bond issuance costs, net Net capital assets: Land and construction in progress Depreciable capital assets Restricted assets Other assets Total noncurrent assets Total assets Exhibit 1 CITY OF PADUCAH, KENTUCKY STATEMENT OF NET ASSETS JUNE 30, 2004 Primary Government - - Governmental Business -type - Component Activities Activities Total Units $ 7,419,546 $ 943,762 $ 8,363,308 $ 1,596,627 5,774,204 1,200,000 6,974,204 - 195,000 - 195,000 - 296,499 55,536 352,035 2,829,582 617,121 - 617,121 190,065 32,900 5,568 38,468 - 4,121,736 - 4,121,736 - - - - 1,211,561 6,004 (6,004) - - 376,874 - 376,874 1,366,349 212,055 - 212,055 - 1,028,104 6,994 1,035,098 39,231 20,080,043 2,205,856 22,285,899 8,069,304 - - - 5,480,663 6,681,500 - 6,681,500 - 145,411 - 145,411 - 7,140,048 65,908 7,205,956 3,628,208 24,797,494 1,397,761 26,195,255 71,152,006 - - - 69,111 - - - 116,329 38,764,453 1,463,669 40,228,122 80,446,317 58,844,496 3,669,525 62,514,021 88,515,621 -27- LIABILITIES Primary Government Governmental Business -type Component Current Liabilities: Activities Activities Total Units Voucher and accounts payable $ 1,917,833 $ 129,568 $ 2,047,401 $ 3,832,690 - Accrued payroll and payroll taxes 778,491 31,608 810,099 505,363 Due to other taxing agencies 51,491 - 51,491 - Unearned revenue 5,137,007 - 5,137,007 1,379,222 Accrued compensated absences 370,130 51,185 421,315 26,956 Accrued interest - - - 161,023 Notes payable due within one year 133,359 - 133,359 29,182 Bonds payable due within one year 400,000 - 400,000 1,215,000 Other current liabilities - - - 1,850,610 Total current liabilities 8,788,311 212,361 9,000,672 9,000,046 Noncurrent Liabilities: Accrued compensated absences 1,374,274 14,002 1,388,276 - Notes payable 3,295,496 - 3,295,496 275,025 Bonds payable 13,220,000 - 13,220,000 9,085,621 Total noncurrent liabilities 17,889,770 14,002 17,903,772 9,360,646 Total liabilities 26,678,081 226,363 26,904,444 18,360,692 NET ASSETS Invested in capital assets, net of related debt 27,826,117 1,463,668 29,289,785 64,644,282 Restricted for: Program purposes 714,538 - 714,538 - Capital projects 4,031,802 - 4,031,802 1,113,399 -- Unrestricted (406,042) 1,979,494 1,573,452 4,397,248 TOTAL NET ASSETS $32,166,415 $3,443,162 $35,609,577 $70,154,929 See accompanying notes to the basic financial statements. -28- CITY OF PADUCAH, KENTUCKY STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2004 FUNCTIONSIPROGRAMS Primary Government: Governmental activities: General government Public safety Public service Parks and recreation Planning and development Interest on long-term debt Total governmental activities (See Note 1) Business -type activities: Solid Waste Wastewater Civic Center TISA Total business -type activities TOTAL PRIMARY GOVERNMENT Component Units: Authorities: Paducah Water Works Paducah Power System Paducah Transit Authority TOTAL COMPONENT UNITS Exhibit 2 General revenues: Taxes and licenses: Property taxes, levied for general purposes Franchise tax Telecommunications tax Insurance premium tax Vehicle tax Bank tax Gross receipts license tax Employee license tax Other taxes Intergovernmental revenue Unrestricted investment earnings Gain on sale of capital assets Rent income Miscellaneous Total general revenues Transfers Total general revenues and transfers Change in net assets Net assets, July 1, 2003, as previously reported Adjustment to beginning net assets NET ASSETS, JUNE 30,2004 See accompanying notes to the basic financial statements. -29- Program Revenues Operating Capital Charges for Grants and Grants and Expenses Services Contributions Contributions $ 7,969,027 $ 1,601,414 $ - $1,840,000 13,243,912 1,134,386 61,400 363,446 8,618,901 986,618 710,715 1,009,920 1,026,293 132,388 10,102 - 5,330,393 12,893 2,507,917 8,271 496,049 - - - 36,684,575 3,867,699 3,290,134 3,221,637 3,419,464 3,568,056 - - - 222,076 - - 33,181 36,455 - - 184,166 100,778 - 24,990 3,636,811 3,927,365 - 24,990 $40,321,386 $ 7,795,064 $3,290,134 $3,246,627 $ 5,950,078 $ 6,141,550 $ - $ 416,757 39,969,207 40,438,080 - - 5,849,879 2,883,911 2,339,780 1,226,325 $51,769,164 $49,463,541 $2,339,780 $1,643,082 General revenues: Taxes and licenses: Property taxes, levied for general purposes Franchise tax Telecommunications tax Insurance premium tax Vehicle tax Bank tax Gross receipts license tax Employee license tax Other taxes Intergovernmental revenue Unrestricted investment earnings Gain on sale of capital assets Rent income Miscellaneous Total general revenues Transfers Total general revenues and transfers Change in net assets Net assets, July 1, 2003, as previously reported Adjustment to beginning net assets NET ASSETS, JUNE 30,2004 See accompanying notes to the basic financial statements. -29- Net (Expense) Revenue and Changes in Net Assets Primary Government 148,592 Governmental Business -type Component Activities Activities Total Units $ (4,527,613) $ - $ (4,527,613) $ - (11,684,680) - (11,684,680) - (5,911,648) - (5,911,648) - (883,803) - (883,803) - (2,801,312) - (2,801,312) - (496,049) - (496,049) - (26,305,105) - (26,305,105) - - 148,592 148,592 - - 222,076 222,076 - - 3,274 3,274 - - (58,398) (58,398) - - 315,544 315,544 - (26,305,105) 315,544 (25,989,561) - - - - 608,229 - - - 468,873 - - - 600,137 - - - 1,677,239 4,012,168 - 4,012,168 - 244,877 - 244,877 - 665,807 - 665,807 - 3,767,864 - 3,767,864 - 493,800 - 493,800 - 161,550 - 161,550 - 3,496,438 3,496,438 - 10,616,223 10,616,223 - 198,106 - 198,106 - 871,273 - 871,273 - 220,992 32,826 253,818 88,846 (1,972) 34,975 33,003 - - - - 13,900 - _ - 21,264 24,747,126 67,801 24,814,927 124,010 (68,964) 68,964 - - 24,678,162 136,765 24,814,927 124,010 (1,626,943) 452,309 (1,174,634) 1,801,249 33,824,314 2,990,853 36,815,167 68,353,680 (30,956) - (30,956) - $32,166,415 $3,443,162 $35,609,577 $70,154,929 -30- CITY OF PADUCAH, KENTUCKY BASIC FINANCIAL STATEMENTS FUND FINANCIAL STATEMENTS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 309 2004 THIS PAGE INTENTIONALLY LEFT BLANK CITY OF PADUCAH, KENTUCKY BALANCESHEET GOVERNMENTAL FUNDS JUNE 30, 2004 ASSETS Cash and cash equivalents Investments Accounts receivable: Accounts Grants Interest Property taxes (net of allowances for uncollectibles) Prepaid items Due from other funds TOTAL ASSETS LIABILITIES AND FUND BALANCES Liabilities: Voucher and accounts payable Accrued payroll and payroll taxes Due to other funds Due to other taxing agencies Unearned revenue Accrued compensated absences Total liabilities Fund Balances: Reserved for: Program purposes Capital improvements Unreserved: General Fund Special Revenue Funds Debt Service Fund Total fund balances TOTAL LIABILITIES AND FUND BALANCES See accompanying notes to the basic financial statements. -31- General 2,300,000 72,354 71,393 6,844 3,993,055 Exhibit 3 General Downtown Capital Capital Improvements Improvements $ 823,868 $2,164,514 - 1,674,204 453,472 - - 3,728 $9,952,571 $1,277,340 $3,842,446 $ 298,438 $ 292,672 $ 694,215 739,288 - - 51,491 - - 3,875,525 246,508 - 5,310,498 539,180 694,215 - 738,160 3,148,231 4,642,073 - - 4,642,073 738,160 3,148,231 $9,952,571 $1,277,340 $3,842,446 Nonmajor Total Governmental Governmental Funds Funds $1,099,082 $ 6,548,643 500,000 4,474,204 133,737 206,091 92,256 617,121 3,267 13,839 - 3,993,055 12,962 12,962 - 1,047,746 $1,841,304 $16,913,661 $ 243,126 $ 1,528,451 30,102 769,390 49,405 49,405 - 51,491 234,552 4,356,585 - 345,756 557,185 7,101,078 483,423 483,423 - 3,886,391 - 4,642,073 770,453 770,453 30,243 30,243 1,284,119 9,812,583 $1,841,304 $16,913,661 -32- Exhibit 4 CITY OF PADUCAH, KENTUCKY RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO STATEMENT OF NET ASSETS JUNE 30, 2004 Total fund balance - total governmental funds $ 9,812,583 Amounts reported for governmental activities in the Statement of Net Assets are different because: Delinquent property taxes receivable are not reported in the governmental funds balance sheet since they are not considered "available" revenues. 128,681 The long-term notes receivable are not reported in the governmental funds balance sheet since they are not available to pay current period expenditures. 6,827,500 Interest receivable on the long-term notes receivable is not reported on the governmental funds balance sheet since neither the note receivable nor the interest is available to pay current period expenditures. 12,451 Inventory is not a current financial resource and, therefore, is not reported in the governmental funds balance sheet. 278,760 A prepaid pension obligation is not a current financial resource, and therefore, is not reported in the governmental funds balance sheet. 212,055 Capital assets used in governmental activities are not current financial resources and, therefore, are not reported in the governmental funds balance sheet. This amount includes capital assets of Internal Service Funds. 31,937,542 Long-term liabilities are not due and payable in the current period and, therefore, they are not reported in the governmental funds balance sheet. This amount includes Internal Service Funds' non- current liabilities. The long-term liabilities are: Due within one year $ 533,359 Due after one year 17,889,770 (18,423,129) Bond issuance costs used in governmental activities are not current financial resources and, therefore, are not reported in the governmental funds balance sheet. 145,411 (Continued) -33- CITY OF PADUCAH, KENTUCKY RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO STATEMENT OF NET ASSETS JUNE 30, 2004 Debt proceeds deferred for future construction are not current financial resources and, therefore, are not reported in the governmental funds balance sheet. Accrued interest payments on debt are not due and payable in the current period and, therefore, are not reported in the governmental funds balance sheet. Internal service funds are used by management to charge the costs of certain activities, such as insurance and fleet management, to individual funds. The assets and liabilities of the Internal Service Funds (net of amount allocated to business -type activities) not included in other reconciling items are: Current assets $ 3,430,393 Current liabilities (1,396,399) Net amount allocated to business -type activities 6,004 NET ASSETS OF GOVERNMENTAL ACTIVITIES See accompanying notes to the basic financial statements. -34- Exhibit 4 (Continued) $ (780,637) (24,800) 2,039,998 $32,166,415 Exhibit 5 CITY OF PADUCAH, KENTUCKY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2004 Revenues: Taxes Licenses Charges for services Intergovernmental Grants Interest Miscellaneous Total revenues Expenditures: Current operations: General government Public safety Public service Parks and recreation Planning and development Other Capital outlay Debt service: Principal requirement Interest and fiscal requirement Total expenditures Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses): Long-term debt issued Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances, July 1, 2003 Adjustment to beginning fund balance FUND BALANCES, JUNE 30, 2004 3,891,251 - - 11,750,018 - - 5,582,006 - - 1,026,297 - - 2,343,844 - - - 4,063,505 6,923,679 24,593,416 4,063,505 6,923,679 2,880,394 (2,665,996) (6,538,245) - General Downtown General Capital Capital Fund Improvements Improvements $ 5,205,422 $ - $ - 18,423,244 - - 569,320 - - - 48,036 - 635,525 926,120 - 118,566 627 49,084 2,521,733 422,726 336,350 - 27,473,810 1,397,509 385,434 3,891,251 - - 11,750,018 - - 5,582,006 - - 1,026,297 - - 2,343,844 - - - 4,063,505 6,923,679 24,593,416 4,063,505 6,923,679 2,880,394 (2,665,996) (6,538,245) - - 8,500,000 3,282 2,820,567 - (3,167,585) - (1,813,524) (3,164,303) 2,820,567 6,686,476 (283,909) 154,571 148,231 4,925,982 583,589 3,000,000 $ 4,642,073 $ 738,160 $ 3,148,231 See accompanying notes to the basic financial statements. -35- Nonmajor Total Governmental Governmental Funds Funds $ 665,807 $ 5,871,229 - 18,423,244 99,339 668,659 981,271 1,029,307 2,441,076 4,002,721 22,073 190,350 500,225 3,781,034 4,709,791 33,966,544 - 3,891,251 1,213,667 12,963,685 1,332,517 6,914,523 - 1,026,297 2,570,473 2,570,473 - 2,343,844 - 10,987,184 428,613 428,613 471,625 471,625 6,016,895 41,597,495 (1,307,104) (7,630,951) - 8,500,000 1,115,339 3,939,188 (314,467) (5,295,576) -- 800,872 7,143,612 (506,232) (487,339) 1,821,307 10,330,878 (30,956) (30,956) $1,284,119 $ 9,812,583 -36- Exhibit 6 CITY OF PADUCAH, KENTUCKY RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2004 Net change in fund balances - total governmental funds $ (487,339) Amounts reported for governmental activities in the Statement of Activities are different because: Inventory purchases require the use of current financial resources and, therefore, are reported as expenditures in governmental funds. 264,120 Inventory sales provide current financial resources and are reported as revenues in governmental funds. (51,558) 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 as depreciation expense. This is the amount of capital outlays in the current period. 6,068,511 The loss on disposal of capital assets is not recorded in the governmental funds because the assets were recorded as expenditures when purchased. (216) Interest revenue on the long-term note receivable is not reported on the governmental funds since neither the note receivable nor the interest is available to pay current period expenditures. 12,451 Delinquent property taxes receivable are not considered "available" revenues in the governmental funds. (94,922) Governmental funds report contributions of buildings and infrastructure as revenue and expense. However, in the Statement of Activities, the value of the assets is allocated over their estimated useful life as depreciation expense. 1,840,000 The prepayment of a pension obligation requires the use of current financial resources and, therefore, is reported as an expenditure in governmental funds. However, the prepayment does not affect net assets in the government -wide Statement of Activities. 212,055 (Continued) -37- Exhibit 6 (Continued) CITY OF PADUCAH, KENTUCKY RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2004 The issuance of long-term debt provides current financial resources to governmental funds and is reported as a revenue in governmental - funds. However, the proceeds do not affect net assets in the government -wide Statement of Net Assets. $ (8,500,000) Depreciation expense on capital assets is reported in the government - wide statement of activities and changes in net assets, but does not require the use of current financial resources. Therefore, depreciation expense is not reported as an expenditure in governmental funds. This amount includes Internal Service Funds' depreciation expense of $410,068. (2,853,770) Principal payments of debt require the use of current financial resources and, therefore, are reported as expenditures in governmental funds. However, principal payments of debt do not affect net assets in the government -wide Statement of Activities. 318,613 Accrued interest payments on debt do not require the use of current financial resources. Accrued interest is reported as an expenditure in the government -wide statement of activities. (24,800) Long-term accrued compensated absences do not require the use of current financial resources and, therefore, are not reported as - expenditures in governmental funds. (11,078) Governmental funds report the effect of bond issuance costs when debt is issued, whereas these amounts are deferred and amortized in the statement of activities. Includes amortization expense of $3,192. 145,411 Internal service funds are used by management to charge the costs of certain activities, such as insurance and fleet management, to individual funds. The net revenue of the Internal Service Funds is reported with governmental activities net of the amount allocated to business -type activities and depreciation expense. These amounts are as follows: Change in net assets $1,215,437 Net of amount allocated to business -type activities (89,926) Depreciation expense 410,068 1,535,579 CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES $ (1,626,943) See accompanying notes to the basic financial statements. -38- Exhibit 7 CITY OF PADUCAH, KENTUCKY STATEMENT OF NET ASSETS PROPRIETARY FUNDS JUNE 30, 2004 NET ASSETS Invested in capital assets, net of related debt 1,125,481 338,187 1,463,668 Unrestricted 1,914,969 70,529 1,985,498 TOTAL NET ASSETS $3,040,450 $408,716 3,449,166 Reconciliation to government -wide statements of net assets: Adjustment to reflect the consolidation of Internal Service Funds' activities related to Enterprise Funds (6,004) NET ASSETS OF BUSINESS -TYPE ACTIVITIES $3,443,162 See accompanying notes to the basic financial statements. -39- 1,648,369 1 00K '207 $3,644,761 - Governmental Business -type Activities Activities ASSETS Nonmajor Internal Solid Enterprise Service Current Assets: Waste Funds Totals Funds Cash and cash equivalents $ 904,874 $ 38,888 $ 943,762 $ 870,903 Investments 1,200,000 - 1,200,000 1,300,000 Accounts receivable 28,530 27,006 55,536 - Interest receivable 5,568 - 5,568 146,233 Prepaid expenses - 6,994 6,994 1,015,142 Inventory - - - 98,115 Total current assets 2,138,972 72,888 2,211,860 3,430,393 Noncurrent Assets: Net capital assets: Land 65,908 - 65,908 - Depreciable capital assets 1,059,574 338,187 1,397,761 1,648,369 Total noncurrent assets 1,125,482 338,187 1,463,669 1,648,369 Total assets 3,264,454 411,075 3,675,529 5,078,762 LIABILITIES Current Liabilities: Voucher and accounts payable 127,209 2,359 129,568 364,583 Accrued payroll and payroll taxes 31,608 - 31,608 9,101 Accrued compensated absences 51,185 - 51,185 24,374 Due to other funds - - - 998,341 Total current liabilities 210,002 2,359 212,361 1,396,399 Noncurrent Liabilities: Accrued compensated absences 14,002 - 14,002 37,602 Total liabilities 224,004 2,359 226,363 1,434,001 NET ASSETS Invested in capital assets, net of related debt 1,125,481 338,187 1,463,668 Unrestricted 1,914,969 70,529 1,985,498 TOTAL NET ASSETS $3,040,450 $408,716 3,449,166 Reconciliation to government -wide statements of net assets: Adjustment to reflect the consolidation of Internal Service Funds' activities related to Enterprise Funds (6,004) NET ASSETS OF BUSINESS -TYPE ACTIVITIES $3,443,162 See accompanying notes to the basic financial statements. -39- 1,648,369 1 00K '207 $3,644,761 - CITY OF PADUCAH, KENTUCKY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2004 Operating Revenues: Charges for services - internal Charges for services - external Miscellaneous Total operating revenues Operating Expenses: Cost of sales and service Depreciation and amortization Total operating expenses Operating income (loss) Nonoperating Revenues (Expenses): Interest and investment income Gain (loss) on disposal of property and equipment Total nonoperating revenues (expenses) Income (loss) before contributions and operating transfers Contributions and Operating Transfers: Capital contributions Transfers in Transfers out Total contributions and operating transfers Change in net assets Total net assets, July 1, 2003 TOTAL NET ASSETS - JUNE 30, 2004 Exhibit 8 32,617 209 32,826 34,975 - 34,975 67,592 209 67,801 18,129 (1,972) 1L 1 C 7 126,258 142,171 268,429 619,006 - 24,990 24,990 Governmental Business -type Activities Activities (3,282) Nonmajor (225,358) Internal Solid Enterprise 345,052 Service Waste Funds Totals Funds $3,463,958 $359,309 $3,823,267 $4,529,915 - - - 501,809 14,172 - 14,172 - 3,478,130 359,309 3,837,439 5,031,724 3,129,575 140,017 3,269,592 4,018,807 289,889 77,330 367,219 410,068 3,419,464 217,347 3,636,811 4,428,875 58,666 141,962 200,628 602,849 32,617 209 32,826 34,975 - 34,975 67,592 209 67,801 18,129 (1,972) 1L 1 C 7 126,258 142,171 268,429 619,006 - 24,990 24,990 222,076 72,246 294,322 (3,282) (222,076) (225,358) 218,794 (124,840) 93,954 345,052 17,331 362,383 2,695,398 391,385 $3,040,450 $408,716 Reconciliation to government -wide statements of net assets: Adjustment to reflect the consolidation of Internal Service Funds' activities related to Enterprise Funds 89,926 CHANGE IN NET ASSETS OF BUSINESS -TYPE ACTIVITIES $ 452,309 See accompanying notes to the basic financial statements. -40- 596,431 CnL A71 1,215,437 2,429,324 $3,644,761 CITY OF PADUCAH, KENTUCKY STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2004 Cash Flows from Operating Activities: Cash received from customers Payments to suppliers Payments to employees Claims paid Payments to internal service funds Other receipts (payments) Net cash provided (used) by operating activities Cash Flows from Noncapital Financing Activities: Transfers (to) from other funds Cash Flows from Capital and Related Financing Activities: Capital contributions Purchase of capital assets Proceeds from sale of capital assets Net cash provided (used) by capital and related financing activities Cash Flows from Investing Activities: Proceeds from sale of investment securities Interest on cash and investments Purchase of investments Net cash provided (used) by investing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, July 1, 2003 CASH AND CASH EQUIVALENTS, JUNE 30, 2004 Reconciliation of Operating Income (Loss) to Net Cash Provided by Operating Activities: Operating income (loss) Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization Change in assets and liabilities: Receivables Prepaid expenses Inventories Accounts payable NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES See accompanying notes to the basic financial statements. -41- Exhibit Q Governmental Business -type Activities Activities Nonmajor Internal Solid Enterprise Service Waste Funds Totals Funds $ 3,440,728 $332,304 $ 3,773,032 $ 5,144,721 (2,130,618) - (2,130,618) (789,579) - (789,579) (174,524) - (174,524) 14,073 (360,839) (346,766) 360,080 (28,535) 331,545 222,076 (149,830) 72,246 (208,108) (206,830) (2,990,822 (1,076,335) 662,626 596,431 - 24,990 24,990 - (352,718) (64,106) (416,824) (581,525 43,381 - 43,381 12,836 (309,337) (39,116) (348,453) (568,689,. 1,636,997 - 1,636,997 743,333 32,617 209 32,826 15,491 (1,204,071) - (1,204,071) (1,304,232) 465,543 209 465,752 (545,408, 738,362 (217,272) 521,090 144,960 166,512 256,160 422,672 725,943 $ 904,874 $ 38,888 $ 943,762 $ 870,903 $ 58,666 $141,962 $ 200,628 289,889 77,330 367,219 $ 602,845 410,06f (23,329) (27,006) (50,335) 112,996 (6,994) (6,994) (1,015,14: - - - 34,751..-.. 34,854 (213,827) (178,973) 517,097 $ 360,080 $ (28,535) $ 331,545 $ 662,626-- CITY OF PADUCAH, KENTUCKY STATEMENT OF NET ASSETS FIDUCIARY FUNDS JUNE 30, 2004 ASSETS Cash and cash equivalents Receivables: Interest Other Investments at fair value Total assets LIABILITIES Voucher and accounts payable Payroll taxes and withholdings payable Total liabilities NET ASSETS Held in trust for pension benefits and other purposes See accompanying notes to the basic financial statements -42- Exhibit 10 Primary Government Private - Pension purpose Agency Funds Trusts Funds $ 353,580 $ 2,825 $306,560 64,151 - - 1,425 - - 9,257,586 77,651 - 9,676,742 80,476 $306,560 823 - $ - - - 306,560 823 - $306,560 $9,675,919 $80,476 Exhibit 11 CITY OF PADUCAH, KENTUCKY STATEMENT OF CHANGES IN NET ASSETS FIDUCIARY FUNDS FOR THE YEAR ENDED JUNE 30, 2004 See accompanying notes to the basic financial statements. -43- Private- _ Pension purpose Additions: Funds Trusts Contributions: Employer $ 195,962 $ - Plan members 27,355 - Intergovernmental revenues - 9,235 Private donations - 675,000 Total contributions 223,317 684,235 Investment income: Net increase (decrease) in fair value of investments 607,613 (217) Interest and dividends 270,310 2,912 Net investment income 877,923 2,695 Interfund transfers 690,992 1 Total additions 1,792,232 686,931 Deductions: Benefits 1,849,974 - Capital outlay - 679,493 Administrative expenses 54,433 2,457 Total deductions 1,904,407 681,950 Change in net assets (112,175) 4,981 Net assets, July 1, 2003 9,788,094 75,495 NET ASSETS, JUNE 30, 2004 $9,675,919 $ 80,476 See accompanying notes to the basic financial statements. -43- CITY OF PADUCAH, KENTUCKY BASIC FINANCIAL STATEMENTS COMPONENT UNITS FINANCIAL STATEMENTS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2004 THIS PAGE INTENTIONALLY LEFT BLANK CITY OF PADUCAH, KENTUCKY STATEMENT OF NET ASSETS COMPONENT UNITS JUNE 30, 2004 ASSETS Current Assets: Cash and cash equivalents Receivables, net: Accounts Grants Other Inventories Prepaid expenses Other current assets Total current assets Noncurrent Assets: Investments, restricted Net capital assets: Land and construction in progress Depreciable capital assets Restricted assets Other assets Total noncurrent assets Total assets Paducah Water 336,441 627,370 351,682 835,889 3,341,719 Paducah Paducah Power Transit System Authority $ 229,422 $ 176,868 2,446,431 46,710 - 190,065 579,427 4,764 998,920 15,747 39,231 - 2,561,030 2,919,633 - 3,155,682 30,568,317 36,377,984 69,111 - - 116,329 .. .. ,.�., .rn An min inn 36,540,177 -44- Exhibit 12 All Component Unit 2,829,582 190,065 1,211,561 1,366,349 39,231 434,154 8,069,304 5,480,663 472,526 3,628,208 4,205,705 71,152,006 - 69,111 4,678,231 80,446,317 5,112,385 88,515,621 LIABILITIES Current Liabilities: Voucher and accounts payable Accrued payroll and payroll taxes Unearned revenue Accrued compensated absences Accrued interest Notes payable due within one year Bonds payable due within one year Other current liabilities Total current liabilities Noncurrent Liabilities: Bonds payable Notes payable Total noncurrent liabilities Total liabilities NET ASSETS Net Assets: Invested in capital assets, net of related debt Restricted for: Capital projects Unrestricted TOTAL NET ASSETS 25,913,758 34,054,660 4,675,864 64,644,282 - 1,113,399 All Paducah Paducah Paducah Component Water Power Transit Unit Works System Authority Totals $ 369,864 $ 3,424,532 $ 38,294 $ 3,832,690 - 404,006 101,357 505,363 - 1,379,222 - 1,379,222 - - 26,956 26,956 - 161,023 - 161,023 29,182 - - 29,182 870,000 345,000 - 1,215,000 972,739 875,504 2,367 1,850,610 2,241,785 6,589,287 168,974 9,000,046 3,578,947 5,121,223 385,451 9,085,621 275,025 - - 275,025 3,853,972 5,121,223 385,451 9,360,646 6,095,757 11,710,510 554,425 18,360,692 25,913,758 34,054,660 4,675,864 64,644,282 - 1,113,399 - 1,113,399 4,530,662 (15,510) (117,904) 4,397,248 $30,444,420 $35,152,549 $4,557,960 $70,154,929 See accompanying notes to the basic financial statements -45- CITY OF PADUCAH, KENTUCKY STATEMENT OF ACTIVITIES COMPONENT UNITS FOR THE YEAR ENDED JUNE 30, 2004 FUNCTIONS/PROGRAMS Authorities: Business -type activities: Paducah Water Works Paducah Power System Paducah Transit Authority TOTAL COMPONENT UNITS General Revenues: Unrestricted investment earnings Rent income Miscellaneous general Total general revenues and transfers Change in net assets Net assets, July 1, 2003 NET ASSETS, JUNE 30, 2004 Exhibit 13 See accompanying notes to the basic financial statements -46- Program Revenues Operating Capital Charges for Grants and Grants and Expenses Services Contributions Contributions $ 5,950,078 $ 6,141,550 $ - $ 416,757 39,969,207 40,438,080 - - 5,849,879 2,883,911 2,339,780 1,226,325 $51,769,164 $49,463,541 $2,339,780 $1,643,082 See accompanying notes to the basic financial statements -46- Net (Expense) Revenue and Changes in Net Assets Paducah Paducah Paducah Water Power Transit Works System Authority Totals $ 608,229 $ - $ - $ 608,229 - 468,873 - 468,873 - - 600,137 600,137 608,229 468,873 600,137 1,677,239 53,929 33,672 1,245 88,846 - - 13,900 13,900 4,388 15,922 954 21,264 58,317 49,594 16,099 124,010 666,546 518,467 616,236 1,801,249 29,777,874 34,634,082 3,941,724 68,353,680 $30,444,420 $35,152,549 $4,557,960 $70,154,929 -47- CITY OF PADUCAH, KENTUCKY NOTES TO THE FINANCIAL STATEMENTS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2004 CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note 1 - Summary of Significant Accounting Policies: General Statement The City of Paducah (City) complies with generally accepted accounting principles (GAAP). GAAP includes all relevant Governmental Accounting Standards Board (GASB) pronouncements. In the government -wide financial statements and the fund financial statements for the proprietary funds, Financial Accounting Standards Board (FASB) pronouncements and Accounting Principles Board (APB) opinions issued on or before November 30, 1989, have been applied unless those pronouncements conflict with or contradict GASB pronouncements, in which case, GASB prevails. For enterprise funds, GASB Statement Nos. 20 and 34 provide the City the option of electing to apply FASB pronouncements issued after November 30, 1989. The City has elected not to apply those pronouncements. The accounting and reporting framework and the more significant accounting policies are discussed in subsequent subsections -- of this Note. The financial reporting entity, basis of accounting, and other significant policies employed by the City are summarized as follows: Financial Reporting Entity The City operates under a City Manager form of government. The Board of Commissioners consists of a Mayor and four Commissioners elected at large by the citizens on a non-partisan basis. As required by generally accepted accounting principles, the financial statements of the reporting entity include those of the City of Paducah (the primary government) and its component units. The component units discussed below are included in the City's reporting entity because of the significance of their operational or _ financial relationships with the City. Blended Component Units The following component units have been presented as blended component units because the component unit's governing body is substantially the same as the governing body of the City, or the component unit provides services almost entirely to the primary government. Paducah Public Improvement Corporation - The Mayor and Commissioners serve as the governing body for the Corporation. Although it is legally separate from the City, the Paducah Public Improvement Corporation is reported as if it were part of the primary government because its sole purpose is to finance long-term debt since the City may not legally obligate itself beyond one year. Police and Firefighters' Pension Fund - This retirement fund was established for the benefit of the police and firemen of the City. It is administered by a Board of Trustees consisting of the Mayor, City Finance Director and representatives of the Police and Fire Departments. The Board is authorized to establish benefit levels and to approve actuarial assumptions used in the determination of contribution levels. Discretely Presented Component Units The component unit column in the basic financial statements includes the financial data of the City's other component units. They are reported in a separate column to emphasize that they are legally separate from the City. The following component units are included in the reporting entity because of their financial relationship with the City. (Continued) -48- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note 1 - Summary of Significant Accounting Policies: Paducah Water Works - The City of Paducah Water Works Commission is appointed by the Mayor. The rates for user charges and bond issuance authorizations are subject to approval by the City Commission of the City of Paducah. Paducah Power System - The members of the Electric Plant Board are appointed by the Mayor. The system provides a financial benefit to the City through a payment in lieu of taxes. Transit Authority of the City of Paducah - The Transit Authority's governing board is appointed by the Mayor of the City of Paducah. The City is the grantee agency receiving, on behalf of the Transit Authority, its principal revenues. The City also contributes substantially to the operation of the Authority by providing cash subsidies and facilities. Complete financial statements of the individual component units can be obtained from their respective administrative offices in the following locations: Paducah Water Works 401 Washington Street Paducah, Kentucky 42003 Related Organizations Paducah Power System 1500 Broadway Paducah, Kentucky 42001 Transit Authority of the City of Paducah 850 Harrison Street Paducah, Kentucky 42001 City officials are also responsible for appointing the members of boards of other organizations, but the City's accountability for these organizations do not extend beyond appointing authority. The organizations listed below are notable related organizations which have not been included in the City's report. Paducah Housing Authority — The Paducah Housing Authority (PHA) is a legally separate entity that provides for construction, operation and management of low income housing projects within the City. PHA is a legally separate entity and is not financially accountable to the City. This organization is not included as a component unit of the City. Joint Sewer Agency — As of July 1, 1999, the assets and liabilities of the Wastewater/Stormwater Fund were transferred to the Paducah -McCracken County Joint Sewer Agency pursuant to a municipal order dated June 29, 1999. The Paducah -McCracken County Joint Sewer Agency is a legally separate entity and is not financially accountable to the City. This organization is not included as a component unit of the City. Forest Hills Village, Inc. — The Corporation's purpose is to manage City of Paducah properties known as "Forest Hills Housing Development". The City and Corporation have a lease agreement detailing the terms and conditions of operations. Forest Hills Village, Inc. is a legally separate entity and is not financially accountable to the City. This organization is not included as a component unit of the City. Paducah Junior College, Incorporated (PJC) — The College is a part of the University of Kentucky Community College System which is now administered by the Kentucky Community and Technical College System. Under this system, the University of Kentucky receives the monies from student tuition, fees and other related income and provides the financing for the operational budget of the College. A tax levied and collected by the City is a primary revenue source for the College. These funds, as well as gifts and grants made to the College, may be used for the acquisition or improvement of property or to finance programs beyond the level of those normally provided by community colleges in the University of Kentucky system. PJC is a legally separate entity and is not financially accountable to the City. This organization is not included as a component unit of the City. (Continued) CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note 1 - Summary of Significant Account Policies: Basis of Presentation Government -wide Financial Statements The Statement of Net Assets and Statement of Activities display information about the reporting -- government as a whole. They include all funds of the reporting entity except for fiduciary funds. The statements distinguish between governmental and business -type activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange revenues. Business -type activities are financed in whole or in part by fees charged to external parties for goods or services. Fund Financial Statements Fund financial statements of the reporting entity are organized into funds, each of which is considered to be separate accounting entities. Each fund is accounted for by providing a separate set of self -balancing accounts that constitute its assets, liabilities, fund equity, revenues, and expenditure/expenses. Funds are organized into three major categories: governmental, proprietary, and fiduciary. An emphasis is placed on major funds within the governmental and proprietary categories. A fund is considered major if it is the primary operating fund of the City or meets the following criteria: a. Total assets, liabilities, revenues, or expenditures/expenses of that individual governmental or enterprise fund are at least ten percent of the corresponding total for all funds of that category or type; and b. Total assets, liabilities, revenues, or expenditures/expenses of the individual governmental fund or enterprise fund are at least five percent of the corresponding total for all governmental and enterprise funds combined. The funds of the financial reporting entity are described below: Governmental funds are those funds through which most governmental functions typically are financed. The measurement focus of governmental funds is on the sources, uses and balance of current financial resources. The City has presented the following major governmental funds: General Fund - To account for resources traditionally associated with governments which are not required to be accounted for in another fund. General Capital Improvements — To account for the acquisition or construction of major capital projects other than those financed by proprietary fund operations and special assessments. Downtown Capital Improvements — To account for the acquisition or construction of major capital facilities related to the development of downtown Paducah. Proprietary funds are accounted for using the economic resources measurement focus and the accrual basis of accounting. The accounting objectives are determinations of net income, financial position and cash flow. All assets and liabilities are included on the Statement of Net Assets. The City has presented the following major proprietary fund: Solid Waste Fund — To account for the provision of refuse services to the residents of the City. Additionally, the City reports the internal service funds which are used to account for the fleet management services, self funded property and casualty self insurance and self funded health and disability insurance provided to departments of the city. (Continued) -50- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note 1 - Summary of Significant Account Policies: Fiduciary funds, which are not included in government -wide statements, include Police and Firefighters' Retirement Fund, Appointive Employees' Pension Fund, two private -purpose trusts, and two agency funds. Measurement Focus Measurement focus is a term used to describe "which" transactions are recorded within the various financial statements. Basis of accounting refers to "when" transactions are recorded regardless of the measurement focus applied. On the government -wide Statement of Net Assets and the Statement of Activities, both governmental and business -like activities are presented using the economic resources measurement focus as defined in item b. below. In the fund financial statements, the "current financial resources" measurement focus or the "economic resources" measurement focus is used as appropriate: a. All governmental funds utilize a "current financial resources" measurement focus. Only current financial assets and liabilities are generally included on their balance sheets. Their operating statements present sources and uses of available spendable financial resources during a given period. These funds use fund balance as their measure of available spendable financial resources at the end of the period. b. The proprietary fund utilizes an "economic resources" measurement focus. The accounting objectives of this measurement focus are the determination of operating income, changes in net assets (or cost recovery), financial position, and cash flows. All assets and liabilities (whether current or noncurrent) associated with their activities are reported. Proprietary fund equity is classified as net assets. c. Agency funds are not involved in the measurement of results of operations; therefore, measurement focus is not applicable to them. Basis of Accounting In the government -wide Statement of Net Assets and Statement of Activities, both governmental and business -like activities are presented using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. In the fund financial statements, governmental funds are presented on the modified accrual basis of accounting. Under this modified accrual basis of accounting, revenues are recognized when "measurable and available." Measurable means knowing or being able to reasonably estimate the amount. Available means collectible within the current period or within sixty days after year end. Expenditures (including capital outlay) are recorded when the related fund liability is incurred, except for general obligation bond principal and interest which are reported when due. Agency funds are presented using the accrual basis of accounting. All proprietary funds utilize the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. (Continued) -51- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note 1 - Summary of Significant Account Policies: Revenues - Exchange and Non -Exchange Transactions Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded on the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal year in which the resources are measurable and become available. Available means that the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year. For the City, available means expected to be received within sixty days of year end. Non-exchange transactions, in which the City receives value without directly giving equal value in return, include employee license taxes, property taxes, grants, entitlements and donations. The City considers - property taxes as available if they are collected within sixty days after year end. Revenue from grants, entitlements, and donations is recognized in the year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year when the resources are required to be used or the year when use is first permitted, matching requirements, in which the City must provide local resources to be used for a specified purpose, and expenditure requirements, in which the resources are provided to the City on a reimbursement basis. On a modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized. The revenues susceptible to accrual are taxes, intergovernmental, employer and employees' contributions to trust funds, interest revenue and charges for services. License and permit revenues are not susceptible to accrual because generally they are not measurable until received in cash. Unearned revenue The City reports unearned revenue on its statement of net assets. Unearned revenues arise when potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period. Unearned revenues also arise when resources are received by the City before it has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the City has a legal claim to the resources, the liability for unearned revenue is removed from the statement of net assets and revenue is recognized. Budgets and Budgetary Accounting The City follows these procedures in establishing the budgetary data reflected in these financial statements: 1. Prior to July, the City Manager submits to the City Commission a proposed operating budget for the fiscal year commencing on July 1. The operating budget includes proposed expenditures and the means of financing those. 2. Public hearings are conducted by the City to obtain taxpayer comments. 3. Prior to July, the budget is legally enacted through passage of an ordinance. 4. The City Manager is authorized to transfer budgeted amounts between department line items; however, any revisions that alter the total expenditures of any department must be approved by the City Commission. (Continued) -52- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note 1 - Summary of Sil!nilicant Accounting Policies: 5. Formal budgetary integration is employed as a management control device during the year and the budget is legally adopted. Budget amendments are also legally adopted. 6. The budget is adopted on a basis (budget basis), which differs from generally accepted accounting principles (GAAP basis). Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of formal budgetary integration in the General Fund, Special Revenue Funds, Debt Service Fund, and Capital Projects Funds. In accordance with generally accepted accounting principles (GAAP), encumbrances outstanding at year end are reported as reservations of fund balances since they do not constitute expenditures or liabilities. There are no encumbrances at June 30, 2004. Cash and Investments For the purpose of the Statement of Net Assets, "cash and cash equivalents" includes all demand and savings accounts of the City. For the purpose of the proprietary fund Statement of Cash Flows, "cash and cash equivalents" include all demand and savings accounts, and certificates of deposit or short-term investments with an original maturity of three months or less. Investments are reported at fair value which is determined using selected bases. Short-term investments are reported at cost, which approximates fair value. Additional cash and investment disclosures are presented in Note 3. Receivables In the government -wide statements, receivables consist of all revenues earned at year end and not yet received. Major receivable balances for the governmental activities include property taxes, franchise taxes and grant revenue. Business -type activities report utilities and interest earnings as their major receivables. The government -wide statements also include general obligation notes receivable related to the general obligation bonds outstanding as described in Note 3. In the fund financial statements, material receivables in governmental funds include revenue accruals such as franchise tax and grants and other similar intergovernmental revenues since they are usually both measurable and available. Nonexchange transactions collectible but not available are deferred in the fund financial statements in accordance with modified accrual, but not deferred in the government -wide financial statements in accordance with the accrual basis. Interest and investment earnings are recorded when earned only if paid within sixty days since they would be considered both measurable and available. Proprietary fund material receivables consist of all revenues earned at year end and not yet received. Utility accounts receivable and interest earnings compose the majority of proprietary fund receivables. Allowances for uncollectible accounts receivable are based upon historical trends and the periodic aging of accounts receivable. Interfund Receivables and Payables During the course of operations, numerous transactions occur between individual funds that may result in amounts owed between funds. Those related to goods and services type transactions are classified as "due to and from other funds." Short-term interfund loans are reported as "interfund receivables and payables." Long-term interfund loans (noncurrent portion) are reported as "advances from and to other funds." Interfund receivables and payables between funds within governmental activities are eliminated in the Statement of Net Assets. See Note 3 for details of interfund transactions, including receivables and payables at year end. (Continued) -53- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note I - Summary of Significant Accounting Policies: Inventories Inventories are stated at cost on a first -in, first -out basis. Fixed Assets The accounting treatment over property, plant, and equipment (fixed assets) depends on whether the assets are used in governmental fund operations or proprietary fund operations and whether they are reported in the government -wide or fund financial statements. Government -wide Statement In the government -wide financial statements, fixed assets are accounted for as capital assets. All fixed assets are valued at historical cost, or estimated historical cost if actual is unavailable, except for donated fixed assets which are recorded at their estimated fair value at the date of donation. Estimated historical cost was used to value the majority of the assets acquired prior to June 30, 2004. Assets capitalized have an original cost of $500 or more prior to July 1, 1999, and $2,500 or more after July 1, 1999. Prior to July 1, 2002, governmental funds' infrastructure assets were not capitalized. These assets have been valued at estimated historical cost. Depreciation of all exhaustible fixed assets used by propriety funds is charged as an expense against their operations. Accumulated depreciation is reported on proprietary fund balance sheets. Depreciation has been provided over the estimated useful lives using the straight-line method. The estimated useful lives are as follows: Land improvements 10-20 Years Buildings 30-60 Years Building improvements 3- 7 Years Infrastructure 15-20 Years Equipment 5-25 Years Furnishings and fixtures 3-10 Years Vehicles 3- 9 Years Fund Financial Statements In the fund financial statements, fixed assets used in governmental fund operations are accounted for as capital outlay expenditures of the governmental fund upon acquisition. Fixed assets used in proprietary fund operations are accounted for the same as in the government -wide statements. Restricted Assets Certain proceeds of enterprise fund revenue bonds, as well as certain resources set aside for their repayment, are classified as restricted assets on the balance sheet because their use is limited to applicable bond covenants. Compensated Absences Accumulated unpaid vacation, sick pay, and other employee benefit amounts are recorded as long-term debt in the government -wide statements. The current portion of accrued compensated absences is estimated based on historical trends. In the fund financial statements, governmental funds report only the compensated absence liability payable from expendable available financial resources, while the proprietary funds report the liability as it is incurred. (Continued) -54- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note 1 - Summary of Significant Accounting Policies: Accumulations for vacation pay are restricted to a maximum of 50 days and provide vesting rights upon completion of six months service. Accumulations for sick pay are restricted to a maximum of 150 days and provide payment to employees or beneficiaries for accumulations in excess of 50 days and up to 120 days upon death or retirement from City service. Long -Term Debt The accounting treatment of long-term debt depends on whether the assets are used in governmental fund operations or proprietary fund operations and whether they are reported in the government -wide or fund financial statements. All long-term debt to be repaid from governmental and business -type resources is reported as liabilities in the government -wide statements. The long-term debt consists primarily of bonds payable and accrued compensated absences. Long-term debt for governmental funds is not reported as liabilities in the fund financial statements. The debt proceeds are reported as other financing sources and payment of principal and interest as expenditures. The accounting for proprietary funds is the same in the fund statements as it is in the government -wide statements. Equity Classifications Government -wide Statements Equity is classified as net assets and displayed in three components: a. Invested in capital assets, net of related debt — Consists of capital assets including restricted 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 those assets. b. Restricted net assets — Consists of net assets with constraints placed on the use either by (1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments; or (2) law through constitutional provisions or enabling legislation. c. Unrestricted net assets — All other net assets that do not meet the definition of "restricted" or "invested in capital assets, net of related debt." Fund Statements Governmental fund equity is classified as fund balance. Fund balance is further classified as reserved and unreserved. Proprietary fund equity is classified the same as in the government -wide statements. Interfund Transactions Quasi -external transactions are accounted for as revenues, expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from it that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as reductions of expenditures/expenses in the fund that is reimbursed. (Continued) -55- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note 1 - Summary of Significant Accounting Policies: All other interfund transactions, except quasi -external transactions and reimbursements, are reported as transfers. Nonrecurring or nonroutine permanent transfers of equity are reported as residual equity transfers. All other interfund transfers are reported as operating transfers. Program Revenues 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. Operating and Non -Operating Revenues and Expenses — Proprietary Funds Operating revenues and expenses for proprietary funds are those that result from providing services and producing and delivering goods and/or services. It also includes all revenue and expenses not related to capital and related financing, noncapital financing, or investing activities. Operating expenses for the enterprise and internal service funds 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 nonoperating revenues and expenses. Expenditures/Expenses In the government -wide financial statements, expenses are classified by function for both governmental and business -type activities. In the fund financial statements, expenditures are classified as follows: Governmental Funds - by character: Current (further classified by function) Debt Service Capital Outlay Proprietary Fund - by operating and nonoperating In the fund financial statements, governmental funds report expenditures of financial resources. Proprietary funds report expenses relating to use of economic resources. Interfund Transfers Permanent reallocation of resources between funds of the reporting entity are classified as interfund transfers. For the purposes of the Statement of Activities, all interfund transfers between individual governmental funds have been eliminated. Statement of Cash Flows In September, 1989, the Governmental Accounting Standards Board issued Statement No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting. The City adopted the provisions of the Statement in its 1991 financial statements. For purposes of the statement of cash flows, the City considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. (Continued) -56- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note 1- Summary of Significant Accounting Policies: Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make assumptions that affect reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Stewardship, Compliance, and Accountability By its nature as a local government unit, the City and its component units are subject to various federal, state, and local laws and contractual regulations. An analysis of the City's compliance with significant laws and regulations and demonstration of its stewardship over City resources follows. Fund Accounting Requirements The City complies with all state and local laws and regulations requiring the use of separate funds. Revenue Restrictions The City has various restrictions placed over certain revenue sources from state or local requirements. The primary restricted revenue sources include. Revenue Source Legal Restrictions of Use Kentucky Police Incentive Grant Salaries Kentucky Fire Incentive Grant Salaries HOME Investment Partnerships Grant Construction of Low-income Rental Units Emergency Communication Revenue E-911 Emergency Services County Bed Tax Debt Obligations Kentucky Transportation Cabinet Street Repairs and Maintenance Kentucky Housing Corporation Facade Loans Other Grants Grant Program Expenditures For the year ended June 30, 2004, the City complied, in all material respects, with these revenue restrictions. Debt Restrictions and Covenants The City may not incur any indebtedness that would require payment from resources beyond the current fiscal year revenue without first obtaining voter approval. For the year ended June 30, 2004, the City incurred no such indebtedness. Note 2 — Property Taxes: The City bills and collects its own property taxes. The City elects to use the annual property assessment prepared by McCracken County as its base to apply the property tax rate. According to Kentucky Revised Statutes, the assessment date for the City must conform to the assessment date of McCracken County, and the annual increase in the property tax levy cannot exceed 4%. City property tax revenues are recorded as a receivable when assessed because the City has an enforceable legal claim to the resources. At this time, the receivable is offset by unearned revenue. Property tax revenues are recognized during the period for which they are levied. (Continued) -57- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note 2 - Property Taxes: The due dates and collection period for all property taxes, exclusive of vehicle taxes, for the fiscal year ended June 30, 2004, are as follows: Description Date Assessment and enforceable lien January 1, 2003 Levy October 7, 2003 Face value amount payment dates ls` half by November 1, 2003 2°d half by February 1, 2004 Delinquent date - 10% penalty plus 1/2% per month ls` half - November 30, 2003 2°a half - February 29, 2004 Note 3 - Detail Notes on Transaction Classes/Accounts: The following notes present detail information to support the amounts reported in the basic financial statements for its various assets, liabilities, equity, revenues, and expenditures/expenses. Deposits - Primary Government At year end, the carrying amount of the City's demand deposits was $8,697,848 and the bank balance was $9,496,736. These balances include $345,411 of trust and agency fund cash not included in the government -wide statements. The balances below also include bank certificates of deposit of $5,550,000, including $550,000 of agency fund certificates of deposit not included in the government -wide statements and $5,000,000 of certificates of deposit classified as investments in the financial statements. The bank balance is categorized as follows: Amount secured by the FDIC, or collateralized with securities held by the City in its name $ 500,000 Amount collateralized with securities held by the pledging institution's agent in the City's name 14,496,736 Amount uncollateralized 50,000 TOTAL BANK BALANCE 15.046.736 Investments Kentucky Revised Statutes (KRS 66.480) authorize the City to invest in: 1. Obligations of the U.S. Treasury, agencies, and instrumentalities. Such investments may be accomplished through repurchase agreements reached with national or state banks chartered in Kentucky; 2. Bonds or certificates of indebtedness of the state of Kentucky and of its agencies and instrumentalities; 3. Savings and loan associations insured by the U.S. government; 4. Interest-bearing deposits in national or state banks chartered in Kentucky and insured by an agency of the U.S. government; (Continued) -58- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note 3 - Detail Notes on Transaction Classes/Accounts: 5. Deposit accounts with banking institutions; 6. State treasurer investment pool. The Police and Firefighters' Pension Fund is also authorized to invest in real estate mortgage notes, bonds and other interest bearing or dividend paying securities. Investments made by the City, including repurchase agreements, are summarized below. The investments that are represented by specific identifiable investment securities are classified as to credit risk by the three categories described below: Category 1 - Insured or registered, with securities held by the City or its agent in the City's name. Category 2 - Uninsured and unregistered, with securities held by the counterparty's trust department or agent in the City's name. Category 3 - Uninsured and unregistered, with securities held by the counterpart, or by its trust department or agent, but not in the City's name. Investments of the primary government are classified as follows: U.S. government securities Mortgage backed securities Corporate bonds and notes Category 1 2 3 $2,851,936- 42,289 - - 1,645,813 4 540 038 � � Investment in mutual funds TOTAL INVESTMENTS (excluding $5,000,000 of bank CD's) Carrying Fair Amount Value $ 2,851,936 $ 2,851,936 42,289 42,289 1,645,813 1,645,813 4,540,038 4,540,038 6,219,403 6,219,403 10.759.441 $10.759.441 The above amounts include $8,785,237 of fiduciary fund investments not included in the government -wide financial statements, but do not include $550,000 of fiduciary fund bank CD's. Investments of the discretely presented component units are classified as follows: Investment in mutual funds and money markets TOTAL INVESTMENTS (excluding $3,443,769 of bank CD's and savings accounts) -59- Carrying Fair Amount Value $ 2,036,894 $ 2,036,894 2.036.894 $2,036,894 (Continued) CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note 3 - Detail Notes on Transaction Classes/Accounts: The following methods and assumptions were used by the entities in estimating fair values for financial instruments: Certificates of Deposit - The carrying amounts reported for certificates of deposit approximate their fair value. Investment Securities (including Mortgage -Backed Securities) - Fair values for investment securities are based on quoted market prices. Capital Assets Capital asset activity for the year ended June 30, 2004, was as follows: Balance Balance Governmental Activities: July 1, 2003 Increases Decreases June 30, 2004 Capital assets, not being depreciated: Land $ 5,084,335 $ 336,350 $ - $ 5,420,685 Construction -in -progress 2,988,191 1,719,363 2,988,191 1,719,363 Total capital assets, not being depreciated 8,072,526 2,055,713 2,988,191 7,140,048 Capital assets, being depreciated: Land improvements 950,000 55,955 - 1,005,955 Buildings and improvements 13,119,697 751,660 - 13,871,357 Infrastructure 21,760,735 6,185,597 - 27,946,332 Equipment 5,808,004 121,926 46,390 5,883,540 Furnishings and fixtures 237,285 - 4,300 232,985 Vehicles 6,508,552 686,429 821,444 6,373,537 Total capital assets, being depreciated 48,384,273 7,801,567 872,134 55,313,706 - Less accumulated depreciation: Land improvements 950,000 2,453 - 952,453 Buildings and improvements 10,022,715 202,925 - 10,225,640 Infrastructure 7,518,031 1,823,730 - 9,341,761 Equipment 4,775,016 329,294 46,172 5,058,138 Furnishings and fixtures 231,598 3,932 4,300 231,230 Vehicles 4,923,775 557,009 773,794 4,706,990 Total accumulated depreciation 28,421,135 2,919,343 824,266 30,516,212 Total capital assets, being depreciated, net 19,963,138 4,882,224 47,868 24,797,494 GOVERNMENTAL ACTIVITIES CAPITAL ASSETS, NET $6,937,937 $31,937,542 The increases in accumulated depreciation for governmental funds include $65,573 in prior year accumulated depreciation on capital assets transferred from business -type activities. (Continued) CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note 3 - Detail Notes on Transaction Classes/Accounts: (Continued) -61- Balance Balance Business -type Activities: July 1, 2003 Increases Decreases June 30, 2004 Capital assets, not being depreciated: Land $ 65,908 $ - $ - 65,908 Capital assets, being depreciated: Buildings and improvements 324,882 20,901 - 345,783 Equipment 1,996,135 64,107 - 2,060,242 Vehicles 1,905,498 331,818 239,680 1,997,636 Total capital assets, being depreciated 4,226,515 416,826 239,680 4,403,661 Less accumulated depreciation: Buildings and improvements 141,027 10,417 - 151,444 Equipment 1,619,777 152,144 - 1,771,921 Vehicles 1,105,866 204,658 227,989 1,082,535 Total accumulated depreciation 2,866,670 367,219 227,989 3,005,900 Total capital assets, being depreciated, net 1,359,845 49,607 11,691 1,397,761 BUSINESS -TYPE ACTIVITIES CAPITAL ASSETS, NET 1 425 753 49 607 11 691 1 463 669 Depreciation expense was charged to governmental activities as follows: General government: General administration $ 82,043 Finance 2,505 Planning 11,107 Human rights 862 Personnel 1,188 Information systems 16,602 Fleet maintenance 11,408 Total general government 125,715 Public safety: Police 41,333 Fire 124,095 Grants 149,670 Emergency 911 21,757 Court awards 19,757 Fleet Lease Trust 398,660 Total public safety 755,272 Public service: Public works 77,392 Engineering 11,095 Total public service 88,487 (Continued) -61- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note 3 - Detail Notes on Transaction Classes/Accounts: Parks and recreation $ 51,297 Planning and development: Infrastructure 1,823,730 Grants 9,269 Total planning and development 1,832,999 TOTAL DEPRECIATION EXPENSE — GOVERNMENTAL ACTIVITIES $2,853,770 Depreciation expense was charged to business -type activities as follows: Solid Waste Fund $ 289,889 Civic Center 8,173 TISA Fund 69,157 TOTAL DEPRECIATION EXPENSE — BUSINESS -TYPE ACTIVITIES 367 219 Balance Balance _.._ Discretely Presented July 1, 2003 Increases Decreases June 30, 2004 Component Units: Capital assets, not being depreciated: Land $ 1,644,512 $ 333,395 $ 87,028 $ 1,890,879 Construction -in -progress 797,763 3,261,060 2,321,494 1,737,329 Total capital assets, not being -- depreciated 2,442,275 3,594,455 2,408,522 3,628,208 Capital assets, being depreciated: Buildings and improvements 19,513,178 339,532 18,184,484 1,668,226 Equipment 5,206,041 1,568,176 2,470,523 4,303,694 Utility plant 108,410,804 5,063,913 740,745 112,733,972 - Total capital assets, being depreciated 133,130,023 6,971,621 21,395,752 118,705,892 Less accumulated depreciation: Buildings and improvements 2,926,276 101,012 2,808,142 219,146 Equipment 2,211,011 438,466 1,102,408 1,547,069 Utility plant 43,008,825 3,454,202 675,356 45,787,671 Total accumulated depreciation 48,146,112 3,993,680 4,585,906 47,553,886 Total capital assets, being depreciated, net 84,983,911 2,977,941 16,809,846 71,152,006 COMPONENT UNIT CAPITAL ASSETS, NET 87,426,186 $6,572,396 $19,218,368 74,780,214 (Continued) -62- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note 3 - Detail Notes on Transaction Classes/Accounts: The decreases in component units include $20,469,118 in capital assets and $3,687,879 in accumulated depreciation related to prior year component units that are no longer component units of the City of Paducah. Depreciation expense, charged to functions/programs of discretely presented major component units as follows: Paducah Water Works $ 1,216,550 Paducah Power System 2,237,652 Paducah Transit Authority 539,478 TOTAL DEPRECIATION EXPENSE BY ACTIVITY3.993.680 Accounts Payable Payables in the governmental and proprietary funds are composed of payables to vendors and accrued salaries and benefits. Long -Term Debt The City's long-term debt is segregated between the amounts to be repaid from governmental activities and amounts to be repaid from business -type activities. Governmental Activities As of June 30, 2004, the governmental long-term debt consisted of the following: General obligation bonds: Current portion $ 400,000 Noncurrent portion 13,220,000 TOTAL GENERAL OBLIGATION BOND COSTS $13,620,000 Note payable: Current portion $ 133,359 Noncurrent portion 3,295,496 TOTAL NOTE PAYABLE PAYMENTS3.428.855 Accrued compensated absences: Current portion $ 370,130 Noncurrent portion 1,374,274 TOTAL ACCRUED COMPENSATED ABSENCES $ 1.744.404 (Continued) -63- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note 3 - Detail Notes on Transaction Classes/Accounts: Business -type Activities As of June 30, 2004, the long-term debt payable from proprietary fund resources consisted of the following: Accrued compensated absences: Current portion $51,185 Noncurrent portion 14,002 TOTAL ACCRUED COMPENSATED ABSENCES 65 187 General Obligation Bonds Series 2001 Bond Issue - The City of Paducah issued general obligation bonds of $9,290,000 in June, 2001, to finance construction of the new Luther F. Carson Four Rivers Center for the Performing Arts and the expansion of the Julian Carroll Convention Center. Interest rates range from 3.5% to 5%. These bonds are required to be fully paid within 25 years from the date of issue and are backed by the full faith and credit of the City. While these bonds are issued by the City, 50% of the principal amount of the bonds was issued on behalf of the County of McCracken, Kentucky which intends to participate on an equal basis with the City in financing the projects and has issued the City a general obligation note in a principal amount equal to 50% of the principal amount of the bonds and bearing interest at the same rates as the City's bonds in order to secure the County's obligations to the City. This note receivable is reflected in the government -wide Statement of Net Assets. In accordance with an Interlocal Cooperation Agreement between the City, McCracken County, Kentucky (the County), and the Paducah -McCracken County Tourist and Convention Commission (the Bureau), principal and interest payments on the bonds are being made from an additional 2% transient room tax collected by the County with the remaining payments split evenly between the City, the County, and the Bureau. Series 2004 Bond Issue - The City of Paducah issued general obligation bonds of $5,000,000 in June, 2004, to finance construction of the new Infiniti Media Building. Interest rates range from 2.25% to 6%. These bonds are required to be fully paid within 20 years from the date of issue and are backed by the full faith and credit of the City. While these bonds are issued by the City, 50% of the principal amount of the bonds was issued on behalf of the County of McCracken, Kentucky which intends to participate on an equal basis with the City in financing the projects and has issued the City a general obligation note in a principal amount equal to 50% of the principal amount of the bonds and bearing interest at the same rates as the City's bonds in order to secure the County's obligations to the City. This note receivable is reflected in the government -wide Statement of Net Assets. In accordance with a Capital Sublease Agreement between McCracken County, Kentucky (the County) and Infiniti Plastic Technologies, Inc., principal and interest payments prior to June 1, 2007, on the bonds are being split evenly between the City and the County. After June 1, 2007, The County will pay 2.031% of the bond payments with the remaining amount being made from Infiniti's lease payments. Notes Payable Kentucky League of Cities - On July 1, 2003, the City entered into an agreement in the amount of $3,500,000 with the Kentucky League of Cities to finance the acquisition and installation of various public projects. Interest is charged at a rate of approximately 2.98%. The note is required to be fully paid within 20 years from the date of issue and is backed by the full faith and credit of the City. (Continued) CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note 3 - Detail Notes on Transaction Classes/Accounts: Paducah Bank - On April 1, 2003, the City entered into a note for up to $70,000 with Paducah Bank & Trust Company to help finance the purchase of property located at 233 North 6th Street, which is part of the LowerTown property acquired for resell. Interest is charged at a rate of 3.25% with the full amount of the note due to be paid in a lump sum on April 1, 2006. Changes in Long -Term Debt The following is a summary of changes in long-term debt for the year ended June 30, 2004: Amounts Ending Due within Reductions Balance One Year $230,000 $ 8,620,000 $240,000 - 5,000,000 160,000 79,825 - - 118,789 3,381,211 133,359 - 47,644 - 333,029 1,744,404 370,130 TOTAL GENERAL LONG- TERM DEBT 10.622.534 8 932 368 761 643 18.793.259 903 489 Business -type activities: Accrued compensated absences $ 64,833 46,516 46 162 $ 65,187 51 185 Annual Debt Service Requirements The annual debt service requirements to maturity, Beginning absences, for general long-term debt as of June 30, 2004, are as follows: Type of Debt: Balance Additions Governmental activities: June 30 Principal General obligation bonds: 2005 $ 533,359 Convention and Arts Center $ 8,850,000 $ - Infiniti Media Building - 5,000,000 Capital lease 79,825 - Notes payable: 712,329 2009 Kentucky League of Cities - 3,500,000 Paducah Bank - 47,644 Accrued compensated 2,200,361 2020-2024 absences 1,692,709 384,724 Amounts Ending Due within Reductions Balance One Year $230,000 $ 8,620,000 $240,000 - 5,000,000 160,000 79,825 - - 118,789 3,381,211 133,359 - 47,644 - 333,029 1,744,404 370,130 TOTAL GENERAL LONG- TERM DEBT 10.622.534 8 932 368 761 643 18.793.259 903 489 Business -type activities: Accrued compensated absences $ 64,833 46,516 46 162 $ 65,187 51 185 Annual Debt Service Requirements The annual debt service requirements to maturity, excluding obligations associated with compensated absences, for general long-term debt as of June 30, 2004, are as follows: Year Ending June 30 Principal Interest 2005 $ 533,359 $ 764,531 2006 595,055 750,642 2007 566,585 732,677 2008 590,887 712,329 2009 610,319 689,772 2010-2014 3,442,940 3,047,839 2015-2019 4,305,782 2,200,361 2020-2024 5,203,928 1,079,835 2025-2026 1,200,000 90,750 TOTALS $17,048,855 $10,068,736 (Continued) -65- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note 3 - Detail Notes on Transaction Classes/Accounts: Accrued Compensated Absences Compensated absence obligations arise from amounts due to City employees for vested amounts of vacation pay and sick pay which will be payable in the future. Amounts accrued at June 30, 2004, are as follows: Interfund Transactions and Balances Interfund transfers during the year ended June 30, 2004, were as follows: Governmental Business -type Governmental Funds: Activities Activities Accrued sick leave $ 766,820 $16,960 Accrued vacation leave 853,620 43,594 Applicable payroll taxes 123,964 4,633 Totals 1,744,404 65,187 Less current portion 370,130 51,185 LONG-TERM PORTION 1 374 274 14 002 Interfund Transactions and Balances Interfund transfers during the year ended June 30, 2004, were as follows: Proprietary Funds: Solid Waste Fund 222,076 3,282 Nonmajor Proprietary Funds 72,246 222,076 TOTALS 5 520 934 5 520 934 Transfers are used to (a) move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them and to (b) use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. Due To/From Balances Due to/from balances used to cover current operating expenses were as follows as of June 30, 2004: General Fund Nonmajor Governmental Funds Internal Service Funds TOTALS Due From Due To $1,047,746 $ - 49,405 - 998,341 1,047,746$1,047,746 (Continued) Interfund Interfund Governmental Funds: Transfers In Transfers Out General Fund $ 3,282 $3,167,585 Capital Project Fund 2,820,567 - Downtown Capital Project Fund - 1,813,524 Nonmajor Governmental Funds 1,115,339 314,467 Internal Service Funds 596,431 - Fiduciary Funds: Appointive Employee Pension Fund 75,553 - Police and Firefighters' Pension Fund 615,439 - Oak Grove Cemetery Trust Fund 1 - Proprietary Funds: Solid Waste Fund 222,076 3,282 Nonmajor Proprietary Funds 72,246 222,076 TOTALS 5 520 934 5 520 934 Transfers are used to (a) move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them and to (b) use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. Due To/From Balances Due to/from balances used to cover current operating expenses were as follows as of June 30, 2004: General Fund Nonmajor Governmental Funds Internal Service Funds TOTALS Due From Due To $1,047,746 $ - 49,405 - 998,341 1,047,746$1,047,746 (Continued) CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note 4 - Pension Plans - City of Paducah: The City provides retirement benefits to its employees through three pension funds. Two of these funds are single -employer defined benefit funds and are administered by the City. These funds are Police and Firefighters' Pension Fund (PFPF) and Appointive Employee' Pension Fund (AEPF). The other pension is a multi-employer public employee retirement fund administered by the Kentucky County Employees Retirement System (CERS). The City also participates in two deferred compensation plans. Information regarding these plans follows: Single Employer Defined Benefit Funds Basis of Accounting - The financial statements are prepared using the accrual basis of accounting. Plan member and employer contributions are recognized in the period in which the contributions are due. Benefits and refunds are recognized when due and payable in accordance with the terms of each plan. Funding - The Appointive Employee's Pension Fund Board and the City of Paducah Police and Firefighter's Pension Fund Board are responsible for establishing or amending contribution rates and requirements for their respective plans. Valuation of Investments - Investments are reported at fair value. Investments are composed of securities valued at current market prices. Police and Firefighters' Pension Fund Plan Description: PFPF is a single -employer defined benefit plan. On August 1, 1988, the plan was closed to new entrants and current active duty police and firemen of the City were given a choice of remaining in this plan or transferring into the CERS. Effective August 1, 1988, the PFPF covered 21 active duty members; all other active duty members elected coverage under CERS. PFPF provides retirement, disability and death benefits to plan members and their beneficiaries. These benefits are determined by Kentucky Revised Statutes (KRS) sections 95.851 to 95.884. The plan financial statements are included in this audit report. Contributions: Plan members are required to contribute 8% of their annual covered salary. A member reserve is established for member contributions, less amounts transferred to reserves for retirement and disability and amounts refunded to terminated employees. Components of annual pension cost for PFPF are as follows: Year Ended Component June 30, 2004 Beginning NPO balance $ - ARC 811,401 Pension cost 811,401 Less actual contribution 811,401 Net change in NPO ENDING NPO BALANCE $ PERCENTAGE OF PENSION COST CONTRIBUTED 100% -67- Year Ended Year Ended June 30, 2003 June 30, 2002 645,773 806,632 645,773 806,632 645,773 806,632 100% 100% (Continued) CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note 4 - Pension Plans - City of Paducah: The financial statements for the Police and Firefighters' Pension Fund are as follows: Statement of Fiduciary Net Assets Police and Firefighters' Retirement Fund June 30, 2004 Assets: Cash and cash equivalents $ 330,591 Receivables 64,770 Investment at fair value 8,957,586 Total assets 9,352,947 Liabilities: Voucher and accounts payable 648 Net Assets: Held in trust for pension benefits and other purposes $9,352,299 Statement of Changes in Net Assets Police and Firefighters' Retirement Fund For the Year Ended June 30, 2004 Additions: Employer contributions $ 195,962 Plan members' contributions 27,355 Total contributions 223,317 Investment earnings: Net increase in fair value of investments 607,613 Interest and dividends 265,306 Net investment earnings 872,919 Interfund transfers 615,439 Total additions 1,711,675 Deductions: Benefits 1,773,398 Administrative expenses 46,698 Total deductions 1,820,096 Change in net assets (108,421) Net assets, July 1, 2003 9,460,720 NET ASSETS, JUNE 30, 2004 U 352 299 (Continued) -68- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note 4 - Pension Plans - City of Paducah: Appointive Employees' Pension Fund Plan Description: AEPF is a single -employer defined benefit plan which covers past appointed employees of the City. In 1975, the City froze admission of new entrants into the plan. There are no active participants in the plan at June 30, 2004. The plan financial statements are included in this audit report. Contributions: Since there are only retired employees and beneficiaries receiving benefits, the City expects little or no additional pension obligation. The City has pledged to maintain benefits and the financial soundness of the plan by appropriations from the General Fund, as necessary. Components of annual pension cost for AEPF are as follows: Component Beginning NPO balance ARC Interest on NPO Unfunded ARC adjustment Pension cost Less actual contribution Net change in NPO ENDING NPO BALANCE PERCENTAGE OF PENSION Assets: Year Ended Year Ended Year Ended June 30, 2004 June 30, 2003 June 30, 2002 $(198,365) $086,170) $ 182 940) 48,339 50,112 59,297 (11,902) (11,170) (10,976) 25,426 23,863 23,449 61,863 62,805 71,770 75,553 75,000 75,000 (13,690) (12,195) (3,230) 212 055) $(198,365) 186170 COST CONTRIBUTED 122% 120% 105% Statement of Fiduciary Net Assets Appointive Employees' Pension Fund June 30, 2004 Cash and cash equivalents $ 22,989 Receivables 806 Investment at fair value 300,000 Total assets 323,795 Liabilities: Voucher and accounts payable 175 Net Assets: Held in trust for pension benefits and other purposes M3,620 (Continued) CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note 4 - Pension Plans - City of Paducah: Statement of Changes in Net Assets Appointive Employees' Pension Fund For the Year Ended June 30, 2004 Additions: Interest and dividends $ 5,004 Interfund transfers 75,553 Total additions 80,557 Deductions: Benefits 76,576 Administrative expenses 7,735 Total deductions 84,311 Change in net assets (3,754) Net assets, July 1, 2003 327,374 NET ASSETS, JUNE 30, 2004 S323,620 Contribution Information A summary of actuarial assumptions at June 30, 2004, the date of the latest actuarial valuation is as follows: PFPF AEPF Valuation date 7/l/04 7/l/04 Actuarial cost method Entry age normal Aggregate (1) Amortization method Level dollar closed Level dollar closed Remaining amortization period 28 Years 10 Years Asset valuation method Market value Market value Actuarial assumptions: - Investment rate of return 7.75% 6.0% Projected salary increases 4.00% (2) Inflation rates adjustments 3.27% (2) (1) The Aggregate Method does not identify or separately amortize the unfunded actuarial liabilities. (2) The plan has no active participants. The pension cost for each year is determined as an amortization of the unfunded actuarial accrued liability over the lesser of 10 years or the weighted average of expected term of payment of plan benefits. (Continued) -70- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note 4 - Pension Plans - City of Paducah: Membership Information Membership of each plan consisted of the following at June 30, 2004: PFPF AEPF Active participants 6 - Beneficiaries 43 8 Retired participants 54 4 TOTAL PARTICIPANTS 103 12 Cost -Sharing Multiple -Employer Defined Benefit Plan County Employees' Retirement System Plan Description: The City is a participant in the County Employees Retirement System (CERS), a cost sharing, multi-employer public employee retirement system. CERS provides retirement, disability, and death benefits to plan members. Retirement benefits may be extended to beneficiaries of plan members under certain circumstances. Cost -of -living adjustments are provided at the discretion of the State legislature. Kentucky Retirement Systems issues a publicly available financial report that includes financial statements and required supplementary information for CERS. That report may be obtained by writing to Kentucky Retirement Systems, Perimeter Park West, 1260 Louisville Road, Frankfort, Kentucky 40601-6124 or by calling 1-502-564-4646. Funding Policy: Hazardous position employees are required to contribute 8% to the plan and nonhazardous position employees are required to contribute 5% of their creditable compensation by State statute. The City is required by the same statute to contribute the remaining amounts necessary to pay benefits when due. For the years ended June 30, 2004, 2003 and 2002, the City contributed 7.34%, 6.34%, and 6.41%, respectively, of each nonhazardous employee's creditable compensation and 18.51%, 16.28%, and 16.28%, respectively, of each hazardous employee's creditable compensation. These actuarially determined rates are set by the Board of Trustees of Kentucky Retirement Systems. The City's contributions to CERS for the years ending June 30, 2004, 2003 and 2002, were $2,387,011, $2,104,841, and $2,092,620, respectively, equal to the required contributions for each year. Note 5 - Budget Deficits: No departments that adopted budgets annually had excess expenditures over appropriations for the fiscal year ended June 30, 2004. Note 6 - Component Unit Long -Term Debt: Long-term debt of the discretely presented component units consists of the following at June 30, 2004: Refunding Revenue Bonds of 1991 - Paducah Water Works The City of Paducah, Kentucky Refunding Bonds, Series of 1991, in the amount of $10,775,000 were issued for the purpose of defeasing certain bonds of the Revenue Refunding Bonds, Series of 1985. During the year ended June 30, 1998, Paducah Water Works refunded a portion ($6,075,000) of the 1991 bond issue by issuing $6,780,000 of 1997 revenue refunding bonds, Series 1997. At June 30, 2004, the total bonds that are considered extinguished under an in -substance defeasance (refund) are $11,790,000. The bonds are secured by a first pledge of the revenues of Paducah Water Works. City bond ordinances require that net revenues, as defined in the ordinances, equal or exceed 130% of the maximum annual debt service. Payment of bonds and related interest is fully guaranteed by the Municipal Investors Assurance Corporation. (Continued) -71- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note 6 - Component Unit Long -Term Debt: The following schedule summarizes the debt service requirements for the Refunding Revenue Bonds, Series of 1991: Fiscal Year 2005 2006 2007 2008 2009 Less deferred debit arising from advanced refunding TOTALS (296,053 - (296,053) $4,448,947 648 715 5 097 662 Note Payable, Kentucky Infrastructure Authority (KIA) — Paducah Water Works In connection with a merger with Reidland Water District, Paducah Water Works assumed a loan from the KIA. Interest rates range from 2.5% to 4.25%, with a .2% annual service fee. The annual requirements to amortize the outstanding debt as of June 30, 2004, are as follows: Year Ending Total Debt Principal Interest Service $ 870,000 $209,790 $1,079,790 905,000 171,510 1,076,510 950,000 131,690 1,081,690 990,000 89,890 1,079,890 1,030,000 45,835 1,075,835 (296,053 - (296,053) $4,448,947 648 715 5 097 662 Note Payable, Kentucky Infrastructure Authority (KIA) — Paducah Water Works In connection with a merger with Reidland Water District, Paducah Water Works assumed a loan from the KIA. Interest rates range from 2.5% to 4.25%, with a .2% annual service fee. The annual requirements to amortize the outstanding debt as of June 30, 2004, are as follows: Year Ending June 30 Principal Interest Fee (0.2%) Total 2005 $ 29,182 $12,106 $ 608 $ 41,897 2006 30,066 11,231 550 41,847 2007 30,950 10,329 489 41,768 2008 31,835 9,246 428 41,509 2009 33,603 7,972 183 41,758 2010-2018 148,571 16,101 940 165,612 TOTALS $304,207 66 985 3 198 374 391 Paducah Electric Plant Board 1991 Bond Issue In 1991, bonds amounting to $4,725,000 were issued to make improvements to the Paducah Power sub- station and renovation of the building that houses the System's offices, warehouse and storage. All assets of the System are pledged as collateral to the bond issue. Interest rates range from 6.25% to 6.30%. On November 1, 1998, the Utility issued $3.35 million in special revenue refunding bonds with interest rates between 3.75% and 4.20%. The Utility issued the bonds to advance refund $3.06 million of the outstanding Series 1991 general obligation bonds with a 6.30% interest rate and were secured by all assets of the Utility. The Utility used the net proceeds along with other resources to purchase the U. S. Government Securities. These securities were deposited in an irrevocable trust to provide for all future debt service on the refunded portion of the 1991 Series bonds maturing on or after January 1, 2002. As a result, that portion of the 1991 Series bonds is considered defeased and the Utility has removed the liability from its books. On November 9, 2001, the System issued $3.32 million in special revenue refunding bonds with interest rates between 3.00% and 4.25% and is secured by a first pledge of the net revenues of the System. The System issued the bonds to finance construction of a fiber optic network in the community. (Continued) -72- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note 6 - Component Unit Long -Term Debt: The following schedule summarizes the remaining debt service requirements for the Paducah Electric Plant Board 1991 Bond Issue: TOTALS 1ZAL6.482 Bonds payable totaling $5,466,223 are recorded net of $238,777 unamortized bond discount and advance refunding deferred charges. Note 7 - Commitments and Contingencies: Construction Commitments The City has on-going contracts for paving materials, equipment, and labor. As of June 30, 2004, the balance of the contract commitments were $264,993. Escrow Account Securing Note Payable The City has established a $300,000 escrow account which is included in General Fund investments to secure a note payable for the Greater Paducah Economic Development Council (GPEDC) for the construction of a speculation building in the McCracken County Information Age Park. The City also signed a loan guarantee agreement in the amount of $221,876 related to another GPEDC note payable, but does not anticipate any required payment. Grant Contingencies Amounts received from grantor agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time although the government expects such amounts, if any, to be immaterial. Note 8 - Risk Management and Litigation: The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City obtains coverage from commercial insurance companies to handle the risk of loss. There have been no decreases in insurance -- coverage from the prior year. There have been no settlements in excess of insurance coverage during the prior three years. (Continued) -73- Total Debt Fiscal Year Principal Interest Service 2005 $ 345,000 $ 233,058 $ 578,058 2006 355,000 219,607 574,607 2007 370,000 205,758 575,758 2008 385,000 191,117 576,117 2009 400,000 175,532 575,532 2010-2014 2,260,000 619,560 2,879,560 2015-2018 1,590,000 136,850 1,726,850 TOTALS 1ZAL6.482 Bonds payable totaling $5,466,223 are recorded net of $238,777 unamortized bond discount and advance refunding deferred charges. Note 7 - Commitments and Contingencies: Construction Commitments The City has on-going contracts for paving materials, equipment, and labor. As of June 30, 2004, the balance of the contract commitments were $264,993. Escrow Account Securing Note Payable The City has established a $300,000 escrow account which is included in General Fund investments to secure a note payable for the Greater Paducah Economic Development Council (GPEDC) for the construction of a speculation building in the McCracken County Information Age Park. The City also signed a loan guarantee agreement in the amount of $221,876 related to another GPEDC note payable, but does not anticipate any required payment. Grant Contingencies Amounts received from grantor agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time although the government expects such amounts, if any, to be immaterial. Note 8 - Risk Management and Litigation: The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City obtains coverage from commercial insurance companies to handle the risk of loss. There have been no decreases in insurance -- coverage from the prior year. There have been no settlements in excess of insurance coverage during the prior three years. (Continued) -73- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 - Note 8 - Risk Management and Litigation: An analysis of claims activity is presented below: Current Year Beginning of Claims and Actual Balance at Fiscal Year Changes in Claim Fiscal Liability Estimates Payments Year End 1996- 1997 $ - $ 85,326 $ 85,326 $ - 1997 - 1998 - 96,101 96,101 - 1998 - 1999 - 26,457 26,457 - 1999-2000 - 26,455 26,455 - 2000-2001 - 102,380 102,380 - 2001-2002 - 2,879 2,879 - 2002-2003 - 3,277 3,277 - 2003-2004 - 133,383 133,383 - During fiscal year 1999, the City established the Health Insurance Fund (an internal service fund) to account for and finance employee medical costs relating to the City's employee self-insured medical benefit plan that went into effect as of July 1, 1999. The health insurance provides coverage for up to $150,000 for each covered individual. The City purchases commercial insurance (reinsurance) for claims in excess of the coverage provided per individual or in excess of the maximum aggregate limit of $2,000,000. Self-insurance costs are accrued based on claims reported within 90 days of the balance sheet date as well as an estimated liability for claims incurred but not reported. The total accrued liability for self-insurance costs was $350,000 at June 30, 2004. The analysis of claims activity is presented below: Current Year Beginning of Claims and Actual Balance at Fiscal Year Changes in Claim Fiscal Liability Estimates Payments Year End 1999-2000 $ - $1,874,033 $1,874,033 $ - 2000-2001 - 2,636,969 2,351,969 285,000 2001-2002 285,000 2,601,988 2,601,988 285,000 2002-2003 285,000 3,257,340 3,210,340 332,000 2003-2004 332,000 2,217,067 2,199,067 350,000 Several lawsuits are pending involving citizens' complaints and the City of Paducah. Various allegations have been made seeking damages which the legal counsel of the City, along with its management, has determined to be immaterial to the City's financial position. Note 9 - Lease Agreements: The City is leasing land to the Luther F. Carson Four Rivers Center for the Performing Arts (Center) for a -- primary term of 99 years. No rental revenue is being collected from this lease. The rental for the primary term of the lease is the construction of the performing arts center. The building will be deemed the property of the City upon termination of the lease. In December, 2003, with the authorization of the City, the Center secured financing of $6.5 million subject to a mortgage against the leasehold and real property on which the performing arts center is located. The City also consented to an assignment of the lease as security for the loan. The City is leasing land and a building to Infiniti Media, Incorporated for use by Infiniti Plastic Technologies, Incorporated for a primary term of 20 years. No rental revenue is collected for the first three years of the lease term. Rental payments will commence on September 1, 2007, at a monthly payment of $33,816 and end with the final payment due May 1, 2024. Infiniti Media has the option to cancel this lease at any time after the sixth year of the lease term. (Continued) -74- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 Note 9 - Lease Agreements: The City leases certain other property to various lessees under agreements that have various expiration dates through June 30, 2079. Rental revenue received from leased property during 2004 totaled $271,292. The following is an analysis of property leased under these operating leases at June 30, 2004: Land $ 606,350 Buildings 2,592,613 Equipment 110,126 Total 3,309,089 Less: accumulated depreciation 671,865 NET BOOK VALUE2.637.224 Depreciation expense for the year ended June 30, 2004, on leased property was $20,775. The following is a schedule of future minimum rental income from operating leases at June 30, 2004: TOTAL MINIMUM LEASE RECEIPTS7.554.602 Note 10 - Reclassification of Beginning Fund Balance: A reclassification was made to the following beginning fund balance as follows: Lease Paducah Mainstreet, Inc. Income 2005 $ 216,963 2006 141,973 2007 61,973 2008 398,786 2009 466,419 Future years 6,268,488 TOTAL MINIMUM LEASE RECEIPTS7.554.602 Note 10 - Reclassification of Beginning Fund Balance: A reclassification was made to the following beginning fund balance as follows: Beginning net assets for component units were decreased as a result of entities previously considered component units no longer being component units of the City of Paducah. The beginning net assets decreased as follows: Total Component Units June 30, 2003, balance as previously reported Section 8 Paducah Mainstreet, Inc. Housing June 30, 2003, balance as (612,002) previously reported $ 193,265 Section 8 Housing adjustment (30,956) JULY 1, 2003, BALANCE AS RESTATED $ 162,309 Beginning net assets for component units were decreased as a result of entities previously considered component units no longer being component units of the City of Paducah. The beginning net assets decreased as follows: Total Component Units June 30, 2003, balance as previously reported $ 90,440,239 Paducah Mainstreet, Inc. (11,769) Forest Hills Village, Inc. (612,002) Edwin J. Paxton Park Golf Course (467,873) Paducah Junior College, Inc. (20,994,915) JULY 1, 2004, BALANCE AS RESTATED 68.353.680 -75- CITY OF PADUCAH, KENTUCKY REQUIRED SUPPLEMENTARY INFORMATION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2004 Exhibit A-1 CITY OF PADUCAH, KENTUCKY REQUIRED SUPPLEMENTARY INFORMATION PENSION TRUST FUNDS SCHEDULES Schedules of Funding Progress -76- Actuarial Actuarial Unfunded Annual UAAL as a Actuarial Value of Accrued AAL Funded Covered Percentage of Valuation Assets Liability (AAL) (UAAL) Ratio Payroll Covered Payroll Date (a) (b) (b -a) (a/b) (c) ((b-a)/c) Police and Firefighters' Pension Fund (PFPF) (Using Entry Age Normal Method) 7/1/1999 $11,949,160 $16,011,730 $4,062,570 74.6% $332,825 1220.63% 7/1/2000 11,914,754 15,923,034 4,008,280 74.8 345,500 1160.14 7/1/2001 11,346,128 15,724,236 4,378,108 72.2 356,406 1228.40 7/1/2002 10,382,216 15,550,968 5,168,752 66.8 356,304 1450.66 7/1/2003 9,460,720 15,334,484 5,873,764 61.7 320,782 1831.08 7/1/2004 9,352,299 15,204,717 5,852,418 61.5 287,923 2032.63 Appointive Employees' Pension Fund (AEPF) (Using Aggregate Actuarial Method) The Aggregate Cost Method is used for the AEPF; therefore, a schedule of funding progress is not required. Schedules of Employer Contributions _. PFPF AEPF Year Annual Required Percent Annual Required Percent Ending Ended Contribution ARC Contribution ARC Net Pension June 30 (ARC) Contributed (ARC) Contributed Obligation (NPO) 1999 $593,776 100% $72,984 103% $(186,860) 2000 649,274 100 66,716 112 (182,405) 2001 865,026 100 62,029 121 (182,940) 2002 806,632 100 59,297 126 (186,170) 2003 645,773 100 50,112 150 (198,365) 2004 811,401 100 48,339 156 (212,055) -76- CITY OF PADUCAH, KENTUCKY BUDGETARY COMPARISON SCHEDULE (BUDGETARY BASIS) GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2004 Beginning budgetary fund balance Resources (Inflows): Taxes: Real and personal, current year Real and personal, prior year Franchise Bank taxes In lieu of tax payment Penalty, interest and advertising Paducah Junior College tax collections Total taxes Licenses: Business licenses Employee earnings Comcast fees Penalties Alcoholic beverages Insurance premium tax Building permits Electrical permits Zoning change fees Miscellaneous building and electrical fees KJDA payroll rebate Total licenses Charges for services: Tax collection fee Administrative charge Base court revenue Recreation fees Total charges for services Budgeted Amounts Actual Original Final Amounts me An a ." m A n m.- -- Exhibit A-2 Variance with Final Budget Positive (Negative) �D 4,077,000 4,196,940 4,196,949 9 165,000 139,775 140,776 1,001 244,000 233,845 233,854 9 165,200 161,550 161,550 - 115,000 146,145 146,145 - 35,000 51,630 51,630 - - - 274,518 274,518 4,801,200 4,929,885 5,205,422 275,537 3,400,000 3,496,440 3,496,438 (2) 10,600,000 10,616,225 10,616,223 (2) 300,000 281,245 281,244 (1) 57,000 61,500 61,532 32 115,000 113,685 113,685 - 3,700,000 3,781,365 3,767,864 (13,501) 105,000 112,820 112,820 - 31,000 34,570 34,569 (1) 3,500 3,680 3,681 1 1,000 600 602 2 - (65,415) (65,414) 1 18,312,500 18,436,715 18,423,244 (13,471) 125,000 111,840 111,860 20 240,700 240,700 240,696 (4) 84,375 84,375 84,376 1 121,500 132,400 132,388 (12) 571,575 569,315 569,320 5 109 (Continued) CITY OF PADUCAH, KENTUCKY BUDGETARY COMPARISON SCHEDULE (BUDGETARY BASIS) GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2004 Exhibit A-2 (Continued) Variance with -78- Final Budget Budgeted Amounts Actual Positive Grants: Original Final Amounts (Negative) Police State Incentive $ 270,000 $ 268,625 $ 268,626 $ 1 Fire State Incentive 265,000 259,410 259,410 - Paducah Housing Authority after school program 29,000 52,380 52,384 4 Police supplemental grants 28,000 52,520 55,105 2,585 Total grants 592,000 632,935 635,525 2,590 Interest 183,400 118,565 118,566 1 Other: Property rent and sales 428,475 458,370 465,124 6,754 Property upkeep and maintenance 106,700 100,245 100,260 15 Contractual programs 3,000 5,755 5,754 (1) E911 - GIS - 9,870 9,868 (2) Miscellaneous 84,300 1,940,695 1,940,727 32 Total other 622,475 2,514,935 2,521,733 6,798 Other financing sources: Operating transfers in - 3,280 3,282 2 Amounts available for appropriation 30,177,572 32,131,612 32,403,074 271,462 Charges to Appropriations (Outflows): General government: General administration: Mayor and Commissioners 176,300 185,005 185,003 2 City Manager 219,690 211,580 211,227 353 City Clerk 125,395 131,480 131,366 114 Corporate Counsel 227,625 142,925 142,921 4 Non -departmental 230,000 280,000 280,000 - Memberships and contingency 248,925 21,920 21,872 48 Civic beautification 2,625 2,645 2,645 - Total general administration 1,230,560 975,555 975,034 521 Finance: Finance administration 150,420 154,815 154,815 - Accounting and payroll 303,945 288,410 288,409 1 Revenue collection 294,290 279,140 279,077 63 Total finance 748,655 722,365 722,301 64 (Continued) -78- CITY OF PADUCAH, KENTUCKY BUDGETARY COMPARISON SCHEDULE (BUDGETARY BASIS) GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2004 Exhibit A-2 (Continued) Variance with Inspection: Inspection administration 149,305 145,555 145,551 Final Budget Construction Budgeted Amounts Actual Positive General government: Original Final Amounts (Negative) Planning: 750,680 701,205 700,983 222 Administration $ 217,115 $ 245,310 $ 245,303 $ 7 Planning 205,365 205,700 205,696 4 Grants 104,025 103,375 103,052 323 Economic development 212,500 299,535 299,532 3 Total planning 739,005 853,920 853,583 337 Human rights 99,545 96,470 96,309 161 Human resources 338,570 329,770 329,740 30 Inspection: Inspection administration 149,305 145,555 145,551 4 Construction 272,140 271,485 271,289 196 Code enforcement 329,235 284,165 284,143 22 Total inspection 750,680 701,205 700,983 222 Total fire Information systems 242,845 213,305 213,301 4 Public safety: Public works: Police: Public Works Administration 188,970 Police administration 1,114,190 1,135,870 1,135,867 3 Patrol 4,576,425 4,323,205 4,323,142 63 Investigations 1,176,475 1,187,415 1,187,224 191 Total police 6,867,090 6,646,490 6,646,233 257 Fire: Fire administration 233,560 227,325 226,985 340 Suppression 4,584,010 4,596,320 4,596,318 2 Prevention 174,900 170,055 169,952 103 Training 133,730 110,535 110,530 5 Total fire 5,126,200 5,104,235 5,103,785 450 Public service: Public works: Public Works Administration 188,970 156,995 156,993 2 Street maintenance 2,225,560 1,924,855 1,924,712 143 Street lighting 458,185 480,370 480,369 1 (Continued) -79- CITY OF PADUCAH, KENTUCKY BUDGETARY COMPARISON SCHEDULE (BUDGETARY BASIS) GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2004 Public service: Public works: Facility maintenance Custodial service Landscape maintenance Summer youth program Total public works Engineering services: Engineering services Flood control Total engineering services Recreation: Recreation administration Pools and recreation Total recreation Other: Cable authority Grant match expense Leave expense Intergovernmental expense Donated assets Total other Other financing uses: Operating transfers out Total charges to appropriations BUDGETARY FUND BALANCE, JUNE 30, 2004 Budgeted Amounts Actual Original Final Amounts $ 561,930 $ 444,025 $ 443,730 230,770 201,300 201,294 1,347,740 1,402,200 1,402,197 100,765 69,115 69,113 5,113,920 4,678,860 4,678,408 Exhibit A-2 (Continued) Variance with Final Budget Positive (Negative) $ 295 6 3 2 452 508,675 461,095 461,042 53 380,960 443,005 442,556 449 889,635 904,100 903,598 502 589,195 553,190 553,172 18 492,820 473,195 473,125 70 1,082,015 1,026,385 1,026,297 88 107,785 70,975 70,971 4 - 120,255 120,252 3 - 34,710 34,709 1 - 277,915 277,912 3 - 1,840,000 1,840,000 - 107,785 2,343,855 2,343,844 11 2,177,065 3,303,580 3,167,585 135,995 25,513,570 27,900,095 27,761,001 139,094 $4,664,002 $4,231,517 $ 4,642,073 $410,556 -80- Exhibit A-3 CITY OF PADUCAH, KENTUCKY BUDGETARY COMPARISON SCHEDULE NOTE TO RSI FOR THE YEAR ENDED JUNE 30, 2004 Note A - Explanation of Differences Between Budgetary Inflows and Outflows and GAAP Revenues and Expenditures Sources/inflows of resources: Actual amounts "available for appropriation" from the budgetary comparison schedule Differences - budget to GAAP: The beginning fund balance is a budgetary resource, but is not a current year revenue for financial reporting purposes Transfers from these funds are inflows of budgetary resources, but are not revenues for financial reporting purposes Total revenues as reported on the statement of revenues, expenditures, and changes in fund balances - governmental funds Uses/outflows of resources: Actual amounts "total charges to appropriations" from the budgetary comparison schedule Differences - budget to GAAP: Transfers to other funds are outflows of budgetary resources, but are not expenditures for financial reporting purposes Total expenditures as reported on the statement of revenues, expenditures, and changes in fund balances - governmental funds IF -3E General Fund $32,403,074 (4,925,982) (3,282) $27,473,810 $27,761,001 (3,167,585) $24,593,416 CITY OF PADUCAH, KENTUCKY SUPPLEMENTARY INFORMATION NONMAJOR GOVERNMENTAL FUNDS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2004 COMBINING FINANCIAL STATEMENTS NONMAJOR GOVERNMENTAL FUNDS Special Revenue Funds Municipal Aid Program - to account for revenues and expenditures of Kentucky gas tax refunds. Emergency Communication Service Fund - to account for revenues associated with 911 program. Court Awards Fund - to account for revenues associated with judicial system confiscations. Federal, State, and Local Grants - to account for the grant programs awarded to the City of Paducah from agencies of the Federal Government and the Commonwealth of Kentucky. Debt Service Fund To account for the payment of bond principal and interest, note principal and interest, and capital lease payments. THIS PAGE INTENTIONALLY LEFT BLANK Exhibit B-1 CITY OF PADUCAH, KENTUCKY COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2004 See auditors report on pages 13-14. -82- Special Revenue Funds Emergency Court Small CDBG ASSETS Municipal Communication Awards Grant Grant Aid Program Service Fund Fund Fund Fund Cash and cash equivalents $ 41,203 $154,354 $168,142 $113,312 $43,000 Investments 500,000 - - - - Receivables, net: Accounts - 114,540 - - - Grants - - - 9,996 7,000 Interest 3,267 - - - - Prepaid items - 12,962 - - - TOTAL ASSETS $544,470 $281,856 $168,142 $123,308 $50,000 LIABILITIES AND FUND BALANCES Liabilities: Voucher and accounts payable $ 52,654 $ 37,682 $116,032 $ 2,879 $ - Accrued payroll and payroll taxes - 17,647 - - - Unearned revenue - - - 93,687 50,000 Due to other funds - - - 24,439 - Total liabilities 52,654 55,329 116,032 121,005 50,000 Fund Balances: Reserved for: Program purposes - - - 2,303 - Unreserved 491,816 226,527 52,110 - - Total fund balances 491,816 226,527 52,110 2,303 - TOTAL LIABILITIES AND FUND BALANCES $544,470 $281,856 $168,142 $123,308 $50,000 See auditors report on pages 13-14. -82- $ - $ - $ 35 $ - $ 33,844 $ - - - 12,455 - 90,865 - - - - - - 3,135 21,831 90,865 35 3,135 68,130 - $ 243,126 30,102 234,552 49,405 130,761 - 212,843 - 137,516 - 483,423 - - - - - 30,243 800,696 130,761 - 212,843 - 137,516 30,243 1,284,119 $130,761 $90,865 $212,878 $3,135 $205,646 $30,243 $1,841,304 -83- Debt Special Revenue Funds Service HOPE 3 Home HUD PHA Section Debt Total Nonmajor Grant Grant Revolving Police Eight Service Governmental Fund Fund Grant Fund Grant Fund Housing Fund Funds $130,761 $59,924 $212,878 $ 3 $145,262 $30,243 $1,099,082 - - - - - - 500,000 - - - - 19,197 - 133,737 - 30,941 - 3,132 41,187 - 92,256 _ - _ - - - 3,267 - - - - - - 12,962 $130,761 $90,865 $212,878 $3,135 $205,646 $30,243 $1,841,304 $ - $ - $ 35 $ - $ 33,844 $ - - - 12,455 - 90,865 - - - - - - 3,135 21,831 90,865 35 3,135 68,130 - $ 243,126 30,102 234,552 49,405 130,761 - 212,843 - 137,516 - 483,423 - - - - - 30,243 800,696 130,761 - 212,843 - 137,516 30,243 1,284,119 $130,761 $90,865 $212,878 $3,135 $205,646 $30,243 $1,841,304 -83- CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2004 Revenues: Taxes Charges for services Intergovernmental Grants Interest Miscellaneous Total revenues Expenditures: Current operations: Public safety Public service Planning and development Debt Service: Principal requirement Interest and fiscal requirement Total expenditures Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses): Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances, July 1, 2003 Adjustment to beginning fund balance FUND BALANCES, JUNE 30, 2004 See auditors report on pages 13-14. Exhibit B-2 - 1,158,873 25,361 - - 1,332,517 - - - - - - - 46,693 12,500 1,332,517 Special Revenue Funds 25,361 46,693 12,500 Emergency Court Small CDBG Municipal Communication Awards Grant Grant Aid Program Service Fund Fund Fund Fund $ - $ 665,807 $ - $ - $ - - 99,339 - - - 405,763 - - - - 281,250 - - 30,591 16,500 14,922 1,637 1,712 59 - 187,568 186,644 31,967 19,291 - 889,503 953,427 33,679 49,941 16,500 - 1,158,873 25,361 - - 1,332,517 - - - - - - - 46,693 12,500 1,332,517 1,158,873 25,361 46,693 12,500 (443,014) (205,446) 8,318 3,248 4,000 93,750 236,802 - - - - - - (2,795) (4,000) 93,750 236,802 - (2,795) (4,000) (349,264) 31,356 8,318 453 - 841,080 195,171 43,792 1,850 - $ 491,816 -84- $ 226,527 $52,110 $ 2,303 $ - -85- Debt Special Revenue Funds Service HOPE 3 Home HUD PHA Section Debt Total Nonmajor Grant Grant Revolving Police Eight Service Governmental Fund Fund Grant Fund Grant Fund Housing Fund Funds _._ $ - $ - $ - $ - $ - $ - $ 665,807 - - - - - - 99,339 - - - - - 575,508 981,271 - 490,344 - 29,433 1,592,958 - 2,441,076 - - 3,047 - 696 - 22,073 - 29,957 44,798 - - - 500,225 - - 520,301 47,845 29,433 1,593,654 575,508 4,709,791 - - - 29,433 - - 1,213,667 - - - - - - 1,332,517 15,670 564,266 312,897 - 1,618,447 - 2,570,473 - - - - - 428,613 428,613 - - - - - 471,625 471,625 15,670 564,266 312,897 29,433 1,618,447 900,238 6,016,895 (15,670) (43,965) (265,052) - (24,793) (324,730) (1,307,104) - 78,356 397,509 - - 308,922 1,115,339 - (34,391) (273,281) - - - (314,467) - 43,965 124,228 - - 308,922 800,872 (15,670) - (140,824) - (24,793) (15,808) (506,232) 146,431 - 353,667 - 193,265 46,051 1,821,307 - - - - (30,956) - (30,956) $130,761 $ - $212,843 $ - $ 137,516 $ 30,243 $1,284,119 -85- CITY OF PADUCAH, KENTUCKY MUNICIPAL AID PROGRAM FUND DETAIL STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2004 Revenues: Intergovernmental Grants Interest Other Total revenues Expenditures: Public service Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses): Operating transfers in Net change in fund balance Fund balance, July 1, 2003 FUND BALANCE, JUNE 30, 2004 See auditors report on pages 13-14. Final Budget Actual $ 405,760 $ 405,763 281,250 281,250 14,920 14,922 187,570 187,568 889,500 889,503 1,332,545 1,332,517 (443,045) (443,014) 93,750 93,750 $ (349,295) (349,264) 841,080 $ 491,816 Exhibit B-3 Variance with Final Budget Positive (Negative) $ 3 2 (2) 3 28 31 $31 CITY OF PADUCAH, KENTUCKY EMERGENCY COMMUNICATION SERVICE FUND DETAIL STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2004 Revenues: Local contributions Telephone surcharges Interest Miscellaneous Total revenues Expenditures: Public safety Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses): Operating transfers in Net change in fund balance Fund balance, July 1, 2003 FUND BALANCE, JUNE 30, 2004 See auditors report on pages 13-14. -87- Exhibit B-4 Variance with 226,527 Final Budget Final Positive Budget Actual (Negative) $ 659,080 $ 665,807 $6,727 99,340 99,339 (1) 1,635 1,637 2 186,645 186,644 (1) 946,700 953,427 6,727 1,158,820 1,158,873 (53) (212,120) (205,446) 6,674 236,800 236,802 2 $ 24,680 31,356 $6,676 226,527 CITY OF PADUCAH, KENTUCKY COURT AWARDS FUND DETAIL STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2004 Revenues: Court awarded forfeitures Interest Total revenues Expenditures: Public safety Excess (deficiency) of revenues over expenditures Fund balance, July 1, 2003 FUND BALANCE, JUNE 30, 2004 See auditors report on pages 13-14. -88- Final Budget Actual $31,970 $31,967 1,710 1,712 33,680 33,679 25,390 25,361 $ 8,290 8,318 43,792 $52,110 Exhibit B-5 Variance with Final Budget Positive (Negative) $ (3) 2 (1) 29 $ 28 CITY OF PADUCAH, KENTUCKY SMALL GRANT FUND DETAIL STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2004 Revenues: Grants Interest Other Total revenues Expenditures: Planning and development Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses): Operating transfers out Net change in fund balance Fund balance, July 1, 2003 FUND BALANCE, JUNE 30, 2004 See auditors report on pages 13-14. -89- Exhibit B-6 Variance with Final Budget Final Positive Budget Actual (Negative) $30,590 $30,591 $ 1 55 59 4 19,290 19,291 1 49,935 49,941 6 46,695 46,693 2 3,240 3,248 8 (2,795) (2,795) - $ 445 453 $ 8 1,850 $ 2,303 CITY OF PADUCAH, KENTUCKY CDBG FUND DETAIL STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2004 Revenues: Grants Expenditures: Planning and development Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses): Operating transfers out Net change in fund balance Fund balance, July 1, 2003 FUND BALANCE, JUNE 30, 2004 See auditors report on pages 13-14. .D Exhibit B-7 Variance with Final Budget Final Positive Budget Actual (Negative) $16,500 $16,500 $ - 12,500 12,500 - 4,000 4,000 - (4,000) (4,000) - CITY OF PADUCAH, KENTUCKY HOPE 3 IMPLEMENTATION GRANT FUND DETAIL STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2004 Revenues: Other Expenditures: Planning and development Excess (deficiency) of revenues over expenditures Fund balance, July 1, 2003 FUND BALANCE, JUNE 30, 2004 See auditors report on pages 13-14. -91- Exhibit B-8 Variance with Final Budget Final Positive Budget Actual (Negative) 15,670 15,670 - $(15,670) (15,670) $ - 146,431 $130,761 CITY OF PADUCAH, KENTUCKY HOME GRANT FUND DETAIL STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2004 Revenues: Grants Miscellaneous Total revenues Expenditures: Planning and development Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses): Operating transfers in Operating transfers out Total other financing sources (uses) Net change in fund balance Fund balance, July 1, 2003 FUND BALANCE, JUNE 30, 2004 See auditors report on pages 13-14. -92- Exhibit B-9 Variance with Final Budget Final Positive Budget Actual (Negative) $490,340 $490,344 $ 4 29,955 29,957 2 520,295 520,301 6 564,265 564,266 (1) (43,970) (43,965) 5 78,360 78,356 (4) (34,395) (34,391) 4 43,965 43,965 - $ (5) - $ 5 CITY OF PADUCAH, KENTUCKY HUD REVOLVING GRANT FUND DETAIL STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2004 Revenues: Interest Other Total revenues Expenditures: Planning and development Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses): Operating transfers in Operating transfers out Total other financing sources (uses) Net change in fund balance Fund balance, July 1, 2003 FUND BALANCE, JUNE 30, 2004 See auditors report on pages 13-14. -93- Exhibit B-10 353,667 $ 212,843 Variance with Final Budget Final Positive Budget Actual (Negative) $ 3,045 $ 3,047 $ 2 44,800 44,798 (2) 47,845 47,845 - 312,900 312,897 3 (265,055) (265,052) 3 396,185 397,509 1,324 (273,285) (273,281) 4 122,900 124,228 1,328 $(142,155) (140,824) $1,331 353,667 $ 212,843 CITY OF PADUCAH, KENTUCKY PADUCAH HOUSING AUTHORITY POLICE GRANT FUND DETAIL STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2004 Revenues: Grants Expenditures: Public safety Excess (deficiency) of revenues over expenditures Fund balance, July 1, 2003 FUND BALANCE, JUNE 30, 2004 See auditors report on pages 13-14. -94- Final Budget Actual $29,430 $29,4T3- 29,510 29,433 $ (80) - Exhibit B-11 Variance with Final Budget Positive (Negative) $3 77 $80 Exhibit B-12 CITY OF PADUCAH, KENTUCKY DEBT SERVICE FUND DETAIL STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2004 Variance with Final Budget -- Final Positive Revenues: Budget Actual (Negative) Intergovernmental $ 575,510 $ 575,508 $ (2) Expenditures: Debt service: Principal requirement 428,615 428,613 2 Interest and fiscal requirement 471,655 471,625 30 Total expenditures 900,270 900,238 32 Excess (deficiency) of revenues over expenditures (324,760) (324,730) 30 Other Financing Sources (Uses): Operating transfers in 308,920 308,922 2 Net change in fund balance $ (15,840) (15,808) $ 32 Fund balance, July 1, 2003 46,051 FUND BALANCE, JUNE 30, 2004 $ 30,243 See auditors report on pages 13-14. -95- CITY OF PADUCAH, KENTUCKY SUPPLEMENTARY INFORMATION NONMAJOR PROPRIETARY FUNDS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2004 COMBINING FINANCIAL STATEMENTS NONMAJOR PROPRIETARY FUNDS Wastewater/Stormwater Fund — to account for the remaining assets and liabilities of wastewater/stormwater operations not yet transferred to the Joint Sewer Agency. Civic Center Fund — to account for the operation of the Civic Center. TISA Fund — to account for revenues and expenses associated with the operation of the Paducah - McCracken County telecommunications and information systems. Exhibit C-1 See auditors report on pages 13-14. -96- CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF NET ASSETS NONMAJOR PROPRIETARY FUNDS JUNE 30, 2004 ASSETS Wastewater/ Civic Total Nonmajor Stormwater Center TISA Enterprise Current Assets: Fund Fund Fund Funds Cash and cash equivalents $ - $ 22,551 $ 16,337 $ 38,888 Receivables, net - - 27,006 27,006 Prepaid expense - - 6,994 6,994 Total current assets - 22,551 50,337 72,888 Noncurrent Assets: Net depreciable capital assets - 161,285 176,902 338,187 Total assets - 183,836 227,239 411,075 LIABILITIES Current Liabilities: Voucher and accounts payable - 1,434 925 2,359 Total liabilities - 1,434 925 2,359 NET ASSETS Invested in capital assets, net of related debt - 161,285 176,902 338,187 Unrestricted - 21,117 49,412 70,529 TOTAL NET ASSETS $ - $182,402 $226,314 $408,716 See auditors report on pages 13-14. -96- CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS NONMAJOR PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2004 Operating Revenues: Charges for services Operating Expenses: Cost of sales and service Depreciation and amortization Total operating expenses Operating income (loss) Non -Operating Revenues (Expenses): Interest and investment income Income (loss) before contributions and operating transfers Contributions and Operating Transfers: Capital contributions Transfers in Transfers out Total contributions and operating transfers Change in net assets Net assets, July 1, 2003 NET ASSETS, JUNE 30, 2004 See auditors report on pages 13-14. Wastewater/ Civic Stormwater Center TISA Fund Fund Fund $222,076 $ 36,455 $100,778 222,076 25,008 115,009 8,173 69,157 33,181 184,166 3,274 (83,388) 209 - 222,076 3,483 (83,388) - 24,990 - 72,246 (222,076) - - (222,076) - 97,236 3,483 13,848 178,919 212,466 $ - $182,402 $226,314 -97- Exhibit C-2 Total Nonmajor Enterprise Funds $359,309 140,017 77,330 217,347 141,962 209 142,171 24,990 72,246 (222,076) (124,840) 17,331 391,385 $408,716 CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF CASH FLOWS NONMAJOR PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2004 Cash Flows from Noncapital Financing Activities: Transfers (to) from other funds (222,076) Cash Flows from Capital and Related Financing Activities: Capital contributions - Acquisition and construction of capital assets - Net cash used by capital and related financing activities - Cash Flows from Investing Activities: Interest on cash and investments - Net increase (decrease) in cash and cash Exhibit C-3 Total Nonmajor Enterprise Funds $332,304 (360,839) (28,535) - 72,246 (149,830) - 24,990 24,990 (4,512) (59,594) (64,106) (4,512) (34,604) (39,116) 209 - 209 equivalents Wastewater/ Civic (31,015) (217,272) Stormwater Center TISA Cash Flows from Operating Activities: Fund Fund Fund Cash received from customers $222,076 $ 36,455 $ 73,773 Other receipts (payments) (191,079) (27,330) (142,430) Net cash provided (used) by operating activities 30,997 9,125 (68,657) Cash Flows from Noncapital Financing Activities: Transfers (to) from other funds (222,076) Cash Flows from Capital and Related Financing Activities: Capital contributions - Acquisition and construction of capital assets - Net cash used by capital and related financing activities - Cash Flows from Investing Activities: Interest on cash and investments - Net increase (decrease) in cash and cash Exhibit C-3 Total Nonmajor Enterprise Funds $332,304 (360,839) (28,535) - 72,246 (149,830) - 24,990 24,990 (4,512) (59,594) (64,106) (4,512) (34,604) (39,116) 209 - 209 equivalents (191,079) 4,822 (31,015) (217,272) Cash and cash equivalents, July 1, 2003 191,079 17,729 47,352 256,160 --- CASH AND CASH EQUIVALENTS, JUNE 30, 2004 $ - $ 22,551 $ 16,337 $ 38,888 Reconciliation of Operating Income (Loss) to Net Cash Provided by Operating Activities: Operating income (loss) $222,076 $ 3,274 $(83,388) $141,962 Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation and amortization - 8,173 69,157 77,330 Change in assets and liabilities: Receivables - - (27,006) (27,006) Prepaid expense - - (6,994) (6,994) Accounts payable and accrued expenses (191,079) (2,322) (20,426) (213,827) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ 30,997 $ 9,125 $ (68,657) $ (28,535) See auditors report on pages 13-14. CITY OF PADUCAH, KENTUCKY SUPPLEMENTARY INFORMATION INTERNAL SERVICE FUNDS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2004 INTERNAL SERVICE FUNDS Fleet Maintenance — to account for costs of operating a maintenance facility for automotive equipment used by other City departments. Fleet Lease Trust — to account for the financing of vehicle acquisitions provided by one department or agency to other departments or agencies of the government and to other governmental units, on a cost reimbursement basis. Insurance Fund — to account for the costs of obtaining insurance for other City departments. Health Insurance Fund — to account for the costs associated with the City's health insurance activities. The intent of the City of Paducah is that the cost of providing insurance coverages on a continuing basis be financed primarily through user charges. Exhibit D-1 CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF NET ASSETS INTERNAL SERVICE FUNDS JUNE 30, 2004 ASSETS Health Fleet Fleet Lease Insurance Insurance Combined Current Assets: Maintenance Trust Fund Fund Total Cash and cash equivalents $ 3,955 $ 373,284 $ 1 $493,663 $ 870,903 Investments - 1,300,000 - - 1,300,000 Receivables, net - 6,610 - 139,623 146,233 Prepaid expense - - 1,015,142 - 1,015,142 Inventories 98,115 - - - 98,115 Total current assets 102,070 1,679,894 1,015,143 633,286 3,430,393 Noncurrent Assets: Net depreciable capital assets 33,760 1,614,609 - - 1,648,369 Total assets 135,830 3,294,503 1,015,143 633,286 5,078,762 LIABILITIES Current Liabilities: Voucher and accounts payable 2,584 - - 361,999 364,583 Accrued payroll and payroll taxes 9,101 - - - 9,101 Accrued compensated absences 24,374 - - - 24,374 Due to other funds - - 998,341 - 998,341 Total current liabilities 36,059 - 998,341 361,999 1,396,399 Noncurrent Liabilities: Accrued compensated absences 37,602 - - - 37,602 Total liabilities 73,661 - 998,341 361,999 1,434,001 NET ASSETS Invested in capital assets, net of related debt 33,760 1,614,609 - - 1,648,369 Unrestricted 28,409 1,679,894 16,802 271,287 1,996,392 TOTAL NET ASSETS $ 62,169 $3,294,503 $ 16,802 $271,287 $3,644,761 See auditors report on pages 13-14. 01 CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2004 Operating Revenues: Charges for services - internal Charges for services - external Total operating revenues Operating Expenses: Health Fleet Fleet Lease Insurance Insurance Maintenance Trust Fund Fund Exhibit D-2 Combined $290,164 $ 458,333 $ 933,046 $2,848,372 $4,529,915 - - - 501,809 501,809 290,164 458,333 933,046 3,350,181 5,031,724 Vehicle maintenance 434,858 - - - 434,858 - Administrative - 4,854 - 876 5,730 Insurance - - 1,053,804 2,518,509 3,572,313 Leave expense 5,906 - - - 5,906 Depreciation 11,408 398,660 - - 410,068 Total operating expenses 452,172 403,514 1,053,804 2,519,385 4,428,875 Operating income (loss) (162,008) 54,819 (120,758) 830,796 602,849 Nonoperating Revenues and (Expenses): Interest and investment income - 18,129 - - 18,129 Gain (loss) on disposal of property and equipment - (1,972) - - (1,972) Total nonoperating revenues (expenses) - 16,157 - - 16,157 Income (loss) before operating transfers (162,008) 70,976 (120,758) 830,796 619,006 Contributions and Operating Transfers: Transfers in 100,000 496,431 - - 596,431 Change in net assets (62,008) 567,407 (120,758) 830,796 1,215,437 Net assets, July 1, 2003 124,177 2,727,096 137,560 (559,509) 2,429,324 NET ASSETS, JUNE 30, 2004 $ 62,169 $3,294,503 $ 16,802 $ 271,287 $3,644,761 See auditors report on pages 13-14. -100- Exhibit D-3 CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2004 Health Fleet Fleet Lease Insurance Insurance Combined Cash Flows from Operating Activities: Maintenance Trust Fund Fund Total Receipts from other funds for services $ 290,164 $ 458,333 $ 933,046 $3,463,178 $5,144,721 Payments to suppliers (208,108) - - - (208,108) Payments to employees (206,830) - - - (206,830) Claims paid - - - (2,990,822) (2,990,822) Other receipts (payments) - (4,854) (1,070,605) (876) (1,076,335) Net cash provided (used) by operating activities (124,774) 453,479 (137,559) 471,480 662,626 Cash Flows from Noncapital Financing Activities: Transfers from other funds 100,000 496,431 - - 596,431 Cash Flows from Capital and Related Financing Activities: Purchase of capital assets (2,995) (578,530) - - (581,525) Insurance proceeds received - 12,836 - - 12,836 Net cash used by capital and related financing (2,995) (565,694) - - (568,689) Cash Flows from Investing Activities: Proceeds from sales and maturities of investments - 743,333 - - 743,333 Interest and dividends - 15,491 - - 15,491 Purchase of investments - (1,304,232) - - (1,304,232) Net cash used by investing activities - (545,408) - - (545,408) Net increase (decrease) in cash and cash equivalents (27,769) (161,192) (137,559) 471,480 144,960 Cash and cash equivalents, July 1, 2003 31,724 534,476 137,560 22,183 725,943 - CASH AND CASH EQUIVALENTS, JUNE 30, 2004 $ 3,955 $ 373,284 $ 1 $ 493,663 $ 870,903 Reconciliation of Operating Income (Loss) to Net Cash Provided by Operating Activities: Operating income (loss) $(162,008) $ 54,819 $ (120,758) $ 830,796 $ 602,849 Adjustments to reconcile operating _. income (loss) to net cash provided (used) by operating activities: Depreciation and amortization 11,408 398,660 - - 410,068 Change in assets and liabilities: Receivables - - - 112,996 112,996 Prepaid expense - - (1,015,142) - (1,015,142) Inventories 34,758 - - - 34,758 Accounts payable and accrued expenses (8,932) - 998,341 (472,312) 517,097 NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $(124,774) $ 453,479 $ (137,559) $ 471,480 $ 662,626 See auditors report on pages 13-14. -101- CITY OF PADUCAH, KENTUCKY SUPPLEMENTARY INFORMATION FIDUCIARY FUNDS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 309 2004 FIDUCIARY FUNDS Pension Trust Funds Police and Firefighters' Retirement Fund and Appointive Employees' Pension Fund — to account for the accumulation of resources to be used for retirement payments at appropriate amounts and times in the future. Resources are contributed by employees and by the City at amounts determined by Kentucky Statutes and/or City Commission decisions. Exhibit E-1 CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS - PENSION TRUST FUNDS JUNE 30, 2004 Police and Appointive ASSETS Firefighters' Employees' Retirement Fund Pension Fund Total Cash and cash equivalents Receivables: Interest Other Investments at fair value Total assets LIABILITIES Voucher and accounts payable NET ASSETS Held in trust for pension benefits and other purposes See auditors report on pages 13-14. -102- $ 330,591 $ 22,989 $ 353,580 63,345 806 64,151 1,425 - 1,425 8,957,586 300,000 9,257,586 9,352,947 323,795 9,676,742 648 175 823 $9,352,299 $323,620 $9,675,919 Exhibit E-2 CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF CHANGES IN NET ASSETS FIDUCIARY FUNDS - PENSION TRUST FUNDS FOR THE YEAR ENDED JUNE 30, 2004 See auditors report on pages 13-14. -103- Police and Appointive Firefighters' Employees' Additions: Retirement Fund Pension Fund Totals Contributions: Employer $ 195,962 $ - $ 195,962 Plan members 27,355 - 27,355 Total contributions 223,317 - 223,317 Investment earnings: Net increase in fair value of investments 607,613 - 607,613 Interest and dividends 265,306 5,004 270,310 Net investment earnings 872,919 5,004 877,923 Interfund transfers 615,439 75,553 690,992 Total additions 1,711,675 80,557 1,792,232 Deductions: Benefits 1,773,398 76,576 1,849,974 Administrative expenses 46,698 7,735 54,433 Total deductions 1,820,096 84,311 1,904,407 Change in net assets (108,421) (3,754) (112,175) Net assets, July 1, 2003 9,460,720 327,374 9,788,094 NET ASSETS, JUNE 30, 2004 $9,352,299 $323,620 $9,675,919 See auditors report on pages 13-14. -103- FIDUCIARY FUNDS Private -purpose Trust Funds Oak Grove Cemetery Trust and Maintenance and Rehab Trust — to account for assets held by the City in the capacity of trustee for specified purposes. CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF NET ASSETS FIDUCIARY FUNDS - PRIVATE -PURPOSE TRUST FUNDS JUNE 30, 2004 ASSETS r Cash and cash equivalents Investments at fair value Held in trust for other purposes See auditors report on pages 13-14. -104- Exhibit E-3 Oak Grove Maintenance Cemetery and Rehab Trust Trust Total $ 1,923 $ 902 $ 2,825 77,651 - 77,651 $79,574 $ 902 $80,476 CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF CHANGES IN NET ASSETS FIDUCIARY FUNDS - PRIVATE -PURPOSE TRUST FUNDS FOR THE YEAR ENDED JUNE 30, 2004 Additions: Contributions: Intergovernmental revenues Private donations Total contributions Investment earnings: Net decrease in fair value of investments Interest and dividends Net investment earnings Interfund transfers Total additions Deductions: Capital outlay Administrative expenses Total deductions Change in net assets Net assets, July 1, 2003 NET ASSETS, JUNE 30, 2004 See auditors report on pages 13-14. -105- Oak Grove Maintenance Cemetery and Rehab Trust Trust $ 2,235 $ 7,000 - 675,000 2,235 682,000 (217) - 2,912 - 2,695 - 1 - 4,931 682,000 Exhibit E-4 Totals $ 9,235 675,000 684,235 (217) 2,912 2,695 1 686,931 - 679,493 679,493 852 1,605 2,457 852 681,098 681,950 4,079 902 4,981 75,495 - 75,495 $79,574 $ 902 $ 80,476 FIDUCIARY FUNDS Agency Fund Payroll Agency Fund — to account for disbursements relative to the City payroll. The various City departments transfer amounts to this fund to cover routine payroll and the related benefits and taxes. All payroll disbursements are made from this fund. Exhibit E-5 CITY OF PADUCAH, KENTUCKY AGENCY FUND STATEMENT OF CHANGES IN ASSETS AND LIABILITIES FOR THE YEAR ENDED JUNE 30, 2004 Balance Balance Payroll Fund: July 1, 2003 Additions Deductions June 30, 2004 Assets: Cash and cash equivalents $251,099 $10,257,456 $10,201,995 $306,560 Liabilities: Payroll taxes and withholdings payable $251,099 $10,257,456 $10,201,995 $306,560 See auditors report on pages 13-14. -106- CITY OF PADUCAH, KENTUCKY STATISTICAL SECTION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 309 2004 L 00 M r- C� \o Q*, N r -M O_ O O v CN O� tn 01 0*1 ON 00 CN O O O O 6 000 O Or- +�+ N �t N 64 b N [— 00 I'D y� O 00 00 N ct -� Vn IlO Ile oo a a \p V1 00 to O l— I'D M ..V. d� CIN N O -� [ M v N_ C� O� O M M to O N 01, Q a r- N M N 0�, Q M "I LnLr) �O Gos 00 M CN — �, 00 O � r- O Z ti: 00 N r- N � � kn = Vn M M �O O M V1 O N t w o0 0. o C; o C C 00 00 00 -+ -- Q A 01 v) `O 00 C\ M M d1 M 00 rad Q � tf) Lr) k � N � M O\ 00 v G N N M M 64 00 O Ol, �D 00 M v') It v'i M �D O M N %O MC14 rte+ 00 C� r- M 00 `O O 00 O 00 - C1 O N N Vl 69 L kr) C� C� r- C� 00 CN D\ CN O O O O O O v CN O� tn 01 0*1 ON 00 CN O O O O -107- N O z W U O W � wz u Z U FSI aaH O � � Eza UW C y M V) kr) \O �10 o0 01 N M O - Q1 0\ O 00 0\ M N y C C 00 \C O N M O Ni- O FSI w 00 r- w r- N - to kn kn L O w l- \O M l- 00 t- 00 OM Q\ knN O r- all � 00 V1 'ct m r- M i4 C\ kn O N O C1 \C � N Vi C� \C V> - 00 U v1 M O N O [� 6R V) l n V-) llO [ O r N V1 Lr) Vl O l-- 00 O 00 00 to C1 N V') 00 O 01 O M 00 6 O Ni- Itt M It V) ON V') It V'I O M M 00 16 IlC V'� M C OM _M C MO O 00 W N .M. M1 � 00 01 to D1 H V1 — 00 \C V) N \O 00 N V1 O N M M � to 00 N N N N N N N N N N 64 U. CE � N N � V) t- 00 N 0000 IC N M 0� y D1 0\ C1 O \.c tn 0\ C\ 69 01 01 01 O O O O O C y M V) kr) \O �10 o0 01 N M O - Q1 0\ O 00 0\ M N y C C 00 \C O N M O Ni- O FSI w m r- N r- N - to N "o O O w l- \O M l- 00 t- 00 N Q\ N 1 V1 M 00 — m r- M i4 C\ kn O N O C1 \C � N Vi C� \C V> - 00 U v1 M O N O [� �n V) l n V-) llO [ O O N V1 Lr) kn kn O IC _M C w O O 00 W N c NV 00 01 to D1 H 14 I M m Izi- T to tr) -108- III 00 M 00 00 O 0000 O �C �10 N m i4 C\ kn O N O C1 \C � N Vi C� \C V> - 00 t- V) M O N O [� N n l n rl llO [ O O N V1 Lr) kn O IC _M w O 00 CNr H N M -- 00 l- M O N M M � to 00 N N N N N N N N N N 64 U. V) t- 00 a1 O N M y D1 0\ C1 O O O C\ O, 01 01 01 O O O O O .� - C� d' V) I I \O 1 00 01 O N M U C1 C1 O� C\ O C1 O O O O C1 Cl\ 0l, 01 Cl) D\ O O O O -108- III rA by O C C� O 00 kn (n M N Cl� v1 M 00 O 110 CSS �.• i! �:+ Itil Ln h O Cl� M N O M 00 00 Ol, C�.- M O Ln o Vl "D 00 00 M `O O N M O 00 O G N C\ Lr 00 Ln \O Vl kn V) M V �' kn a "V H 00 N kn 00 M 00 O h 00 M cp .- kr cp 4r �. I� O� d00 00 O N ON Ga O� 110 00 C. 011 � C� oo O N D\ v i Vi �' N M •--' — M 00 h E„ N N N N N •--� •--� ^--' ^' •--' b9 kr) O O Ln - tr) CN Vl M Ln CN N all 00 00 O V � C h V) O� •--� O ^ h O� O M y� 01 M N 00 .--� M •--� N V) N kn N 00 N M N W L C� h 00 \O 00 00 kn N — kn � h O\ C� 00 a, 00 cn 'n N O 69 ~ C CN N Gh ol Ln v C y VMi oho 000 000 N_ CN h N M 00 V) ^' O00 0o0 O O an an 00 O 00 F+•1 a �„i d• � � M M M t7 � � 6�4 �O \.D M Lrl �/'� CN .•� %C h d' O h N �O [� � N 00 V'1 M O V) 00 N l0 N Ln FI M �O 00 \lO 00 Ln V) V) kn 69 L C� N 00 O� O ^' N M V' y CN C1 C� ON O O O O O p, O OLr) O O v 00 o 0 0 0 � rn CN N N N N � .� •.-� .-� r. .-� •--� —109— -110- TABLE 4 CITY OF PADUCAH, KENTUCKY SECURED TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS (1) (1) Percent of Total Total Levy Fiscal Year Levy Collections Collected 1994-1995 $4,998,288 $4,981,828 99.6% 1995-1996 5,040,252 5,022,419 99.6% 1996-1997 4,361,298 4,350,475 97.8% 1997-1998 4,417,910 4,373,272 99.0% 1998-1999 4,614,749 4,602,800 99.7% 1999-2000 4,428,970 4,384,681 99.0% 2000-2001 4,549,413 4,406,600 96.9% 2001-2002 4,679,795 4,532,885 96.9% 2002-2003 4,653,264 4,631,782 99.5% 2003-2004 4,890,723 4,866,871 99.5% (1) Includes current year real and personal property tax, franchise, auto and bank shares. -110- F a w a a ISI �F z�� >d W U d dApLTo E�AVZ adEW" Oma 00 U0.4 H W A W W d ci -- 00 all lrCD ON d' 00 M N O N %O M CC \p M M �O M d' M ON vl O\ o0 C L 00 N O N N t-- M M It Cl) 'IT N �c IrL 00 lr� 00 O, 'n 69 N L O O V rn OO dam ' "It u00M N M i(• if• iF * t iF it it• M Cpn 0 N CC L 69 h _ o o l 69 oho 00 00 ON Q\ O C O C M M l M M ( O� N N � 00 00 ti' 00 00 00 Q\ O IC E 000 N M Q .--i M Vl 'IT kf) to 00O1 W) kr) 00 W)70 O O OC, W rn 0 O a, O, all N N ON W vi O R O kf) N L y a > In k!1 Vl M M D, M CN 1616 Q1 01 ON W h O, 'IT o^ C Cr � M h �O M d kn � O N d• � 00 �!1 'IT O� N N 00 O h M M h W a> N M N M �t 69 ci -111- O -- h lc� lrCD ON d' 00 M N O N %O M CC \p M 00 h M d' M ON vl O\ o0 C L 00 N O N N t-- M M It Cl) 'IT N �c IrL 00 lr� 00 O, 'n 69 N N V rn OO dam ' "It oho N M 0000 M v1 00 M Cq M M M M Cpn N N CC L 69 h _ o o l kn oho -111- O V1 00 h M 00 ON d' ,N., M N N O, C\ 00 %O M M O 00 O1 N h h 00 h C L 00 00 01 N h M DD O O1 O N N V W) OO dam ' "It oho N M 0000 M v1 00 M M M M M M Cpn N N CC L 69 h _ o o l kn oho 00 00 ON Q\ O O O -111- O V1 00 h M 00 ON d' ,N., M N N O, C\ 00 %O M M O 00 O1 N h h 00 h C L 00 00 01 N h M DD O h rq d L ar :+ h It O ON D, 41 N O\ h M v1 00 M M M M M M Cpn N N aM 69 h N -111- O O\ •-- h 00 M 00 '•-� M O 00 O1 N h h 00 h h N �k N d^ ID00 O M O ONO o0 Cpn N N aM h N o o l kn oho 00 00 ON Q\ O O O 6 CC kn 00 a\ O N M � C, C\ � O O O O O rn 0 0 0 u OC, rn rn 0 O a, O, all N N ON W N -111- O -112- = \D O tn r- 0000 [� 00 O O O O O O C p., O y rC 10 N O 00 U 00 00 iO Q1 (71 D\ y w R C M M M M M M N N N N ami L O O O O O O O O O O S � a to U 0 b L RS O_ O Q M M M M M N N N N N w 0 0 0 0 0 0 0 0 0 0 R v1 O r- 00 O M (� +y+ � a A O w w CA � O L O , H a C 0 C u w LL L O O O O O O u_ � u D CC � � � M M •-• O � � � � w _ ^o 0ON OM1 OM1 C L � � M M M M M M � a CQ L u r►. v C M M N N O O O O O F+H W i' 1p 00 01 01 01 01 01 O O O O O N O O O � � � V 0C1 O1 O1 O, 01 O1 O O O O 01 O1 Q1 01 01 O, O O L=. N N -112- 6 to C*l r. 110 CN r- � .-1 oo CN .-11 Ol, � .-i O O N .-. O N N O N M "t O O N N V �I C a 00 i � ONCN oo � D\ ON O O N i — O N i i N M O O N N O U A z PC W abs�� C14 oo O r. aZA�> r, M N y Q zAoA p Ln O MO o0 o co ao 0 00 00 y O 00 N O O kn to 00 v1 , h M M O i0i O Ct N O p A O 0t0 00 O N kn Cll Vii 0�1 00 M y 00 1p O M `O 00 Ol� N N N M Ln kn v? Eoq 0 0 0 0 0 0 .-. N Ln N ° N t4) N Ln N N M M M M O CL %-o �10 �10 O N N N N N N N N N N a 6 to C*l r. 110 CN r- � .-1 oo CN .-11 Ol, � .-i O O N .-. O N N O N M "t O O N N V �I � � i � ONCN oo � D\ ON O O N i — O N i i N M O O N N -113- TABLE 8 CITY OF PADUCAH, KENTUCKY RATIO OF ANNUAL DEBT SERVICE EXPENDITURES FOR GENERAL BONDED DEBT TO TOTAL GENERAL EXPENDITURES LAST TEN FISCAL YEARS (1) Includes the General Fund and Municipal Aid Fund * Includes in -substance defeasance of Kentucky League of Cities - Pooled Leasing debt. -114- Ratio of (1) Debt Service Total To Total Total General Governmental Debt Government Fund Type Fiscal Year Principal Interest Service Expenditures Expenditures 1994-1995 $ 913,564 $405,000 $1,318,564 $16,744,678 7.9% 1995-1996 438,141 355,361 793,502 17,737,044 4.5% 1996-1997 4,119,275 * 431,669 4,550,944 19,823,351 22.9% 1997-1998 150,709 46,829 197,538 18,787,240 1.1% 1998-1999 170,615 35,891 206,506 21,306,659 1.0% 1999-2000 134,295 30,536 164,831 19,817,326 0.8% 2000-2001 140,636 25,752 166,388 20,677,530 0.8% 2001-2002 362,275 413,364 775,639 22,904,317 3.4% 2002-2003 379,229 428,578 807,807 22,836,738 3.5% 2003-2004 428,613 471,625 900,238 25,925,933 3.5% (1) Includes the General Fund and Municipal Aid Fund * Includes in -substance defeasance of Kentucky League of Cities - Pooled Leasing debt. -114- TABLE 9 CITY OF PADUCAH, KENTUCKY COMPUTATION OF LEGAL DEBT MARGIN YEAR ENDED NNE 30, 2004 Net assessed value Add exemption Total assessed value Debt limit - 10% of total assessed value (1) Debt outstanding: General obligation bonds outstanding Notes payable Less debt not subject to limit Gross bonded debt Less amount available in debt service funds Net bonded indebtedness subject to limit Legal Debt Margin (1) Section 158 of the Commonwealth of Kentucky states: $13,620,000 3,428,855 17,048,855 $1,598,892,475 61,656,208 $1,660,548,683 $ 166,054,868 17,018,612 $ 149,036,256 "Cities shall not be authorized or permitted to incur indebtedness to an amount, including existing indebtedness, in the aggregate exceeding the following named maximum percentages on the value of the taxable property therein, to be estimated by the assessment previous to the incurring of the indebtedness: Cities of the first and second classes, and of the third class having a population exceeding fifteen hundred, ten per centum." -115- —116— I-Tm O\ tT N t— 00 00 r- Th r- 00 00 H O W) -� -RI-00 V'1 CE p„ C * '�' 00 cp 00 tz \1 M cl cr �, 00 69 00 O� t- O W) O tr) M 00 00 N M O, vl W) !� Q1 00 M W N = R O O 00 tr) M 00 N 00 M 00 Q, O 00 a, a U N 00 O 00 O 00 O � 'IT00 � O O y N O M n On O - r- N CO O D ^ OM •L cD V > O O N M O IC O 00 \O rL+ MOM 69 M M N M m M N 8 O C O U U O Z CI N N N 00 OM N O \O N ^ N n \O \O CQ O \O O, �tO M \C IT O, O, p kn gyp \ 00 vl \O N O 7, r r- 00 000 0 O O O O ^ N 69 00 \O IT kn 00 t— 00 M M lc -- M M Cl� O,00 N r+ a' � � � 00 O � V N 0000 kr)y oo O� 00 \O N M O n 'IT V M V v) 00 cp 06 �p W V'1 v') v') Wn W') \O \O \O L V f3, � N � W) N O O O ^ 00 L O M M O 00 t \O V O, o M O O, O tl- 00 'T �n O M 01 O O� [- C� �V V O cl :w M �t N ai M 69 M M M ' d' V) kn O� M M \p 0000 r O \O cl o0 l� 00 N i' V O, 00 M t-- O_ l� O tel' r � � � oo0 N oho O Wn 00 t` t` N 00 O \O 00 V \D N vl U rn M "tr It kn V1 to kn \o L CQ V O\ Q1 O\ O\ O1 O O O O O i i i i i N C'.4 N i N i N i eC 'ch �n \p r oo i D, O N M u (7NO, rn rn rn CN O o o O ON all rn O, O, O, o O O o —116— -11%- oA �, 0 * 3 0 0000 0� U � w L O O o o 3 cc O N v7 v� O kr F C tu N 69 N N N On 6l � L cd 3 0� Y a �- Clcl, 0 3F * * Q "C N M 3z s_ a� � w O 0 A 00 r- � 1�0 M- Ln O\ 0 00 CCS r.+ 00 l - v') kn N U ti z A O U N O 00 r- \o V) O r�A \O •-- to v) In U N QO 00 [� M ^" 9F iE iF iF iE p aU+ y O n 0000 O w o 'O O N C •> s 00 U c y w O N 0000 r-�\ vi N CC On M r- 000 � y �O ll� M M L = a M Mm M oq >, O V U 75 O O U En C ' m C U � O L O O Q V)� O� CN r-00 O� ON O� O� O O �-+ O N O M O � O L � n y C 4. m O� O1 C\ O1 O� O O O O O O v 4V1 O� a\ \,O a\ [� D\ 00 a\ O, O, O O OC) N O CIN � Ql, O� '-+ O� •--� Ol, •--� O N O N O N O N � � •-- .-. N -11%- TABLE 12 CITY OF PADUCAH, KENTUCKY DEMOGRAPHIC STATISTICS LAST TEN FISCAL YEARS Sources: (1) Bureau of the Census Count - 1990 and 2000. (2) Board of Education; represents elementary and secondary public schools. (3) Kentucky Cabinet for Human Resources, Department for Employment Services. -118- Unemployment g 3.9% 4.4% 5.5% 4.3% 3.2% 3.8% 4.2% 5.2% 6.0% 4.0% (1) (1) (1) (2) Per Capita Median School Fiscal Year Population Income Age Enrollment 1994-1995 27,256 11,918 36.6 3,389 1995-1996 27,256 11,918 36.6 3,320 1996-1997 27,256 11,918 36.6 3,312 1997-1998 27,256 11,918 36.6 3,244 1998-1999 27,256 11,918 36.6 3,195 1999-2000 27,256 11,918 36.6 3,289 2000-2001 26,307 11,918 39.9 3,037 2001-2002 26,307 18,417 39.9 2,909 2002-2003 26,307 18,417 39.9 2,887 2003-2004 26,307 18,417 39.9 2,977 Sources: (1) Bureau of the Census Count - 1990 and 2000. (2) Board of Education; represents elementary and secondary public schools. (3) Kentucky Cabinet for Human Resources, Department for Employment Services. -118- Unemployment g 3.9% 4.4% 5.5% 4.3% 3.2% 3.8% 4.2% 5.2% 6.0% 4.0% TABLE 13 CITY OF PADUCAH, KENTUCKY MISCELLANEOUS STATISTICAL DATA JUNE 30, 2004 Miscellaneous: Date of incorporation 1830 Form of government City Manager, Mayor High school and Commissioners Area - square miles 19.92 Miles of streets/paved 213 Miles of sidewalks 45 Population 26,307 Registered voters 28037 Votes cast last general election 9879 Number of hospitals 2 Schools: Number of public schools: High school 1 Middle school I Elementary 4 Head Start I Alternative learning center 1 Adult education I Students 2977 Teachers 225 Administrative personnel 34 Support personnel 241 Parks and Recreation: Number of parks 14 Acres of parks 280 Public golf courses 2 Public swimming pools 1 Public tennis courts 6 -119- TABLE 13 CITY OF PADUCAH, KENTUCKY MISCELLANEOUS STATISTICAL DATA JUNE 30, 2004 Police and Fire Protection: Number of employees: Policemen 73 Firefighters 69 Number of fire stations 5 Utilities: Water utility: Number of users 22419 Annual consumption 2,467,110,100 Gallons Distribution lines 476 Miles Employees 46 Sewer utility: Plant capacity main plant 9,000,000 Gallons/Day Miles of collection system: Sanitary sewers 300 Miles Combination sewers 56 Miles Storm sewers 38 Miles Employees 35 Electric utility: Number of street lights 4795 Number of city maintained traffic light intersections 10 Employees 62 -120- TABLE 14 CITY OF PADUCAH, KENTUCKY PRINCIPAL TAXPAYERS JANUARY 1, 2004 (1) Source - Property Valuation Administration; Assessed value as of January 1, 2004. -121- (1) Percentage of Assessed Total Assessed Taxpayer Type of Business Valuation Valuation Kentucky Oaks Mall Mall $ 41,626,900 3.10% Wal-Mart Retailer 34,007,318 2.53% Lourdes Medical Pavilion Healthcare 19,071,118 1.42% Alliant Foodservice, Inc. Food wholesaler 15,935,683 1.19% Computer Services, Inc. Bank Data Processor 14,661,833 1.09% Amerisource Drug Wholesaler 14,515,613 1.08% Ducmall LLC Mall 14,225,000 1.06% Sams East Inc Retailer 13,950,726 1.04% Lowe's Retailer 13,790,170 1.03% Paducah Medical Investors Healthcare 13,440,090 1.00% TOTALS $195,224,451 14.54% (1) Source - Property Valuation Administration; Assessed value as of January 1, 2004. -121- TABLE 15 CITY OF PADUCAH, KENTUCKY COMPUTATION OF DIRECT AND OVERLAPPING DEBT JUNE 30, 2004 (1) Applicable percentage is determined by ratio of assessed valuation of property subject to taxation in overlapping unit to valuation of property subject to taxation in reporting unit. -122- (1) _ Amount Percentage Available Applicable Bonds/Loans Debt Service Net Debt to City Outstanding Funds Outstanding of Paducah City of Paducah $17,048,855 $30,243 $17,018,612 100.0% Paducah Independent School District 7,595,000 - 7,595,000 100.0% McCracken County 12,982,500 - 12,982,500 47.1% McCracken County Board of Education 28,562,802 - 28,562,802 24.4% Overlapping Debt 49,140,302 - 49,140,302 TOTALS $66,189,157 $30,243 $66,158,914 (1) Applicable percentage is determined by ratio of assessed valuation of property subject to taxation in overlapping unit to valuation of property subject to taxation in reporting unit. -122- TABLE 16 CITY OF PADUCAH, KENTUCKY POLICE AND FIREFIGHTERS' RETIREMENT FUND REVENUE BY SOURCE LAST TEN FISCAL YEARS (1) Includes interfund transfers. (2) Includes interest and dividend income and net gain (loss) on sale of investments, but does not include net appreciation (depreciation) in fair value of investments. -123- (1) (2) Employee Employer Investment Fiscal Year Contributions Contributions Income Other Total 1994-1995 $34,737 $323,844 $ 784,629 $ 2,702 $1,145,912 1995-1996 33,253 340,773 884,085 4,052 1,262,163 1996-1997 33,888 744,484 858,541 1,203 1,638,116 1997-1998 36,110 660,651 989,175 8,967 1,694,903 1998-1999 31,371 593,776 716,366 2,998 1,344,511 1999-2000 27,640 649,274 1,224,591 2,000 1,903,505 2000-2001 28,482 865,026 1,033,814 - 1,927,322 2001-2002 29,224 806,632 487,024 - 1,322,880 2002-2003 29,981 645,773 (51,867) - 623,887 2003-2004 27,355 811,401 1,390,740 - 2,229,496 (1) Includes interfund transfers. (2) Includes interest and dividend income and net gain (loss) on sale of investments, but does not include net appreciation (depreciation) in fair value of investments. -123- TABLE 17 CITY OF PADUCAH, KENTUCKY POLICE AND FIREFIGHTERS' RETIREMENT FUND EXPENSES BY TYPE LAST TEN FISCAL YEARS -124- Benefit Investment Fiscal Year Refunds Payments Services Other Total 1994-1995 $ - $1,492,528 $ 6,302 $ 5,842 $1,504,672 1995-1996 - 1,535,885 7,119 12,433 1,555,437 1996-1997 - 1,585,549 7,008 2,102 1,594,659 1997-1998 - 1,613,710 15,777 7,649 1,637,136 1998-1999 28,684 1,695,198 11,756 10,831 1,746,469 1999-2000 - 1,719,043 10,993 9,868 1,739,904 2000-2001 - 1,742,179 8,008 10,437 1,760,624 2001-2002 - 1,761,979 9,107 27,002 1,798,088 2002-2003 - 1,760,964 9,509 44,160 1,814,633 2003-2004 - 1,773,398 22,687 24,011 1,820,096 -124- tn M �t OC1 00 -125- CITY OF PADUCAH, KENTUCKY SINGLE AUDIT SECTION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2004 CITY OF PADUCAH, KENTUCKY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2004 Total Department of Housing and Urban Development Department of Justice: Direct Programs: Local Law Enforcement Block Grants Program Bulletproof Vest Partnership Program Passed -through Marshall County: Byrne Formula Grant Program Passed -through Kentucky Department of Juvenile Justice: Juvenile Accountability Incentive Block Grant Total Department of Justice Department of Agriculture: Passed -through Kentucky Department of Natural Resources - Division of Forestry: Cooperative Forestry Assistance Passed -through Kentucky Department of Education: Summer Food Service Program for Children Total Department of Agriculture Department of Homeland Security: Passed -through Division of Disaster and Emergency Services: Assistance to Firefighters Grant 2,108,791 16.592 N/A 57,034 16.607 N/A 5,681 16.579 2000 -DD -VX -0047 5,992 16.523 2002 -JB -BX -0023 (104) 6,920 75,627 02 -DG -11083121-020 10.664 03-DG-11083121-OIA 5,702 10.559 079V70999SU 29,703 35,405 97.044 EMW-2003-FG-12050 24,286 -126- (Continued) Federal Federal Grantor/Pass-Through Grantor/ CFDA Pass -Through Program Title: Number Grantor Number Expenditures Department of Housing and Urban Development: Direct Programs: Section 8 Housing Choice Vouchers 14.871 N/A $1,618,447 Passed -through Kentucky Housing Corporation: HOME Investment Partnerships 14.239 M -98 -SG -2101-05-00 Program M -99 -SG -2101-05-00 M -01 -SG -2101-36-00 M -01 -SG -2101-05-00 490,344 Total Department of Housing and Urban Development Department of Justice: Direct Programs: Local Law Enforcement Block Grants Program Bulletproof Vest Partnership Program Passed -through Marshall County: Byrne Formula Grant Program Passed -through Kentucky Department of Juvenile Justice: Juvenile Accountability Incentive Block Grant Total Department of Justice Department of Agriculture: Passed -through Kentucky Department of Natural Resources - Division of Forestry: Cooperative Forestry Assistance Passed -through Kentucky Department of Education: Summer Food Service Program for Children Total Department of Agriculture Department of Homeland Security: Passed -through Division of Disaster and Emergency Services: Assistance to Firefighters Grant 2,108,791 16.592 N/A 57,034 16.607 N/A 5,681 16.579 2000 -DD -VX -0047 5,992 16.523 2002 -JB -BX -0023 (104) 6,920 75,627 02 -DG -11083121-020 10.664 03-DG-11083121-OIA 5,702 10.559 079V70999SU 29,703 35,405 97.044 EMW-2003-FG-12050 24,286 -126- (Continued) CITY OF PADUCAH, KENTUCKY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2004 Federal Federal Grantor/Pass-Through Grantor/ CFDA Pass -Through Program Title: Number Grantor Number Expenditures Department of Homeland Security: Passed -through Kentucky Department of Military Affairs: State Domestic Preparedness Equipment M-03453577 Support Program 97.004 M-03199593 $ 47,804 Total Department of Homeland Security 72,090 - Department of Transportation: Direct Programs: - Airport Improvement Program 20.106 N/A 15,236 Recreation Trails Program 20.219 N/A 50,000 Passed -through Kentucky Transportation Cabinet: Highway Planning and Construction Project - River Heritage Museum 20.205 C-02076510 78,946 Highway Planning and Construction Project - Streetscape 20.205 C-021-30342 287,715 Passed -through Paducah Area Transit System: Federal Transit Formula Grant 20.507 MASS0335902 281,250 Total Department of Transportation 713,147 TOTAL EXPENDITURES OF FEDERAL AWARDS $3,005,060 See accompanying notes to schedule of expenditures of federal awards. -127- - CITY OF PADUCAH, KENTUCKY NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2004 Note 1 - Basis of Presentation: The accompanying schedule of expenditures of federal awards includes the federal grant activity of the City of Paducah and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non -Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the financial statements. Note 2 — Subrecipients: The City of Paducah provided federal awards to subrecipients as follows: Program Title River Heritage Center, Inc. Paducah Board of Education Federal CFDA Amount Number Provided 20.205 $ 78,946 10.559 29,703 $108,649 -128- WILLIAMS, WILLIAMS & LENTz, LLP CERTIFIED PUBLIC ACCOUNTANTS 601 JEFFERSON PADUCAH, KENTUCKY 42001 J. RICHARD WALKER JERRY G. SEVERNS MAILING ADDRESS POST OFFICE BOX 2500 ROBERT R. ROBERTSON PADUCAH, KY 42002.2500 C. SUZETTE CRONCH ANNETTE T. RYAN TELEPHONE MICHAEL F. KARNES 270-443-3643 MARK ROGER ROGER G. HARRIS Report on Compliance and on Internal Control P P .HARRS J. DAVID BAILEY, III Over Financial Reporting Based on an Audit FAX 270-444-0652 of Financial Statements Performed in Accordance G. LEON WILLIAMS, 1926-2004 with WEBSITE H. WILLIAM LENTZ Government Auditing Standards "" Lpa. m Honorable William F. Paxton, Mayor Members of the Board of Commissioners City of Paducah Paducah, Kentucky We have audited the financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Paducah, Kentucky, as of and for the year ended June 30, 2004, which collectively comprise the City of Paducah, Kentucky's basic financial statements and have issued our report thereon dated September 20, 2004. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Compliance As part of obtaining reasonable assurance about whether the City of Paducah, Kentucky's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City of Paducah, Kentucky's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that are considered to be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. However, we noted other matters involving the internal control over financial reporting that we have reported to management of the City of Paducah, Kentucky, in a separate letter dated September 20, 2004. This report is intended for the information and use of the Board of Commissioners of the City of Paducah, Kentucky, management, others within the organization, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. September 20, 2004 9PRE Honorable William F. Paxton, Mayor Members of the Board of Commissioners City of Paducah Paducah, Kentucky Compliance We have audited the compliance of the City of Paducah, Kentucky, with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each of its major federal programs for the year ended June 30, 2004. The City of Paducah, Kentucky's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs is the responsibility of the City of Paducah, Kentucky's management. Our responsibility is to express an opinion on the City of Paducah, Kentucky's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, - issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non -Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City of Paducah Kentucky's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of the City of Paducah, Kentucky's compliance with those requirements. - In our opinion, the City of Paducah, Kentucky complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended June 30, 2004. Internal Control Over Compliance The management of the City of Paducah, Kentucky, is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs. In planning and performing our audit, we considered the City of Paducah, Kentucky's internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A- 133. -130- WILLIAMS, WILLIAMS & LENTZ, LLP CERTIFIED PUBLIC ACCOUNTANTS 601 JEFFERSON PADUCAH, KENTUCKY 42001 J. RICHARD WALKER MAILING ADDRESS JERRY G. SEVERNS POST OFFICE BOX 2500 ROBERT R. ROBERTSON PADUCAH, KY 42002-2500 C. SUZETTE CRONCH ANNETTE T. RYAN TELEPHONE MICHAEL F. KARNES 270-443-3643 MARK A. THOMAS Requirements Applicable ROGER G. HARRIS Report on Compliance with FAX J. DAVID BAILEY, III to Each Major Program and Internal Control Over 270-444-0652 Compliance in Accordance with OMB Circular A-133 WEBSITE G. LEON WILLIAMS, 1926-2004 —Icpa.com H. WILLIAM LENTZ Honorable William F. Paxton, Mayor Members of the Board of Commissioners City of Paducah Paducah, Kentucky Compliance We have audited the compliance of the City of Paducah, Kentucky, with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each of its major federal programs for the year ended June 30, 2004. The City of Paducah, Kentucky's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs is the responsibility of the City of Paducah, Kentucky's management. Our responsibility is to express an opinion on the City of Paducah, Kentucky's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, - issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non -Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City of Paducah Kentucky's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of the City of Paducah, Kentucky's compliance with those requirements. - In our opinion, the City of Paducah, Kentucky complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended June 30, 2004. Internal Control Over Compliance The management of the City of Paducah, Kentucky, is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs. In planning and performing our audit, we considered the City of Paducah, Kentucky's internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A- 133. -130- Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. This report is intended solely for the information and use of the Board of Commissioners of the City of Paducah, Kentucky, management, others within the organization, and federal awarding agencies and pass- through entities and is not intended to be and should not be used by anyone other than these specified parties. 00 September 20, 2004 -131- CITY OF PADUCAH, KENTUCKY SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2004 A. Summary of Audit Results: 1. The auditor's report expresses an unqualified opinion on the basic financial statements of the City of Paducah, Kentucky. 2. No reportable conditions were disclosed during the audit of the basic financial statements of the City of Paducah, Kentucky. 3. No instances of noncompliance material to the basic financial statements of the City of Paducah, Kentucky were disclosed during the audit. 4. No reportable conditions were disclosed during the audit of the major federal award programs. 5. The auditor's report on compliance for the major federal award programs for the City of Paducah, Kentucky expresses an unqualified opinion. 6. There are no audit findings relative to the major federal awards program to be reported. 7. The programs tested as major programs included: Name CFDA# Section 8 Housing Choice Vouchers 14.871 Home Investment Partnerships 14.239 Highway Planning and Construction — River Heritage Project and Streetscape 20.205 8. The threshold for distinguishing Types A and B programs was $300,000. 9. The City of Paducah, Kentucky was determined to be a low-risk auditee. B. Findings - Basic Financial Statements Audit: None C. Findings and Questioned Costs - Maior Federal Award Programs: None -132-