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HomeMy WebLinkAboutCAFR-June-30-2007City of Paducah Paducah, Kentucky Comprehensive Annual Financial Report Year Ended June 30, 2007 Issued by the Finance Department CITY OF PADUCAH, KENTUCKY COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2007 TABLE OF CONTENTS Exhibit No. Page No. Introductory Section: Letter of Transmittal 1 - 7 Organizational Chart 8 Principal Officials 9 GFOA Certificate of Achievement 10 Financial Section: Independent Auditor’s Report 11-12 Required Supplementary Information: Management’s Discussion and Analysis 13-25 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets 1 26-27 Statement of Activities 2 28-29 Fund Financial Statements: Governmental Funds: Balance Sheet 3 30-31 Reconciliation of the Governmental Funds Balance Sheet to Statement of Net Assets 4 32-33 Statement of Revenues, Expenditures and Changes in Fund Balances 5 34-35 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 6 36-37 Budgetary Comparison Schedule (Budgetary Basis) – General Fund 7 38-41 Budgetary Comparison Schedule – Note to RSI – General Fund 8 42 Budgetary Comparison Schedule (Budgetary Basis) – Special Revenue Investment Fund 9 43 Budgetary Comparison Schedule – Note to RSI – Special Revenue Investment Fund 10 44 Budgetary Comparison Schedule (Budgetary Basis) – Special Revenue Investment Fund 11 45 Budgetary Comparison Schedule – Note to RSI – Special Revenue Investment Fund 12 46 Proprietary Funds: Statement of Net Assets 13 47 Statement of Revenues, Expenses and Changes in Fund Net Assets 14 48 Statement of Cash Flows 15 49 Fiduciary Funds: Statement of Net Assets 16 50 Statement of Changes in Net Assets 17 51 Component Units Financial Statements: Statement of Net Assets 18 52-53 Statement of Activities 19 54-55 Notes to Financial Statements 56-89 Required Supplementary Information: Pension Trust Funds Schedules A-1 90 Exhibit No. Page No. Supplementary Information: Nonmajor Governmental Funds: Combining Balance Sheet B-1 91-92 Combining Statement of Revenues, Expenditures and Changes in Fund Balances B-2 93-94 Detail Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual: Municipal Aid Program Fund B-3 95 Emergency Communication Service Fund B-4 96 Court Awards Fund B-5 97 Small Grant Fund B-6 98 Hope 3 Implementation Grant Fund B-7 99 Home Grant Fund B-8 100 HUD Revolving Grant Fund B-9 101 Paducah Housing Authority Police Grant Fund B-10 102 Debt Service Fund B-11 103 Nonmajor Proprietary Funds: Combining Statement of Net Assets C-1 104 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets C-2 105 Combining Statement of Cash Flows C-3 106 Internal Service Funds: Combining Statement of Net Assets D-1 107 Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets D-2 108 Combining Statement of Cash Flows D-3 109 Fiduciary Funds: Combining Statement of Net Assets – Pension Trust Funds E-1 110 Combining Statement of Changes in Net Assets – Pension Trust Funds E-2 111 Combining Statement of Net Assets – Private-purpose Trust Funds E-3 112 Combining Statement of Changes in Net Assets – Private-purpose Trust Funds E-4 113 Statement of Changes in Assets and Liabilities – Agency Funds E-5 114 Table No. Page No. Statistical Section: Net Assets by Component 1 115 Changes in Net Assets 2 116-117 Fund Balances, Governmental Funds 3 118 Changes in Fund Balances, Governmental Funds 4 119 Assessed and Estimated Actual Value of Taxable Property 5 120 Property Tax Rates - Direct and Overlapping Governments 6 121 Principal Taxpayers 7 122 Secured Tax Levies and Collections 8 123 Employee License Tax Collections 9 124 Principal Employee License Taxpayers 10 125 Ratio of Outstanding Debt by Type 11 126 Ratio of Net General Bonded Debt Outstanding 12 127 Table No. Page No. Statistical Section: Direct and Overlapping Governmental Activities Debt 13 128 Legal Debt Margin Information 14 129 Schedule of Sewer Revenue Bond Coverage 15 130 Demographic and Economic Statistics 16 131 Principal Employers 17 132 City Full-Time Employees by Function 18 133 Operating Indicators by Function 19 134 Capital Asset Statistics by Function 20 135 Single Audit Section: Schedule of Expenditures of Federal Awards 136-137 Notes to the Schedule of Expenditures of Federal Awards 138 Report on Internal Control Over Financial Reporting And on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 139-140 Report on Compliance with Requirements Applicable to Each Major Program and On Internal Control Over Compliance in Accordance with OMB Circular A-133 141-142 Schedule of Findings and Questioned Costs 143-144 CITY OF PADUCAH, KENTUCKY INTRODUCTORY SECTION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2007 December 17, 2007 Honorable Mayor and Commissioners City of Paducah Paducah, Kentucky We are pleased to submit Paducah's Comprehensive Annual Financial Report for the year ended June 30, 2007. 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. City management’s narrative on the financial activities of the City for the fiscal year ended June 30, 2007, is in the Management’s Discussion and Analysis (MD&A) section of this report, immediately following the Report of Independent Auditors. The letter of transmittal is written to complement the MD&A and the financial statements, and should be read from that perspective and in conjunction with all other sections of the CAFR. THE CITY Paducah was established in 1827 by explorer General William Clark. The City of Paducah is situated at the confluence of the Ohio and Tennessee Rivers 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. 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. Equal Opportunity Employer CITY OF PADUCAH Finance Department P.O. Box 2267 Paducah, KY 42002-2267 270-444-8512 In the early 1990s, 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 was 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 2007, GPEDC began assembling property to establish Riverport West, a 1,000-acre industrial park with rail and river access in western McCracken County. In FY2007, as the following table indicates, there were 104 jobs created and retained, and $9.1 million capital invested not to mention the added fiscal impact from the jobs created and capital invested. Additionally, the City’s second Lowe’s, New York and Company, and numerous other retail shops opened, creating several dozen more service industry jobs, further strengthening Paducah’s retail market. Summary of Capital Investment and New/Retained Jobs FY2007 Jobs Company Capital Investment In Millions New Retained Dynatorch $0.4 5 7 James Marine $2.0 45 0 Crounse $4.5 0 14 Western Rivers $2.2 33 0 Total $9.1 83 21 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. The private American Justice School of Law opened in the Information Age Park in 2005. In 2007, Paducah and WKCTC laid plans to create a new Paducah School for the Arts. 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 major medical specialty represented in the physician population. The medical industry, represented by Lourdes Hospital and Western Baptist Hospital, provides over 640 beds for medical needs. The two largest hospitals, together, employ approximately 2,900 persons. -2- 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, disc golf, skate boarding, 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. The LowerTown Art and Music Festival is uniquely showcased within the borders of Paducah’s 140-year-old historic neighborhood. The LowerTown Art and Music Festival is an outdoor-juried show in its 6th year. The weekend includes jazz, salsa, zydeco and blues music, as well as food from area restaurants. Over 15,000 people attended in 2007. Paducah is the site of the Museum of the American Quilter’s Society. The museum, dedicated in 1991, is the centerpiece for the quilters’ annual convention held in April. The convention attracts an estimated 30,000 visitors to Paducah annually. The ‘After Dinner Downtown Program’, which 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 ‘8th 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 40,000 participants to Paducah’s riverfront during the last weekend in September. Over time, this annual event has grown to incorporate other events, including ‘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. 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 Council-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 342 full-time employees as of June 30, 2007. 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. 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 of Paducah. Blended units are presented as such because the units’ governing bodies are substantially the same as the governing body of the City, or provide services almost entirely to the City of Paducah. The City has only one blended unit: the 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. Financial Policies The City’s financial policies are shaped by state law and established by management and the City Commission. Financial policies include budgeting and financial planning, capital planning, revenue, investment, debt management, procurement, and accounting and auditing. As part of the City’s annual budget process, financial policies are reviewed and amended as necessary. In FY2007, there were no changes in policy that would have a significant impact on the financial statements of the City. LONG-TERM FINANCIAL PLANNING On October 1, 2005, the City’s payroll tax was increased ½ cent. As a result of the payroll tax increase, the City Commission created the Investment Fund. The Investment Fund is funded with the ½ cent increase and is dedicated to the following purposes: economic development, neighborhood redevelopment, infrastructure capital investment, and property tax relief. During the FY 2008 budget process, the Commission reviewed numerous decision packages proposed for the Investment Fund Budget; expenditures totaling $3.875 million were appropriated. The City has numerous infrastructure/capital items that will affect the long-term financial planning process. The following projects are two examples of future considerations facing the City: Floodwall Restoration. The 12.5-mile long floodwall system protecting a large portion of the Paducah- McCracken area is approaching 60 years of age. It is still in good condition long beyond its design life; however, it is in need of necessary repairs. The estimated cost of this restoration project is approximately $6 million. Anticipated grant funds will cover 65% of the project, but the City will proceed with an expenditure of around $2 million to make the most seriously needed repairs. Riverfront Redevelopment Plan. The City’s Riverfront Redevelopment Plan includes proposed improvements that will provide public amenities, recreational facilities & public spaces that will tie the City’s downtown to the River. The plan includes steamboat landing redevelopment, a public marina, boat ramp, and recreational trails and shoreline enhancements, just to name a few. Completion of Phase I & Phase II of the riverfront redevelopment will cost an estimated $46.2 million. In FY2007 the City was allocated $5.3 million in federal funds for Phase 1. As the project gets underway, property acquisition, construction, and eventually operating costs will be a long-term planning consideration. ECONOMIC CONDITION The City continues to be aggressive 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 remained steady in recent years and is expected to continue to be steady over the near- term. Area employment remains stable with 30,047 persons employed (McCracken County) as of June 30, 2007. The June 2007 unemployment rate was 5.6% (McCracken County), which is 19% higher than the federal rate of 4.7%. The local unemployment rate of 5.6%, compares favorably to last year’s 5.7%. The number of active electric and water meters was nearly the same as the prior year. The number of building and electric permits obtained was 1,418 for fiscal year 2007 valued at $71.4 million, which is $20.7 million up from fiscal year 2006. -5- CASH MANAGEMENT The Finance Department is responsible for the custody, investment and disbursement of all funds of the City in accordance with the procedures adopted by the City Commission. It is the City’s policy to invest funds in a manner that will provide the highest investment return with the maximum security of principal, while meeting the City’s daily cash flow demands. The City’s investments are governed by Kentucky Revised Statute (KRS) 66.480, and an investment policy approved by the City Commission. All funds, except trust funds which are governed by their respective investment policies, were invested in either obligations of the United States or its agencies, or collateralized Certificates of Deposit. Interest income totaling approximately $724 thousand was earned in these funds during this fiscal year. 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. In fiscal year 2005, a risk manager was hired in order to more aggressively address risk issues. The City has selected various insurance coverage to mitigate potential risk, with premiums/deductibles remaining flat at approximately $1.2 million for both fiscal years 2007 and 2006 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 Kentucky 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. The financial health of the fund is evaluated by an annual actuarial report. In the past year, the PFPF had a net asset increase of $307,000, with net assets valued at $14.5 million on June 30, 2007. In November 2005, the City issued general obligation bonds of $6.1 million to finance the Police and Firefighters’ Pension Fund estimated actuary liability. There were 3 active members and 88 retirees and/or beneficiaries in this fund as of June 30, 2007. The most recent actuarial report prepared for the PFPF was as of July l, 2007. 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 PFPF 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 13.19% for non-hazardous and 28.21% for hazardous duty employees in fiscal year 2007. The AEPF is a single-employer contributory defined benefit plan created by local ordinance under Kentucky statute. While there are no active members in the plan, there are 9 retirees and/or beneficiaries receiving benefits from the fund as of June 30, 2007. 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 $27,068 in fiscal year 2007, with net assets valued as of June 30, 2007, of $317,575. -6- 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 Kemper CPA Group, 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. CERTIFICATE OF ACHIEVEMENT The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Paducah, Kentucky for its comprehensive annual financial report for the fiscal year ended June 30, 2006. This was the sixteenth consecutive year that the City achieved this prestigious award. In order to be awarded a Certificate of Achievement for Excellence in Financial Reporting, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy 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 comprehensive annual financial report continues to meet the Certificate of Achievement Program’s 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 Kemper CPA Group, 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. -7- CITY OF PADUCAH, KENTUCKY ORGANIZATIONAL CHART CITIZENS OF PADUCAH CITIZENS OF PADUCAH Advisory Board and Committees City Attorney Facility Maintenance Division Engineering Division Flood Control Division Street Division -8- Downtown Development Solid Waste Fleet Maintenance DivisionCity Manager Mayor and Commissioners Risk Manager Parks Department Inspection City Clerk Fire Department Police Department Human Resources Engineering Department Public Information Public Works Department Finance Department Planning Department CITY OF PADUCAH, KENTUCKY PRINCIPAL OFFICIALS BOARD OF COMMISSIONERS Mayor William F. Paxton Mayor Pro tem Robert Coleman Commissioner Gerald Watkins Commissioner Gayle Kaler Commissioner Buz Smith CITY MANAGER James Zumwalt Human Resources Herschel Dungey Finance Jonathan Perkins, C.P.A. Police Chief Randy Bratton Fire Chief Redell Benton City Engineer Richard Murphy Planning Thomas Barnett Parks Services Mark Thompson Inspections Joel Scarbrough Public Works Earnie Via Information Services Greg Mueller City Clerk Tammy Brock Risk Manager Cindy Medford Public Information Pam Spencer Downtown Development Steve Doolittle -9- -10- CITY OF PADUCAH, KENTUCKY FINANCIAL SECTION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2007 CITY OF PADUCAH, KENTUCKY REQUIRED SUPPLEMENTARY INFORMATION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2007 CITY OF PADUCAH, KENTUCKY MANAGEMENT’S DISCUSSION AND ANALYSIS JUNE 30, 2007 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, 2007. 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 1-7) and the basic financial statements (pages 26-89) 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 $49.5 million at the close of the 2006-2007 fiscal year. Of this amount, $8.9 million (unrestricted net assets) may be used to meet City government’s ongoing obligations to citizens and creditors. Total net assets increased $6.0 million. At fiscal year end, City governmental funds reported a combined ending fund balance of $16.1 million. Approximately 65% of this total amount, $10.5 million, is unreserved and available for spending at the City’s discretion. Of the $10.5 million, $534,025 is in various special funds, which are earmarked for specific purposes. At the end of the current fiscal year, unreserved general fund balance was $10.0 million, of which cash makes up approximately $5.3 million. When compared to actual total appropriations, the general fund cash balance is 18%. 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 -13- debt. Business-type activities of the City include Solid Waste, Civic Center and Telecommunication Information System Authority (TISA). 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 26-29 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 thirteen (13) 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 Investment Funds, all of which are considered to be major funds. Data from the other ten (10) 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 91-103. 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 32-33) and Exhibit 6 (pages 36-37) 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 30-37 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. -14- The City uses three enterprise funds to account for Solid Waste, Civic Center and TISA, as well as certain component units that provide electric, water, and public transit. TISA and Civic Center receive subsidy from the General Fund. 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 47-49. 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 104-106 of this report. Individual data for the internal service funds is likewise presented in the form of combining statements on pages 107- 109 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, Other Trust Funds, Maintenance and Rehabilitation Trust and Payroll Agency) are presented in the form of combining statements on pages 110-114 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 56-89 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 91-114 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 $49.5 million as of June 30, 2007. The largest portion of the City’s net assets (69%) 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 -15- 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. 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 (18%) may be used to meet the City’s ongoing obligations to citizens and creditors. As of June 30, 2007, 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. City of Paducah, Kentucky Net Assets June 30 Governmental Activities Business-Type Activities Total Primary Government 2007 2006 2007 2006 2007 2006 Current Assets $ 33,220,547 $ 29,580,305 $ 2,222,258 $ 2,586,401 $ 35,442,805 $ 32,166,706 Capital Assets 38,575,330 36,786,376 1,491,523 1,277,720 40,066,853 38,064,096 Other noncurrent assets 6,520,288 6,833,601 - - 6,520,288 6,833,601 Total Assets 78,316,165 73,200,282 3,713,781 3,864,121 82,029,946 77,064,403 Current Liabilities 8,045,120 8,287,277 300,832 420,861 8,345,952 8,708,138 Noncurrent liabilities 22,132,588 22,822,101 2,068,712 2,033,450 24,201,300 24,855,551 Total liabilities 30,177,708 31,109,378 2,369,544 2,454,311 32,547,252 33,563,689 Net assets: Invested in capital assets, net of related debt 32,557,572 30,664,671 1,491,523 1,277,720 34,049,095 31,942,391 Restricted 6,523,244 3,708,035 - - 6,523,244 3,708,035 Unrestricted 9,057,641 7,718,198 (147,286) 132,090 8,910,355 7,850,288 TOTAL NET ASSETS $ 48,138,457 $ 42,090,904 $ 1,344,237 $ 1,409,810 $ 49,482,694 $ 43,500,714 A. Analysis of the City’s Operations The following table provides a summary of the City’s operations for the years ended June 30, 2007 and 2006. Governmental activities increased the City’s net assets by $6,047,553. Business-type activities decreased the City’s net assets by $65,573. The following table provides a summary of the City’s operations for the years ended June 30, 2007 and June 30, 2006: -16- City of Paducah, Kentucky Changes in Net Assets June 30 Governmental Activities Business-Type Activities Total Primary Government 2007 2006 2007 2006 2007 2006 Revenues: Program revenues: Charges for services $ 4,038,902 $ 3,452,878 $ 4,153,226 $ 3,829,684 $ 8,192,128 $ 7,282,562 Operating grants/ contributions 2,797,216 2,988,612 - - 2,797,216 2,988,612 Capital grants/ contributions 3,681,490 3,302,568 23,969 22,894 3,705,459 3,325,462 General Revenues: Property taxes 4,122,538 4,107,934 - - 4,122,538 4,107,934 Franchise taxes 183,736 282,115 - - 183,736 282,115 Telecommunications tax 522,665 626,971 - - 522,665 626,971 Insurance premium tax 4,414,672 3,863,953 - - 4,414,672 3,863,953 Vehicle tax 594,585 518,648 - - 594,585 518,648 Bank tax 163,930 178,871 - - 163,930 178,871 Gross receipts license tax 4,050,057 3,899,432 - - 4,050,057 3,899,432 Employee license tax 16,273,966 14,794,217 - - 16,273,966 14,794,217 Other taxes 499,185 498,409 - - 499,185 498,409 Intergovernmental revenue 1,243,028 1,201,973 - - 1,243,028 1,201,973 Unrestricted investment earnings 639,702 462,292 83,854 85,786 723,556 548,078 Gain on sale of capital assets 48,656 8,340 16,641 55,337 65,297 63,677 Total revenues 43,274,328 40,187,213 4,277,690 3,993,701 47,552,018 44,080,914 Expenses: General Government 9,462,543 9,057,295 - - 9,462,543 9,057,295 Public safety 15,182,704 14,592,756 - - 15,182,704 14,592,756 Public service 8,299,658 8,486,662 - - 8,299,658 8,486,662 Park & recreation 1,197,072 1,044,361 - - 1,197,072 1,044,361 Planning & development 1,891,725 2,404,636 - - 1,891,725 2,404,636 Interest on long-term debt 1,134,898 974,101 - - 1,134,898 974,101 Solid Waste - - 4,079,684 3,893,013 4,079,684 3,893,013 Civic Center - - 54,560 45,894 54,560 45,894 TISA - - 267,194 269,781 267,194 269,781 Total expenses 37,168,600 36,559,811 4,401,438 4,208,688 41,570,038 40,768,499 Increase (decrease) in Net assets before transfers 6,105,728 3,627,402 (123,748) (214,987) 5,981,980 3,412,415 Transfers (58,175) (115,754) 58,175 115,754 - - Change in net assets 6,047,553 3,511,648 (65,573) (99,233) 5,981,980 3,412,415 Net assets, July 1 42,090,904 38,579,256 1,409,810 1,509,043 43,500,714 40,088,299 NET ASSETS, JUNE 30 $ 48,138,457 $ 42,090,904 $ 1,344,237 $ 1,409,810 $ 49,482,694 $ 43,500,714 -17- B. Governmental Activities As with most municipalities, the City’s governmental activities are heavily subsidized by taxes, with little or no program revenue for each function. The chart below demonstrates the importance of tax revenue to essential functions of the City. Governmental Activities Expenses and Program Revenues $0 $2 $4 $6 $8 $10 $12 $14 $16 General Government Public safety Public service Park & recreation Planning & development Interest on long- term debtMillionsExpenses Revenues The graph below depicts the breakdown of revenue by source for fiscal year 2007. Governmental Activities Revenue by Source Unrestricted investment earnings 1% Intergovernmental revenue 3% Capital grants/contributions 9% Operating grants/contributions 7% Other Taxes 5% Property taxes 10% Charges for services 9% Occupational Licenses 56% -18- In fiscal year 2007, the City derived 71% of its revenue from taxes/licenses. Occupational licenses, which include both payroll withholding tax, business licenses, and insurance premium tax is the largest source of income to the City, totaling approximately $24.7 million. This area of revenue grew almost 10% from the prior year, with the majority of the increase resulting from payroll withholding tax collections. It should be noted that property tax revenue remained fairly flat from the prior year. As a component of the payroll tax increase, which was implemented in October 2005, the Commission committed to reducing property taxes, so that the goods and services provided by the City would be more equally supported by the massive inflow of population into the City daily for business and entertainment. The Commission has kept its commitment by decreasing the rate from $.30 to $.275 in fiscal year 2007 and again to $.25 for fiscal year 2008. Although there was a decrease in the tax rate, new properties, annexation, and increasing property value assessments kept the revenue source stable. C. Business-Type Activities Business-type activities decreased the City’s net assets by $65,573, in contrast to the positive position in net assets for Governmental Activities for the year. The chart below shows the operating results for each of the City’s business-type activities. These activities should break-even; the charges for services should be large enough to sustain operations. Although there was a decrease in net assets from the prior year, the operating gap was reduced by one-third. The Solid Waste fund, as a major fund of the organization, is of particular interest. Efforts are currently being made to improve the performance of this function, including rate increases for fiscal year 2008, as well as efficiency measures through equipment and route reorganization. -19- Business-Type Activities Expenses and Revenues - 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 Solid Waste Civic Center TISAMillions Expenses Revenues 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 $16.1 million (see Exhibit 3). Approximately 65% of this total amount, $10.5 million, is unreserved fund balance, which is available for spending at the government’s discretion but only up to the amount represented by cash. Of the $10.5 million, $534,025 is in the debt service fund and various special revenue funds, which are earmarked for specific purposes. The remaining $5.6 million of fund balance is reserved for specific future uses. -20- Governmental Funds Ending Fund Balances Unreserved - general fund 62%Unreserved - other funds 3% Reserved 35% Business-Type Activities Revenue by Source Interest Income 2% Gain on sale of capital assets and transfers 2% Capital grants/contributions 1% Charges for Services 95% The general fund is the chief operating fund of the City. At the end of the 2006-2007 fiscal year, the general fund unreserved fund balance was $10.0 million. City fiscal policy (ordinance 2006-6-7137) required that an amount not less than 8% of the General Fund’s budgeted expenditures remain undesignated in the fund balance, or $2.3 million, which leaves $7.7 million as unreserved for fiscal year 2007. While $7.7 million represents unreserved fund balance, it is worth noting here that at year-end there was only $5.3 million available as cash, the balance is tied up in other assets including accounts receivable and property taxes collectible. 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 35% of expenditures and transfers out ($29 million). When compared to total appropriations ($29 million), the general fund cash balance ($5.3 million) is 18%. The General Fund fund balance increased by $819 thousand during the 2006-2007 fiscal year and was the result of expenditures being held down and a strong revenue environment, thus revenues outgrew expenditures. Key factors contributing to this positive change include the following: o Strong business license collections, o Continued growth in payroll tax collections, and o Increased property values The General Capital Improvements Fund had a fund balance of $2.9 million all of which is reserved. The General Capital Improvements fund balance increased $1 million over last year. The fund balance increased because several capital projects that were fully funded had not yet been completed; therefore, funds remained on hand at year-end. The Investment Fund had a fund balance of $1.7 million, all of which is reserved for capital projects. The Investment Fund’s fund balance increased $1.0 million. The Investment Fund was authorized by the City Commission in fiscal year 2005-2006 as a special revenue fund whose use is restricted to economic development, community redevelopment and capital and infrastructure projects. The Investment Fund captures all manner of financial activities related to revenue from the ½ cent payroll tax increase, effective October 1, 2005. B. Proprietary Funds The City’s proprietary funds provide the same information found in the government-wide financial statements, but in more detail. Net assets of the respective proprietary funds are: Solid Waste $ 821,214 Civic Center 223,764 TISA 203,543 Combined total net asset change for the three funds was a decrease of $128 thousand, broken down as follows: Solid Waste ($114 thousand), Civic Center ($8 thousand), and TISA ($6 thousand). Other factors concerning the proprietary enterprise funds have been addressed in the discussion of City business-type activities (III, C). -21- V. General Fund Budgetary Highlights Differences between the original budget and the final actual amounts resulted in a $1.128 million decrease in appropriations and can be briefly summarized as follows: Appropriations Department Increase Decrease (In Thousands) General administration $ - $ 296 Finance 16 - Planning - 56 Human rights - 6 Human resources - 4 Inspection - - Information systems - 53 Risk management - 6 Police - 484 Fire - 34 Public works - 355 Engineering services - 109 Recreation - 58 Other 317 - Transfers out were increased $1.2 million. This increase is due to two mid-year budget appropriations designating nearly $1 million for capital projects such as waterfront engineering/design, various roof replacements, and floodwall restoration engineering. Appropriations were also made for funding the old Police and Fire Pension Fund and an IAFF pay raise for members. 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, 2007, is $40.1 million (net of accumulated depreciation). This investment in capital assets includes land, buildings and improvements, vehicles 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 2007, projects and equipment expenditures totaled nearly $6.5 million. The largest capital-type projects, in terms of dollars in fiscal year 2007, are shown in the following table: Pecan Drive improvement project $3,251,321 Neighborhood Redevelopment (includes Fountain & Lowertown) 732,215 Noble Park Improvements & Recreation Trail 588,684 Olivet Church & Coleman Road Improvements 853,232 In the upcoming years, several street, economic development, riverfront 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, recreational facility improvements, continued neighborhood revitalization, and street and sidewalk rehabilitation are among the projects to be addressed. -22- City of Paducah, Kentucky Capital Assets (Net of Accumulated Depreciation) June 30 Governmental Activities Business-Type Activities Total Primary Government 2007 2006 2007 2006 2007 2006 Land $ 6,518,216 $ 5,320,275 $ 65,908 $ 65,908 $ 6,584,124 $ 5,386,183 Land improvements 1,606,021 940,577 - - 1,606,021 940,577 Construction in progress 802,177 3,945,451 - - 802,177 3,945,451 Buildings and improvements 7,208,859 7,103,751 253,670 267,090 7,462,529 7,370,841 Infrastructure 19,175,949 16,261,506 - - 19,175,949 16,261,506 Equipment 1,460,002 1,583,603 55,343 111,326 1,515,345 1,694,929 Furnishings and fixtures 5,845 7,112 - - 5,845 7,112 Vehicles 1,798,261 1,624,101 1,116,602 833,396 2,914,863 2,457,497 TOTALS $ 38,575,330 $ 36,786,376 $ 1,491,523 $ 1,277,720 $ 40,066,853 $ 38,064,096 Additional information on City capital assets can be found in Note 3 in the notes to financial statements on pages 70-73. B. Long-Term Debt At year-end, the City had $23,569,480 in outstanding bonds, accrued compensated absences and notes payable, compared to $24,083,707 at June 30, 2006 with maturities extending through 2026. During the year, the City’s total debt decreased by $514,227, as shown in the following table: Governmental Activities 2007 2006 Convention and Performing Arts Center – 2001 $ 7,870,000 $ 8,130,000 Kentucky League of Cities – 2003 2,968,856 3,110,441 Infiniti Media Building – 2004 4,515,000 4,680,000 General Fund accrued compensated absences 1,938,958 1,854,481 KACO – 2005 105,000 208,785 Police/Firefighter Pension Fund Liability – 2006 5,925,000 6,100,000 Jones Agreement (Art School) -- 2007 246,666 - TOTALS $23,569,480 $24,083,707 Convention and Performing Arts Center. 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. Kentucky League of Cities. In fiscal year 2003, 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). -23- Infiniti Media Building. 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. KACO. In fiscal year 2005, the County of McCracken entered into two separate agreements totaling $550,000, with the Kentucky Association of Counties (KACO) for purchase of a rail spur and construction of a speculative building in the Industrial Park West. In fiscal year 2007, the Paducah- McCracken County Industrial Development Authority received a $125,000 grant from the Delta Regional Commission. The entire payment was applied toward the rail spur note, and the note was paid in full by the end of the fiscal year. The remaining speculative building note is required to be fully paid within 5 years from date of issue and is backed jointly by the full faith and credit of the City and County. While the County issued the note, 50% of the principal amount was issued on behalf of the City, which intends to participate on an equal basis with the County in accordance with an interlocal agreement. Police/Firefighter Pension Fund Liability In fiscal year 2006, the City issued $6.1 million in general obligation bonds to finance the police and firefighter’s pension fund estimated pension liability. These bonds are to be fully paid within 20 years and are backed by the full faith and credit of the City. Jones Agreement (Art School). In fiscal year 2007, the City entered into an agreement with F. Burnham and Cynthia Jones in the amount of $375,000 to finance the acquisition of real property to be used for the development of an art school. This note is to be fully paid by January 2009. 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 $182,759,543. 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. In fiscal year 2007, less than 6.6% 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 73-76. VII. Economic Factors and Next Year’s Budgets and Rates. A. General Comments. Paducah continued to experience steady-growth in the local economy as compared to the national economy in fiscal year 2007. It is estimated that over 100 jobs were created or retained in fiscal year 2007 along with $9.1 million in private capital investments. Paducah continues to experience retail growth in the Kentucky Oaks Mall area and the City’s Southside in addition to job expansions in the Information Age Park and the Industrial Park West. B. Downtown Development. 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. Just prior to the end of fiscal year 2007, the City hired a Downtown Development Director. This new cost center is tasked with establishing a Tax Increment Financing (TIF) District in the downtown/riverfront area for financing current and future development projects as well as mediating between the City and potential hotel and business developers in the downtown area. C. Unemployment Rate. The unemployment rate for the City of Paducah (McCracken County) as of June 2007 was 5.6%. -24- D. Inflationary Trends. Inflationary trends in the City compare favorably to state and national trends. E. Annexation Policy. 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. F. Post-employment Benefits. Personal service costs make up nearly 67% of the City’s annual budget, and that number increases annually partially due to rising retirement costs. In the past five years, the City’s combined hazardous and non-hazardous retirement contribution has more than doubled, increasing annual expenditures approximately $2 million from fiscal year 2004 to the projected figures for fiscal year 2008. Providing this benefit has become so costly that for the first time in fiscal year 2007, retirement match exceeded the cost of providing health insurance to City employees. Although Kentucky Retirement Systems has announced a slight decrease in fiscal year 2009 rates, the long-term outlook on funding requirements is of utmost concern. G. Permanence of Payroll Tax Increase. Early in fiscal year 2008, the increase in employee payroll withholding tax that went into effect October 2005 was made permanent. The additional ½% generates approximately $4 million annually. Making this increase permanent allows for more certainty in long-term planning and partially alleviates the City’s long-term concern for funding of capital and economic development projects. H. Infrastructure. Recently completed and upcoming major road/infrastructure projects have and will continue to increase the flow of commerce, tourism and traffic flow in the City. During fiscal 2007, the Pecan Drive Improvements project was completed, an investment of nearly $5.5 million. This roadway project consists of 1.8 miles of roadway designed to accommodate modern-day traffic flow near the City’s retail areas and opens up over 160 acres for development in the western part of the City. The City continues to work on the $6.5 million Olivet Church Road Project, and is currently in the process of obtaining the necessary right-of way. This project will relieve traffic congestion and improve traffic safety for Interstate 24 at Exit 3 and 4. VIII. Requests for Information This financial report is designed to provide a general financial overview for those interested in the City of Paducah government finances. Questions or requests for additional financial information may be addressed to Jonathan Perkins, Finance Director, City of Paducah, 500 South 5th Street, Paducah, KY 42001. -25- CITY OF PADUCAH, KENTUCKY BASIC FINANCIAL STATEMENTS GOVERNMENT-WIDE FINANCIAL STATEMENTS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2007 Exhibit 1 Governmental Business-type Component Current Assets: Activities Activities Total Units Cash and cash equivalents 8,109,480$ 409,839$ 8,519,319$ 4,715,392$ Investments 5,865,534 1,480,000 7,345,534 - Receivables, net: Notes 351,500 - 351,500 - Accounts 6,023,457 208,317 6,231,774 2,941,134 Grants 633,323 - 633,323 614,512 Interest 145,684 13,291 158,975 - Property tax 4,413,890 - 4,413,890 - Other - - - 803,394 Internal balances (95,716) 95,716 - - Inventory 894,799 - 894,799 1,789,470 Prepaid pension obligation 5,831,378 - 5,831,378 - Prepaid expenses 1,047,118 15,095 1,062,213 106,720 Other current assets 100 - 100 763,181 Total current assets 33,220,547 2,222,258 35,442,805 11,733,803 Noncurrent Assets: Investments, restricted - - - 2,676,425 Notes receivable 6,290,000 - 6,290,000 - Bond issuance costs, net 230,288 - 230,288 - Net capital assets: Land and construction in progress 7,320,393 65,908 7,386,301 3,517,365 Depreciable capital assets 31,254,937 1,425,615 32,680,552 78,911,052 Restricted assets - - - 1,745,444 Other assets - - - 477,609 Total noncurrent assets 45,095,618 1,491,523 46,587,141 87,327,895 Total assets 78,316,165$ 3,713,781$ 82,029,946$ 99,061,698$ -26- Primary Government CITY OF PADUCAH, KENTUCKY STATEMENT OF NET ASSETS JUNE 30, 2007 ASSETS Governmental Business-type Component Current Liabilities: Activities Activities Total Units Voucher and accounts payable 1,571,310$ 199,615$ 1,770,925$ 5,086,916$ Line of credit - - - 1,568,014 Accrued payables 543,685 30,766 574,451 534,113 Due to other taxing agencies 190,332 - 190,332 - Deferred revenue 4,196,451 - 4,196,451 768,282 Accrued compensated absences 512,672 70,451 583,123 - Accrued interest 106,450 - 106,450 156,375 Notes payable due within one year 294,220 - 294,220 55,171 Bonds payable due within one year 630,000 - 630,000 1,375,000 Other current liabilities - - - 1,721,642 Total current liabilities 8,045,120 300,832 8,345,952 11,265,513 Noncurrent Liabilities: Accrued compensated absences 1,426,286 6,212 1,432,498 - Landfill post-closure costs - 2,062,500 2,062,500 - Other liabilities - - - 401,938 Notes payable 3,026,302 - 3,026,302 6,479,382 Bonds payable 17,680,000 - 17,680,000 5,020,948 Total noncurrent liabilities 22,132,588 2,068,712 24,201,300 11,902,268 Total liabilities 30,177,708 2,369,544 32,547,252 23,167,781 Invested in capital assets, net of related debt 32,557,572 1,491,523 34,049,095 69,355,892 Restricted for: Program purposes 1,904,321 - 1,904,321 - Capital projects 4,618,923 - 4,618,923 - Debt service - - - 3,458,574 Unrestricted 9,057,641 (147,286) 8,910,355 3,079,451 TOTAL NET ASSETS 48,138,457$ 1,344,237$ 49,482,694$ 75,893,917$ See accompanying notes to the basic financial statements. -27- LIABILITIES NET ASSETS Primary Government Exhibit 2 FUNCTIONS/PROGRAMS Operating Charges for Grants and Primary Government: Expenses Services Contributions Governmental activities: General government 9,462,543$ 1,730,046$ -$ -$ Public safety 15,182,704 1,024,610 60,983 631,644 Public service 8,299,658 1,150,507 399,528 3,044,146 Parks and recreation 1,197,072 122,929 5,000 - Planning and development 1,891,725 10,810 2,331,705 5,700 Interest on long-term debt 1,134,898 - - - Total governmental activities (See Note 1) 37,168,600 4,038,902 2,797,216 3,681,490 Business-type activities: Solid Waste 4,079,684 3,928,141 - - Civic Center 54,560 31,372 - - TISA 267,194 193,713 - 23,969 Total business-type activities 4,401,438 4,153,226 - 23,969 TOTAL PRIMARY GOVERNMENT 41,570,038$ 8,192,128$ 2,797,216$ 3,705,459$ Component Units: Authorities: Paducah Water Works 6,712,204$ 6,867,559$ -$ 520,355$ Paducah Power System 48,905,522 49,733,519 - - Paducah Transit Authority 5,988,216 3,366,711 1,990,000 531,898 TOTAL COMPONENT UNITS 61,605,942$ 59,967,789$ 1,990,000$ 1,052,253$ 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, restricted for debt and street maintenance Unrestricted investment earnings Gain (loss) on sale of capital assets Miscellaneous Total general revenues Transfers Total general revenues and transfers Change in net assets Net assets, July 1, 2006 NET ASSETS, JUNE 30, 2007 See accompanying notes to the basic financial statements. -28- CITY OF PADUCAH, KENTUCKY Grants and Contributions FOR THE YEAR ENDED JUNE 30, 2007 STATEMENT OF ACTIVITIES Program Revenues Capital Governmental Business-type Component Activities Activities Total Units (7,732,497)$ -$ (7,732,497)$ -$ (13,465,467) - (13,465,467) - (3,705,477) - (3,705,477) - (1,069,143) - (1,069,143) - 456,490 - 456,490 - (1,134,898) - (1,134,898) - (26,650,992) - (26,650,992) - - (151,543) (151,543) - - (23,188) (23,188) - - (49,512) (49,512) - - (224,243) (224,243) - (26,650,992) (224,243) (26,875,235) - - - - 675,710 - - - 827,997 - - - (99,607) - - - 1,404,100 4,122,538 - 4,122,538 - 183,736 - 183,736 - 522,665 - 522,665 - 4,414,672 - 4,414,672 - 594,585 - 594,585 - 163,930 - 163,930 - 4,050,057 - 4,050,057 - 16,273,966 - 16,273,966 - 499,185 - 499,185 - 1,243,028 - 1,243,028 - 639,702 83,854 723,556 481,505 48,656 16,641 65,297 - - - - 331,114 32,756,720 100,495 32,857,215 812,619 (58,175) 58,175 - - 32,698,545 158,670 32,857,215 812,619 6,047,553 (65,573) 5,981,980 2,216,719 42,090,904 1,409,810 43,500,714 73,677,198 48,138,457$ 1,344,237$ 49,482,694$ 75,893,917$ -29- Net (Expense) Revenue and Changes in Net Assets Primary Government CITY OF PADUCAH, KENTUCKY BASIC FINANCIAL STATEMENTS FUND FINANCIAL STATEMENTS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2007 Exhibit 3 Special General Fund Cash and cash equivalents 1,707,270$ 2,624,446$ 439,838$ Investments 3,542,767 - - Accounts receivable: Accounts 5,759,882 - 400,000 Grants 70,443 555,290 - Interest 63,874 - - Property taxes (net of allowances for uncollectibles) 4,244,083 - - Due from other funds 1,071,915 93,215 951,313 TOTAL ASSETS 16,460,234$ 3,272,951$ 1,791,151$ Liabilities: Voucher and accounts payable 352,590$ 346,900$ 5,064$ Accrued payroll and payroll taxes 492,605 - - Due to other funds 951,313 - 93,215 Due to other taxing agencies 190,332 - - Deferred revenue 3,997,355 - - Accrued compensated absences 499,960 - - Total liabilities 6,484,155 346,900 98,279 Fund Balances: Reserved for: Program purposes - - - Capital improvements - 2,926,051 1,692,872 Unreserved: General Fund 9,976,079 - - Special Revenue Funds - - - Debt Service Fund - - - Total fund balances 9,976,079 2,926,051 1,692,872 TOTAL LIABILITIES AND FUND BALANCES 16,460,234$ 3,272,951$ 1,791,151$ See accompanying notes to the basic financial statements. -30- Revenue Investment Fund LIABILITIES AND FUND BALANCES ASSETS JUNE 30, 2007 GOVERNMENTAL FUNDS BALANCE SHEET CITY OF PADUCAH, KENTUCKY General Capital Improvements 2,171,007$ 6,942,561$ - 3,542,767 105,663 6,265,545 7,589 633,322 - 63,874 - 4,244,083 - 2,116,443 2,284,259$ 23,808,595$ 435,242$ 1,139,796$ 42,894 535,499 85,816 1,130,344 - 190,332 176,760 4,174,115 - 499,960 740,712 7,670,046 1,009,522 1,009,522 - 4,618,923 - 9,976,079 502,189 502,189 31,836 31,836 1,543,547 16,138,549 2,284,259$ 23,808,595$ -31- Nonmajor Governmental Funds Total Funds Governmental Exhibit 4 Total fund balance - total governmental funds 16,138,549$ Amounts reported for governmental activities in the Statement of Net Assets are different because: 170,040 169,807 6,192,500 26,029 808,216 5,831,378 38,575,330 $ 924,220 22,132,588 (23,056,808) (Continued) 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. A prepaid pension obligation is not a current financial resource, and therefore, is not reported in the governmental funds balance sheet. CITY OF PADUCAH, KENTUCKY RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO STATEMENT OF NET ASSETS Inventory is not a current financial resource and, therefore, is not reported in the governmental funds balance sheet. Delinquent property taxes receivable are not reported in the governmental funds balance sheet since they are not considered "available" revenues. The long-term notes receivable are not reported in the governmental funds balance sheet since they are not available to pay current period expenditures. Other account receivables are not available to pay current expenditures and, therefore, are deferred in the funds. 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. JUNE 30, 2007 Due within one year Due after one year -32- Long-term liabilities of ($21,630,522) are not due and payable in the current period and, therefore, they are not reported in the governmental funds balance sheet. See Note 3 for detail. Other related amounts include accrued compensated absences of ($1,426,286). The long-term liabilities are: Exhibit 4 (Continued) 230,288$ (106,450) 4,716,041$ (1,460,747) (95,716) 3,159,578 NET ASSETS OF GOVERNMENTAL ACTIVITIES 48,138,457$ See accompanying notes to the basic financial statements. -33- Current assets Net amount allocated to 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 liabilities JUNE 30, 2007 Bond issuance costs used in governmental activities 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. business-type activities CITY OF PADUCAH, KENTUCKY RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO STATEMENT OF NET ASSETS Exhibit 5 Special General Revenues: Fund Taxes 5,521,404$ -$ -$ Licenses 21,193,930 - 3,946,685 Charges for services 560,289 - - Intergovernmental - 283,755 - Grants 583,865 3,451,663 - Interest 492,090 - - Miscellaneous 1,068,954 235,902 - Total revenues 29,420,532 3,971,320 3,946,685 Expenditures: Current operations: General government 4,763,839 - - Public safety 13,430,359 - - Public service 6,219,132 - - Parks and recreation 1,192,727 - - Planning and development - - 532,190 Other 526,238 - - Capital outlay - 6,504,491 - Debt service: Principal requirement - - - Interest and fiscal requirement - - - Total expenditures 26,132,295 6,504,491 532,190 Excess (deficiency) of revenues over expenditures 3,288,237 (2,533,171) 3,414,495 Other Financing Sources (Uses): Long-term debt issued - 246,667 - Transfers in 91,668 3,560,249 1 Transfers out (2,561,136) (317,697) (2,441,425) Total other financing sources (uses) (2,469,468) 3,489,219 (2,441,424) Net change in fund balances 818,769 956,048 973,071 Fund balances, July 1, 2006 9,157,310 1,970,003 719,801 FUND BALANCES, JUNE 30, 2007 9,976,079$ 2,926,051$ 1,692,872$ See accompanying notes to the basic financial statements. -34- CITY OF PADUCAH, KENTUCKY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2007 Improvements Revenue Investment Fund General Capital 522,665$ 6,044,069$ - 25,140,615 222,729 783,018 1,393,028 1,676,783 2,054,183 6,089,711 48,114 540,204 527,305 1,832,161 4,768,024 42,106,561 - 4,763,839 1,329,376 14,759,735 1,007,410 7,226,542 - 1,192,727 1,892,008 2,424,198 - 526,238 - 6,504,491 782,870 782,870 1,108,385 1,108,385 6,120,049 39,289,025 (1,352,025) 2,817,536 - 246,667 1,558,059 5,209,977 (236,464) (5,556,722) 1,321,595 (100,078) (30,430) 2,717,458 1,573,977 13,421,091 1,543,547$ 16,138,549$ -35- Funds Governmental Total Funds Nonmajor Governmental Exhibit 6 Net change in fund balances - total governmental funds 2,717,458$ Amounts reported for governmental activities in the Statement of Activities are different because: 765,265 (125,754) 4,638,045 (212,500) 2,279 23,291 170,040 118,613 (Continued) FOR THE YEAR ENDED JUNE 30, 2007 Contributions for debt service received from other governments are reported as current year revenue in the governmental funds. However, receipts for long-term receivables are not considered revenue in the Statement of Activities. 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. Delinquent property taxes receivable are not considered "available" revenues in the governmental funds. Accrued 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. -36- CITY OF PADUCAH, KENTUCKY RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES Inventory purchases require the use of current financial resources and, therefore, are reported as expenditures in governmental funds. Inventory sales provide current financial resources and are reported as revenues in governmental funds. Tax revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the governmental funds. 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. Exhibit 6 (Continued) (246,667)$ (3,519,277) 845,370 (27,014) (48,644) (13,313) 525,945$ (62,988) 497,404 960,361 CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES 6,047,553$ See accompanying notes to the basic financial statements. -37- 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 business-type activities Depreciation expense 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 $497,404. The issuance of long-term debt provides current financial resources to governmental funds and is reported as revenue in governmental funds. However, the proceeds are not reported in the government-wide Statement of Activities. CITY OF PADUCAH, KENTUCKY RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND Principal payments of debt require the use of current financial resources and, therefore, are reported as expenditures in governmental funds. However, principal payments of debt do not affect net assets in the government-wide Statement of Activities. CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2007 Accrued interest payments on debt do not require the use of current financial resources. Accrued interest is reported as an expenditure in the government-wide Statement of Activities. Long-term accrued compensated absences do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Net of amount allocated to Governmental funds report the effect of bond issuance costs when debt is issued, whereas these amounts are deferred and amortized in the Statement of Activities. Exhibit 7 Variance with Final Budget Positive Original Final (Negative) Beginning budgetary fund balance 9,157,310$ 9,157,310$ 9,157,310$ -$ Resources (Inflows): Taxes: Real and personal, current year 4,385,500 4,549,475 4,549,474 (1) Real and personal, prior year 107,000 137,365 137,361 (4) Franchise 260,000 191,210 191,202 (8) Bank taxes 185,000 163,930 163,930 - In lieu of tax payment 170,000 166,755 166,757 2 Penalty, interest and advertising 33,500 31,315 31,314 (1) Paducah Junior College tax collections - 281,370 281,366 (4) Total taxes 5,141,000 5,521,420 5,521,404 (16) Licenses: Business licenses 3,955,000 3,899,425 3,899,422 (3) Employee earnings 11,910,000 12,312,265 12,312,261 (4) Comcast fees 284,000 342,155 342,155 - Penalties 67,000 84,875 84,877 2 Alcoholic beverages 116,500 109,775 109,775 - Insurance premium tax 4,050,000 4,410,285 4,410,285 - Building permits 123,000 160,320 160,280 (40) Electrical permits 27,000 42,570 42,403 (167) Zoning change fees 4,500 3,410 3,407 (3) Miscellaneous building and electrical fees 500 - - - KJDA payroll rebate (143,750) (170,935) (170,935) - Total licenses 20,393,750 21,194,145 21,193,930 (215) Charges for services: Tax collection fee 120,000 115,725 115,724 (1) Administrative charge 252,000 252,000 252,000 - Base court revenue 57,000 69,635 69,636 1 Recreation fees 122,000 122,930 122,929 (1) Total charges for services 551,000 560,290 560,289 (1) (Continued) ActualBudgeted Amounts -38- CITY OF PADUCAH, KENTUCKY BUDGETARY COMPARISON SCHEDULE (BUDGETARY BASIS) GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2007 Amounts Exhibit 7 (Continued) Variance with Final Budget Actual Positive Grants:Original Final Amounts (Negative) Police State Incentive 306,000$ 277,100$ 277,097$ (3)$ Fire State Incentive 265,000 239,930 239,928 (2) Paducah Housing Authority after school program 36,500 36,595 36,594 (1) Police supplemental grants 5,000 30,220 30,246 26 Total grants 612,500 583,845 583,865 20 Interest 413,000 492,085 492,090 5 Other: Property rent and sales 615,240 626,150 626,135 (15) Property upkeep and maintenance 147,375 164,810 164,811 1 Contractual programs 4,200 10,235 10,231 (4) E911 - GIS 21,855 21,855 21,859 4 Miscellaneous 181,675 245,920 245,918 (2) Total other 970,345 1,068,970 1,068,954 (16) Other financing sources: Long-term debt issued - - - - Operating transfers in 219,000 91,670 91,668 (2) Total other financing sources 219,000 91,670 91,668 (2) Amounts available for appropriation 37,457,905 38,669,735 38,669,510 (225) Charges to Appropriations (Outflows): General government: General administration: Mayor and Commissioners 200,280 197,230 197,230 - City Manager 354,075 330,760 330,760 - City Clerk 184,630 152,165 152,166 (1) Corporate Counsel 178,630 144,560 144,559 1 Non-departmental 416,800 591,500 591,500 - Memberships and contingency 401,155 23,945 23,944 1 Civic beautification 3,365 2,975 2,971 4 Total general administration 1,738,935 1,443,135 1,443,130 5 Finance: Finance administration 180,510 179,030 179,026 4 Accounting and payroll 357,545 395,815 395,812 3 Revenue collection 372,500 351,805 351,803 2 Total finance 910,555 926,650 926,641 9 (Continued) CITY OF PADUCAH, KENTUCKY BUDGETARY COMPARISON SCHEDULE (BUDGETARY BASIS) Budgeted Amounts GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2007 -39- Exhibit 7 (Continued) Variance with Final Budget Actual Positive General government:Original Final Amounts (Negative) Planning: Administration 260,290$ 255,520$ 255,518$ 2$ Planning 250,490 239,060 239,061 (1) Grants 119,005 79,315 79,316 (1) Economic development - - - - Total planning 629,785 573,895 573,895 - Human rights 104,000 98,210 98,206 4 Human resources 317,365 313,550 313,548 2 Inspection: Inspection administration 181,820 174,335 174,336 (1) Construction 319,720 336,970 336,968 2 Code enforcement 432,475 422,550 422,546 4 Neighborhood redevelopment 75,390 75,440 75,437 3 Total inspection 1,009,405 1,009,295 1,009,287 8 Information systems 330,510 277,820 277,819 1 Risk management 127,045 121,315 121,313 2 Public safety: Police: Police administration 1,143,140 1,135,770 1,135,763 7 Patrol 5,559,510 5,218,060 5,218,059 1 Investigations 1,385,585 1,250,045 1,250,044 1 Total police 8,088,235 7,603,875 7,603,866 9 Fire: Fire administration 351,790 245,845 245,844 1 Suppression 5,158,355 5,263,140 5,263,135 5 Prevention 219,245 190,070 190,070 - Training 131,385 127,450 127,444 6 Total fire 5,860,775 5,826,505 5,826,493 12 Public service: Public works: Public Works Administration 307,450 302,045 302,044 1 Street maintenance 2,320,990 1,980,415 1,980,412 3 Street lighting 445,000 463,280 463,280 - (Continued) BUDGETARY COMPARISON SCHEDULE (BUDGETARY BASIS) CITY OF PADUCAH, KENTUCKY Budgeted Amounts GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2007 -40- Exhibit 7 (Continued) Variance with Final Budget Actual Positive Public service:Original Final Amounts (Negative) Public works: Downtown maintenance 317,685$ 321,130$ 321,128$ 2$ Landscape maintenance 2,061,045 2,055,015 2,055,011 4 Summer youth program 74,615 49,385 49,383 2 Total public works 5,526,785 5,171,270 5,171,258 12 Engineering services: Engineering services 705,125 610,530 610,527 3 Flood control 451,600 437,350 437,347 3 Total engineering services 1,156,725 1,047,880 1,047,874 6 Recreation: Recreation administration 619,250 627,680 627,677 3 Pools and recreation 631,880 565,055 565,050 5 Total recreation 1,251,130 1,192,735 1,192,727 8 Other: Cable authority 71,470 83,980 83,978 2 Leave expense - 49,060 49,056 4 Intergovernmental expense - 281,366 281,366 - Miscellaneous property expense 137,460 111,840 111,838 2 Total other 208,930 526,246 526,238 8 Other financing uses: Operating transfers out 1,332,505 2,561,140 2,561,136 4 Total charges to appropriations 28,592,685 28,693,521 28,693,431 90 BUDGETARY FUND BALANCE, JUNE 30, 2007 8,865,220$ 9,976,214$ 9,976,079$ (135)$ See accompanying notes to the basic financial statements. BUDGETARY COMPARISON SCHEDULE (BUDGETARY BASIS) -41- CITY OF PADUCAH, KENTUCKY Budgeted Amounts GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2007 Exhibit 8 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 38,669,510$ Differences - budget to GAAP: The beginning fund balance is a budgetary resource, but is not a current year revenue for financial reporting purposes (9,157,310) Transfers from other funds are inflows of budgetary resources, but are not revenues for financial reporting purposes (91,668) Total revenues as reported on the statement of revenues, expenditures, and changes in fund balances- governmental funds 29,420,532$ Uses/outflows of resources: Actual amounts "total charges to appropriations" from the budgetary comparison schedule 28,693,431$ Differences - budget to GAAP: Transfers to other funds are outflows of budgetary resources, but are not expenditures for financial reporting purposes (2,561,136) Total expenditures as reported on the statement of revenues, expenditures, and changes in fund balances- governmental funds 26,132,295$ See accompanying notes to the basic financial statements. CITY OF PADUCAH, KENTUCKY -42- FOR THE YEAR ENDED JUNE 30, 2007 NOTE TO RSI BUDGETARY COMPARISON SCHEDULE GENERAL FUND Exhibit 9 Variance with Final Budget Positive Original Final (Negative) Beginning budgetary fund balance 719,801$ 719,801$ 719,801$ -$ Resources (Inflows): Licenses: Employee earnings 3,900,000 3,946,685 3,946,685 - Total licenses 3,900,000 3,946,685 3,946,685 - Other financing sources: Operating transfers in - - 1 1 Total other financing sources - - 1 1 Amounts available for appropriation 4,619,801 4,666,486 4,666,487 1 Charges to Appropriations (Outflows): General government: Planning and development: Economic development 976,700 532,255 532,190 65 Total planning and development 976,700 532,255 532,190 65 Other financing uses: Operating transfers out 3,302,440 2,441,430 2,441,425 5 Total charges to appropriations 4,279,140 2,973,685 2,973,615 70 BUDGETARY FUND BALANCE, JUNE 30, 2007 340,661$ 1,692,801$ 1,692,872$ 71$ See accompanying notes to the basic financial statements. ActualBudgeted Amounts -43- Amounts CITY OF PADUCAH, KENTUCKY BUDGETARY COMPARISON SCHEDULE (BUDGETARY BASIS) SPECIAL REVENUE INVESTMENT FUND FOR THE YEAR ENDED JUNE 30, 2007 Exhibit 10 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 4,666,487$ Differences - budget to GAAP: The beginning fund balance is a budgetary resource, but is not a current year revenue for financial reporting purposes (719,801) Transfers from other funds are inflows of budgetary resources, but are not revenues for financial reporting purposes (1) Total revenues as reported on the statement of revenues, expenditures, and changes in fund balances- governmental funds 3,946,685$ Uses/outflows of resources: Actual amounts "total charges to appropriations" from the budgetary comparison schedule 2,973,615$ Differences - budget to GAAP: Transfers to other funds are outflows of budgetary resources, but are not expenditures for financial reporting purposes (2,441,425) Total expenditures as reported on the statement of revenues, expenditures, and changes in fund balances- governmental funds 532,190$ See accompanying notes to the basic financial statements. CITY OF PADUCAH, KENTUCKY -44- FOR THE YEAR ENDED JUNE 30, 2007 NOTE TO RSI BUDGETARY COMPARISON SCHEDULE SPECIAL REVENUE INVESTMENT FUND Exhibit 11 Variance with Final Budget Positive Original Final (Negative) Beginning budgetary fund balance 1,970,003$ 1,970,003 1,970,003 -$ Resources (Inflows): Intergovernmental and grants Intergovernmental - 283,755 283,755 - Grants - 3,451,660 3,451,663 3 Total intergovernmental and grants - 3,735,415 3,735,418 3 Interest - - - - Other: Miscellaneous - 235,895 235,902 7 Total other - 235,895 235,902 7 Other financing sources: Long-term debt issued - 246,670 246,667 (3) Operating transfers in 2,448,250 3,560,255 3,560,249 (6) Total other financing sources 2,448,250 3,806,925 3,806,916 (9) Amounts available for appropriation 4,418,253 9,748,238 9,748,239 1 Charges to Appropriations (Outflows): General government: Capital outlay 2,448,250 6,504,510 6,504,491 19 Total planning and development 2,448,250 6,504,510 6,504,491 19 Other financing uses: Operating transfers out - 317,705 317,697 8 Total charges to appropriations 2,448,250 6,822,215 6,822,188 27 BUDGETARY FUND BALANCE, JUNE 30, 2007 1,970,003$ 2,926,023$ 2,926,051$ 28$ See accompanying notes to the basic financial statements. CITY OF PADUCAH, KENTUCKY BUDGETARY COMPARISON SCHEDULE (BUDGETARY BASIS) GENERAL CAPITAL IMPROVEMENTS FUND FOR THE YEAR ENDED JUNE 30, 2007 ActualBudgeted Amounts -45- Amounts Exhibit 12 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 9,748,239$ Differences - budget to GAAP: The beginning fund balance is a budgetary resource, but is not a current year revenue for financial reporting purposes (1,970,003) Proceeds from issuance of long-term debt are inflows of budgetary resources, but are not revenues for financial reporting purposes (246,667) Transfers from other funds are inflows of budgetary resources, but are not revenues for financial reporting purposes (3,560,249) Total revenues as reported on the statement of revenues, expenditures, and changes in fund balances- governmental funds 3,971,320$ Uses/outflows of resources: Actual amounts "total charges to appropriations" from the budgetary comparison schedule 6,822,188$ Differences - budget to GAAP: Transfers to other funds are outflows of budgetary resources, but are not expenditures for financial reporting purposes (317,697) Total expenditures as reported on the statement of revenues, expenditures, and changes in fund balances- governmental funds 6,504,491$ See accompanying notes to the basic financial statements. CITY OF PADUCAH, KENTUCKY -46- FOR THE YEAR ENDED JUNE 30, 2007 NOTE TO RSI BUDGETARY COMPARISON SCHEDULE GENERAL CAPITAL IMPROVEMENTS FUND Exhibit 13 Nonmajor Solid Enterprise Current Assets: Waste Funds Totals Cash and cash equivalents 318,670$ 91,170$ 409,840$ 1,166,918$ Investments 1,480,000 - 1,480,000 2,322,767 Accounts receivable 136,070 72,246 208,316 - Interest receivable 13,291 - 13,291 92,653 Prepaid expenses - 15,095 15,095 1,047,118 Inventory - - - 86,585 Total current assets 1,948,031 178,511 2,126,542 4,716,041 Noncurrent Assets: Net capital assets: Land 65,908 - 65,908 - Depreciable capital assets 1,163,799 261,816 1,425,615 1,808,391 Total noncurrent assets 1,229,707 261,816 1,491,523 1,808,391 Total assets 3,177,738 440,327 3,618,065 6,524,432 Current Liabilities: Voucher and accounts payable 186,595 13,020 199,615 431,513 Accrued payroll and payroll taxes 30,766 - 30,766 8,186 Accrued compensated absences 70,451 - 70,451 12,713 Deferred revenue - - - 22,335 Due to other funds - - - 986,000 Total current liabilities 287,812 13,020 300,832 1,460,747 Noncurrent Liabilities: Landfill post-closure costs 2,062,500 - 2,062,500 - Accrued compensated absences 6,212 - 6,212 - Total noncurrent liabilities 2,068,712 - 2,068,712 - Total liabilities 2,356,524 13,020 2,369,544 1,460,747 Invested in capital assets 1,229,707 261,816 1,491,523 1,808,391 Unrestricted (408,493) 165,491 (243,002) 3,255,294 TOTAL NET ASSETS 821,214$ 427,307$ 1,248,521 5,063,685$ Reconciliation to government-wide statements of net assets: Adjustment to reflect the consolidation of Internal Service Funds' activities related to Enterprise Funds 95,716 NET ASSETS OF BUSINESS-TYPE ACTIVITIES 1,344,237$ See accompanying notes to the basic financial statements. Governmental Activities CITY OF PADUCAH, KENTUCKY STATEMENT OF NET ASSETS PROPRIETARY FUNDS JUNE 30, 2007 -47- Business-type Activities ASSETS LIABILITIES NET ASSETS Funds Service Internal Exhibit 14 Nonmajor Solid Enterprise Operating Revenues: Waste Funds Totals Charges for services - internal 3,848,021$ 160,807$ 4,008,828$ 5,611,715$ Charges for services - external - - - 426,632 Miscellaneous 17,132 64,278 81,410 - Total operating revenues 3,865,153 225,085 4,090,238 6,038,347 Operating Expenses: Cost of sales and service 3,791,225 257,146 4,048,371 5,180,443 Depreciation and amortization 288,458 64,609 353,067 497,404 Total operating expenses 4,079,683 321,755 4,401,438 5,677,847 Operating income (loss)(214,530) (96,670) (311,200) 360,500 Nonoperating Revenues (Expenses): Interest and investment income 83,854 - 83,854 97,219 Gain (loss) on disposal of property and equipment 16,641 - 16,641 48,656 Total nonoperating revenues (expenses)100,495 - 100,495 145,875 Income (loss) before contributions and transfers (114,035) (96,670) (210,705) 506,375 Contributions and Transfers: Capital contributions - 23,969 23,969 - Transfers in - 58,175 58,175 19,570 Total contributions and transfers - 82,144 82,144 19,570 Change in net assets (114,035) (14,526) (128,561) 525,945 Total net assets, July 1, 2006 935,249 441,833 4,537,740 TOTAL NET ASSETS - JUNE 30, 2007 821,214$ 427,307$ 5,063,685$ Reconciliation to government-wide statements of net assets: Adjustment to reflect the consolidation of Internal Service Funds' activities related to Enterprise Funds 62,988 CHANGE IN NET ASSETS OF BUSINESS-TYPE ACTIVITIES (65,573)$ See accompanying notes to the basic financial statements. ActivitiesBusiness-type Activities CITY OF PADUCAH, KENTUCKY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2007 Governmental Internal Service Funds -48- Exhibit 15 Nonmajor Solid Enterprise Cash Flows from Operating Activities: Waste Funds Totals Cash received from customers 3,810,046$ 157,230$ 3,967,276$ 6,208,087$ Payments to suppliers (2,572,618) - (2,572,618) (224,921) Payments to employees (880,173) - (880,173) (296,268) Claims paid - - - (3,408,898) Payments to internal service funds (426,216) (4,828) (431,044) - Other receipts (payments)17,132 (250,967) (233,835) (1,367,634) Net cash provided (used) by operating activities (51,829) (98,565) (150,394) 910,366 Cash Flows from Noncapital Financing Activities: Transfers (to) from other funds - 58,175 58,175 19,570 Cash Flows from Capital and Related Financing Activities: Capital contributions - 23,969 23,969 - Purchase of capital assets (549,180) (17,690) (566,870) (671,190) Proceeds from sale of capital assets 16,641 - 16,641 49,666 Net cash provided (used) by capital and related financing activities (532,539) 6,279 (526,260) (621,524) Cash Flows from Investing Activities: Proceeds from sale of investment securities 1,462,354 - 1,462,354 1,474,806 Interest on cash and investments 98,631 - 98,631 70,756 Purchase of investments (1,480,000) - (1,480,000) (2,322,767) Net cash provided (used) by investing activities 80,985 - 80,985 (777,205) Net increase (decrease) in cash and cash equivalents (503,383) (34,111) (537,494) (468,793) Cash and cash equivalents, July 1, 2006 822,053 125,281 947,334 1,635,711 CASH AND CASH EQUIVALENTS, JUNE 30, 2007 318,670$ 91,170$ 409,840$ 1,166,918$ Reconciliation of Operating Income (Loss) to Net Cash Provided by Operating Activities: Operating income (loss)(214,530)$ (96,670)$ (311,200)$ 360,500$ Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization 288,458 64,609 353,067 497,404 Change in assets and liabilities: Receivables (37,975) (67,855) (105,830) 180,399 Prepaid expenses - (1,665) (1,665) 136,064 Inventories - - - (20,653) Accounts payable (87,782) 3,016 (84,766) (243,348) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (51,829)$ (98,565)$ (150,394)$ 910,366$ See accompanying notes to the basic financial statements. CITY OF PADUCAH, KENTUCKY STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2007 -49- Governmental Activities Internal Service Business-type Activities Funds Exhibit 16 Private- Pension purpose Agency Funds Trusts Funds Cash and cash equivalents 122,189$ 4,582$ 712,834$ Receivables: Interest 68,180 - - Prepaid expenses 255 - - Investments at fair value Money market funds - 5,594 - Certificates of deposits 240,000 - - Common stock 5,723,490 - - Corporate bonds 1,029,907 - - U.S. agencies bonds 808,379 - - Mortgage backed securities 3,761,272 - - Mutual funds 3,034,198 140,373 - Total assets 14,787,870 150,549 712,834 Voucher and accounts payable 279 - - Due to other funds - 100 - Payroll taxes and withholdings payable - - 712,834 Total liabilities 279 100 712,834$ Held in trust for pension benefits and other purposes 14,787,591$ 150,449$ -$ See accompanying notes to the basic financial statements NET ASSETS Primary Government -50- ASSETS LIABILITIES CITY OF PADUCAH, KENTUCKY STATEMENT OF NET ASSETS FIDUCIARY FUNDS JUNE 30, 2007 Exhibit 17 Private- Pension purpose Additions: Funds Trusts Contributions: Employer 234,221$ -$ Plan members 12,386 - Intergovernmental revenues - 10,615 Total contributions 246,607 10,615 Investment income: Net increase (decrease) in fair value of investments 1,520,671 7,937 Interest and dividends 438,718 3,074 Net investment income 1,959,389 11,011 Interfund transfers - 50,000 Total additions 2,205,996 71,626 Deductions: Benefits 1,840,165 - Capital outlay - 7,486 Administrative expenses 86,383 5,189 Total deductions 1,926,548 12,675 Change in net assets 279,448 58,951 Net assets, July 1, 2006 14,508,143 91,498 NET ASSETS, JUNE 30, 2007 14,787,591$ 150,449$ See accompanying notes to the basic financial statements. -51- STATEMENT OF CHANGES IN NET ASSETS CITY OF PADUCAH, KENTUCKY FIDUCIARY FUNDS FOR THE YEAR ENDED JUNE 30, 2007 CITY OF PADUCAH, KENTUCKY BASIC FINANCIAL STATEMENTS COMPONENT UNITS FINANCIAL STATEMENTS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2007 Exhibit 18 All Paducah Paducah Paducah Component Water Power Transit Unit Current Assets: Works System Authority Totals Cash and cash equivalents 581,532$ 4,086,775$ 47,085$ 4,715,392$ Receivables, net: Accounts 339,096 2,551,308 50,730 2,941,134 Grants - - 614,512 614,512 Other 712,345 81,521 9,528 803,394 Inventories 415,268 1,312,167 62,035 1,789,470 Prepaid expenses - 53,433 53,287 106,720 Other current assets 763,181 - - 763,181 Total current assets 2,811,422 8,085,204 837,177 11,733,803 Noncurrent Assets: Investments, restricted 799,541 1,876,884 - 2,676,425 Net capital assets: Land and construction in progress 1,106,899 1,924,152 486,314 3,517,365 Depreciable capital assets 31,024,878 44,153,429 3,732,745 78,911,052 Restricted assets 1,745,444 - - 1,745,444 Other assets 47,833 429,776 - 477,609 Total noncurrent assets 34,724,595 48,384,241 4,219,059 87,327,895 Total assets 37,536,017 56,469,445 5,056,236 99,061,698 ASSETS -52- CITY OF PADUCAH, KENTUCKY STATEMENT OF NET ASSETS COMPONENT UNITS JUNE 30, 2007 All Paducah Paducah Paducah Component Water Power Transit Unit Current Liabilities: Works System Authority Totals Voucher and accounts payable 388,359$ 4,061,671$ 636,886$ 5,086,916$ Cash deficit - - - - Line of credit - 1,568,014 - 1,568,014 Accrued payables - 460,118 73,995 534,113 Deferred revenue - 768,282 - 768,282 Accrued interest - 156,375 - 156,375 Notes payable due within one year 25,000 - 30,171 55,171 Bonds payable due within one year 990,000 385,000 - 1,375,000 Other current liabilities 990,598 731,044 - 1,721,642 Total current liabilities 2,393,957 8,130,504 741,052 11,265,513 Noncurrent Liabilities: Bonds payable 911,580 4,109,368 - 5,020,948 Notes payable 140,000 6,000,000 339,382 6,479,382 Other liabilities - 401,938 - 401,938 Total noncurrent liabilities 1,051,580 10,511,306 339,382 11,902,268 Total liabilities 3,445,537 18,641,810 1,080,434 23,167,781 Net Assets: Invested in capital assets, net of related debt 30,113,030 35,583,213 3,659,649 69,355,892 Restricted for: Capital projects - - - - Debt service 1,581,690 1,876,884 - 3,458,574 Unrestricted 2,395,760 367,538 316,153 3,079,451 TOTAL NET ASSETS 34,090,480$ 37,827,635$ 3,975,802$ 75,893,917$ See accompanying notes to the basic financial statements -53- NET ASSETS LIABILITIES Exhibit 19 Charges for Authorities: Expenses Services Business-type activities: Paducah Water Works 6,712,204$ 6,867,559$ -$ 520,355$ Paducah Power System 48,905,522 49,733,519 - - Paducah Transit Authority 5,988,216 3,366,711 1,990,000 531,898 TOTAL COMPONENT UNITS 61,605,942$ 59,967,789$ 1,990,000$ 1,052,253$ General Revenues: Unrestricted investment earnings Gain (loss) on disposal of assets Miscellaneous general Total general revenues and transfers Change in net assets Net assets, July 1, 2006 NET ASSETS, JUNE 30, 2007 See accompanying notes to the basic financial statements -54- CITY OF PADUCAH, KENTUCKY STATEMENT OF ACTIVITIES COMPONENT UNITS FOR THE YEAR ENDED JUNE 30, 2007 Grants and Contributions Program Revenues FUNCTIONS/PROGRAMS Operating Grants and Contributions Capital Paducah Paducah Paducah Water Power Transit Works System Authority Totals 675,710$ -$ -$ 675,710$ - 827,997 - 827,997 - - (99,607) (99,607) 675,710 827,997 (99,607) 1,404,100 157,231 315,997 8,277 481,505 - - - - 266,784 38,705 25,625 331,114 424,015 354,702 33,902 812,619 1,099,725 1,182,699 (65,705) 2,216,719 32,990,755 36,644,936 4,041,507 73,677,198 34,090,480$ 37,827,635$ 3,975,802$ 75,893,917$ -55- Net (Expense) Revenue and Changes in Net Assets CITY OF PADUCAH, KENTUCKY NOTES TO THE FINANCIAL STATEMENTS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2007 CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 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 pronouncements 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 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 and the City is able to impose its will on the organizations. (Continued) -56- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 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 Paducah Power System Transit Authority of the 401 Washington Street 1500 Broadway City of Paducah Paducah, Kentucky 42003 Paducah, Kentucky 42001 850 Harrison Street Paducah, Kentucky 42001 Related Organizations 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) -57- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 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. Special Revenue Investment Fund – To account for restricted funds from employee license fee used for economic development, neighborhood redevelopment and infrastructure capital investments within Paducah. 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) -58- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 Note 1 - Summary of Significant Account Policies: Fiduciary funds report resources held in trust. 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). Pension trust funds report the receipt, investment, and distribution of retirement contributions. The remaining funds are private-purpose trust funds which report the receipt and distribution of in accordance with maintenance trust agreements. Agency fund accounts for the City’s payroll wages, taxes and related withholdings. 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-type 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, pension and private-purpose trust funds, and financial statements of City component units utilize 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, pension and private-purpose trust 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-type activities are presented using the accrual basis of accounting generally including the reclassification or elimination of internal activity (between or within funds). 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 (Continued) -59- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 Note 1 - Summary of Significant Account Policies: principal and interest which are reported when due. Agency funds are presented using the accrual basis of accounting. All proprietary, pension and private-purpose 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. 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. Permit revenues are not susceptible to accrual because generally they are not measurable until received in cash. Deferred revenue The City reports deferred revenue on its statement of net assets. Deferred revenues arise when potential revenue does not meet both the “measurable” and “available” criteria for recognition in the current period. Deferred 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 deferred revenue is removed from the statement of net assets and revenue is recognized. Allocation of Indirect Expenses The City allocates indirect expenses primarily comprised of fleet management services and various self funded insurance coverage provided to departments and employees of the city not directly allocated. Allocations are charged to functions based on use by weighted-average methodology. Budgets and Budgetary Accounting The City legal adopts annual budgets for all governmental and proprietary funds except for Section Eight Housing Fund. The City follows these procedures in establishing the budgetary data reflected in these financial statements: (Continued) -60- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 Note 1 - Summary of Significant Accounting Policies: 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. 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, 2007. Cash and Investments The City Council updated and adopted formal deposit and investment policies in January 2001. These policies apply to all City funds not contained in public trusts. Pension trust fund has investment policies separately approved by their oversight board. The private purpose trust has no adopted deposit and investment policy. 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. Securities traded on a national or international exchange are valued at the last reported sales price at current exchange rates. Managed funds related to the pension and private purpose trust funds not listed on an established market are reported at estimated fair value as determined by the respective fund managers based on quoted sales prices of the underlying securities. Cash deposits and certificates of deposits are reported at carrying amount which reasonably estimates fair value. Additional cash and investment disclosures are presented in Note 3. (Continued) -61- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 Note 1 - Summary of Significant Accounting Policies: 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, employee earnings taxes, business licenses, insurance premiums taxes, franchise taxes, grant revenue and interlocal note receivable. 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, employee earnings taxes, business licenses, insurance premiums taxes, 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. Inventories Inventories are stated at cost on a first-in, first-out basis. Capital Assets The accounting treatment of property, plant, and equipment (capital 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, property, plant, and equipment are accounted for as capital assets. All capital assets are valued at historical cost, or estimated historical cost if actual is unavailable, except for donated capital 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. (Continued) -62- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 Note 1 - Summary of Significant Accounting Policies: Capital assets of the primary government are depreciated 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, capital assets used in governmental fund operations are accounted for as capital outlay expenditures of the governmental fund upon acquisition. Capital 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 matured compensated absence liability payable from expendable available financial resources, while the proprietary funds report the liability as it is incurred. 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, notes 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. (Continued) -63- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 Note 1 - Summary of Significant Accounting Policies: 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 Interfund services provided and used 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. All other interfund transactions are reported as 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. (Continued) -64- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 Note 1 - Summary of Significant Accounting Policies: 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 reallocations 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. 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. (Continued) -65- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 Note 1 - Summary of Significant Accounting Policies: 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 Façade Loans Other Grants Grant Program Expenditures 25% of Employee Earning Tax Economic and Capital Development For the year ended June 30, 2007, 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, 2007, 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. The due dates and collection period for all property taxes, exclusive of vehicle taxes, for the fiscal year ended June 30, 2007, are as follows: Description Date Assessment and enforceable lien January 1, 2006 Levy September 26, 2006 Face value amount payment dates 1st half by November 1, 2006 2nd half by February 1, 2007 Delinquent date - 10% penalty plus 1/2% per month 1st half - November 30, 2006 2nd half - February 28, 2007 (Continued) -66- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 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 Custodial credit risk for deposits is the risk that in the event of a bank failure, the City’s deposits may not be returned or the City will not be able to recover collateral securities in the possession of an outside party. The City’s investment policy requires all investments be made in accordance with applicable legal requirements with consideration of investment safety. Accordingly, the City maintains collateral agreements with its financial institutions. Deposits are 101% secured with collateral valued at market or par, whichever is lower, less the amount of the Federal Deposit Insurance Corporation insurance (FDIC). The City Council approves and designates a list of authorized depository institutions based on evaluation of solicited responses and certifications provided by financial institutions and recommendations of an evaluation committee and/or Finance Director. Deposits of the City’s reporting entity are insured or collateralized with securities held by the City, its agent, or by the pledging financial institution’s trust department or agent in the name of City. During the year ended June 30, 2007, the City’s only cash and cash equivalents were demand deposits. At year end, the carrying amount and the bank balance of the City’s cash and cash equivalents was $9,358,924 and $10,059,708, respectively. Investments As of June 30, 2007, the City’s reporting entity had the following investments: Fair Value/ Average Investment Maturities (In Years) (2) Carrying Credit Quality/ Less Greater Types of Investments Amount Rating (1) Than 1 1-5 6-10 Than 10 Primary Government Certificates of Deposits (3) $ 7,345,534 NA $ 7,345,534 $ - $ - $ - Component Units Money Market Funds 943,038 AAA 943,038 - - - Certificates of Deposits 1,733,387 NA 1,733,387 - - - 2,676,425 Total Primary Government And Component Units $ 10,021,959 Fiduciary and Private Purpose Trust Funds Money Market Funds $ 5,594 AAA $ - $ - $ - $ - Certificates of Deposits (3) 240,000 NA 240,000 - - - Common Stock 5,723,490 NA NA NA NA NA Corporate Bonds 1,029,907 AAA/A- 297,791 197,212 534,904 - U.S. Agencies 808,379 AAA 808,379 - - - Mortgage Backed Securities (4) 3,761,272 AAA/AA- 114,341 851,237 2,795,694 - Mutual Funds Equity 87,315 NA NA NA NA NA Fixed 53,058 NA NA NA NA NA Index 3,034,198 NA NA NA NA NA Total Fiduciary and Private Purpose Trust Funds $ 14,743,213 (Continued) -67- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 Note 3 - Detail Notes on Transaction Classes/Accounts: (1) Ratings are provided where applicable to indicate associated Credit Risk. NA indicates not applicable. NR indicates that instrument is not rated. (2) Maturities are provided for debt instruments with maturity dates. NA indicates not applicable. (3) $240,000 of the fiduciary's certificates of deposits is pooled with the primary government's certificates of deposits. (4) Includes $502,294 of securities callable as of 6/30/07. Investment Policies City Policy Credit Risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Generally, the City’s investing activities are managed under the custody of the City’s Finance Director. Investing is performed in accordance with investment policies adopted by the City Council complying with State Statutes. In accordance with the City’s investment policy and the State Statutes, the City may invest funds temporarily in excess of operating needs in the following: Kentucky Revised Statutes (KRS 66.480) authorize the City to invest in: 1. Obligations of the U.S. Treasury, agencies, and instrumentalities, including obligations subject to repurchase agreements, provided delivery of obligations subject to repurchase agreements are held by the City or through an authorized agent; 2. Obligations and contracts for future delivery or purchase of obligations backed by the full faith and credit of the United States or a United States government agency; 3. Obligations of any corporation of the United States government; 4. Bonds or certificates of indebtedness of the state of Kentucky and of its agencies and instrumentalities; 5. Certificates of deposit issued by or other interest-bearing accounts of any bank or savings and loan institution which are insured by the Federal Deposit Insurance Corporation or similar entity or which are collateralized, to the extent uninsured, by any obligations permitted by section 41.240(4) of the Kentucky Revised Statutes; 6. Securities issued by a state or local government, or any instrumentality or agency thereof, in the United States, and rated in one of the three highest categories by a national recognized rating agency. (Continued) -68- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 Note 3 - Detail Notes on Transaction Classes/Accounts: Interest Rate Risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The City policy provides that to the extent practicable, investments are matched with anticipated cash flows. Investments are diversified to minimize the risk of loss resulting from over- concentration of assets in a specific maturity period, a single issuer, or an individual class of securities. Unless matched to a specific cash flow, investments are not, in general, made in securities maturing more than five years from the date of purchase. Surplus cash may be invested in securities exceeding five years if the maturity of such investments is made to coincide as nearly as practicable with the expected use of the investment. Concentration of credit risk is the risk of loss attributed to the magnitude of the City’s investment in a single issuer. The City policy does not specifically address concentration of credit risk. Pension Trust Policy The City’s pension trust is the Police and Firefighters’ Pension Fund (PFPF). Investment policy provide for investment manager(s) who have full discretion of assets allocated to them subject to the overall investment guidelines set out in the policy. Overall investment guidelines provide for diversification and allow investment in domestic and international common stocks, fixed income securities, and cash equivalents. Custodial credit risk is addressed by the policy providing for the engagement of a custodian who accepts possession of securities for safekeeping; collects and disburses income; collects principal of sold, matured, or called items; and provides periodic accounting to the pension board. Asset allocation guideline for the plan is as follows: PFPF Retirement Plan Minimum Target Maximum Equities 35% 50% 65% Fixed Income 35% 50% 65% The retirement plan addresses credit risk and concentration of credit risk with a policy that prohibits investment of more than 5% of its assets in the securities of any one issuer with the exception of U.S. government. Policy further prohibits investment of more than 20% in any one market sector. No more than 10% of corporate debt securities in the fixed income portfolio may be rated below-investment grade. Commercial paper must be rated A1, P1. Interest rate risk is addressed by the policy requiring the plan manager(s) to maintain both diversification and a predictable and dependent source of current income. Fixed income investments are flexibly allocated among maturities of different lengths. Private Purpose Trust The private purpose trust does not have a formal investment policy. The City established the trust in accordance with Kentucky Revised Statutes. The trust provides for an investment manager who has full discretion of assets allocated to him subject to the provisions of the trust agreement. The trust invests in domestic and international mutual funds, fixed income securities, U.S. treasury securities, and cash and equivalents. (Continued) -69- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 Note 3 - Detail Notes on Transaction Classes/Accounts: Capital Assets Capital asset activity for the year ended June 30, 2007, was as follows: Primary Government Balance July 1, 2006 Additions Deductions Balance June 30, 2007 Capital assets, not being depreciated: Land $ 5,320,275 $ 1,197,941 $ - $ 6,518,216 Construction in Progress 3,945,451 4,236,941 7,380,215 802,177 Total capital assets, not being depreciated: 9,265,726 5,434,882 7,380,215 7,320,393 Capital assets, being depreciated: Land improvements 1,954,953 719,589 - 2,674,542 Building and improvements 17,923,587 421,273 - 18,344,860 Infrastructure 29,556,136 5,007,666 - 34,563,802 Equipment 7,379,496 430,080 13,000 7,796,576 Furnishings and fixtures 241,855 - - 241,855 Vehicles 7,116,024 675,965 423,710 7,368,279 Totals at historical cost 64,172,051 7,254,573 436,710 70,989,914 Less: Accumulated depreciation Land improvements 1,014,376 54,145 - 1,068,521 Buildings and improvements 10,819,836 329,165 13,000 11,136,001 Infrastructure 13,294,630 2,093,223 - 15,387,853 Equipment 5,795,893 540,681 - 6,336,574 Furnishings and fixtures 234,743 1,267 - 236,010 Vehicles 5,491,923 500,795 422,700 5,570,018 Total accumulated depreciation 36,651,401 3,519,276 435,700 39,734,977 Total capital assets, being depreciated, net: $27,520,650 $ 3,735,297 $ 1,010 $ 31,254,937 Primary Government Activities Capital Assets – Net $36,786,376 $ 9,170,179 $ 7,381,225 $ 38,575,330 Business-type Activities: Balance July 1, 2006 Additions Deductions Balance June 30, 2007 Capital assets, not being depreciated: Land $ 65,908 $ - $ - $ 65,908 (Continued) -70- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 Note 3 - Detail Notes on Transaction Classes/Accounts: Business-type Activities: Balance July 1, 2006 Additions Deductions Balance June 30, 2007 Capital assets, being depreciated: Building and improvements 429,254 - - 429,254 Equipment 2,133,452 17,690 - 2,151,142 Vehicles 2,164,751 549,180 86,633 2,627,298 Totals at historical cost 4,727,457 566,870 86,633 5,207,694 Less: Accumulated depreciation Buildings and improvements 162,164 13,420 - 175,584 Equipment 2,022,126 73,673 - 2,095,799 Vehicles 1,331,355 265,974 86,633 1,510,696 Total accumulated depreciation 3,515,645 353,067 86,633 3,782,079 Total capital assets, being depreciated, net: $ 1,211,812 $ 213,803 $ - $ 1,425,615 Business - Type Activities Capital Assets – Net $ 1,277,720 $ 213,803 $ - $ 1,491,523 Depreciation expense was charged to governmental activities as follows: General government: General administration $ 184,416 Finance 2,332 Planning 6,700 Inspections 528 Personnel 1,188 Information systems - Fleet maintenance 5,496 Total general government 200,660 Public safety: Police 133,303 Fire 35,680 Grants 149,670 Emergency 911 52,383 Court awards 11,697 Fleet Lease Trust 491,907 Total public safety 874,640 Public service: Public works 88,350 Engineering 167,125 Total public service 255,475 (Continued) -71- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 Note 3 - Detail Notes on Transaction Classes/Accounts: Parks and recreation $ 93,407 Planning and development: Infrastructure 2,093,223 Grants 1,871 Total planning and development 2,095,094 Total Depreciation Expense – Governmental Activities $ 3,519,276 Depreciation expense was charged to business-type activities as follows: Solid Waste Fund $ 288,458 Civic Center 12,801 TISA Fund 51,808 Total Depreciation Expense – Business-Type Activities $ 353,067 Discretely Presented Component Units: Balance July 1, 2006 Additions Deductions Balance June 30, 2007 Capital assets, not being depreciated: Land $ 1,878,096 $ 13,987 $ - $ 1,892,083 Construction in Progress 875,755 749,527 - 1,625,282 Total capital assets, not being depreciated: 2,753,851 763,514 - 3,517,365 Capital assets, being depreciated: Building and improvements 1,672,826 - - 1,672,826 Equipment 4,732,374 487,708 - 5,220,082 Utility Plant 122,988,607 7,069,631 894,855 129,163,383 Totals capital assets, being depreciated: 129,393,807 7,557,339 894,855 136,056,291 Less: Accumulated depreciation: Buildings and improvements 432,919 107,385 - 540,304 Equipment 1,885,319 734,540 - 2,619,859 Utility plant 51,174,945 3,728,051 917,920 53,985,076 Total accumulated depreciation 53,493,183 4,569,976 917,920 57,145,239 Total capital assets, being depreciated, net: 75,900,624 2,987,363 (23,065) 78,911,052 Component Units Capital Assets – Net $78,654,475 $ 3,750,877 $ (23,065) $ 82,428,417 (Continued) -72- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 Note 3 - Detail Notes on Transaction Classes/Accounts: Depreciation expense, charged to functions/programs of discretely presented major component units as follows: Paducah Water Works $ 1,246,302 Paducah Power System 2,481,749 Paducah Transit Authority 841,925 TOTAL DEPRECIATION EXPENSE BY ACTIVITY $ 4,569,976 Accounts Payable Payables in the governmental and proprietary funds are composed of payables to vendors and accrued salaries and benefits. Long-Term Debt (1) 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, 2007, the governmental long-term debt consisted of the following: General obligation bonds: Current portion $ 630,000 Noncurrent portion 17,680,000 TOTAL GENERAL OBLIGATION BOND COSTS $18,310,000 Note payable: Current portion $ 294,220 Noncurrent portion 3,026,303 TOTAL NOTE PAYABLE PAYMENTS $ 3,320,523 Accrued compensated absences: Current portion $ 512,672 Noncurrent portion 1,426,286 TOTAL ACCRUED COMPENSATED ABSENCES $ 1,938,958 (Continued) -73- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 Note 3 - Detail Notes on Transaction Classes/Accounts: Business-type Activities As of June 30, 2007, the long-term debt payable from proprietary fund resources consisted of the following: Accrued compensated absences: Current portion $ 70,451 Noncurrent portion 6,212 TOTAL ACCRUED COMPENSATED ABSENCES $ 76,663 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. Principal and interest payments prior to September 1, 2007, on the bonds are being split evenly between the City and the County. After September 1, 2007, the City and County will share 2.031% of the bond payments with the remaining amount being made from a sublease with Infiniti Plastic Technologies, Inc. Series 2005 Bond Issue - The City of Paducah issued general obligation bonds of $6,100,000 in November, 2005, to finance the police and firefighter’s pension fund estimated actuary liability. Interest rate is fixed at 5.35%. 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. (Continued) -74- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 Note 3 - Detail Notes on Transaction Classes/Accounts: 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 capital 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. Kentucky Association of Counties - The County of McCracken, Kentucky entered into an agreement in the amount of $300,000 in May, 2005, with the Kentucky Association of Counties for purchase of a rail spur in the Industrial Park West. Interest rates range from 2.175% to 4.250%. This note is required to be fully paid within 5 years from the date of issue and is backed jointly by the full faith and credit of the City and the County. While this note is issued by the County, 50% of the principal amount of the note was issued on behalf of the City which intends to participate on an equal basis with the County in accordance with an Interlocal Cooperation Agreement between the City and McCracken County, Kentucky on June 1, 2004. This note was paid in full during the fiscal year by the County from a grant thru the Greater Paducah Economic Development Council. Kentucky Association of Counties - The County of McCracken, Kentucky entered into an agreement in the amount of $250,000 in August, 2004, with the Kentucky Association of Counties to assist the Paducah- McCracken County Industrial Development Authority finance construction of the new speculative building in Industrial Park West. Interest rate is 4.250%. This note is required to be fully paid within 5 years from the date of issue and is backed jointly by the full faith and credit of the City and the County. While this note is issued by the County, 50% of the principal amount of the note was issued on behalf of the City which intends to participate on an equal basis with the County in accordance with an Interlocal Cooperation Agreement between the City and McCracken County, Kentucky on June 1, 2004. F. Burnham and Cynthia Jones – On September 6, 2006, the City entered into an agreement in the amount of $375,000 with F. Burnham and Cynthia Jones to finance the acquisition of real property to be used for the development of an arts school in the community. Interest rate is New York prime, adjusted monthly. This note is required to be fully paid by January 8, 2009. (Continued) -75- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 Note 3 - Detail Notes on Transaction Classes/Accounts: Changes in Long-Term Debt The following is a summary of changes in long-term debt for the year ended June 30, 2007: Amounts Beginning Ending Due within Type of Debt: Balance Additions Reductions Balance One Year Governmental activities: General obligation bonds: Convention and Arts Center $ 8,130,000 $ - $ 260,000 $ 7,870,000 $ 270,000 Infiniti Media Building 4,680,000 - 165,000 4,515,000 175,000 Pension 6,100,000 - 175,000 5,925,000 185,000 Notes payable: Kentucky League of Cities 3,110,411 - 141,585 2,968,856 145,887 Kentucky Association of Counties 81,285 - 81,285 - - Kentucky Association of Counties 127,500 - 22,500 105,000 25,000 Jones Agreement - 246,666 - 246,666 123,333 Accrued compensated absences 1,854,481 1,199,342 1,114,865 1,938,958 512,672 TOTAL GENERAL LONG- TERM DEBT $24,083,707 $1,446,008 $1,960,235 $ 23,569,480 $ 1,436,892 Business-type activities: Accrued compensated absences $ 76,070 $ 70,487 $ 69,894 $ 76,663 $ 70,451 (1) To reconcile amounts in this schedule to the calculation of “net assets invested in capital assets, net of related debt”, capital related debt includes 14.75% of the outstanding 2001 general obligation bonds - $1,550,049 net of the portion on behalf of the County ($775,024); 100% of the outstanding 2004 general obligation bonds - $4,515,000 net of the portion on behalf of the County ($2,257,500); 100% of the outstanding Kentucky League of Cities’ note payable - $2,968,856; 100% of the Jones Agreement - $246,666 less unamortized bond costs - ($230,288). Annual Debt Service Requirements The annual debt service requirements to maturity, excluding obligations associated with compensated absences, for long-term debt as of June 30, 2007, are as follows: Year Ending June 30 Principal Interest 2008 $ 924,220 $ 999,688 2009 953,653 966,929 2010 862,386 923,643 2011 902,092 886,485 2012 919,441 848,361 2013-2017 5,280,249 3,587,636 2018-2022 6,690,571 2,234,485 2023-2026 5,097,911 563,883 TOTALS $ 21,630,523 $ 11,011,110 (Continued) -76- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 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. Typically, the compensated absence obligations have been paid by the general fund, emergency communication service fund, section eight housing fund, solid waste fund and fleet maintenance fund. Amounts accrued at June 30, 2007, are as follows: Governmental Activities Business-type Activities Accrued sick leave $ 792,440 $ 18,278 Accrued vacation leave 1,012,309 52,937 Applicable payroll taxes 134,209 5,448 Totals 1,938,958 76,663 Less current portion 512,672 70,451 LONG-TERM PORTION $ 1,426,286 $ 6,212 Landfill Closure and Post-Closure Costs The County of McCracken, Kentucky (County) closed the local landfill to the public on June 30, 1995. The County must comply with established state and federal landfill closure procedures and must perform maintenance and monitoring procedures at the site for thirty years after closure. The 30-year period will begin upon approval from the Commonwealth of Kentucky regarding the environmental condition of the landfill site. As of June 30, 2007, approval had not yet been granted. The County estimated post-closure care costs totaling $4,125,000 or $125,000 per year plus 10% for inflation. Actual costs may be higher due to inflation, changes in technology, or changes in regulations. In the year ending June 30, 2001, the City entered into an inter-local agreement to share equally the costs for post-closure costs and accordingly, has recorded a long-term liability for 50% of the estimated closure expense. It is anticipated that post-closure costs will be paid out of the Solid Waste Fund to the extent that funds are available with any excess costs being funded using long-term borrowing. Interfund Transactions and Balances Interfund transfers during the year ended June 30, 2007, were as follows: Governmental Funds: Interfund Transfers In Interfund Transfers Out General Fund $ 91,668 $ 2,561,136 Capital Project Fund 3,560,249 317,697 Capital Investment Fund 1 2,441,425 Nonmajor Governmental Funds 1,558,059 236,464 Internal Service Funds 19,570 - Fiduciary Funds: Appointive Employee Pension Fund 25,000 - Police and Firefighters’ Pension Fund 194,000 - Other trusts 50,000 - Proprietary Funds: Nonmajor Proprietary Funds 58,175 - TOTALS $ 5,556,722 $ 5,556,722 (Continued) -77- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 Note 3 - Detail Notes on Transaction Classes/Accounts: 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, 2007: Due From Due To General Fund $1,071,915 $ 951,313 General Capital Improvements Fund 93,215 - Special Revenue Investment Fund 951,313 93,215 Nonmajor Governmental Funds - 85,815 Internal Service Funds - 986,000 Fidiciary Funds - 100 TOTALS $2,116,433 $2,116,443 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. Administrative Costs - Administrative costs are funded from investment earnings. Valuation of Investments - Investments are reported at fair value. Investments are composed of securities valued at current market prices. (Continued) -78- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 Note 4 - Pension Plans - City of Paducah: 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. PFPF does not issue a separate, stand-alone report. Accordingly, 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 Year Ended Year Ended Component June 30, 2007 June 30, 2006 June 30, 2005 Beginning NPO balance $ (5,425,468) $ - $ - ARC 46,948 719,348 953,044 Interest on NPO (420,474) - - Unfunded ARC adjustment 455,664 - - Pension cost 82,138 719,348 953,044 Less actual contribution 209,221 6,144,816 953,044 Net change in NPO (127,083) (5,425,468) - ENDING NPO BALANCE $ (5,552,551) $ (5,425,468) $ - PERCENTAGE OF PENSION COST CONTRIBUTED 446% 854% 100% (Continued) -79- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 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, 2007 Assets: Cash and cash equivalents $ 48,913 Receivables 64,133 Investment at fair value 14,357,246 Total assets 14,470,292 Liabilities: Voucher and accounts payable 276 Net Assets: Held in trust for pension benefits and other purposes $ 14,470,016 Statement of Changes in Net Assets Police and Firefighters’ Retirement Fund For the Year Ended June 30, 2007 Additions: Employer contributions $ 209,221 Plan members’ contributions 12,386 Total contributions 221,607 Investment earnings: Net increase in fair value of investments 1,520,671 Interest and dividends 423,404 Net investment earnings 1,944,075 Total additions 2,165,682 Deductions: Benefits 1,781,138 Administrative expenses 78,028 Total deductions 1,859,166 Change in net assets 306,516 Net assets, July 1, 2006 14,163,500 NET ASSETS, JUNE 30, 2007 $ 14,470,016 (Continued) -80- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 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, 2007. AEPF does not issue a separate, stand-alone report. Accordingly, 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: Year Ended Year Ended Year Ended Component June 30, 2007 June 30, 2006 June 30, 2005 Beginning NPO balance $(287,297) $(246,269) $(212,055) ARC 13,883 17,182 26,328 Interest on NPO (17,238) (14,776) (12,723) Unfunded ARC adjustment 36,825 31,566 27,181 Pension cost 33,470 33,972 40,786 Less actual contribution 25,000 75,000 75,000 Net change in NPO 8,470 (41,028) (34,214) ENDING NPO BALANCE $(278,827) $(287,297) $(246,269) PERCENTAGE OF PENSION COST CONTRIBUTED 75% 221% 184% The financial statements for the Appointive Employees’ Pension Fund are as follows: Statement of Fiduciary Net Assets Appointive Employees’ Pension Fund June 30, 2007 Assets: Cash and cash equivalents $ 73,276 Receivables 4,047 Prepaid expenses 255 Investment at fair value 240,000 Total assets 317,578 Liabilities: Voucher and accounts payable 3 Net Assets: Held in trust for pension benefits and other purposes $ 317,575 (Continued) -81- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 Note 4 - Pension Plans - City of Paducah: Statement of Changes in Net Assets Appointive Employees’ Pension Fund For the Year Ended June 30, 2007 Additions: Interest and dividends $ 15,314 Employer contributions 25,000 Total additions 40,314 Deductions: Benefits 59,027 Administrative expenses 8,355 Total deductions 67,382 Change in net assets (27,068) Net assets, July 1, 2006 344,643 NET ASSETS, JUNE 30, 2007 $ 317,575 Contribution Information A summary of actuarial assumptions at June 30, 2007, the date of the latest actuarial valuation is as follows: PFPF AEPF Valuation date 7/1/07 7/1/07 Actuarial cost method Entry age normal Aggregate (1) Amortization method Level dollar closed Level dollar closed Remaining amortization period 25 Years 10 Years Asset valuation method Market value Market value Actuarial assumptions: Investment rate of return 8.00% 6.0% Projected salary increases 4.00% (2) Inflation rates adjustments 3.00% (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) -82- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 Note 4 - Pension Plans - City of Paducah: Membership Information Membership of each plan consisted of the following at June 30, 2007: PFPF AEPF Active participants 3 - Beneficiaries 39 6 Retired participants 49 3 TOTAL PARTICIPANTS 91 9 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, 2007, 2006 and 2005, the City contributed 28.21%, 25.01%, and 22.08%, respectively, of each hazardous employee’s creditable compensation and 13.19%, 10.98%, and 8.48%, respectively, of each nonhazardous 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, 2007, 2006 and 2005, were $3,849,611, $3,460,797, and $2,963,431, respectively, equal to the required contributions for each year. Note 5 – Appropriations Deficit: No departments that adopted budgets annually had excess expenditures over appropriations for the fiscal year ended June 30, 2007. Note 6 - Component Unit Long-Term Debt: Long-term debt of the discretely presented component units consists of the following at June 30, 2007: 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) -83- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 Note 6 - Component Unit Long-Term Debt: The following schedule summarizes the debt service requirements for the Refunding Revenue Bonds, Series of 1991, maturing July 1, 2009 bearing interest rates of 4.375% to 4.450%: Total Debt Fiscal Year Principal Interest Service 2008 990,000 89,890 1,079,890 2009 1,030,000 45,835 1,075,835 Less deferred debit arising from advanced refunding (118,420) - (118,420) TOTALS $1,901,580 $135,725 $2,037,305 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 3.16% to 5.19%, with a .2% annual service fee. The annual requirements to amortize the outstanding debt as of June 30, 2007, are as follows: Year Ending June 30 Principal Interest Fee (0.2%) Total 2008 $ 25,000 $ 7,769 $ 330 $ 33,099 2009 25,000 6,759 280 32,039 2010 25,000 5,673 230 30,903 2011 30,000 4,521 180 34,701 2012 30,000 3,069 120 33,189 2013 30,000 1,557 60 31,617 TOTALS $165,000 $29,348 $1,200 $195,548 Paducah Electric Plant Board 1991 Bond Issue On November 1, 1998, the System issued $3.35 million in special revenue refunding bonds with interest rates between 3.75% and 4.20%. The System 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 System. The System 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 System 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) -84- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 Note 6 - Component Unit Long-Term Debt: The following schedule summarizes the remaining debt service requirements for the Paducah Electric Plant Board 2001 and 1998 Bond Issues: Total Debt Fiscal Year Principal Interest Service 2008 385,000 191,117 576,117 2009 400,000 175,533 575,533 2010 415,000 159,332 574,332 2011 435,000 142,083 577,083 2012 450,000 124,015 574,015 2013-2017 2,550,000 330,980 2,880,980 TOTALS $4,635,000 $1,123,060 $5,758,060 Bonds payable totaling $4,494,368 are recorded net of $140,632 unamortized bond discount and advance refunding deferred charges. Note Payable, Bond Anticipation Notes (BANs) – Paducah Electric Plant Board In August 2006, the System issued $6 million in BANs with an interest rate of 4.31% maturing June 1, 2008. BANs will be used for capital construction and are secured by the System’s assets. The System anticipated these interest-only BANs will be refinanced with the issuance of larger revenue bonds to complete the capital construction. The following schedule summarizes the remaining debt service requirements for the Paducah Electric Plant Board’s note payable: Total Debt Fiscal Year Principal Interest Service 2008 $ - 129,300 129,300 2009 6,000,000 129,300 6,129,300 TOTALS $ 6,000000 $ 258,600 $6,258,600 (Continued) -85- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 Note 6 - Component Unit Long-Term Debt: Notes Payable, Kentucky Association of Counties (KACO) – Paducah Transit Authority On February 13, 2004 and October 24, 2006, the Transit Authority of the City of Paducah entered into agreements with the KACO in connection with grant match projects. Interest rates on these agreements are 4.25%. As of June 30, 2007, the outstanding balance was $236,347 and $133,206, respectively. The following schedule summarizes the remaining debt service requirements for the Transit Authority of the City of Paducah notes payable: Total Debt Fiscal Year Principal Interest Service 2008 $ 30,171 13,938 44,109 2009 73,877 12,272 86,149 2010 79,912 8,791 88,703 2011 84,185 5,318 89,503 2012 37,078 3,596 40,674 2013-2017 64,330 2,417 66,747 TOTALS $ 369,553 $ 46,332 $ 415,885 Note 7 - Commitments and Contingencies: 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. Construction Commitments The City has various on-going contracts for construction, renovations, paving materials, equipment, and labor. As of June 30, 2007, the construction commitments were as follows: Cumulative Costs Incurred Estimated Costs Stormwater Phase II $ 55,566 $ 66,500 Floodwall Pipe Rehabilitation - 163,800 Oliver Church Road Improvement Project 171,515 218,500 Riverfront – Ohio River Boat Launch Project 151,095 210,275 $ 378,176 $ 659,075 (Continued) -86- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 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. 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 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 - 2004 - 2005 - 1,004 1,004 - 2005 - 2006 - 23,829 23,829 - 2006 - 2007 - 57,168 57,168 - 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 $386,326 at June 30, 2007. 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 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 2004 - 2005 350,000 2,994,673 2,931,673 413,000 2005 - 2006 413,000 2,853,645 2,812,645 454,000 2006 - 2007 454,000 2,601,505 2,669,179 386,326 During the fiscal year ending June 30, 2006, several current and former firefighters of the City of Paducah filed a lawsuit for unpaid compensation benefits and related pension obligations. The range of possible financial exposure for the City is zero to six million dollars. The City intends to vigorously defend the case. In addition, 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. (Continued) -87- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 Note 9 - Lease Agreements: The City is leasing land and building 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 is the property of the City, however, for financial reporting; the building is reported with the Luther F. Carson Four Rivers Center financial records. 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 may purchase the property during the term of lease by paying off the related indebtedness. In addition, at the end of the lease term, Infiniti Media may purchase the property for $1. Infiniti Media has the option to cancel this lease at any time after the sixth year of the lease term by providing written notice 18 months prior to the date of termination. The City also leases certain other property to various lessees under non-cancelable agreements that have various expiration dates through June 30, 2011. Rental revenue received from leased property during 2007 totaled $421,954. The following is an analysis of property leased under these leases at June 30, 2007: Land $ 606,350 Buildings 3,422,262 Equipment 110,126 Total 4,138,738 Less: accumulated depreciation 882,882 NET BOOK VALUE $ 3,255,855 Depreciation expense for the year ended June 30, 2007, on leased property was $71,755. The following is a schedule of future minimum rental income from operating leases at June 30, 2007: Lease Income 2008 $ 776,106 2009 843,739 2010 843,739 2011 336,151 TOTAL MINIMUM LEASE RECEIPTS $ 2,799,735 (Continued) -88- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2007 Note 10 – Subsequent Event Subsequent to the fiscal year ended June 30, 2007, the City donated real property valued at $377,393 to the Paducah Junior College for the development of a community arts school. -89- CITY OF PADUCAH, KENTUCKY REQUIRED SUPPLEMENTARY INFORMATION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2007 Exhibit A-1 CITY OF PADUCAH, KENTUCKY REQUIRED SUPPLEMENTARY INFORMATION PENSION TRUST FUNDS SCHEDULES Schedules of Funding Progress 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) 7/1/2001 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 7/1/2005 9,150,861 15,310,380 6,159,519 59.8 198,307 3,106.05 7/1/2006 14,163,498 14,527,020 363,522 97.5 165,414 219.76 7/1/2007 14,470,016 14,463,785 (6,231) 100.0 100,986 (6.17) 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 Year Ended June 30 Annual Required Contribution (ARC) Percent ARC Contributed Ending Net Pension Obligation (NPO) 2001 865,026 100 - 2002 806,632 100 - 2003 645,773 100 - 2004 811,401 100 - 2005 953,044 100 - 2006 719,348 854 (5,425,468) 2007 46,948 446 (5,552,551) AEPF Year Ended June 30 Annual Required Contribution (ARC) Percent ARC Contributed Ending Net Pension Obligation (NPO) 2001 62,029 121 (182,940) 2002 59,297 126 (186,170) 2003 50,112 150 (198,365) 2004 48,339 156 (212,055) 2005 26,328 285 (246,269) 2006 17,182 437 (287,297) 2007 13,883 180 (278,827) -90- CITY OF PADUCAH, KENTUCKY SUPPLEMENTARY INFORMATION NONMAJOR GOVERNMENTAL FUNDS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2007 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. Exhibit B-1 Court Small HOPE 3 Awards Grant Grant Fund Fund Fund Cash and cash equivalents 200,322$ 337,726$ 235,661$ 189,502$ -$ Receivables, net: Accounts - 105,663 - - - Grants - - - - - TOTAL ASSETS 200,322$ 443,389$ 235,661$ 189,502$ -$ Liabilities: Voucher and accounts payable 197,034$ 15,791$ 156,846$ 3,148$ -$ Accrued payroll and payroll taxes - 24,709 - - - Deferred revenues - - - 176,760 - Due to other funds - 26,767 - - - Total liabilities 197,034 67,267 156,846 179,908 - Fund Balances: Reserved for: Program purposes - - - 9,594 - Unreserved 3,288 376,122 78,815 - - Total fund balances 3,288 376,122 78,815 9,594 - TOTAL LIABILITIES AND FUND BALANCES 200,322$ 443,389$ 235,661$ 189,502$ -$ See auditors report on pages 11-12. LIABILITIES AND ASSETS Municipal Communication CITY OF PADUCAH, KENTUCKY COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2007 -91- Special Revenue Funds FUND BALANCES Aid Program Service Fund Emergency Debt Service Home HUD Section Debt Grant Revolving Eight Service Fund Grant Fund Housing Fund 43,964$ 271,635$ 901$ 859,460$ 31,836$ 2,171,007$ - - - - - 105,663 - - 7,589 - - 7,589 43,964$ 271,635$ 8,490$ 859,460$ 31,836$ 2,284,259$ -$ 704$ -$ 61,719$ -$ 435,242$ - - - 18,185 - 42,894 - - - - - 176,760 - - 8,490 50,559 - 85,816 - 704 8,490 130,463 - 740,712 - 270,931 - 728,997 - 1,009,522 43,964 - - - 31,836 534,025 43,964 270,931 - 728,997 31,836 1,543,547 43,964$ 271,635$ 8,490$ 859,460$ 31,836$ 2,284,259$ Grant Fund GovernmentalPolice Special Revenue Funds -92- Total Nonmajor Funds PHA Exhibit B-2 Court Small HOPE 3 Awards Grant Grant Revenues: Fund Fund Fund Taxes -$ 522,665$ -$ -$ -$ Charges for services - 222,729 - - - Intergovernmental 583,493 - - - - Grants - - - 4,344 - Interest 14,051 13,236 9,778 - - Miscellaneous 177,033 240,577 26,038 30,980 - Total revenues 774,577 999,207 35,816 35,324 - Expenditures: Current operations: Public safety - 1,260,856 33,575 - - Public service 1,007,410 - - - - Planning and development - - - 27,684 - Debt Service: Principal requirement - - - - - Interest and fiscal requirement - - - - - Total expenditures 1,007,410 1,260,856 33,575 27,684 - Excess (deficiency) of revenues over expenditures (232,833) (261,649) 2,241 7,640 - Other Financing Sources (Uses): Transfers in - 276,867 - - - Transfers out (51,405) (33,013) - (1,649) (127,397) Total other financing sources (uses) (51,405) 243,854 - (1,649) (127,397) Net change in fund balances (284,238) (17,795) 2,241 5,991 (127,397) Fund balances, July 1, 2006 287,526 393,917 76,574 3,603 127,397 FUND BALANCES, JUNE 30, 2007 3,288$ 376,122$ 78,815$ 9,594$ -$ See auditors report on pages 11-12. Emergency -93- Special Revenue Funds Municipal Aid Program Communication Service Fund CITY OF PADUCAH, KENTUCKY FOR THE YEAR ENDED JUNE 30, 2007 NONMAJOR GOVERNMENTAL FUNDS AND CHANGES IN FUND BALANCES COMBINING STATEMENT OF REVENUES, EXPENDITURES Debt Service Home HUD Section Debt Grant Revolving Eight Service Fund Grant Fund Housing Fund -$ -$ -$ -$ -$ 522,665$ - - - - - 222,729 - - - - 809,535 1,393,028 - - 34,945 2,014,894 - 2,054,183 - 10,323 - 726 - 48,114 - 52,677 - - - 527,305 - 63,000 34,945 2,015,620 809,535 4,768,024 - - 34,945 - - 1,329,376 - - - - - 1,007,410 6,036 141,781 - 1,716,507 - 1,892,008 - - - - 782,870 782,870 - - - - 1,108,385 1,108,385 6,036 141,781 34,945 1,716,507 1,891,255 6,120,049 (6,036) (78,781) - 299,113 (1,081,720) (1,352,025) 50,000 150,000 - - 1,081,192 1,558,059 - (23,000) - - - (236,464) 50,000 127,000 - - 1,081,192 1,321,595 43,964 48,219 - 299,113 (528) (30,430) - 222,712 - 429,884 32,364 1,573,977 43,964$ 270,931$ -$ 728,997$ 31,836$ 1,543,547$ Total Nonmajor Governmental -94- Funds PHA Police Grant Fund Special Revenue Funds Exhibit B-3 Variance with Final Budget Final Positive Revenues: Budget Actual (Negative) Intergovernmental 583,495$ 583,493$ (2)$ Interest 14,050 14,051 1 Other 177,035 177,033 (2) Total revenues 774,580 774,577 (3) Expenditures: Public service 1,007,410 1,007,410 - Excess (deficiency) of revenues over expenditures (232,830) (232,833) (3) Other Financing Sources (Uses): Operating transfers out (51,405) (51,405) - Net change in fund balance (284,235)$ (284,238)$ (3)$ Fund balance, July 1, 2006 287,526 FUND BALANCE, JUNE 30, 2007 3,288$ See auditors report on pages 11-12. -95- FOR THE YEAR ENDED JUNE 30, 2007 CITY OF PADUCAH, KENTUCKY MUNICIPAL AID PROGRAM FUND DETAIL SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL Exhibit B-4 Variance with Final Budget Final Positive Revenues: Budget Actual (Negative) Local contributions 522,665$ 522,665$ -$ Telephone surcharges 222,730 222,729 (1) Interest 13,235 13,236 1 Miscellaneous 240,575 240,577 2 Total revenues 999,205 999,207 2 Expenditures: Public safety 1,260,860 1,260,856 4 Excess (deficiency) of revenues over expenditures (261,655) (261,649) 6 Other Financing Sources (Uses): Operating transfers in 276,865 276,867 2 Operating transfers out (33,015) (33,013) 2 Net change in fund balance (17,805)$ (17,795) 10$ Fund balance, July 1, 2006 393,917 FUND BALANCE, JUNE 30, 2007 376,122$ See auditors report on pages 11-12. -96- FOR THE YEAR ENDED JUNE 30, 2007 CITY OF PADUCAH, KENTUCKY EMERGENCY COMMUNICATION SERVICE FUND DETAIL SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL Exhibit B-5 Variance with Final Budget Final Positive Revenues: Budget Actual (Negative) Court awarded forfeitures 26,040$ 26,038$ (2)$ Interest 9,775 9,778 3 Total revenues 35,815 35,816 1 Expenditures: Public safety 33,575 33,575 - Excess (deficiency) of revenues over expenditures 2,240$ 2,241 1$ Fund balance, July 1, 2006 76,574 FUND BALANCE, JUNE 30, 2007 78,815$ See auditors report on pages 11-12. -97- CITY OF PADUCAH, KENTUCKY COURT AWARDS FUND DETAIL SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2007 Exhibit B-6 Variance with Final Budget Final Positive Revenues: Budget Actual (Negative) Grants 4,340$ 4,344$ 4$ Other 30,980 30,980 - Total revenues 35,320 35,324 4 Expenditures: Planning and development 27,680 27,684 (4) Excess (deficiency) of revenues over expenditures 7,640 7,640 - Other Financing Sources (Uses): Operating transfers out (1,650) (1,649) 1 Total other financing sources (uses) (1,650) (1,649) 1 Net change in fund balance 5,990$ 5,991 1$ Fund balance, July 1, 2006 3,603 FUND BALANCE, JUNE 30, 2007 9,594$ See auditors report on pages 11-12. -98- FOR THE YEAR ENDED JUNE 30, 2007 CITY OF PADUCAH, KENTUCKY SMALL GRANT FUND DETAIL SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL Exhibit B-7 Variance with Final Budget Final Positive Revenues: Budget Actual (Negative) Other -$ -$ -$ Expenditures: Planning and development - - - Excess (deficiency) of revenues over expenditures - - - Other Financing Sources (Uses): Operating transfers out (127,400) (127,397) 3 Net change in fund balance (127,400)$ (127,397) 3$ Fund balance, July 1, 2006 127,397 FUND BALANCE, JUNE 30, 2007 -$ See auditors report on pages 11-12. -99- FOR THE YEAR ENDED JUNE 30, 2007 CITY OF PADUCAH, KENTUCKY HOPE 3 IMPLEMENTATION GRANT FUND DETAIL SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL Exhibit B-8 Variance with Final Budget Final Positive Revenues: Budget Actual (Negative) Grants -$ -$ -$ Total revenues - - - Expenditures: Planning and development 6,040 6,036 4 Excess (deficiency) of revenues over expenditures (6,040) (6,036) 4 Other Financing Sources (Uses): Operating transfers in 50,000 50,000 - Total other financing sources (uses) 50,000 50,000 - Net change in fund balance 43,960$ 43,964 4$ Fund balance, July 1, 2006 - FUND BALANCE, JUNE 30, 2007 43,964$ See auditors report on pages 11-12. -100- FOR THE YEAR ENDED JUNE 30, 2007 CITY OF PADUCAH, KENTUCKY HOME GRANT FUND DETAIL SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL Exhibit B-9 Variance with Final Budget Final Positive Revenues: Budget Actual (Negative) Interest 10,320$ 10,323$ 3$ Other 52,675 52,677 2 Total revenues 62,995 63,000 5 Expenditures: Planning and development 141,785 141,781 4 Excess (deficiency) of revenues over expenditures (78,790) (78,781) 9 Other Financing Sources (Uses): Operating transfers in 150,000 150,000 - Operating transfers out (23,000) (23,000) - Total other financing sources (uses) 127,000 127,000 - Net change in fund balance 48,210$ 48,219 9$ Fund balance, July 1, 2006 222,712 FUND BALANCE, JUNE 30, 2007 270,931$ See auditors report on pages 11-12. -101- FOR THE YEAR ENDED JUNE 30, 2007 CITY OF PADUCAH, KENTUCKY HUD REVOLVING GRANT FUND DETAIL SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL Exhibit B-10 Variance with Final Budget Final Positive Revenues: Budget Actual (Negative) Grants 34,945$ 34,945$ -$ Expenditures: Public safety 34,945 34,945 - Excess (deficiency) of revenues over expenditures -$ - -$ Fund balance, July 1, 2006 - FUND BALANCE, JUNE 30, 2007 -$ See auditors report on pages 11-12. -102- FOR THE YEAR ENDED JUNE 30, 2007 CITY OF PADUCAH, KENTUCKY PADUCAH HOUSING AUTHORITY POLICE GRANT FUND DETAIL SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL Exhibit B-11 Variance with Final Budget Final Positive Revenues: Budget Actual (Negative) Intergovernmental 809,530$ 809,535$ 5$ Expenditures: Debt service: Principal requirement 782,870 782,870 - Interest and fiscal requirement 1,108,385 1,108,385 - Total expenditures 1,891,255 1,891,255 - Excess (deficiency) of revenues over expenditures (1,081,725) (1,081,720) 5 Other Financing Sources (Uses): Operating transfers in 1,081,195 1,081,192 (3) Net change in fund balance (530)$ (528) 2$ Fund balance, July 1, 2006 32,364 FUND BALANCE, JUNE 30, 2007 31,836$ See auditors report on pages 11-12. -103- FOR THE YEAR ENDED JUNE 30, 2007 CITY OF PADUCAH, KENTUCKY DEBT SERVICE FUND DETAIL SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL CITY OF PADUCAH, KENTUCKY SUPPLEMENTARY INFORMATION NONMAJOR PROPRIETARY FUNDS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2007 COMBINING FINANCIAL STATEMENTS NONMAJOR PROPRIETARY FUNDS 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 Civic Center TISA Current Assets: Fund Fund Cash and cash equivalents 621$ 90,549$ 91,170$ Receivables, net 588 71,658 72,246 Prepaid expense - 15,095 15,095 Total current assets 1,209 177,302 178,511 Noncurrent Assets: Net depreciable capital assets 222,764 39,052 261,816 Total assets 223,973 216,354 440,327 Current Liabilities: Voucher and accounts payable 209 12,811 13,020 Due to other funds - - - Total liabilities 209 12,811 13,020 Invested in capital assets 222,764 39,052 261,816 Unrestricted 1,000 164,491 165,491 TOTAL NET ASSETS 223,764$ 203,543$ 427,307$ See auditors report on pages 11-12. ASSETS LIABILITIES NET ASSETS -104- Total Nonmajor Enterprise Funds CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF NET ASSETS NONMAJOR PROPRIETARY FUNDS JUNE 30, 2007 Exhibit C-2 Civic Center TISA Operating Revenues: Fund Fund Charges for services 31,372$ 129,435$ 160,807$ Miscellaneous - 64,278 64,278 Total operating income 31,372 193,713 225,085 Operating Expenses: Cost of sales and service 41,759 215,387 257,146 Depreciation and amortization 12,801 51,808 64,609 Total operating expenses 54,560 267,195 321,755 Operating income (loss) (23,188) (73,482) (96,670) Non-Operating Revenues (Expenses): Interest and investment income - - - Income (loss) before contributions and transfers (23,188) (73,482) (96,670) Contributions and Operating Transfers: Capital contributions - 23,969 23,969 Transfers in 15,000 43,175 58,175 Transfers out - - - Total contributions and operating transfers 15,000 67,144 82,144 Change in net assets (8,188) (6,338) (14,526) Net assets, July 1, 2006 231,952 209,881 441,833 NET ASSETS, JUNE 30, 2007 223,764$ 203,543$ 427,307$ See auditors report on pages 11-12. -105- FOR THE YEAR ENDED JUNE 30, 2007 NONMAJOR PROPRIETARY FUNDS AND CHANGES IN FUND NET ASSETS Funds COMBINING STATEMENT OF REVENUES, EXPENSES CITY OF PADUCAH, KENTUCKY Total Nonmajor Enterprise Exhibit C-3 Civic Center TISA Cash Flows from Operating Activities: Fund Fund Cash received from customers 30,784$ 126,446$ 157,230$ Payments to internal service funds (2,380) (2,448) (4,828) Other receipts (payments) (42,783) (208,184) (250,967) Net cash provided (used) by operating activities (14,379) (84,186) (98,565) Cash Flows from Noncapital Financing Activities: Transfers (to) from other funds 15,000 43,175 58,175 Cash Flows from Capital and Related Financing Activities: Capital contributions - 23,969 23,969 Acquisition and construction of capital assets - (17,690) (17,690) Net cash used by capital and related financing activities - 6,279 6,279 Net increase (decrease) in cash and cash equivalents 621 (34,732) (34,111) Cash and cash equivalents, July 1, 2006 - 125,281 125,281 CASH AND CASH EQUIVALENTS, JUNE 30, 2007 621$ 90,549$ 91,170$ Reconciliation of Operating Income (Loss) to Net Cash Provided by Operating Activities: Operating income (loss) (23,188)$ (73,482)$ (96,670)$ Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation and amortization 12,801 51,808 64,609 Change in assets and liabilities: Receivables (588) (67,267) (67,855) Prepaid expense - (1,665) (1,665) Accounts payable and accrued expenses (3,404) 6,420 3,016 NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (14,379)$ (84,186)$ (98,565)$ See auditors report on pages 11-12. CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF CASH FLOWS NONMAJOR PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2007 -106- Total Nonmajor Enterprise Funds CITY OF PADUCAH, KENTUCKY SUPPLEMENTARY INFORMATION INTERNAL SERVICE FUNDS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2007 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 coverage on a continuing basis be financed primarily through user charges. Exhibit D-1 Health Fleet Lease Insurance Insurance Combined Current Assets: Trust Fund Fund Total Cash and cash equivalents 15,013$ 466,072$ 14,905$ 670,928$ 1,166,918$ Investments - 2,322,767 - - 2,322,767 Receivables, net - 55,781 - 36,872 92,653 Prepaid expense - - 1,032,868 14,250 1,047,118 Inventories 86,585 - - - 86,585 Total current assets 101,598 2,844,620 1,047,773 722,050 4,716,041 Noncurrent Assets: Net depreciable capital assets 22,377 1,786,014 - - 1,808,391 Total assets 123,975 4,630,634 1,047,773 722,050 6,524,432 Current Liabilities: Voucher and accounts payable 7,793 - 20,309 403,411 431,513 Accrued payroll and payroll taxes 8,186 - - - 8,186 Accrued compensated absences 12,713 - - - 12,713 Deferred revenue - - - 22,335 22,335 Due to other funds - - 986,000 - 986,000 Total current liabilities 28,692 - 1,006,309 425,746 1,460,747 Invested in capital assets, net of related debt 22,377 1,786,014 - - 1,808,391 Unrestricted 72,906 2,844,620 41,464 296,304 3,255,294 TOTAL NET ASSETS 95,283$ 4,630,634$ 41,464$ 296,304$ 5,063,685$ See auditors report on pages 11-12. -107- CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF NET ASSETS INTERNAL SERVICE FUNDS JUNE 30, 2007 LIABILITIES ASSETS NET ASSETS Fleet Maintenance Exhibit D-2 Health Fleet Lease Insurance Insurance Combined Trust Fund Fund Total Operating Revenues: Charges for services - internal 535,902$ 716,599$ 1,294,534$ 3,064,680$ 5,611,715$ Charges for services - external - - - 426,632 426,632 Total operating revenues 535,902 716,599 1,294,534 3,491,312 6,038,347 Operating Expenses: Vehicle maintenance 482,957 135 - - 483,092 Administrative - 5,600 - 62,700 68,300 Insurance - - 1,304,131 3,338,143 4,642,274 Leave expense (13,223) - - - (13,223) Depreciation 5,497 491,907 - - 497,404 Total operating expenses 475,231 497,642 1,304,131 3,400,843 5,677,847 Operating income (loss) 60,671 218,957 (9,597) 90,469 360,500 Nonoperating Revenues and (Expenses): Interest and investment income - 97,219 - - 97,219 Gain (loss) on disposal of property and equipment - 48,656 - - 48,656 Total nonoperating revenues (expenses) - 145,875 - - 145,875 Income (loss) before transfers 60,671 364,832 (9,597) 90,469 506,375 Contributions and Transfers: Transfers in - - 19,570 - 19,570 Change in net assets 60,671 364,832 9,973 90,469 525,945 Net assets, July 1, 2006 34,612 4,265,802 31,491 205,835 4,537,740 NET ASSETS, JUNE 30, 2007 95,283$ 4,630,634$ 41,464$ 296,304$ 5,063,685$ See auditors report on pages 11-12. -108- Fleet Maintenance CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2007 Exhibit D-3 Health Fleet Lease Insurance Insurance Combined Cash Flows from Operating Activities: Trust Fund Fund Total Receipts from other funds for services 535,902$ 716,599$ 1,294,534$ 3,661,052$ 6,208,087$ Payments to suppliers (224,921) - - - (224,921) Payments to employees (296,268) - - - (296,268) Claims paid - - - (3,408,898) (3,408,898) Other receipts (payments) - (5,735) (1,299,199) (62,700) (1,367,634) Net cash provided (used) by operating activities 14,713 710,864 (4,665) 189,454 910,366 Cash Flows from Noncapital Financing Activities: Transfers from other funds - - 19,570 - 19,570 Cash Flows from Capital and Related Financing Activities: Proceeds from sale of capital assets - 49,666 - - 49,666 Purchase of capital assets - (671,190) - - (671,190) Net cash used by capital and related financing - (621,524) - - (621,524) Cash Flows from Investing Activities: Proceeds from sales and maturities of investments - 1,474,806 - - 1,474,806 Interest and dividends - 70,756 - - 70,756 Purchase of investments - (2,322,767) - - (2,322,767) Net cash used by investing activities - (777,205) - - (777,205) Net increase (decrease) in cash and cash equivalents 14,713 (687,865) 14,905 189,454 (468,793) Cash and cash equivalents, July 1, 2006 300 1,153,937 - 481,474 1,635,711 CASH AND CASH EQUIVALENTS, JUNE 30, 2007 15,013$ 466,072$ 14,905$ 670,928$ 1,166,918$ Reconciliation of Operating Income (Loss) to Net Cash Provided by Operating Activities: Operating income (loss) 60,671$ 218,957$ (9,597)$ 90,469$ 360,500$ Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization 5,497 491,907 - - 497,404 Change in assets and liabilities: Receivables - - - 180,399 180,399 Prepaid expense - - 150,314 (14,250) 136,064 Inventories (20,653) - - - (20,653) Accounts payable and accrued expenses (30,802) - (145,382) (67,164) (243,348) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 14,713$ 710,864$ (4,665)$ 189,454$ 910,366$ See auditors report on pages 11-12. -109- Fleet Maintenance CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2007 CITY OF PADUCAH, KENTUCKY SUPPLEMENTARY INFORMATION FIDUCIARY FUNDS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2007 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 Total Cash and cash equivalents 48,913$ 73,276$ 122,189$ Receivables: Interest 64,133 4,047 68,180 Prepaid expenses - 255 255 Investments at fair value Certificates of deposits - 240,000 240,000 Common stock 5,723,490 - 5,723,490 Corporate bonds 1,029,907 - 1,029,907 U.S. agencies bonds 808,379 - 808,379 Mortgage backed securities 3,761,272 - 3,761,272 Mutual funds 3,034,198 - 3,034,198 Total assets 14,470,292 317,578 14,787,870 Voucher and accounts payable 276 3 279 Held in trust for pension benefits and other purposes 14,470,016$317,575$ 14,787,591$ See auditors report on pages 11-12. ASSETS LIABILITIES NET ASSETS -110- Employees' Retirement Fund Pension Fund Firefighters' AppointivePolice and CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS - PENSION TRUST FUNDS JUNE 30, 2007 Exhibit E-2 Additions:Totals Contributions: Employer 209,221$ 25,000$ 234,221$ Plan members 12,386 - 12,386 Total contributions 221,607 25,000 246,607 Investment earnings: Net increase in fair value of investments 1,520,671 - 1,520,671 Interest and dividends 423,404 15,314 438,718 Net investment earnings 1,944,075 15,314 1,959,389 Total additions 2,165,682 40,314 2,205,996 Deductions: Benefits 1,781,138 59,027 1,840,165 Administrative expenses 78,028 8,355 86,383 Total deductions 1,859,166 67,382 1,926,548 Change in net assets 306,516 (27,068) 279,448 Net assets, July 1, 2006 14,163,500 344,643 14,508,143 NET ASSETS, JUNE 30, 2007 14,470,016$ 317,575$ 14,787,591$ See auditors report on pages 11-12. CITY OF PADUCAH, KENTUCKY Police and Appointive Retirement Fund Pension Fund Employees'Firefighters' -111- FIDUCIARY FUNDS - PENSION TRUST FUNDS FOR THE YEAR ENDED JUNE 30, 2007 COMBINING STATEMENT OF CHANGES IN NET ASSETS FIDUCIARY FUNDS Private-purpose Trust Funds Other Trusts and Maintenance and Rehab Trust – to account for assets held by the City in the capacity of trustee for specified purposes. Exhibit E-3 Other Trusts Total Cash and cash equivalents -$ 4,582$ 4,582$ Investments at fair value Money market funds 5,594 - 5,594 Mutual funds 140,373 - 140,373 Total assets 145,967 4,582 150,549 Due to other funds 100 - 100 Held in trust for other purposes 145,867$ 4,582$ 150,449$ See auditors report on pages 11-12. Maintenance and Rehab Trust -112- ASSETS LIABILITIES NET ASSETS JUNE 30, 2007 FIDUCIARY FUNDS - PRIVATE-PURPOSE TRUST FUNDS COMBINING STATEMENT OF NET ASSETS CITY OF PADUCAH, KENTUCKY Exhibit E-4 Other Additions: Trusts Totals Contributions: Intergovernmental revenues 2,615$ 8,000$ 10,615$ Private donations - - - Total contributions 2,615 8,000 10,615 Investment earnings: Net increase in fair value of investments 7,937 - 7,937 Interest and dividends 3,074 - 3,074 Net investment earnings 11,011 - 11,011 Interfund transfers 50,000 - 50,000 Total additions 63,626 8,000 71,626 Deductions: Capital outlay 2,152 5,334 7,486 Administrative expenses 1,367 3,822 5,189 Total deductions 3,519 9,156 12,675 Change in net assets 60,107 (1,156) 58,951 Net assets, July 1, 2006 85,760 5,738 91,498 NET ASSETS, JUNE 30, 2007 145,867$ 4,582$ 150,449$ See auditors report on pages 11-12. COMBINING STATEMENT OF CHANGES IN NET ASSETS CITY OF PADUCAH, KENTUCKY -113- FOR THE YEAR ENDED JUNE 30, 2007 FIDUCIARY FUNDS - PRIVATE-PURPOSE TRUST FUNDS Maintenance and Rehab Trust 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 Payroll Fund: Additions Deductions Assets: Cash and cash equivalents 606,178$ 12,541,425$ 12,434,769$ 712,834$ Liabilities: Payroll taxes and withholdings payable 606,178$ 12,541,425$ 12,434,769$ 712,834$ See auditors report on pages 11-12. CITY OF PADUCAH, KENTUCKY AGENCY FUND IN ASSETS AND LIABILITIES STATEMENT OF CHANGES -114- FOR THE YEAR ENDED JUNE 30, 2007 Balance Balance July 1, 2006 June 30, 2007 CITY OF PADUCAH, KENTUCKY STATISTICAL SECTION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2007 STATISTICAL SECTION Contents Page Financial Trends 115-119 Revenue Capacity 120-125 Debt Capacity 126-130 Economic and Demographic Information 131-133 Operating Information 134-135 These schedules offer economic and demographic indicators to help the reader understand the environment within which the City's financial activities take place. These schedules contain service and infrastructure data to help the reader understand how the information in the City's financial report relates to the services the City provides and the activities it performs. Sources:Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The City implemented the new reporting model in the fiscal year ending June 30, 2003. Schedules presenting government- wide information include information beginning in that year. This part of the City of Paducah's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information say about the City's overall financial health. These schedules contain trend information to help the reader understand how the City's financial performance and well-being changed over time. These schedules contain information to help the reader assess the factors affecting the City's ability to generate its property and employee taxes. These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future. 2007 2006 2005 (2) 2004 2003 Governmental activities: Invested in Capital Assets, Net of Related Debt 32,557,572$ 30,664,671$ 29,492,197$ 27,826,117$ 27,955,839$ Restricted for: Program purposes 1,904,321 1,018,231 727,699 714,538 713,766 Capital projects 4,618,923 2,689,804 940,323 4,031,802 3,583,589 Unrestricted 9,057,641 7,718,198 7,419,037 (406,042) 1,571,120 Total governmental activities net assets 48,138,457 42,090,904 38,579,256 32,166,415 33,824,314 Business-type activities: Invested in Capital Assets, Net of Related Debt 1,491,523 1,277,720 1,463,118 1,463,668 1,425,753 Unrestricted (147,286) 132,090 (27,648) 1,979,494 1,565,100 Total business-type activities net assets 1,344,237 1,409,810 1,435,470 3,443,162 2,990,853 Primary government: Invested in Capital Assets, Net of Related Debt 34,049,095 31,942,391 30,955,315 29,289,785 29,381,592 Restricted for: Program purposes 1,904,321 1,018,231 727,699 714,538 713,766 Capital projects 4,618,923 2,689,804 940,323 4,031,802 3,583,589 Unrestricted 8,910,355 7,850,288 7,391,389 1,573,452 3,136,220 Total primary government net assets 49,482,694$ 43,500,714$ 40,014,726$ 35,609,577$ 36,815,167$ (1) (2) -115- The City began to report accrual information when it implemented GASB Statement 34 in fiscal year 2003. Therefore, ten years of data is not available but will be accumulated over time. Significant change in governmental and business-type net assets due to reclassificationfor prior year omitted receivables,capital assets and post- closure landfill expenses. Fiscal Year (accrual basis of accounting) TABLE 1 NET ASSETS BY COMPONENT CITY OF PADUCAH, KENTUCKY Last Five Fiscal Years (1) Pages 1 of 2 2007 2006 2005 (2) 2004 2003 Expenses Governmental activities: General government 9,462,543$ 9,057,295$ 8,431,994$ 7,969,027$ 7,396,882$ Public safety 15,182,704 14,592,756 14,620,938 13,243,912 12,964,120 Public service 8,299,658 8,486,662 6,249,860 8,618,901 7,376,791 Parks and recreation 1,197,072 1,044,361 1,045,024 1,026,293 975,362 Planning and development 1,891,725 2,404,636 2,521,412 5,330,393 3,108,192 Interest on long-term debt 1,134,898 974,101 775,122 496,049 428,578 Total governmental activities expenses 37,168,600 36,559,811 33,644,350 36,684,575 32,249,925 Business-type activities: Solid Waste 4,079,684 3,893,013 3,683,954 3,419,464 3,359,731 Civic Center 54,562 45,894 39,008 33,181 46,509 TISA 267,192 269,781 170,264 184,166 123,719 Total business-type activities expenses 4,401,438 4,208,688 3,893,226 3,636,811 3,529,959 Total primary government expenses 41,570,038$ 40,768,499$ 37,537,576$ 40,321,386$ 35,779,884$ Program Revenues Governmental activities: Charges for services: General government 1,730,046$ 1,618,903$ 1,485,005$ 1,601,414$ 1,445,383$ Public safety 1,024,610 767,086 794,814 1,134,386 94,386 Public service 1,150,507 942,355 895,155 986,618 683,119 Parks and recreation 122,929 103,932 117,317 132,388 131,355 Planning and development 10,810 20,602 13,501 12,893 15,867 Operating grants and contributions 2,797,216 2,988,612 2,452,694 3,290,134 4,176,548 Capital grants and contributions 3,681,490 3,302,568 1,100,064 3,221,637 2,213,757 Total governmental activities program revenues 10,517,608 9,744,058 6,858,550 10,379,470 8,760,415 Business-type activities: Solid Waste 3,928,140 3,696,609 3,583,417 3,790,132 3,298,964 Civic Center 31,372 26,378 32,828 36,455 20,825 TISA 193,713 106,697 104,087 100,778 93,383 Operating grants and contributions - - - - - Capital grants and contributions 23,969 22,894 14,735 24,990 3,666 Total business-type activities program revenues 4,177,194 3,852,578 3,735,067 3,952,355 3,416,838 Total primary government program revenues 14,694,802$ 13,596,636$ 10,593,617$ 14,331,825$ 12,177,253$ Net (Expense)/Revenue Governmental activities (26,650,992)$ (26,815,753)$ (26,785,800)$ (26,305,105)$ (23,489,510)$ Business-type activities (224,244) (356,110) (158,159) 315,544 (113,121) Total primary government net (expense) (26,875,236)$ (27,171,863)$ (26,943,959)$ (25,989,561)$ (23,602,631)$ TABLE 2 CITY OF PADUCAH, KENTUCKY CHANGES IN NET ASSETS Last Four Fiscal Years (1) (accrual basis of accounting) -116- Fiscal Year Pages 2 of 2 2007 2006 2005 (2) 2004 2003 General Revenues and Other Changes in Net Assets Governmental activities: Taxes and licenses: Property taxes, levied for general purposes 4,122,538$ 4,107,934$ 3,919,113$ 4,012,168$ 3,893,211$ Insurance premium tax 4,414,672 3,863,953 3,957,289 3,767,864 3,580,964 Gross receipts license tax 4,050,057 3,899,432 3,720,784 3,496,438 3,404,338 Employee license tax 16,273,966 14,794,217 11,192,445 10,616,223 10,301,231 Other taxes 1,964,101 2,105,014 2,116,403 1,764,140 1,893,064 Intergovernmental revenue 1,243,028 1,201,973 955,645 871,273 836,132 Unrestricted investment earnings 639,702 462,292 290,647 220,992 325,811 Gain on sale of capital assets 48,656 8,340 - (1,972) 125,714 Transfers (58,175) (115,754) (133,959) (68,964) 18,666 Total governmental activities 32,698,545 30,327,401 26,018,367 24,678,162 24,379,131 Business-type activities: Unrestricted investment earnings 83,854 85,786 51,508 32,826 39,530 Gain on sale of capital assets 16,641 55,337 27,500 34,975 24,238 Transfers 58,176 115,754 133,959 68,964 (18,666) Total business-type activities 158,671 256,877 212,967 136,765 45,102 Change in Net Assets Governmental activities:6,047,553 3,511,648 (767,433) (1,626,943) 889,621 Business-type activities:(65,573) (99,233) 54,808 452,309 (68,019) Total primary government 5,981,980$ 3,412,415$ (712,625)$ (1,174,634)$ 821,602$ (1) (2) Significant change in governmental and business-type net assets due to reclassification for prior year omitted receivables, capital assets and post- closure landfill expenses. -117- The City began to report accrual informationwhen it implementedGASB Statement34 in fiscal year 2003. Therefore, ten years of data is not available but will be accumulated over time. Fiscal Year 2007 2006 2005 (1) 2004 2003 2002 2001 (2) 2000 1999 1998General FundReserved for:Encumbrances -$ -$ -$ -$ -$ -$ -$ -$ -$ 81,043$ Unreserved 9,976,079 9,157,310 8,303,702 4,642,073 4,925,982 4,441,662 4,229,377 3,930,807 4,498,239 5,514,441 Total general fund 9,976,079$ 9,157,310$ 8,303,702$ 4,642,073$ 4,925,982$ 4,441,662$ 4,229,377$ 3,930,807$ 4,498,239$ 5,595,484$ All Other Governmental FundsReserved for:Program purposes 1,009,522$ 783,596$ 498,423$ 483,423$ 695,213$ 567,096$ 604,021$ 327,925$ 411,956$ 520,769$ Capital improvements 4,618,923 2,689,804 940,323 3,886,391 3,583,589 4,211,718 9,834,405 1,520,510 1,342,071 467,765 Encumbrances - - - - - - - - - 9,537 Unreserved, reported in:Special revenue funds 502,189 758,017 1,039,854 770,453 1,080,043 714,972 1,247,619 1,402,554 825,094 1,254,083 Debt service funds 31,836 32,364 9,805 30,243 46,051 244,724 232,640 935,605 1,050,400 1,127,758 Total all other governmental funds 6,162,470$ 4,263,781$ 2,488,405$ 5,170,510$ 5,404,896$ 5,738,510$ 11,918,685$ 4,186,594$ 3,629,521$ 3,379,912$ (1) Significant increase in general fund balance due to reclassification for prior year omitted license and tax receivables in the amount of $3,870,992. (2) Significant increase in capital improvements fund balance due to $9,290,000 bond issue for convention and arts center construction. -118-Fiscal YearTABLE 3CITY OF PADUCAH, KENTUCKYFund Balances, Governmental FundsLast Ten Fiscal Years (modified accrual basis of accounting) 2007 2006 2005 2004 2003 (1) 2002 2001 (2) 2000 1999 1998Revenues:Taxes 6,044,069$ 6,204,686$ 6,016,570$ 5,871,229$ 5,773,871$ 5,377,865$ 4,881,408$ 4,659,202$ 4,770,784$ 4,582,205$ Licenses 25,140,615 23,432,565 19,368,765 18,423,244 17,900,739 17,299,400 16,705,030 15,970,996 15,584,674 14,985,551 Charges for services 783,018 654,059 625,281 668,659 743,826 1,452,732 1,332,280 1,073,577 1,167,741 1,154,319 Intergovernmental 1,676,783 1,529,879 1,192,724 1,029,307 1,186,306 590,372 450,412 428,698 449,686 458,006 Grants 6,089,711 5,797,500 3,758,041 4,002,721 4,900,775 3,990,245 3,761,900 3,736,837 3,182,544 4,217,395 Interest 540,204 402,943 251,302 190,350 316,794 541,277 515,299 485,883 503,275 553,341 Miscellaneous 1,832,161 1,844,285 1,377,175 3,781,034 1,803,408 963,956 1,110,447 942,077 1,503,984 1,055,444 Total revenues 42,106,561 39,865,917 32,589,858 33,966,544 32,625,719 30,215,847 28,756,776 27,297,270 27,162,688 27,006,261 Expenditures:General government 4,763,839 4,286,431 4,171,662 3,891,251 3,943,031 3,446,408 3,386,330 3,436,701 4,296,935 3,531,033 Public safety 14,759,735 14,366,846 14,376,161 12,963,685 12,535,382 12,293,481 11,579,654 11,499,408 11,475,934 11,178,439 Public service 7,226,542 7,418,656 5,947,105 6,914,523 5,995,396 7,163,787 5,923,130 4,260,125 5,209,051 4,009,198 Parks and recreation 1,192,727 1,044,299 1,045,024 1,026,297 975,361 897,060 738,401 1,661,562 1,661,119 1,476,446 Planning and development 2,424,198 2,545,227 2,267,774 2,570,473 2,204,395 2,231,628 2,784,725 2,208,864 2,292,407 2,839,121 Other 526,238 481,690 462,099 2,343,844 645,653 323,844 99,657 95,082 90,459 141,436 Capital outlay 6,504,491 5,003,091 4,870,136 10,987,184 4,172,978 7,579,179 3,850,565 2,785,069 2,202,828 1,977,737 Debt service:Principal requirement 782,870 594,047 552,938 428,613 379,229 362,275 140,636 134,295 170,615 150,709 Interest and fiscal requirement 1,108,385 949,537 745,676 471,625 428,578 413,364 25,752 30,536 35,891 46,829 Total expenditures 39,289,025 36,689,824 34,438,575 41,597,495 31,280,003 34,711,026 28,528,850 26,111,642 27,435,239 25,350,948 Other Financing Sources (Uses):Bonds issued - 6,100,000 - 5,000,000 - - 9,104,211 - - - Long-term debt issued 246,667 - 275,000 3,500,000 - - - - - - Transfers in 5,209,977 6,034,070 3,394,420 3,939,188 2,074,459 1,788,462 3,632,867 3,473,339 3,924,453 2,866,960 Transfers out (5,556,722) (12,681,180) (4,712,171) (5,295,576) (3,167,686) (3,062,056) (4,966,004) (4,064,491) (4,500,135) (3,816,173) Total other financing sources (uses) (100,078) (547,110) (1,042,751) 7,143,612 (1,093,227) (1,273,594) 7,771,074 (591,152) (575,682) (949,213) Net change in fund balances 2,717,458$ 2,628,983$ (2,891,468)$ (487,339)$ 252,489$ (5,768,773)$ 7,999,000$ 594,476$ (848,233)$ 706,100$ Capital outlay (2) 4,638,045$ 3,779,542$ 3,981,143$ 9,144,907$ 1,907,998$ -$ -$ -$ -$ -$ Debt service as a percentageof noncapital expenditures 5.46% 4.69% 4.26% 2.77% 2.75% 2.86% 0.67% 0.71% 0.82% 0.85%(1) The City implemented GASB 34, the new reporting standard, in fiscal year 2003.(2) For reports after fiscal year 2002, capital outlay is reported on the Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities.-119-Fiscal Year(modified accrual basis of accounting)TABLE 4CITY OF PADUCAH, KENTUCKYChanges in Fund Balances, Governmental FundsLast Ten Fiscal Years TotalEstimatedDirectFiscal PersonalActualTax Year CommercialResidential PropertyFranchise TotalValueRate Exemptions1998 447,773,935 366,046,353 399,909,183 49,442,125 1,263,171,596 1,318,865,740 0.348 95.8% 55,694,144 1999 467,467,471 419,904,322 394,507,049 90,087,831 1,371,966,673 1,430,510,601 0.340 95.9% 58,258,356 2000 522,210,835 418,704,093 429,763,712 66,465,568 1,437,144,208 1,497,446,385 0.328 95.9% 59,328,314 2001 558,387,762 435,879,813 479,928,323 69,737,433 1,543,933,331 1,603,816,189 0.329 96.3% 58,908,995 2002 575,900,884 448,383,787 466,849,195 71,286,784 1,562,420,650 1,623,844,461 0.328 96.2% 60,449,948 2003 592,033,879 461,336,810 453,327,389 79,952,984 1,586,651,062 1,647,809,422 0.327 96.3% 60,184,497 2004 602,788,179 484,958,897 438,024,336 73,121,063 1,598,892,475 1,661,522,546 0.326 96.2% 61,656,208 2005 622,478,658 500,350,485 425,304,684 74,460,202 1,622,594,029 1,684,469,469 0.325 96.3% 60,901,557 2006 636,606,837 525,613,365 452,475,748 74,683,129 1,689,379,079 1,750,930,676 0.325 96.5% 61,551,597 2007 692,018,288 561,151,216 462,481,332 51,455,112 1,767,105,948 1,827,595,428 0.324 96.7% 60,489,480 Source: McCracken County Property Valuation AdministratorNotes: Property in McCracken County is reassessed once every four years on average.Real EstateEstimatedValue-120-PercentAssessedAssessed Value ToTABLE 5CITY OF PADUCAH, KENTUCKYASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTYLAST TEN FISCAL YEARS TotalFiscal Real Direct Real Real Real Real Real Year Estate Personal Rate Estate Personal Estate Personal Estate Personal Estate Personal Estate Personal1998 0.327 0.390 0.348 0.043 0.050 0.372 0.372 0.585 0.607 0.032 0.034 0.103 0.123 1999 0.318 0.390 0.340 0.041 0.050 0.372 0.372 0.598 0.598 0.030 0.034 0.146 0.187 2000 0.300 0.390 0.328 0.040 0.050 0.385 0.385 0.590 0.599 0.029 0.034 0.146 0.187 2001 0.300 0.390 0.329 - - 0.385 0.385 0.597 0.597 0.022 0.022 0.195 0.223 2002 0.300 0.390 0.328 - - 0.385 0.385 0.600 0.603 0.022 0.022 0.196 0.237 2003 0.300 0.390 0.327 - - 0.396 0.396 0.598 0.605 0.022 0.022 0.196 0.221 2004 0.300 0.390 0.326 - - 0.394 0.394 0.617 0.617 0.021 0.021 0.190 0.199 2005 0.300 0.390 0.325 - - 0.448 0.448 0.618 0.619 0.021 0.021 0.196 0.226 2006 0.300 0.390 0.325 - - 0.433 0.433 0.631 0.631 0.020 0.021 0.197 0.236 2007 0.300 0.390 0.324 - - 0.433 0.433 0.631 0.631 0.020 0.021 0.197 0.236 Source: McCracken County Property Valuation Administrator and City Tax Levy Ordinance.Junior College County -121-General Fund Public Library School Districts School DistrictsLAST TEN FISCAL YEARSCity Direct Rates Overlapping RatesMcCracken Co. City of Paducah Paducah McCrackenTABLE 6CITY OF PADUCAH, KENTUCKYPROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS(PER $100 OF ASSESSED VALUE) (1) (2) Assessed Assessed Taxpayer Valuation Valuation Kentucky Oaks Mall 50,900,262$ 2.88% 44,131,900$ 3.49% Wal-Mart 34,849,607 1.97% 40,690,682 3.22% Olivet Church 1031 LLC 23,261,290 1.32% 38,791,383 3.07% South Central Bell 16,221,600 0.92% 29,562,907 2.34% Lourdes Medical Pavilion 15,982,400 0.90% - Computer Services, Inc. 15,362,263 0.87% 6,812,185 0.54% Ducmall LLC 14,374,800 0.81% - Lowe's 14,201,793 0.80% 13,891,595 1.01% Amerisource 13,672,196 0.77% Paducah Medical Investors 13,440,090 0.76% - H.B. Fuller 11,767,766 0.93% Drury Inns, Inc. 16,237,036 1.29% VMV 6,700,900 0.53% Citizens Bank & Turst Co. 11,603,141 0.92% TOTALS 212,266,301$ 12.03% 220,189,495$ 17.34% (1) Source - Property Valuation Administration; Assessed value as of January 1, 2007. (2) Source - Property Valuation Administration; Assessed value as of January 1, 1998. -122- Total Assessed Total Assessed Valuation Valuation 2007 1998 Percentage of Percentage of TABLE 7 CITY OF PADUCAH, KENTUCKY PRINCIPAL TAXPAYERS CURRENT YEAR AND NINE YEARS AGO Fiscal (1) Year Taxes Levied (1) Collections Ended for the Amount of in Subsequent Total June 30, Fiscal Year Collections Years Collections 1998 4,417,910 4,373,272 99.0% 312 4,373,584$ 99.0% 1999 4,614,749 4,602,800 99.7% 489 4,603,289$ 99.8% 2000 4,428,970 4,384,681 99.0% 998 4,385,679$ 99.0% 2001 4,549,413 4,406,600 96.9% 3,420 4,410,020$ 96.9% 2002 4,679,795 4,532,885 96.9% 6,019 4,538,904$ 97.0% 2003 4,653,264 4,631,782 99.5% 8,935 4,640,717$ 99.7% 2004 4,890,723 4,866,871 99.5% 22,199 4,889,070$ 100.0% 2005 4,765,051 4,725,999 99.2% 39,052 4,765,051$ 100.0% 2006 4,962,311 4,887,983 98.5% 74,328 4,962,311$ 100.0% 2007 4,902,924 4,850,651 98.9% - 4,850,651$ 98.9% * Source - City of Paducah Finance Department. Collected Collected -123- Percent of Percent of Levy Levy Collected within the Fiscal Year of the Levy Total Collections to Date TABLE 8 CITY OF PADUCAH, KENTUCKY SECURED TAX LEVIES AND COLLECTIONS* LAST TEN FISCAL YEARS (1) Includes current year real and personal property tax, franchise, auto and bank shares. (1) Fiscal Taxes Year Collected 1998 8,657,001$ 1.50% 1999 8,911,588 1.50% 2000 9,451,473 1.50% 2001 9,603,106 1.50% 2002 9,873,201 1.50% 2003 10,301,231 1.50% 2004 10,616,222 1.50% 2005 11,183,157 1.50% 2006 14,947,835 2.00% (2) 2007 16,258,946 2.00% 109,803,760$ (1) Source - City of Paducah Finance Department - Actual collections during the fiscal year. (2) Effective October 1, 2005, employee license tax rate increased from 1.5% to 2.0%. Direct Tax Rate -124- TABLE 9 CITY OF PADUCAH, KENTUCKY EMPLOYEE LICENSE TAX COLLECTIONS LAST TEN FISCAL YEARS (1) Taxpayers Number of Percentage Taxes By Range Filers of Total Collected $0 - $50,000 2,264 98.18% 8,747,840$ 53.80% $50,001 - $100,000 22 0.95% 1,602,865 9.86% $100,001 - $500,000 18 0.78% 3,681,440 22.64% Greater than $500,000 2 0.09% 2,226,801 13.70% TOTALS 2,306 100.00% 16,258,946$ 100.00% (1) Taxpayers Number of Percentage Taxes By Range Filers of Total Collected $0 - $50,000 1,603 97.80% 7,462,359$ 54.97% $50,001 - $100,000 19 1.16% 1,326,451 9.77% $100,001 - $500,000 15 0.92% 2,907,406 21.42% Greater than $500,000 2 0.12% 1,879,464 13.84% TOTALS 1,639 100.00% 13,575,680$ 100.00% (1) Source - City of Paducah Finance Department - Actual collections during the fiscal year. * Comparative taxpayers by range information is only available after fiscal year 2006. -125- Total Employee License Tax 2006 Percentage of Total Employee License Tax 2007 Percentage of TABLE 10 CITY OF PADUCAH, KENTUCKY PRINCIPAL EMPLOYEE LICENSE TAXPAYERS CURRENT YEAR AND ONE YEAR AGO* (1)Net Net Net (2)General PublicPublicRefundingTotalFiscal Obligation ImprovementCapital ImprovementRevenue PrimaryYear Bonds Debt Lease Debt Bonds Government1998 -$ -$ -$ 1,435,581$ 792,924$ 2,228,505$ 0.17 82$ 1999 - - - 1,331,220 701,819 2,033,039 0.14 75 2000 - - - - - - - - 2001 9,057,359 - 381,330 - - 9,438,689 0.59 359 2002 8,830,276 - 234,054 - - 9,064,330 0.56 345 2003 8,803,949 - 79,825 - - 8,883,774 0.54 338 2004 13,589,757 3,428,855 - - - 17,018,612 1.02 647 2005 13,210,195 3,503,274 - - - 16,713,469 0.99 635 2006 18,877,636 3,319,227 - - - 22,196,863 1.27 844 2007 18,278,164 3,320,522 - - - 21,598,686 1.18 821 Notes: Details regarding the city's outstanding debt can be found in the notes to the financial statements.(1) See Table 5 for estimated actual property value. This ratio is calculated using estimated property value for the prior year.(2) See Table 16 for population data.Value Capita -126-Debt to Net Actual Debt PerGovernmental Activities Business Activities Ratio ofNet TABLE 11CITY OF PADUCAH, KENTUCKYRATIO OF OUTSTANDING DEBT BY TYPELAST TEN FISCAL YEARS (1) Police and Infiniti Less (2)Convention andFire Pension Media ResourcesFiscal Art Center FundBuildingRestricted forYear Bonds Bonds Bonds Debt Service Total1998 -$ -$ -$ -$ -$ - -$ 1999 - - - - - - - 2000 - - - - - - - 2001 9,290,000 - - 232,641 9,057,359 0.56 344 2002 9,075,000 - - 244,724 8,830,276 0.54 336 2003 8,850,000 - - 46,051 8,803,949 0.53 335 2004 8,620,000 - 5,000,000 30,243 13,589,757 0.82 517 2005 8,380,000 - 4,840,000 9,805 13,210,195 0.78 502 2006 8,130,000 6,100,000 4,680,000 32,364 18,877,636 1.08 718 2007 7,870,000 5,925,000 4,515,000 31,836 18,278,164 1.00 695 Notes: Details regarding the city's outstanding debt can be found in the notes to the financial statements.(2) See Table 16 for population data.-127-(1) See Table 5 for estimated actual property value. This ratio is calculated using estimated property value for the prior year.Net Actual Bonds PerValue CapitaGeneral Bonded Debt Outstanding Ratio ofNet Bonds toTABLE 12CITY OF PADUCAH, KENTUCKYRATIO OF NET GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS Estimated (1) Share of Percentage Direct and Net Debt Applicable Overlapping Outstanding to the City Debt City of Paducah 21,598,686$ 100.0% 21,598,686$ Paducah Independent School District 10,480,000 * 100.0% 10,480,000 McCracken County 12,145,651 * 45.3% 5,501,980 McCracken County Board of Education 25,416,145 * 22.7% 5,769,465 Overlapping Debt 48,041,796 21,751,445 Total direct and overlapping debt 69,640,482$ 43,350,131$ (1) * Information from finance office at each location. 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. -128- TABLE 13 CITY OF PADUCAH, KENTUCKY DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT AS OF JUNE 30, 2007 Net assessed value 1,767,105,948$ Add exemption 60,489,480 Total assessed value 1,827,595,428$ Debt limit - 10% of total assessed value (1) 182,759,543$ Debt outstanding:General obligation bonds outstanding 18,310,000Notes payable 3,320,522Less debt not subject to limit - Gross bonded debt 21,630,522 Less amount available in debt service funds 31,836 Net bonded indebtedness subject to limit 21,598,686 Legal Debt Margin 161,160,857$ 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998Debt Limit 182,759,543$ 175,093,068$ 168,349,559$ 166,054,868$ 164,683,556$ 162,287,060$ 160,284,233$ 149,647,252$ 143,022,503$ 131,886,574$ Total net debt applicable to limit 21,598,686 22,196,863 16,713,469 17,018,612 8,883,774 9,064,330 9,438,689 - - - Legal debt margin 161,160,857$ 152,896,205$ 151,636,090$ 149,036,256$ 155,799,782$ 153,222,730$ 150,845,544$ 149,647,252$ 143,022,503$ 131,886,574$ Total net debt applicable to the limit as a percentage of debt limit 11.82% 12.68% 9.93% 10.25% 5.39% 5.59% 5.89% 0.00% 0.00% 0.00% -129-Fiscal Year(1) "Cities shall not be authorized or permitted to incur indebtedness to an amount, including existing indebtedness, in the aggregate exceeding thefollowing named maximum percentages on the value of the taxable propertytherein, 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."TABLE 14CITY OF PADUCAH, KENTUCKYLEGAL DEBT MARGIN INFORMATIONLAST TEN FISCAL YEARS (1)Fiscal Gross (2)Year RevenueExpensesPrincipal Interest Total1998 3,382,994$ 1,873,558$ 1,509,436$ 210,000$ 45,190$ 255,190$ 5.91x1999 3,369,358 2,081,507 1,287,851 110,000 37,105 147,105 8.75x2000 * * * * * * *2001 * * * * * * *2002 * * * * * * *2003 * * * * * * *2004 * * * * * * *2005 * * * * * * *2006 * * * * * * *2007 * * * * * * *(1) Gross revenue includes only sewer charges received from customers.(2) Total expenses are exclusive of depreciation and bond interest.* This information is not applicable for fiscal years after 1999 as all assets and liabilities of the Wastewater/Stormwater Fund were transferred to the Paducah-McCracken County Joint Sewer Agency as of July 1, 1999.Debt Service Coverage-130-Net RevenueAvailablefor Debt Service RequirementsTABLE 15CITY OF PADUCAH, KENTUCKYSCHEDULE OF SEWER REVENUE BOND COVERAGELAST TEN FISCAL YEARS (1) (1) Personal Income 27,256 324,837,008 11,918 36.6 3,244 4.6% 27,256 324,837,008 11,918 36.6 3,195 4.1% 27,256 324,837,008 11,918 36.6 3,289 4.4% 26,307 324,837,008 11,918 39.9 3,037 5.0% 26,307 484,496,019 18,417 39.9 2,909 6.3% 26,307 484,496,019 18,417 39.9 2,887 7.2% 26,307 484,496,019 18,417 39.9 2,977 5.8% 26,307 484,496,019 18,417 39.9 2,819 6.4% 26,307 484,496,019 18,417 39.9 2,834 5.7% 26,307 484,496,019 18,417 39.9 2,804 5.6% 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. 2005-2006 2006-2007 -131- 2001-2002 2002-2003 2003-2004 2004-2005 1997-1998 1998-1999 1999-2000 2000-2001 Fiscal Year Population Income Age Enrollment Rate Per Capita Median School Unemployment (1) (1) (2) (3) TABLE 16 CITY OF PADUCAH, KENTUCKY DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Employer (1) EmployeesEmployeesWestern Baptist Hospital 1,660 5.55% 1,660 5.55%Lourdes Hospital 1,500 5.01% 1,500 5.01%Paducah Public Schools 600 2.01% 600 2.01%Wal Mart 570 1.91% 570 1.91%LYNX Services 390 1.30% 390 1.30%State of Kentucky 390 1.30% 390 1.30%City of Paducah 380 1.27% 380 1.27%Paxton Media Group 285 0.95% 285 0.95%NRE Acquisitions 270 0.90% 280 0.94%West KY Community & Technical College 270 0.90% 270 0.90%TOTALS 6,315 21.11% 6,325 21.14%(1) Source – Paducah Area Chamber of Commerce(2) State of Kentucky - Office of Employment and Training. Ratio based on employment within the County of McCracken.* Comparative information was unavailable prior to fiscal year 2006.-132-Total Total Employment (2) Employment (2)2007 2006Percentage of Percentage ofTABLE 17CITY OF PADUCAH, KENTUCKYPRINCIPAL EMPLOYERSCURRENT YEAR AND ONE YEAR AGO* 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998Governmental ActivitiesGeneral governmentGeneral administration9877757788Finance 14 14 14 13 13 13 12 12 12 12Human resources3343334443Inspection 13 13 12 12 12 11 14 12 12 11Information Systems433332111Risk Management 1 1 1Public safetyPolice 93 93 96 94 95 94 95 94 94 83Fire 71 76 75 76 76 77 81 86 86 96Public serviceStreets 31 31 31 30 30 25 29 29 29 30Facilities 33 34 34 34 34 31 29 30 24 25Engineering9998778854Other6555585555Parks and recreation9555587554Planning and development11 11 11 11 11 11 11 12 11 11OtherFleet maintenance67766676810Business-type ActivitiesSolid waste 29 29 29 29 29 27 30 29 29 31Sewer/wastewater********2324Total Primary Government342 342 343 336 336 328 340 340 356 357* This information is not applicable for fiscal years after 1999 as all assets and liabilities of the Wastewater/Stormwater Fund were transferred to the Paducah-McCracken County Joint Sewer Agency as of July 1, 1999.**Information from city departments.Fiscal Year-133-TABLE 18CITY OF PADUCAH, KENTUCKYCITY FULL-TIME EMPLOYEES BY FUNCTION**Last Ten Fiscal Years 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998General governmentBuilding and electrical permits issued 1,411 1,362 1,376*******Business licenses issued 3,500 3,700********Public safetyPoliceAdult arrests 5,012 3,827********Murder1 - ********Rape 18 15********Robberies 42 35********Burglary 208 211********Auto theft 117 104********Arson 167********Traffic accidents 1,949 1,815********Traffic violations 7,323 7,468********FireEmergency responses 2,456 2,546 3,219 3,638 3,569 2,845 1,665 1,651 937 *Fires extinguished 163 181 176 189 198 194 177 247 131 *Structure fires 40 53 49 64 70 72 66 69 52 *Incidents with reported losses 80 91 97 106 111 129 102 94 60 *Medical/rescue 1,369 1,589 1,997 2,266 2,290 1,551 370 319 40 *Tours/in-services/training hours 485 485 485 485 485 468 558 430 * *Inspections 1,183 1,418 1,188 965 1,058 804 1,619 1,625 * *Refuse collectionResidentialRefuse collected (tons per day) 45 34********Customers served 9,388 9,368********Commercial Customers served 832 801********Public service911 calls received 122,340 167,847 168,712 168,427 173,536 164,661****Police 59,887 76,144 103,500 104,622 110,310 106,244****Fire 3,107 4,168 3,537 3,305 3,387 4,045****Other 59,346 87,535 61,675 60,500 59,839 54,372***** Information not available.**Information from city departments.-134-TABLE 19CITY OF PADUCAH, KENTUCKYOPERATING INDICATORS BY FUNCTION**Last Ten Fiscal Years 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998Public safetyPolice Stations1111111111FireStations5555555555Refuse collectionCollection trucksResidential988#######Commercial544#######Other public worksSanitary sewers (miles)********125125Combination sewers (miles)********5656Storm sewers (miles)********3636Streets (miles paved) 216 214 214 213 209 209 209 209 209 209Sidewalks (miles) 45 45 45 45 45 45 45 45 45 41Traffic signals 11 11 11 10000000Parks and recreationParks 27 18 18 18 18 18 18 18 18 18Acreage 960 325 325 325 325 325 325 230 230 230Community centers1111111111Swimming pools1111333333Public tennis courts6666666101010Public golf courses2222222222* This information is not applicable for fiscal years after 1999 as all assets and liabilities of the Wastewater/Stormwater Fund were transferred to the Paducah-McCracken County Joint Sewer Agency as of July 1, 1999.# Information not available.**Information from city departments.Fiscal Year-135-TABLE 20CITY OF PADUCAH, KENTUCKYCAPITAL ASSET STATISTICS BY FUNCTION**Last Ten Fiscal Years CITY OF PADUCAH, KENTUCKY SINGLE AUDIT SECTION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2007 Federal CFDA Pass-Through Program Title: Number Grantor Number Department of Housing and Urban Development: Direct Programs: Section 8 Housing Choice Vouchers 14.871 N/A 1,716,507$ Passed-through Kentucky Housing Corporation: Public Housing Capital Fund 14.872 N/A 35,842 Economic Development Initiative - Special Project 14.251 B-06-NI-KY0016 88 Total Department of Housing and Urban Development 1,752,437 Department of Justice: Direct Programs: Edward Byrne Memorial Justice Assistance Grant Program 16.738 2005-DJBX-0259 87 Assistance Grant Program 16.738 2006-F1115-KY-DJ 18,321 Total Department of Justice 18,408 Department of Agriculture: Passed-through Kentucky Department of Forestry: Urban and Community Forestry Program 10.675 600001509 5,000 Passed-through Kentucky Department of Education: Summer Food Service Program for Children 10.559 N/A 36,594 Total Department of Agriculture 41,594 Department of Homeland Security: Passed-through Division of Disaster and Emergency Services: Assistance to Firefighters Grant 97.044 EMW-2005-FG-15498 103,547 97.044 EMW-2005-FG-03666 39,235 Passed-through Kentucky Department of Military Affairs: Buffer Zone Protection Program 97.078 2005-GR-T5-0022 6,600 Total Department of Homeland Security 149,382 (Continued) CITY OF PADUCAH, KENTUCKY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2007 Federal Grantor/Pass-Through Grantor/ -136- Expenditures Federal CFDA Pass-Through Program Title: Number Grantor Number Department of the Interior: Passed-through Kentucky Governor's Office of Local Development Outdoor Recreation_Acquisition, Development and Planning 15.916 LWCF-21-2350 56,711 Total Department of the Interior 56,711 Department of Transportation: Passed-through Kentucky Department of State Police: State and Community Highway Safety 20.600 N/A 34,236 Passed-through Kentucky Governor's Office of Local Development Recreational Trails Program 20.219 RTP 156-01 1,078 Recreational Trails Program 20.219 RTP 187-02 1,246 Recreational Trails Program 20.219 N/A 11,520 Passed-through to River Heritage Museum Highway Planning and Construction 20.205 C05024679 17,698 Total Department of Transportation 65,778 TOTAL EXPENDITURES OF FEDERAL AWARDS 2,084,310$ See accompanying notes to schedule of expenditures of federal awards. Expenditures -137- CITY OF PADUCAH, KENTUCKY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2007 Federal Grantor/Pass-Through Grantor/ CITY OF PADUCAH, KENTUCKY NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2007 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: Federal CFDA Amount Program Title Number Provided Paducah Board of Education 10.559 36,594 River Heritage Museum 20.205 17,698 $ 54,292 -138- CITY OF PADUCAH, KENTUCKY SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2007 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. One significant control deficiency was 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 instances of significant deficiencies 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 Assistance to Firefighters Grant 97.044 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: Reference # 2007-1 Testing of payroll related to termination of employment noted seven discrepancies. Cause Untimely communication between department managers, human resource and finance department- payroll. Effect Untimely communication resulted in two instances of overpayment of wages (both recovered); two instances of late payment of final wages; two instances overpayment of state incentive pay (one recovered); and one instance of improper remittance of timesheet during leave resulting in overpayment of wages (recovered). Recommendation We recommend the City review controls governing employment termination and implement guidelines to improve the timely communication of employee’ termination and/or on leave to insure the finance department-payroll is aware of status changes prior to preparing payroll for each period. -143- CITY OF PADUCAH, KENTUCKY SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2007 Management Response Staff review of these incidents shows that each of these system failures resulted from a communication time lag in the flow of personnel information from the employing department to Human Resources and then to Finance payroll staff. Staff will strengthen the system controls and explore replacing paper forms with electronic forms, which can be communicated instantaneously. The erroneous state incentive payment, which was not recovered, was a $48 amount involved in a difficult termination, which staff chose not to reopen. C. Findings and Questioned Costs - Major Federal Award Programs: None -144-