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HomeMy WebLinkAboutCAFR-June-30-2010FLO City of Paducah Paducah, Kentucky Comprehensive Annual Financial Report Year Ended June 30, 2010 Issued by the Finance Department CITY OF PADUCAH, KENTUCKY COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2010 TABLE OF CONTENTS Exhibit No. Page No. Introductory Section: Letter of Transmittal 1- 8 Organizational Chart 9 Principal Officials 10 GFOA Certificate of Achievement 11 Financial Section: Independent Auditor's Report 12-13 Required Supplementary Information: Management's Discussion and Analysis 14-28 Basic Financial Statements: Government -wide Financial Statements: Statement of Net Assets 1 29-30 Statement of Activities 2 31-32 Fund Financial, Statements: Governmental Funds: Balance Sheet 3 33-34 Reconciliation of the Governmental Funds Balance Sheet to Statement of Net Assets 4 35-36 Statement of Revenues, Expenditures and Changes in Fund Balances 5 37-38 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 6 39-40 Budgetary Comparison Statement (Budgetary Basis) - General Fund 7 41-44 Budgetary Comparison Statement - Note to RSI - General Fund 8 45 Budgetary Comparison Statement (Budgetary Basis) - Special Revenue Investment Fund 9 46 Budgetary Comparison Statement - Note to RSI - Special Revenue Investment Fund 10 47 Budgetary Comparison Statement (Budgetary Basis) - Special Revenue Bond Fund 11 48 Budgetary Comparison Statement - Note to RSI - Special Revenue Bond Fund 12 49 Proprietary Funds: Statement of Net Assets 13 50 Statement of Revenues, Expenses and Changes in Fund Net Assets 14 51 Statement of Cash Flows 15 52 Fiduciary Funds: Statement of Net Assets 16 53 Statement of Changes in Net Assets 17 54 Component Units Financial Statements: Statement of Net Assets 18 55-56 Statement of Activities 19 57-58 Notes to Financial Statements 59-91 Required Supplementary Information: Pension Trust Fund Schedules A-1 92 Exhibit No. Page No. Supplementary Information: Nonmajor Governmental Funds: General Capital Improvements Detail Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual B-1 93 Debt Service Fund Detail Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual B-2 94 Combining Balance Sheet B-3 95-96 Combining Statement of Revenues, Expenditures and Changes in Fund Balances B-4 97-98 Detail Statement of Revenues, Expenditures, and Changes in Fund Balance — Budget and Actual: Municipal Aid Program Fund B-5 99 Emergency Communication Service Fund B-6 100 Court Awards Fund B-7 101 Small Grant Fund B-8 102 CDBG Grant Fund B-9 103 Home Grant Fund B-10 104 HUD Revolving Grant Fund B-11 105 PRA Fund B-12 106 Nonmajor Proprietary Funds: Nonmajor Enterprise Funds: Combining Statement of Net Assets C-1 107 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets C-2 108 Combining Statement of Cash Flows C-3 109 Internal Service Funds: Combining Statement of Net Assets D-1 110 Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets D-2 111 Combining Statement of Cash Flows D-3 112 Fiduciary Funds: Combining Statement of Net Assets — Pension Trust Funds E-1 113 Combining Statement of Changes in Net Assets — Pension Trust Funds E-2 114 Combining Statement of Net Assets — Private -purpose Trust Funds E-3 115 Combining Statement of Changes in Net Assets — Private -purpose Trust Funds E-4 116 Statement of Changes in Assets and Liabilities — Agency Funds E-5 117 Table No. Page No. Statistical Section: Net Assets by Component 1 118 Changes in Net Assets 2 119-121 Fund Balances, Governmental Funds 3 122 Changes in Fund Balances, Governmental Funds 4 123 Assessed and Estimated Actual Value of Taxable Property 5 124 Single Audit Section: Schedule of Expenditures of Federal Awards Table No. Page No. Statistical Section: Awards 141 Property Tax Rates - Direct and Overlapping and on Compliance and Other Matters Based on an Governments 6 125 Principal Taxpayers 7 126 Secured Tax Levies and Collections 8 127 Employee License Tax Collections 9 128 Principal Employee License Taxpayers 10 129 Ratio of Outstanding Debt by Type 11 130 Ratio of Net General Bonded Debt Outstanding 12 131 Direct and Overlapping Governmental Activities Debt 13 132 Legal Debt Margin Information 14 133 Demographic and Economic Statistics 15 134 Principal Employers 16 135 City Full -Time Employees by Function 17 136 Operating Indicators by Function 18 137 Capital Asset Statistics by Function 19 138 Single Audit Section: Schedule of Expenditures of Federal Awards 139-140 Notes to the Schedule of Expenditures of Federal Awards 141 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 142-143 Report on Compliance with Requirements Applicable to each Major Program and On Internal Control Over Compliance in Accordance with OMB Circular A-133 144-145 Schedule of Findings and Questioned Costs 146 CITY OF PADUCAH, KENTUCKY INTRODUCTORY SECTION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2010 Honorable Mayor and Commissioners City of Paducah Paducah, Kentucky CITY OF PADUCAH Finance Department P.O. Box 2267 Paducah, KY 42002-2267 270-444-8512 December 16, 2010 We are pleased to submit Paducah's Comprehensive Annual Financial Report (CAFR) for the year ended June 30, 2010. 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, 2010, 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. 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 1-24/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 FY2010, as the following table indicates, there were 433-448 jobs created and retained, and $20.63 million capital invested not to mention the added fiscal impact from the jobs created and capital invested. Additionally, 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 FY2010 Capital Company Investment In Millions Jobs New Retained H.T. Hackney $14.10 25-40 117 Paducah & Louisville Railway $4.20 (announced) 10 50 Credit Bureau Systems $1.50 35 140 H.B. Fuller $.83 11 45 Total $20.63 81-96 352 Source: Greater Paducah Economic Development Council 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 IPA 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. In 2008, WKCTC opened a Paducah School of Art, which held classes this fall in its temporary location, while the permanent facility is developed. 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 3,400 persons. Recreation And Culture Citizens have available a wide range of recreational and cultural activities which cater to diverse tastes. Area residents may choose from fishing on nearby Kentucky and Barkley Lakes to enjoying the performing arts. City parks provide areas for baseball, softball, golf, football, tennis, disc golf, skate boarding, soccer, hiking 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 Lower Town Art and Music Festival is uniquely showcased within the borders of Paducah's 140 -year- old historic neighborhood. The LowetTown Art and Music Festival is an outdoor juried show in its 8th year. The weekend includes jazz, salsa, zydeco and blues music, as well as food from area restaurants. Started in 2004, the `Rivers Edge International Film Festival' is a four-day event built around the showing of independent film from around the world. The festival is held in multiple venues including Maiden Alley Cinema, Market House Theatre, and Yeiser Art Center. In addition to appealing to the film lover, the festival also provides filmmakers opportunities for exhibition, education, and networking. Paducah is the site of the Museum of the American Quilter's Society. In May 2008, a congressional designation was passed naming the museum as the National Quilt Museum of the United States. 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. `Live on Broadway', which began as the `Downtown After Dinner Program' 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 `8t' 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 70,000 participants to Paducah's riverfront during the last weekend in September. -3- Over time, this annual event has grown to incorporate other events, including `Marine Industry Day' and `Old Market Days'. Paducah Power sponsors the annual `Christmas in the Park' lighting display at Noble Park. The public is invited to a special lighting ceremony the Friday after Thanksgiving. This is the twelfth year for the event. Although the event is free, volunteers collect more than $30,000 in cash and thousands of pounds of canned food annually. 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. 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 318 full-time employees as of June 30, 2010. 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 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. N 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. 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. During FY2010, some of the City's financial policies did have a significant impact on the financial statements: Pension Obligation Costs. In FY2006, the City issued general obligation bonds of $6,100,000 to finance the police and firefighters' pension fund actuary liability. Since the issuance of these bonds, the City has made it policy to contribute the normal cost annually as well as make the necessary contribution to eliminate any unfunded liability that would arise from the fund being in a deficit position as of the actuarial date. For FY2010 this contribution was $460,000. This amount is almost double the contribution amount of $230,530 in FY2009. -5- Fund Balance Reserve. The City's operating budget policy states that the general fund's minimum undesignated cash balance shall be 8% of the general fund's budgeted expenditures. Any year-end operating surpluses in excess of the required reserve may be kept as additional reserve or made available for capital projects and/or "one-time only" general fund expenditures as determined by the Board of Commissioners. In the fall of 2009, the Commission approved $1.265 million in additional appropriations. The most significant of these included a $460,000 transfer to the pension fund to make the required contribution towards the police and fire pension unfunded liability. In addition $450,000 was set aside for a possible negotiated settlement and related attorney costs in the International Association of Fire Fighters (IAFF) overtime lawsuit. As part of the City's annual budget process, financial policies are reviewed and amended as necessary. On May 28, 2010, the City Commission held its annual Budget Advance. At this meeting the Commission conducted a debt review. They examined a summary of all of the City's debt issues, which included the original issuance date/amount, purpose, and payment schedule for each. Although no official action was taken, and the City is well within its legal debt limit, the Commission publicly stated that it has no intention of any future borrowings. In FY2010, there were no official 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 1/z cent. As a result of the payroll tax increase, the City Commission created the Investment Fund. The Investment Fund is funded with the '/z cent increase and is dedicated to the following purposes: economic development, community redevelopment, infrastructure capital investment, and property tax relief. During the FY 2011 budget process, the Commission reviewed numerous decision packages proposed for the Investment Fund Budget; expenditures totaling $4.78 million were appropriated. The City has numerous infrastructure/capital items that will affect the long-term financial planning process. The following projects are 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. It is anticipated that grant funds will cover 65% of the project. In FY2009, the City proceeded with making the most seriously needed repairs by borrowing around $2 million. This phase of repairs neared completion in FY2010. 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 Ohio River. The plan includes a public marina, boat ramp, recreational trails and shoreline enhancements, and a steamboat landing, just to name a few. Completion of Phase I & Phase II of the entire riverfront redevelopment plan will cost an estimated $46.2 million. In FY2007 the City was allocated $5.3 million in federal funds for construction of Phase 1 and the Ohio River Boat Launch Project. Environmental assessment and remediation procedures required by the permitting process have temporarily stalled the construction of this phase of the project. Once all permits are secured, construction will be able to begin. Operating costs will be a long-term planning consideration. Sports Park. In FY2010 the City entered into an agreement for a land purchase that will be used to develop a sports park. In the future a plan will be developed which will likely include soccer fields, softball/baseball fields, trails, shelters, and ancillary buildings. Depending on possible partnerships and construction phasing, development costs may range between $2 million and $6 million dollars. Operating costs of the facility will be a long-term planning consideration and is estimated at build -out to be $150,000 to $200,000 annually. rot Hotel Development. In FY2010 the City spent approximately $2.4 million to purchase a 435 room derelict hotel and prepare it for demolition. This hotel is adjacent to the City's Julian Carroll Convention Center and Expo Center, which provides 110,000. square feet of convention and meeting space, making it the fourth largest convention center in the State of Kentucky. The City has invested $13,8 million into the convention facility, with $7.5 million for initial construction of the Expo Center in 2002, and $6.3 million in renovations to the Convention Center, the most recent one being in 2009. The City is currently preparing a request for proposal for a new hotel facility to be constructed on the site. Demolition is scheduled to being in the fall of 2010. 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 fairly steady considering the nation's recent economic struggles. It is expected that the economy will continue to hold over the near-term. Area employment remained flat in comparison to the prior year, with 29,148 persons employed (McCracken County) as of June 30, 2010. The June 2010 unemployment rate was 8.5% (McCracken County), which is an improvement from 9.4% in the prior year and is favorable compared to the June 2010 federal unemployment rate of 9.6%. 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 1,263 for fiscal year 2010 valued at $48.9 million, which is up $11 million from fiscal year 2009. INDEPENDENT AUDIT Kentucky Revised Statute 91 A-040 requires an annual audit of each fund of the City by an auditor of public accounts or a certified public accountant. The independent certified public accounting firm of Williams, Williams & Lentz, LLP, has conducted this audit and their opinion has been included in this report. The City is also subject to the Single Audit Act Amendments of 1996 reporting requirements. The Single Audit Report is included within this report. 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, 2009. This was the nineteenth 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 -7- to Williams, Williams & Lentz, LLP. We also thank the Mayor, City Manager, and City Commission for their interest and support in planning and conducting the financial operations of the City in a responsible and progressive manner. Re fully submitted, onathan W. Perkins, CPA Finance Director/Treasurer -8- I City Clerk CITY OF PADUCAH, KENTUCKY ORGANIZATIONAL CHART CITIZENS OF PADUCAH I Advisory Board and Mayor and Commissioners Committees H City Manager City Attorney Police Parks Department Fire Department Department Engineering/ Planning Finance Department/ Public Works Department Human Resources Inspection Department Paducah Renaissance Alliance Information Systems Risk Management Mayor Mayor Pro tem Commissioner Commissioner Commissioner Finance/Human Resources Police Chief Fire Chief City Engineer/Public Works Planning Parks Services Inspections Information Services City Clerk Risk Manager Public Information Paducah Renaissance Alliance CITY OF PADUCAH, KENTUCKY PRINCIPAL OFFICIALS BOARD OF COMMISSIONERS INTERIM CITY MANAGER Jonathan Perkins, C.P.A. -lo- William F. Paxton Gayle Kaler Gerald Watkins Carol Gault Richard Abraham Jonathan Perkins, C.P.A. James Berry Steve Kyle Richard Murphy Stephen Ervin Mark Thompson Joel Scarbrough Greg Mueller Tammy Brock Cindy Medford Pam Spencer Steve Doolittle Certificate of Achievement for Excellence in Financial Reporting Presented to City of Paducah Kentucky For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2009 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. y ' President fp W A4 go AP* 04 0 Executive Director -11- CITY OF PADUCAH, KENTUCKY FINANCIAL SECTION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2010 WILLIAMS, WILLIAMS & LENTZ, LLP CERTIFIED PUBLIC ACCOUNTANTS 601 JEFFERSON PADUCAH, KENTUCKY 42001 J. RICHARD WALKER ROBERT R. ROBERTSON MAILING ADDRESS POST OFFICE BOX 2500 C. SUZETTE CRONCH PADUCAH, KY 42002-2500 MICHAEL F. KARNES MARK A. THOMAS TELEPHONE ROGER G. HARRIS 270443-3643 J. DAVID BAILEY, III Independent Auditor's Report FAX G. LEON WILLIAMS, 1926-2004 270-444-0652 H. WILLIAM LENTZ, 1925-2007 JERRY G. SEVERNS WEBSITE wwlcpa.00m Honorable William F. Paxton, Mayor Members of the Board of Commissioners City of Paducah Paducah, Kentucky We have audited the accompanying financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Paducah, Kentucky (the City), as of and for the year ended June 30, 2010, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Paducah, Kentucky's management. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Transit Authority of the City of Paducah, a component unit, which represents nineteen percent of the assets and revenues of the Component Units column. Those financial statements were audited by another auditor whose reports have been furnished to us, and our opinion on the basic financial statements, insofar as it relates to the amounts included for the Transit Authority of the City of Paducah, a discretely presented component unit, is based on the report of another auditor. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall basic financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, based on our audit and the report of another auditor, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Paducah, Kentucky as of June 30, 2010, and the respective changes in financial position and cash flows, where applicable, thereof and the respective budgetary comparisons for the General Fund and Special Revenue Investment Fund, for the year then ended in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial positions of each nonmajor governmental, nonmajor enterprise, internal service, and fiduciary fund, which collectively comprise the City's combining and individual fund statements and schedules as listed in the table of contents as of June 30, 2010, and the respective changes in financial position and cash flows, where applicable, thereof and the respective budgetary comparisons for the General Capital Improvements, Debt Service Fund and the non -major governmental funds, for the year then ended in conformity with accounting principles generally accepted in the United States of America. -12- In accordance with Government Auditing Standards, we have also issued our report dated December 16, 2010, on our consideration of the City's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and important for assessing the results of our audit. Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, Pension Trust Fund Schedules on pages 14 through 28 and 92, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Government Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which, consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Paducah, Kentucky's basic financial statements. The introductory section and statistical tables are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of State, Local Governments, and Non -Profit Organizations, and is also not a required part of the basic financial statements of the City of Paducah, Kentucky. The schedule of expenditures of federal awards has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. December 16, 2010 -13- CITY OF PADUCAH, KENTUCKY REQUIRED SUPPLEMENTARY INFORMATION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 309 2010 CITY OF PADUCAH, KENTUCKY MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2010 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, 2010. 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 1-8) and the basic financial statements (pages 29-91) 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 $49.6 million at the close of the 2009-2010 fiscal year. Of this amount, $10.0 million (unrestricted net assets) may be used to meet City government's ongoing obligations to citizens and creditors. • Total net assets increased $221,555. • At fiscal year end, City governmental funds reported a combined ending fund balance of $19.6 million. Approximately 60% of this total amount, $11.6 million, is unreserved and available for spending at the City's discretion. Of the $11.6 million, $1.4 is in various special funds, which are earmarked for specific purposes. • At the end of the current fiscal year, unreserved General Fund fund balance was $10.2 million, of which cash and investments make up approximately $6.1 million. When compared to total appropriations, the General Fund cash and investments balance is 20%. H. 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 -14- functions that are intended to recover all or a significant portion of their costs through user fees and charges (business -type activities). City governmental activities include general government, public safety, public service, park and recreation, planning and development, and interest on long-term debt. Business -type activities of the City include Solid Waste, Section Eight Housing, 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 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 29-32 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, Investment, Bond, and Debt Service Funds, all of which are considered to be major funds. Data from the other eight (8) 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 93-106. 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 35-36) and Exhibit 6 (pages 39-40) 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 33-40 of this report. 2) Proprietga 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 -15- Where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability or other purposes. The City uses four enterprise funds to account for Solid Waste, Section Eight Housing, Civic Center and TISA, as well as certain component units that provide 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 and Paducah Transit Authority, which provide water and public transportation. These component units, each of which has their own board of directors, are also enterprise funds and are shown on pages 55-58. 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 107-109 of this report. Individual data for the internal service funds is likewise presented in the form of combining statements on pages 110- 112 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 four (4) fiduciary funds (Appointive Employees' Pension, Police and Firefighters' Retirement, Other Trust Funds, and Maintenance and Rehabilitation Trust) are presented in the form of combining statements on pages 113-117 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 59-91 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 95-117 of this report. -16- 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 $49.6 million as of June 30, 2010. For FY2010, the largest portion of the City's net assets (66%) reflects its investment in capital assets (i.e., land, buildings, machinery, equipment and infrastructure) less outstanding related debt used to acquire those assets. The City uses these capital assets to provide service to citizens and, as a result, these assets are not available for future spending. The City's capital assets investment is reported net of related debt, but the resources to pay this debt must be provided from other sources since the capital assets cannot be used to liquidate the liabilities. An additional portion of City net assets (14%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets (20%) may be used to meet the City's ongoing obligations to citizens and creditors. As of June 30, 2010, the City reports positive balances of net assets, both for the government as a whole, as well as for its separate governmental and business -type activities. Current assets Capital assets Other noncurrent assets Total assets Current liabilities Noncurrent liabilities Total liabilities Net assets: Invested in capital assets, net of related debt Restricted Unrestricted TOTAL NET ASSETS City of Paducah, Kentucky Net Assets June 30 Governmental Activities Business -Type Activities Total Primary Government 2010 2009 2010 2009 2010 2009 (Restated) (Restated) $ 38,121,799 $ 39,955,659 $ 4,886,893 $ 3,769,371 $ 43,008,692 $43,725,030 39,531,590 34,407,092 1,652,961 1,721,419 41,184,551 36,128,511 7,822,828 8,093,792 7,822,828 8,093,792 85,476,217 82,456,543 6,539,854 5,490,790 92,016,071 87,947,333 9,880,596 11,410,186 372,106 287,449 10,252,702 11,697,635 30,116,284 24,824,989 2,077,282 2,076,461 32,193,566 26,901,450 39,996,880 36,235,175 2,449,388 2,363,910 42,446,268 38,599,085 31,136,514 31,215,252 1,652,961 1,721,419 32,789,475 32,936,671 6,177,722 6,385,039 620,800 369,367 6,798,522 6,754,406 8,165,101 8,621,077 1,816,705 1,036,094 9,981,806 9,657,171 -17- The exhibit below charts the City's total net assets from the implementation of GASB 34 through the present. Annual increases to total net assets began in FY2005 primarily due to the increase of the City's payroll tax and the creation of the Investment Fund. The additional tax generates approximately $4 million in revenue each year, which is used mostly for capital investment. Increases have leveled off for the past few year's due to mid -year appropriations made by the Commission, reducing the City's unreserved cash balance at June 30 to the minimum requirement of 8% each time. During FY2010, most categories of revenue were either flat or decreased due to the economic downturn. A. Analysis of the City's Operations The following table provides a summary of the City's operations for the years ended June 30, 2010 and 2009. Governmental activities decreased the City's net assets by $742,031. Business -type activities increased the City's net assets by $963,586. -18- Revenues: Program revenues: Charges for services Operating grants/ contributions Capital grants/ contributions General Revenues: Property taxes Franchise taxes Telecommunications tax Insurance premium tax Vehicle tax Bank tax Gross receipts license tax Employee license tax Other taxes Intergovernmental revenue Unrestricted investment earnings Gain on sale of capital assets Total revenues Expenses: General government Public safety Public service Park and recreation Planning and development Interest on long-term debt Solid Waste Section Eight Housing Civic Center TISA Total expenses Increase (decrease) in net assets before transfers Transfers Change in net assets Net assets, July 1, restated NET ASSETS, JUNE 30 City of Paducah, Kentucky Changes in Net Assets June 30 Governmental Activities Business -Type Activities Total Primary Government 2010 2009 2010 2009 2010 2009 (Restated) (Restated) $ 2,828,209 $ 3,308,948 $4,617,153 $4,734,827 $ 7,445,362 $ 8,043,775 1,813,019 2,119,845 2,340,267 1,965,936 4,153,286 4,085,781 1,390,848 4,727,087 27,239 129,032 1,418,087 4,856,119 4,207,736 3,986,760 - - 4,207,736 3,986,760 149,642 134,552 - - 149,642 134,552 794,027 815,859 - - 794,027 815,859 3,797,347 4,055,228 - - 3,797,347 4,055,228 585,495 576,876 - - 585,495 576,876 204,522 186,531 - - 204,522 186,531 4,229,102 4,320,850 - - 4,229,102 4,320,850 16,384,509 16,584,636 - - 16,384,509 16,584,636 610,984 533,506 - - 610,984 533,506 499,484 529,083 - - 499,484 529,083 172,213 336,960 33,724 52,961 205,937 389,921 64,620 68.530 1.112 98.369 65,732 166,899 37,731,757 42.285,251 7,019,495 6,981,125 44,751,252 49,266,376 9,763,178 12,148,118 - - 9,763,178 12,148,118 16,239,042 15,734,557 - - 16,239,042 15,734,557 7,669,729 12,849,566 - - 7,669,729 12,849,566 2,653,474 1,492,306 - - 2,653,474 1,492,306 970,022 708,827 - - 970,022 708,827 1,099,450 1,029,888 - - 1,099,450 1,029,888 - - 3,797,097 4,037,845 3,797,097 4,037,845 - - 2,061,370 2,154,360 2,061,370 2,154,360 - - 69,537 75,692 69,537 75,692 206.798 162.849 206,798 162.849 38,394,895 43,963,262 6,134,802 6,430,746 44,529,697 50,394,008 (663,138) (1,678,011) 884,693 550,379 221,555 (1,127,632) (78,893) (110,838) 78.893 110,838 (742,031) (1,788,849) 963.586 661,217 221,555 (1,127,632) 46.221,368 48.010,217 3,126,880 2,465.663 49.348.248 $49.569,803 50,475.880 $45.479.337 $3.1.6.880 149.348.248 -19- 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. The graph below depicts the breakdown of revenue by source for fiscal year 2010. -20- In fiscal year 2010, the City derived 82% of its revenue from taxes/licenses. Occupational licenses, which include payroll withholding tax, business licenses, and insurance premium tax is the largest source of income to the City, totaling $24.4 million. This category of revenue declined 2.2% from fiscal year 2009. All taxes within this category experienced a decrease in collections. Insurance premium tax had the largest decrease of $257,881 or 6.4%. Gross receipts license tax and employee license tax decreased 2.1% and 1.2%, respectively. There does not appear to be any one significant closing or layoff that led to these ' decreases. Economic downturn appears to have contributed heavily to an overall decrease in general revenues from the prior year. Although most areas of taxes/licenses declined from prior year, they comprised a larger portion of the City's revenue. This is because of a significant decrease in capital grants/contributions from prior year. In 2009 the City received $4.9 million in Federal disaster assistance as a result of the Hurricane Ike windstorm and the 2009 Ice Storm. In 2010 capital grants/contributions was at a more typical level of $1.4 million. C. Business -Type Activities The chart below shows the operating results for each of the City's business -type activities. These activities should break-even; that is, the charges for services should be large enough to sustain operations. For fiscal year 2010, business -type activities as a whole had an increase in net assets of $963,586. This was primarily due to the performance of the Solid Waste Fund. The Solid Waste Fund, a major fund of the organization, has experienced a positive change in net assets in excess of $600,000 for the second year in a row. During 2008, efforts were made to improve the performance of this function, including a rate increase as well as efficiency measures through equipment and route reorganization. In 2009, another rate increase was implemented. In addition, the entire Public Works department was reorganized at the end of FY2009, which led to the sale of unnecessary equipment and reduced spending. -21- 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 $19.6 million. Approximately 59% of this total amount, $11.6 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 $11.6 million, $1.4 million is in the Debt Service Fund and various special revenue funds, which are earmarked for specific purposes. The amount of unreserved general fund dollars has remained virtually unchanged from the prior year at $10.2 million. However, the allocation of fund balances among the categories (shown below) has shifted. This is primarily due to unspent 2010 bond proceeds at June 30, 2010. Of the $6.5 million in bond proceeds, nearly $3 million remained at year-end. These funds have been reserved for several large capital projects including renovation of the Noble Park parking lot, greenway trail development (matching funds), and the sports park property purchase, to name a few. City fiscal policy (ordinance 2009-6-7575) requires that an amount not less than 8% of the General Fund's budgeted expenditures remain undesignated in the fund balance, or $2.4 million, which leaves $7.8 million as unreserved for fiscal year 2010. While $7.8 million represents unreserved fund balance, it is worth noting here that at year-end there was $6.1 million available as cash, the balance is tied up in other assets including accounts receivable and property taxes collectible. -22- As a measure of General Fund liquidity, readers may compare unreserved fund balance to total General Fund expenditures. Unreserved General Fund fund balance represents approximately 34% of expenditures and transfers out ($30 million). This has remained stable since the implementation of GASB 34, staying between approximately 30% and 35% since fiscal year 2003. The Investment Fund had a fund balance of $2.8 million, all of which is reserved for capital projects. The Investment Fund's fund balance increased $227 thousand. The Investment Fund was authorized by the City Commission in fiscal year 2005-2006 as a special revenue fund whose use is restricted to property tax reduction, economic development, community redevelopment and capital and infrastructure projects. The Investment Fund captures all manner of financial activities related to revenue from the 1/z cent payroll tax increase, effective October 1, 2005. Payroll tax revenue decreased slightly from fiscal 2009 to 2010. The increase in fund balance is due to economic development dollars that were set aside but not utilized during the year. 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 $2,652,060 Section Eight Housing 643,539 Civic Center 184,548 TISA 376,949 Combined total net asset change for the four funds was an increase of $933 thousand, broken down as follows: Solid Waste ($681 thousand increase), Section Eight Housing ($252 thousand increase), Civic Center ($14 thousand decrease), and TISA ($14 thousand increase). The most significant change, Solid Waste, was discussed under Business Type Activities (Section III -C). Section Eight experienced an increase in fund balance in FY2010 after losses of over 20% each year in FY2008 and 2009. Annual HUD grant funding is based on expected rentals for the year. During fiscal year 2008 and 2009 rental costs exceeded what had been projected. For fiscal year 2010, the Section Eight office implemented a plan to reduce program expenditures so that reserves would be replenished. 9dcII V. General Fund Budgetary Highlights Differences between the original budget and the final actual amounts resulted in a $1.5 million increase in appropriations and can be briefly summarized as follows: Department General administration Finance Planning Human rights Inspection Information systems Risk management Police Fire Public works Engineering services Recreation Other Appropriations Increase Decrease (In Thousands) $ 360 $ - 195 - 10 - - 4 - 21 - 33 - 11 56 - - 4 - 1,353 - 45 1,249 - 1,118 - In FY2010 there was a mid -year budget appropriation of $1.265 million. Of the $1.265 million, $460,000 was transferred to the pension fund for the required contribution towards the police and firefighters' pension unfunded liability. This is reflected in the increase in General Administration appropriations. In addition $450,000 was set aside for the possible negotiated settlement and related attorney costs for the International Association of Fire Fighters (IAFF) overtime lawsuit. The remaining $355,000 was designated for various police and fire capital projects and restoration of the City's commission contingency fund. The Finance Department's budget increased by $195,000. There are certain non -departmental expenses accounted for in the Finance Department, including the City's 800 mhz radio operations. During FY2010, final payment was made on a radio controller upgrade. This payment was not included in the original FY2010 budget. Other significant budget changes include the remaining after-effects of the FY2009 Economic Efficiency Plan. As a result of this plan, Engineering and Public Works were combined into a single department. After that merger was complete, it was decided to transfer grounds maintenance operations from Public Works to Recreation. Since this management decision was made just prior to the end of FY2009 and subsequent to the development of the FY2010 budget, the original FY2010 budget did not reflect these changes. IMS 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, 2010, is $41.2 million (net of accumulated depreciation). This investment in capital assets includes land, buildings and improvements, vehicles and equipment, park facilities, roads, highways, 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 2010, projects and equipment expenditures totaled over $8.3 million. Some of the largest capital -type projects, in terms of dollars in fiscal year 2010, are shown in the following table: Hotel Purchase/Demolition Preparation $2,419,981 Pavilion Purchase 1,628,920 Floodwall Rehabilitation 1,081,014 Fire Truck Purchase 701,789 Community Redevelopment 409,558 Sports Park Property Purchase 308,748 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, recreational facility improvements, continued neighborhood revitalization, and street and sidewalk rehabilitation are among the projects to be addressed. Land Land improvements Construction in progress Buildings and improvements Infrastructure Equipment Furnishings and fixtures Vehicles TOTALS City of Paducah, Kentucky Capital Assets (Net of Accumulated Depreciation) June 30 Governmental Activities 2010 2009 $ 7,181,028 $ 6,239,585 1,729,014 1,814,848 9,097,164 3,610,527 3,754,087 4,034,368 13,361,137 15,185,098 1,826,536 1,675,022 4,081 5,605 2,578,543 1,842,039 Business -Tyne Activities 2010 2009 $ 62,152 $ 65,908 218,220 227,378 427,177 408,977 945,412 1,019,156 Total Primary Government 2010 2009 $ 7,243,180 $ 6,305,493 1,729,014 1,814,848 9,097,164 3,610,527 3,972,307 4,261,746 13,361,137 15,185,098 2,253,713 2,083,999 4,081 5,605 3,523,955 2,861,195 Additional information on City capital assets can be found in Note 3 in the notes to financial statements on pages 72-76. -25- B. Long -Term Debt At year-end, the City had $31,469,707 in outstanding bonds and notes payable, compared to $24,986,900 at June 30, 2009, with maturities extending through 2030. Convention and Performing Arts Center — 2001 Kentucky League of Cities — 2003 Infiniti Media Building — 2004 Police/Firefighter Pension Fund Liability — 2006 Floodwall Rehabilitation — 2008 Convention Center Renovation — 2008 HOME grant — 2009 Public Improvement Projects — 2010 Sports Park property — 2010 TOTALS During the year, the City had two new debt issues: Governmental Activities 2010 2009 $ 7,030,000 $ 7,320,000 2,517,763 2,672,649 3,975,000 4,160,000 5,340,000 5,545,000 2,671,440 2,774,638 2,417,500 2,500,000 273,004 14,613 6,645,000 - 600,000 - UX, �MVXIIY= 11 Public Improvement Projects. In March 2010, a $6.645 million general obligation was issued to finance several public improvement projects including a major park parking lot renovation and several resurfacing projects, sports park property acquisition, pavilion acquisition, greenway trail development, and a portion of the hotel purchase described earlier in this document. Sports Park Property Purchase. In December 2009, the City entered into an agreement in the amount of $600,000 with L. Wayne & Linda Lindsey to finance the acquisition of real property to be used for the development of a sports park with soccer complex in the community. This obligation will be met with bond proceeds issued in March 2010. Debt issues prior to July 1, 2009, are described below: Floodwall Rehabilitation. In March 2009, a $2.8 million general obligation was issued to finance significant repairs to the City's 60 -year-old floodwall. The first stage of a $6 million project, this money was used to fund the relining of the pipes, which have deteriorated with age. Convention Center Renovation. In March 2009, the City entered into an agreement in the amount $5,000,000 with the Kentucky Association of Counties to finance renovations to the Julian Carroll Convention Center. The note was issued by McCracken County; however, the City is obligated for 50% of the principal amount through an Interlocal Cooperative Agreement between the City and McCracken County. 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). 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). -26- 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. 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. 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 $207,696,169. The City's latest bond rating by Standard & Poor's is AA-. 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 2010, less than 2.4% of the General Fund budget was expended for debt service, and thus has minimal impact on current and future operations. Additional information on the City's long-term liability can be found in Note 3 in the notes to financial statements on pages 76-79. VII. Other Potentially Significant Matters. A. Post -employment Benefits. Personal service costs make up over two-thirds of the City's annual operating budget, and that number is continuously affected by rising retirement costs. In the past five years, the City's combined hazardous and non -hazardous retirement contribution has increased from approximately $2.5 million in fiscal year 2006 to $3.6 million in fiscal year 2010. The rates for FY2011 have increased, causing budgeted figures for the upcoming year. to increase another $263,000 compared to what was incurred in FY2010: Based on trends and projections provided by the Retirement System, the long-term outlook on funding requirements is of utmost concern. B. Police & Fire Pension Fund (PFPF) Unfunded Liability. In fiscal year 2006, the City issued $6.1 million in general obligation bonds to eliminate the unfunded pension liability. With the sharp decline in value of the national stock market in 2009, the PFPF's equity investment dropped accordingly. PFPF net assets dropped in 2009 by nearly $3.5 million, or 28.5% of the beginning net assets (July 1, 2008). The City contributed the actuary's recommended amount of $460,000 toward the unfunded pension liability in fiscal year 2010. The valuation as of July 1, 2010, dated October 22, 2010, indicates the amount for fiscal year 2011 will be $455,000. C. IAFF Overtime Lawsuit. At this time, we are aware of a lawsuit filed against the City of Paducah under Wage and Hour law that affects 76 former and current firefighters named as Plaintiffs, relating to the way the City administered State Incentive Overtime Pay for the five years preceding filing of the lawsuit. An additional element of the lawsuit addresses contract law and could have potential effect reaching back 15 years from the date of filing. A trial date of 12/07/10 has been set. We do not know if this lawsuit will adversely affect the City of Paducah at this time. However, if a judgment is awarded the Plaintiffs, the City could be liable for a significant amount of back pay, interest, and reasonable attorney fees. D. Bond Refunding. In July 2010, the Commission approved an ordinance to refinance a bond issued in 2001. The original bond issued was a 25 -year $9.29 million general obligation bond used to finance the construction of the Paducah -McCracken County Expo Center and to make a contribution to the construction of the Four Rivers Carson Center. Through the remaining life of the bond issue (through 2026), the savings by refinancing will be approximately $987,000. The bonds were sold July 29, 2010. -27- 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, 300 South 5th Street, Paducah, KY 42001. -28- CITY OF PADUCAH, KENTUCKY BASIC FINANCIAL STATEMENTS GOVERNMENT -WIDE FINANCIAL STATEMENTS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2010 THIS PAGE INTENTIONALLY LEFT BLANK ASSETS Current Assets: Cash and cash equivalents Investments Receivables, net: Notes Lease Accounts Grants Interest Property tax Other Internal balances Inventory Prepaid pension obligation Prepaid expenses Other current assets Total current assets Noncurrent Assets: Notes receivable Lease receivable Bond issuance costs, net Net capital assets: Land and construction in progress Depreciable capital assets Other assets Total noncurrent assets Total assets Exhibit 1 CITY OF PADUCAH, KENTUCKY STATEMENT OF NET ASSETS JUNE 30, 2010 3,519,873 - 3,625,253 - 303,431 16,278,192 62,152 23,253,398 1,590,809 Z^7A I"I 47,354,418 1,652,961 85,476,217 6,539,854 -29- 3,519,873 3,625,253 303,431 16,340,344 24,844,207 '2'YA '1^71 5,338,405 37,963,316 11 1^72 In A 49,007,379 45,474,825 M n14 n171 C1 ^7nA 7A'2 Primary Government Governmental Business -type Component Activities Activities Total Units $13,856,597 $2,475,130 $16,331,727 $ 3,346,051 4,900,778 1,525,000 6,425,778 - 1,152,500 - 1,152,500 - 590,719 - 590,719 - 5,661,263 544,593 6,205,856 575,885 541,263 95,569 636,832 159,797 51,151 6,749 57,900 - 4,346,106 - 4,346,106 - - - - 900,304 (233,370) 233,370 - - 1,487,095 - 1,487,095 457,669 5,706,840 - 5,706,840 - 15,000 6,482 21,482 16,043 45,857 - 45,857 773,669 38,121,799 4,886,893 43,008,692 6,229,418 3,519,873 - 3,625,253 - 303,431 16,278,192 62,152 23,253,398 1,590,809 Z^7A I"I 47,354,418 1,652,961 85,476,217 6,539,854 -29- 3,519,873 3,625,253 303,431 16,340,344 24,844,207 '2'YA '1^71 5,338,405 37,963,316 11 1^72 In A 49,007,379 45,474,825 M n14 n171 C1 ^7nA 7A'2 LIABILITIES 860,665 Primary Government 875,447 - Landfill post -closure costs Governmental Business -type 2,062,500 Component Current Liabilities: Activities Activities Total Units Voucher and accounts payable $ 1,444,612 $ 220,261 $ 1,664,873 $ 2,797,640 Accrued payables 739,816 37,934 777,750 103,258 Due to other taxing agencies 73,276 - 73,276 - Unearned revenue 4,249,524 - 4,249,524 - Accrued compensated absences 975,982 71,330 1,047,312 - Accrued interest 183,298 - 183,298 - Notes payable due within one year 1,117,596 - 1,117,596 57,415 Bonds payable due within one year 1,096,492 - 1,096,492 - Other current liabilities - 42,581 42,581 990,047 Total current liabilities 9,880,596 372,106 10,252,702 3,948,360 Noncurrent Liabilities: Accrued compensated absences 860,665 14,782 875,447 - Landfill post -closure costs - 2,062,500 2,062,500 - Notes payable 4,690,671 - 4,690,671 3,650,506 Bonds payable 24,564,948 - 24,564,948 - Total noncurrent liabilities 30,116,284 2,077,282 32,193,566 3,650,506 Total liabilities 39,996,880 2,449,388 42,446,268 7,598,866 NET ASSETS Invested in capital assets, net of related debt 31,136,514 1,652,961 32,7899475 39,601,867 Restricted for: Housing and development projects 19100,696 6209800 1,721,496 - Capital projects 59077,026 - 590779026 - Unrestricted 8,165,101 1,816,705 9,981,806 49503,510 TOTAL NET ASSETS $4594799337 $490909466 $4995699803 $4491059377 See accompanying notes to the basic financial statements. -30- CITY OF PADUCAH, KENTUCKY STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2010 Primary Government: Governmental activities: General government Public safety Public service Parks and recreation Planning and development Interest on long-term debt Total governmental activities (See Note 1) Business -type activities: Solid Waste Section Eight Housing Civic Center TISA Total business -type activities TOTAL PRIMARY GOVERNMENT Component Units: Authorities: Paducah Water Works Paducah Transit Authority TOTAL COMPONENT UNITS Exhibit 2 General revenues: Taxes and licenses: Property taxes, levied for general purposes Franchise tax Telecommunications tax Insurance premium tax Vehicle tax Bank tax Gross receipts license tax Employee license tax Other taxes Transient room tax 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, 2009 Adjustment to beginning net assets (See Note 10) NET ASSETS, JUNE 30, 2010 See accompanying notes to the basic financial statements. 511 Program Revenues Operating Capital Charges for Grants and Grants and Expenses Services Contributions Contributions $ 9,763,178 $ 993,371 $ 434,515 $ - 16,239,042 484,754 655,694 1,319,161 7,669,729 1,197,194 202,587 65,525 2,653,474 152,890 - - 970,022 - 299,427 6,162 1,099,450 - 220,796 - 38,394,895 2,828,209 1,813,019 1,390,848 3,797,097 4,436,540 27,000 10,192 2,061,370 - 2,313,267 - 69,537 32,455 - - 206,798 148,158 - 17,047 6,134,802 4,617,153 2,340,267 27,239 $44,529,697 $7,445,362 $4,153,286 $1,418,087 $ 6,965,498 $7,836,232 $ - $ 473,251 4,500,195 1,457,800 1,708,085 3,036,612 $11,465,693 $9,294,032 $1,708,085 $3,509,863 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 Transient room tax 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, 2009 Adjustment to beginning net assets (See Note 10) NET ASSETS, JUNE 30, 2010 See accompanying notes to the basic financial statements. 511 Net (Expense) Revenue and Changes in Net Assets Primary Government - Governmental Business -type Component Activities Activities Total Units $ (8,335,292) $ - $ (8,335,292) $ - (13,779,433) - (13,779,433) - (6,204,423) - (6,204,423) - (2,500,584) - (2,500,584) - (664,433) - (664,433) - (878,654) - (878,654) - (32,362,819) - (32,362,819) - - 676,635 676,635 - - 251,897 251,897 - (37,082) (37,082) - - (41,593) (41,593) - - 849,857 849,857 - (32,362,819) 849,857 (31,512,962) - - - - 1,343,985 - - - 1,702,302 - - - 3,046,287 4,207,736 - 4,207,736 - 149,642 - 149,642 - 794,027 - 794,027 - 3,797,347 - 3,797,347 - 585,495 - 585,495 - 204,522 - 204,522 - 4,229,102 - 4,229,102 - 16,384,509 - 16,384,509 - 610,984 - 610,984 - 499,484 - 499,484 - 172,213 33,724 205,937 17,338 64,620 1,112 65,732 (8,426) - - - 84,560 31,699,681 34,836 31,734,517 93,472 (78,893) 78,893 - - 31,620,788 113,729 31,734,517 93,472 (742,031) 963,586 221,555 3,139,759 46,383,801 3,126,880 49,510,681 40,965,618 (162,433) - (162,433) - $ 45,479,337 $4,090,466 $ 49,569,803 $44,105,377 -32- CITY OF PADUCAH, KENTUCKY BALANCESHEET GOVERNMENTAL FUNDS JUNE 30, 2010 ASSETS Cash and cash equivalents Investments Accounts receivable: Accounts Grants Interest Property taxes (net of allowances for uncollectibles) Due from other funds TOTAL ASSETS LIABILITIES AND FUND BALANCES Liabilities: Voucher and accounts payable Accrued payroll and payroll taxes Due to other funds Due to other taxing agencies Deferred revenue Accrued compensated absences Total liabilities Fund Balances: Reserved for: Capital improvements Unreserved: General Fund Special Revenue Funds Debt Service Fund Total fund balances TOTAL LIABILITIES AND FUND BALANCES See accompanying notes to the basic financial statements. -33- Exhibit 3 4,260,766 $16,987,737 $2,476,934 $2,844,706 $ 667,100 $ 244,614 $ 687,579 - - 975,573 - - 73,276 - - 4,214,499 - - 161,032 - - 6,779,059 244,614 - - 2,232,320 2,844,706 10,208,678 - - 10,208,678 2,232,320 2,844,706 $16,987,737 $2,476,934 $2,844,706 Special General Revenue General Capital Investment Fund Improvements Fund $ 3,585,045 $1,616,410 $1,209,091 2,500,000 500,000 500,000 6,190,514 159,292 160,000 295,182 201,208 - 10,391 24 24 4,260,766 $16,987,737 $2,476,934 $2,844,706 $ 667,100 $ 244,614 $ 687,579 - - 975,573 - - 73,276 - - 4,214,499 - - 161,032 - - 6,779,059 244,614 - - 2,232,320 2,844,706 10,208,678 - - 10,208,678 2,232,320 2,844,706 $16,987,737 $2,476,934 $2,844,706 Special Revenue Debt Bond Service Fund Fund Nonmajor Total Governmental Governmental Funds Funds $2,919,471 $92,444 $1,306,578 - 150,778 - 204,787 - 44,873 - 516 $2,919,471 $92,444 $1,707,532 $10,729,039 3,650,778 6,714,593 541,263 10,955 4,260,766 $27,028,824 $ 258,255 $ 1,169,969 38,207 725,786 100,000 1,075,573 - 73,276 - 4,214,499 783 161,815 397,245 7,420,918 2,919,471 - - - 1,310,287 - 92,444 - 2,919,471 92,444 1,310,287 $2,919,471 $92,444 $1,707,532 7,996,497 10,208,678 1,310,287 92,444 19,607,906 $27,028,824 -34- Exhibit 4 CITY OF PADUCAH, KENTUCKY RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO STATEMENT OF NET ASSETS JUNE 30, 2010 Total fund balance - total governmental funds $19,607,906 Amounts reported for governmental activities in the Statement of Net Assets are different because: Delinquent property taxes receivable are not reported in the governmental funds balance sheet since they are not considered "available" revenues. 85,340 The long-term notes receivable are not reported in the governmental funds balance sheet since they are not available to pay current period expenditures. 3,596,031 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. 32,432 Inventory is not a current financial resource and, therefore, is not reported in the governmental funds balance sheet. 1,416,130 A prepaid pension obligation is not a current financial resource, and therefore, is not reported in the governmental funds balance sheet. 5,706,840 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. 39,531,590 Governmental funds report losses on direct financing leases when incurred, whereas the loss of direct financing leases are deferred and amortized over the life of the lease in the Statement of Net Assets. 374,271 Bond issuance costs used in governmental activities are not current financial resources and, therefore, are not reported in the governmental funds balance sheet. 303,431 (Continued) -35- CITY OF PADUCAH, KENTUCKY RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO STATEMENT OF NET ASSETS JUNE 30, 2010 Receivables from direct financing leases are not available in the current period and, therefore, are deferred 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. The portion of accrued compensated absences not due and payable in the current period and, therefore, not reported in the governmental funds balance sheet. Long-term debts of ($24,986,899) 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. The long- term debts are: Due within one year $ 2,214,088 Due after one year 29,255,619 Internal service funds are used by management to charge the costs of certain activities, such as insurance and fleet management, to individual funds. The assets and liabilities of the Internal Service Funds (net of amount allocated to business -type activities) not included in other reconciling items are: Current assets $ 4,494,299 Total liabilities (360,226) Net amount allocated to business -type activities (233,370) NET ASSETS OF GOVERNMENTAL ACTIVITIES See accompanying notes to the basic financial statements. -36- Exhibit 4 (Continued) $ 4,215,972 (183,298) (1,638,304) (31,469,707) 3,900,703 $45,479,337 CITY OF PADUCAH, KENTUCKY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2010 Revenues: Taxes Licenses Charges for services Intergovernmental Grants Interest Miscellaneous Total revenues Expenditures: Current operations: General government Public safety Public service Parks and recreation Planning and development Other Capital outlay Debt service: Principal requirement Interest and fiscal requirement Total expenditures Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses): Capital lease Long-term debt draws Long-term debt issued Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances, July 1, 2009 Adjustment to beginning net assets (See Note 10) FUND BALANCES, JUNE 30, 2010 See accompanying notes to the basic financial statements. -37- General 20,969,137 582,978 736,237 82,550 1,336,009 1111 "I ­ 5,277,916 14,575,456 4,636,599 2,582,382 847,188 X1.'9 A'I A &A I General Capital Improvements 1,112,184 14,043 670,302 1,796,529 8,324,312 Exhibit 5 Special Revenue Investment Fund 4,010,631 7,002 A All 1711 680,099 !nA Ann 1,602,515 (6,527,783) 3,337,534 512,102 (2,054,996) (1,542,894) 59,621 10,311,490 (162,433) $ 10,208,678 1,176,866 6,095,916 (258,445) 7,014,337 486,554 1,745,766 45,524 481,635 (3,638,134) (3,110,975) 226,559 2,618,147 $ 2,232,320 $ 2,844,706 Special - - 5,277,916 Revenue Debt Nonmajor Total Bond Service Governmental Governmental Fund Fund Funds Funds $ - $ - $ 511,595 $ 6,326,740 - - - 24,979,768 - - 263,109 846,087 - 601,487 489,837 1,091,324 - - 214,133 2,062,554 9,283 - 8,368 121,246 - - 647,071 2,653,382 - - - 5,277,916 - - 1,423,981 15,999,437 - - 1,347,516 5,984,115 - - - 2,582,382 115,000 - 1,073,270 1,868,369 - - - 847,188 - - - 8,324,312 - 1,020,585 - 1,020,585 - 1,077,128 - 1,077,128 115,000 2,097,713 3,844,767 42,981,432 (105,717) (1,496,226) (1,710,654) (4,900,331) - 405,796 - 405,796 - - - 1,222,390 6,645,000 - 258,391 6,903,391 - 1,089,630 1,543,569 9,722,852 (3,619,812) - (322,322) (9,893,709) 3,025,188 1,495,426 1,479,638 8,360,720 2,919,471 (800) (231,016) 3,460,389 - 93,244 1,541,303 16,309,950 - - - (162,433) $ 2,919,471 $ 92,444 $ 1,310,287 $ 19,607,906 -38- Exhibit 6 CITY OF PADUCAH, KENTUCKY RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2010 Net change in fund balances - total governmental funds $ 3,460,389 Amounts reported for governmental activities in the Statement of Activities are different because: Inventory purchases require the use of current financial resources and, therefore, are reported as expenditures in governmental funds. 810,893 Inventory sales provide current financial resources and are reported as revenues in governmental funds. (1,414,394) 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. This amount includes Internal Service Fund's capital outlays of $1,267,822. 8,763,073 Proceeds from the disposal of capital assets are reported gross in the governmental funds because the related assets were recorded as expenditures when purchased. However, the proceeds are netted with the book value in the government -wide statement of activities. This amount includes Internal Service Fund's book value of $30,811. (30,811) Collections on long-term notes receivable and related interest receivable are revenues in the governmental funds when collected. (149,517) Delinquent property taxes receivable are not considered "available" revenues in the governmental funds. (124,294) Direct financing leases receivable are not considered "available" revenues in the governmental funds. (194,167) 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. (72,423) 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 $513,814. (3,607,763) (Continued) -39- Exhibit 6 (Continued) CITY OF PADUCAH, KENTUCKY RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2010 Proceeds from the issuance and draw down of debt provides current financial resources and is reported as an other financing source in $(8,125,781) governmental funds. Capital acquisitions financed with long term financing excluded from the governmental funds because it does not a produce or use current financial resources (600,000) 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. 1,020,585 Governmental funds report the effect of losses on direct financing leases when incurred, whereas these amounts are deferred and amortized in the Statement of Activities. (26,895) 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. (83,128) Long-term accrued compensated absences do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. (8,901) 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. 99,770 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 $ 294,651 Net of amount allocated to business -type activities (30,121) Capital Outlays (1,267,822) Book value of disposals 30,811 Depreciation expense 513,814 (458,667) CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES $ (742,031) See accompanying notes to the basic financial statements. -40- CITY OF PADUCAH, KENTUCKY BUDGETARY COMPARISON STATEMENT (BUDGETARY BASIS) GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2010 Beginning budgetary fund balance Resources (Inflows): Taxes: Real and personal, current year Real and personal, prior year (net of refunds) Franchise Bank taxes In lieu of tax payment Penalty, interest and advertising Paducah Junior College tax collections Total taxes Licenses: Business licenses Employee earnings Comcast fees Penalties Alcoholic beverages Insurance premium tax Building permits Electrical permits Zoning change fees Miscellaneous building and electrical fees KJDA payroll rebate Total licenses Charges for services: Tax collection fee Administrative charge Base court revenue Recreation fees Total charges for services Budgeted Amounts Original Final Actual $10,149,057 Exhibit 7 Variance with Final Budget Positive (Negative) 4,754,000 4,717,355 4,717,362 7 107,000 110,645 110,646 1 135,000 171,625 171,631 6 195,000 204,520 204,522 2 206,000 253,695 253,700 5 54,000 47,690 47,696 6 - 309,585 309,588 3 5,451,000 5,815,115 5,815,145 30 4,020,000 4,229,100 4,229,102 2 12,231,000 12,373,875 12,373,878 3 307,250 306,870 306,874 4 99,625 156,940 156,944 4 131,000 123,740 123,740 - 4,100,000 3,797,345 3,797,347 2 73,000 107,710 107,714 4 19,500 28,125 28,126 1 7,500 6,605 6,609 4 - 250 252 2 (245,700) (161,450) (161,449) 1 20,743,175 20,969,110 20,969,137 27 133,000 146,075 146,078 3 229,000 229,000 229,000 - 70,000 55,010 55,010 - 98,000 152,875 152,890 15 530,000 582,960 582,978 18 -41- (Continued) Exhibit 7 (Continued) CITY OF PADUCAH, KENTUCKY BUDGETARY COMPARISON SCHEDULE (BUDGETARY BASIS) GENERALFUND FOR THE YEAR ENDED JUNE 30, 2010 Other: Property rent and sales 688,535 767,260 767,274 Variance with Property upkeep and Final Budget maintenance Budgeted Amounts Actual Positive Grants: Original Final Amounts (Negative) Police State Incentive 300,000 $ 288,755 $ 288,757 2 Police hiring supplement - 121,170 121,172 2 Fire State Incentive 264,000 253,855 253,855 - Ronald McDonald Grant - 1,245 1,248 3 Kentucky League of Counties grants - 7,500 7,500 - Waste management grants 5,000 - - - Paducah Housing Authority Charges to Appropriations (Outflows): - after school program 65,000 8,370 8,372 2 Police supplemental grants 25,000 55,330 55,333 3 Total grants 659,000 736,225 736,237 12 Interest 153,000 82,545 82,550 5 Other: Property rent and sales 688,535 767,260 767,274 14 Property upkeep and maintenance 189,225 287,940 287,948 8 Contractual programs 5,000 7,290 7,294 4 E911 - GIS 23,885 23,885 23,885 - Miscellaneous 209,915 249,595 249,608 13 Total other 1,116,560 1,335,970 1,336,009 39 Other financing sources: Operating transfers in - 512,355 512,102 (253) Amounts available for appropriation 38,801,792 40,183,337 40,183,215 (122) Charges to Appropriations (Outflows): General government: General administration: Mayor and Commissioners 213,925 202,125 202,099 26 City Manager 343,160 436,470 436,426 44 City Clerk 173,570 166,680 166,646 34 Corporate Counsel 159,780 182,565 182,550 15 Non -departmental 285,000 830,000 830,000 - Memberships and contingency 381,125 99,010 98,995 15 Civic beautification 4,010 3,770 3,768 2 Total general administration 1,560,570 1,920,620 1,920,484 136 (Continued) -42- CITY OF PADUCAH, KENTUCKY BUDGETARY COMPARISON SCHEDULE (BUDGETARY BASIS) GENERAL FUND FOR THE YEAR ENDED NNE 30, 2010 General government: Finance: Finance administration Accounting and payroll Budget and human resources Rental property Radio operations Revenue collection Total finance Planning: Administration Planning Grants Total planning Human rights Inspection: Inspection administration Construction Code enforcement Neighborhood redevelopment Total inspection Information technology Risk management Public safety: Police: Police administration Patrol Investigations Total police Fire: Fire administration Suppression Prevention Training Total fire Budgeted Amounts Actual Original Final Amounts $ 193,345 $ 158,250 $ 158,209 312,905 284,425 284,384 272,450 252,955 252,904 134,735 34,720 34,706 57,680 455,470 455,459 384,250 364,380 364,333 1,355,365 1,550,200 1,549,995 97,573 52 244,165 260,425 260,382 84,540 78,045 78,006 161,735 162,665 162,642 490,440 501,135 501,030 cL nye Ln nnn aL nnn Exhibit 7 (Continued) Variance with Final Budget Positive (Negative) $ 41 41 51 14 11 47 ,Inc 43 39 1nr 176,805 174,930 174,898 32 289,500 277,935 277,899 36 407,555 399,175 399,145 30 - 1,120 1,110 10 873,860 853,160 853,052 108 522,355 489,210 489,173 37 108,470 97,625 97,573 52 1,091,270 963,685 963,595 90 5,705,690 5,849,540 5,849,460 80 1,580,490 1,620,370 1,620,299 71 8,377,450 8,433,595 8,433,354 241 216,560 219,975 219,926 49 5,611,540 5,640,215 5,640,147 68 191,900 159,200 159,155 45 126,720 L 1 AL 171%n 122,790 L 1 A/1 1 On 122,754 L 1 Al n0/1 36 1nO -43- (Continued) CITY OF PADUCAH, KENTUCKY BUDGETARY COMPARISON SCHEDULE (BUDGETARY BASIS) GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2010 Public service: Public works: Public Works Administration Street maintenance Street lighting Maintenance Downtown landscaping Total public works Engineering services: Engineering services GIS operation Flood control Total engineering services Parks and recreation Parks administration Grounds maintenance Pool Recreation programs Total recreation Other: Cable authority Mainstreet program Leave expense Intergovernmental expense Total other Other financing uses: Operating transfers out Total charges to appropriations BUDGETARY FUND BALANCE, JUNE 30, 2010 Exhibit 7 (Continued) See accompanying notes to the basic financial statements. -44- Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) $ 173,870 $ 166,885 $ 166,841 $ 44 2,151,500 2,049,455 2,049,395 60 535,000 494,680 494,680 - 1,379,715 1,075,952 1,075,892 60 900,905 805 785 20 5,140,990 3,787,777 3,787,593 184 434,550 380,630 380,574 56 - 3,490 3,475 15 460,245 465,020 464,957 63 894,795 849,140 849,006 134 757,055 657,265 657,207 58 - 1,333,698 1,333,628 70 122,340 111,850 111,817 33 454,140 479,780 479,730 50 1,333,535 2,582,593 2,582,382 211 85,665 85,105 85,096 9 237,475 300,710 300,691 19 - (37,660) (37,660) - - 309,590 309,588 2 323,140 657,745 657,715 30 1,271,825 2,055,015 2,054,996 19 28,459,515 29,976,230 29,974,537 1,693 $10,342,277 $10,207,107 $10,208,678 $ 1,571 See accompanying notes to the basic financial statements. -44- Exhibit 8 CITY OF PADUCAH, KENTUCKY BUDGETARY COMPARISON STATEMENT GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2010 Note A - Explanation of Differences Between Budgetary Inflows and Outflows and GAAP Revenues and Expenditures General Sources/inflows of resources: Fund Actual amounts "available for appropriation" from the budgetary comparison schedule $40,183,215 Differences - budget to GAAP: The beginning fund balance is a budgetary resource, but is not a current year revenue for financial reporting purposes (10,149,057) Transfers from other funds are inflows of budgetary resources, but are not revenues for financial reporting purposes (512,102) Total revenues as reported on the statement of revenues, expenditures, and changes in fund balances - governmental funds $29,522,056 Uses/outflows of resources: Actual amounts "total charges to appropriations" from the budgetary comparison schedule $29,974,537 Differences - budget to GAAP: Transfers to other funds are outflows of budgetary resources, but are not expenditures for financial reporting purposes (2,054,996) Total expenditures as reported on the statement of revenues, expenditures, and changes in fund balances - governmental funds $27,919,541 See accompanying notes to the basic financial statements. -45- Exhibit 9 CITY OF PADUCAH, KENTUCKY BUDGETARY COMPARISON STATEMENT (BUDGETARY BASIS) SPECIAL REVENUE INVESTMENT FUND FOR THE YEAR ENDED JUNE 30, 2010 Amounts available for appropriation 6,695,147 7,162,927 7,162,939 12 Charges to Appropriations (Outflows): General government: Planning and development: Economic development 884,500 680,100 680,099 1 Other financing uses: Operating transfers out 3,692,500 3,638,135 3,638,134 1 Total charges to appropriations 4,577,000 4,318,235 4,318,233 2 BUDGETARY FUND BALANCE, JUNE 30, 2010 $2,118,147 $2,844,692 $2,844,706 $ 14 See accompanying notes to the basic financial statements. -46- Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Beginning budgetary fund balance $2,618,147 $2,618,147 $2,618,147 $ - Resources (Inflows): Licenses: Employee earnings 4,077,000 4,010,630 4,010,631 1 Interest - 7,000 7,002 2 Total licenses 4,077,000 4,017,630 4,017,633 3 Other financing sources: Long-term debt issued - 45,520 45,524 4 Operating transfers in - 481,630 481,635 5 Total licenses - 527,150 527,159 9 Amounts available for appropriation 6,695,147 7,162,927 7,162,939 12 Charges to Appropriations (Outflows): General government: Planning and development: Economic development 884,500 680,100 680,099 1 Other financing uses: Operating transfers out 3,692,500 3,638,135 3,638,134 1 Total charges to appropriations 4,577,000 4,318,235 4,318,233 2 BUDGETARY FUND BALANCE, JUNE 30, 2010 $2,118,147 $2,844,692 $2,844,706 $ 14 See accompanying notes to the basic financial statements. -46- Exhibit 10 CITY OF PADUCAH, KENTUCKY BUDGETARY COMPARISON STATEMENT SPECIAL REVENUE INVESTMENT FUND FOR THE YEAR ENDED JUNE 30, 2010 Note A - Explanation of Differences Between Budgetary Inflows and Outflows and GAAP Revenues and Expenditures Sources/inflows of resources: Actual amounts "available for appropriation" from the budgetary comparison schedule Differences - budget to GAAP: The beginning fund balance is a budgetary resource, but is not a current year revenue for financial reporting purposes Proceeds from the issuance of debt are inflows of budgetary resources, but are not revenues for financial reporting purposes Transfers from other funds are inflows of budgetary resources, but are not revenues for financial reporting purposes Total revenues as reported on the statement of revenues, expenditures, and changes in fund balances - governmental funds Uses/outflows of resources: Actual amounts "total charges to appropriations" from the budgetary comparison schedule Differences - budget to GAAP: Transfers to other funds are outflows of budgetary resources, but are not expenditures for financial reporting purposes Total expenditures as reported on the statement of revenues, expenditures, and changes in fund balances - governmental funds See accompanying notes to the basic financial statements. -47- $ 7,162,939 (2,618,147) (45,524) (481,635) $ 4,017,633 $ 4,318,233 (3,638,134) $ 680,099 CITY OF PADUCAH, KENTUCKY BUDGETARY COMPARISON STATEMENT (BUDGETARY BASIS) SPECIAL REVENUE BOND FUND FOR THE YEAR ENDED JUNE 30, 2010 Beginning budgetary fund balance Resources (Inflows): Interest Other financing sources: Long-term debt issued Operating transfers in Total licenses Amounts available for appropriation Charges to Appropriations (Outflows): General government: Planning and development: Bond issuance costs Other financing uses: Operating transfers out Total charges to appropriations BUDGETARY FUND BALANCE, JUNE 30, 2010 Exhibit 11 - 115,000 115,000 - - 3,619,815 3,619,812 3 - 3,734,815 3,734,812 3 $ - $ 2,919,465 $2,919,471 $ 6 See accompanying notes to the basic financial statements. -48- Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) - 9,280 9,283 3 - 6,645,000 6,645,000 - - 6,645,000 6,645,000 - - 6,654,280 6,654,283 3 - 115,000 115,000 - - 3,619,815 3,619,812 3 - 3,734,815 3,734,812 3 $ - $ 2,919,465 $2,919,471 $ 6 See accompanying notes to the basic financial statements. -48- Exhibit 12 CITY OF PADUCAH, KENTUCKY BUDGETARY COMPARISON STATEMENT SPECIAL REVENUE BOND FUND FOR THE YEAR ENDED JUNE 30, 2010 Note A - Explanation of Differences Between Budgetary Inflows and Outflows and GAAP Revenues and Expenditures Sources/inflows of resources: Actual amounts "available for appropriation" from the budgetary comparison schedule Differences - budget to GAAP: The beginning fund balance is a budgetary resource, but is not a current year revenue for financial reporting purposes Proceeds from the issuance of debt are inflows of budgetary resources, but are not revenues for financial reporting purposes Transfers from other funds are inflows of budgetary resources, but are not revenues for financial reporting purposes Total revenues as reported on the statement of revenues, expenditures, and changes in fund balances - governmental funds Uses/outflows of resources: Actual amounts "total charges to appropriations" from the budgetary comparison schedule Differences - budget to GAAP: Transfers to other funds are outflows of budgetary resources, but are not expenditures for financial reporting purposes Total expenditures as reported on the statement of revenues, expenditures, and changes in fund balances - governmental funds See accompanying notes to the basic financial statements. -49- $ 6,654,283 (6,645,000) $ 9,283 $ 3,734,812 (3,619,812) $ 115,000 Exhibit 13 CITY OF PADUCAH, KENTUCKY STATEMENT OF NET ASSETS PROPRIETARY FUNDS JUNE 30, 2010 See accompanying notes to the basic financial statements. -50- Governmental Business -type Activities Activities ASSETS Nonmajor Internal Solid Enterprise Service Current Assets: Waste Funds Totals Funds Cash and cash equivalents $1,404,972 $1,070,158 $2,475,130 $3,127,559 Investments 1,525,000 - 1,525,000 1,250,000 Accounts receivable 540,395 4,198 544,593 - Grants receivable 95,569 - 95,569 - Interest receivable 6,749 - 6,749 30,774 Prepaid expenses - 6,482 6,482 15,000 Inventory - - - 70,966 Total current assets 3,572,685 1,080,838 4,653,523 4,494,299 Noncurrent Assets: Net capital assets: Land 62,152 - 62,152 - Depreciable capital assets 1,302,465 288,344 1,590,809 2,661,881 Total noncurrent assets 1,364,617 288,344 1,652,961 2,661,881 Total assets 4,937,302 1,369,182 6,306,484 7,156,180 LIABILITIES Current Liabilities: Voucher and accounts payable 115,120 105,141 220,261 309,667 Accrued payroll and payroll taxes 37,934 - 37,934 14,030 Accrued compensated absences 69,688 1,642 71,330 - Due to other funds - 42,581 42,581 - Total current liabilities 222,742 149,364 372,106 323,697 Noncurrent Liabilities: Landfill post -closure costs 2,062,500 - 2,062,500 - Accrued compensated absences - 14,782 14,782 36,529 Total noncurrent liabilities 2,062,500 14,782 2,077,282 36,529 Total liabilities 2,285,242 164,146 2,449,388 360,226 NET ASSETS Invested in capital assets 1,364,617 288,344 1,652,961 2,661,881 Restricted for: Housing development projects - 620,800 620,800 - Unrestricted 1,287,443 295,892 1,583,335 4,134,073 TOTAL NET ASSETS $2,652,060 $1,205,036 3,857,096 $6,795,954 Reconciliation to government -wide statements of net assets: Adjustment to reflect the consolidation of Internal Service Funds' activities related to Enterprise Funds 233,370 NET ASSETS OF BUSINESS -TYPE ACTIVTFIES $4,090,466 See accompanying notes to the basic financial statements. -50- Exhibit 14 CITY OF PADUCAH, KENTUCKY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2010 TOTAL NET ASSETS - JUNE 30, 2010 $2,652,060 $1,205,036 $6,795,954 Reconciliation to government -wide statements of net assets: Adjustment to reflect the consolidation of Internal Service Funds' activities related to Enterprise Funds 30,121 CHANGE IN NET ASSETS OF BUSINESS -TYPE ACTIVITIES $ 963,586 See accompanying notes to the basic financial statements. -51- Governmental Business -type Activities Activities Nonmajor Internal Solid Enterprise Service Operating Revenues: Waste Funds Totals Funds Charges for services - internal $ - $ 148,158 $ 148,158 $5,651,545 Charges for services - external 4,380,115 2,344,208 6,724,323 245,589 Miscellaneous 63,497 1,515 65,012 - Total operating revenues 4,443,612 2,493,881 6,937,493 5,897,134 Operating Expenses: Cost of sales and service 3,425,675 2,297,958 5,723,633 5,233,240 Depreciation and amortization 371,423 39,764 411,187 513,814 Total operating expenses 3,797,098 2,337,722 6,134,820 5,747,054 Operating income (loss) 646,514 156,159 802,673 150,080 Nonoperating Revenues (Expenses): Interest and investment income 33,460 280 33,740 50,968 Gain (loss) on disposal of property and equipment 1,112 - 1,112 64,620 Total nonoperating revenues (expenses) 34,572 280 34,852 115,588 Income (loss) before contributions and transfers 681,086 156,439 837,525 265,668 Contributions and Transfers: Capital contributions - 17,047 17,047 - Transfers in - 78,893 78,893 28,984 Transfers out - - - - Total contributions and transfers - 95,940 95,940 28,984 Change in net assets 681,086 252,379 933,465 294,652 Total net assets, July 1, 2009 1,970,974 952,657 6,501,302 TOTAL NET ASSETS - JUNE 30, 2010 $2,652,060 $1,205,036 $6,795,954 Reconciliation to government -wide statements of net assets: Adjustment to reflect the consolidation of Internal Service Funds' activities related to Enterprise Funds 30,121 CHANGE IN NET ASSETS OF BUSINESS -TYPE ACTIVITIES $ 963,586 See accompanying notes to the basic financial statements. -51- CITY OF PADUCAH, KENTUCKY STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2010 Cash Flows from Operating Activities: Cash received from customers Cash received from interfund services provided Payments to suppliers Payments to employees Claims paid Payments to internal service funds Other receipts Other payments Net cash provided (used) by operating activities Cash Flows from Noncapital Financing Activities: Transfers (to) from other funds Cash Flows from Capital and Related Financing Activities: Capital contributions Purchase of capital assets Proceeds from sale of capital assets Net cash provided (used) by capital and related financing activities Cash Flows from Investing Activities: Proceeds from sale of investment securities Interest on cash and investments Purchase of investments Net cash provided (used) by investing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, July 1, 2009 CASH AND CASH EQUIVALENTS, JUNE 30, 2010 Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating income (loss) Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization Change in assets and liabilities: Receivables Prepaid expenses Inventories Due to other funds Accrued expenses Accounts payable NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES See accompanying notes to the basic financial statements. Exhibit 15 $ 1,108,890 $ 269,267 $ 1,378,157 $ 1,446,737 -52- Governmental Business -type Activities Activities Nonmajor Internal Solid Enterprise Service Waste Funds Totals Funds 4,438,855 2,508,333 6,947,188 - - - - 5,971,769 (1,444,794) - (1,444,794) (275,479) (1,373,875) (123,998) (1,497,873) (278,107) - - - (3,100,439) (574,793) (4,268) (579,061) - 63,497 1,515 65,012 - - (2,112,315) (2,112,315) (871,007) 1,108,890 269,267 1,378,157 1,446,737 - 96,012 96,012 28,984 - 17,047 17,047 - (269,594) (73,136) (342,730) (1,267,823) 1,112 - 1,112 95,431 (268,482) (56,089) (324,571) (1,172,392) 1,750,000 - 1,750,000 4,300,000 33,460 280 33,740 50,968 (2,025,000) - (2,025,000) (2,350,000) (241,540) 280 (241,260) 2,000,968 598,868 309,470 908,338 2,304,297 806,104 760,688 1,566,792 823,262 $ 1,404,972 $ 1,070,158 $ 2,475,130 $ 3,127,559 $ 646,514 $ 156,159 $ 802,673 $ 150,080 371,423 39,764 411,187 513,814 58,740 15,967 74,707 74,635 - 21,230 21,230 1,266,647 - - - 2,639 (801,000) (8,211) 912 (7,299) 7,379 40,424 35,235 75,659 232,543 $ 1,108,890 $ 269,267 $ 1,378,157 $ 1,446,737 -52- CITY OF PADUCAH, KENTUCKY STATEMENT OF NET ASSETS FIDUCIARY FUNDS JUNE 30, 2010 ASSETS Cash and cash equivalents Receivables: Accounts Interest Investments at fair value: Money market funds Certificates of deposit Common stock Corporate bonds U.S. agencies bonds. Mutual funds Total assets LIABILITIES Voucher and accounts payable Due to other funds Payroll taxes and withholdings payable Total liabilities NET ASSETS Held in trust for pension benefits and other purposes See accompanying notes to the basic financial statements. -53- Exhibit 16 Primary Government Private - Pension purpose Agency Funds Trusts Funds 58,680 $ 85,730 $111,335 - 3,000 - 27,158 - - 230,787 - - 125,000 - - 1,358,418 - - 365,209 - - 1,251,053 - - S '7n5 Sna 4')A tina - 8,621,809 1,012,334 111,335 268 - - - 3,276 - - - 111,335 268 3,276 $111,335 $8,621,541 $1,009,058 Exhibit 17 CITY OF PADUCAH, KENTUCKY STATEMENT OF CHANGES IN NET ASSETS FIDUCIARY FUNDS FOR THE YEAR ENDED JUNE 30, 2010 Additions: Contributions: Employer Plan members Intergovernmental revenues Private donations Interfund transfers in Total contributions Investment income: Net increase (decrease) in fair value of investments Loss on sale of investments Interest and dividends Net investment income Total additions Deductions: Benefits Capital outlay Administrative expenses Interfund transfers out Total deductions Change in net assets Net assets, July 1, 2009 NET ASSETS, JUNE 30, 2010 880,537 80,246 - (5,898) ncn Ann I n —n 1,132,944 93,191 1,603,189 185,008 1,799,186 - - 893 55,997 13,910 - 8,112 t ncc nn nn nc (251,994) Private - Pension purpose Funds Trusts $ 465,170 $ - 5,075 - - 10,725 - 10,000 880,537 80,246 - (5,898) ncn Ann I n —n 1,132,944 93,191 1,603,189 185,008 1,799,186 - - 893 55,997 13,910 - 8,112 t ncc nn nn nc (251,994) 162,093 8,873,535 846,965 $8,621,541 $1,009,058 See accompanying notes to the basic financial statements. -54- CITY OF PADUCAH, KENTUCKY BASIC FINANCIAL STATEMENTS COMPONENT UNITS FINANCIAL STATEMENTS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 309 2010 THIS PAGE INTENTIONALLY LEFT BLANK CITY OF PADUCAH, KENTUCKY STATEMENT OF NET ASSETS COMPONENT UNITS JUNE 30, 2010 ASSETS Current Assets: Cash and cash equivalents Receivables, net: Accounts Grants Other Inventories Prepaid expenses Other current assets Total current assets Noncurrent Assets: Net capital assets: Land and construction in progress Depreciable capital assets Other assets Total noncurrent assets Total assets -55- Exhibit 18 4,852,091 486,314 5,338,405 All Paducah Paducah Component Water Transit Unit Works Authority Totals 2,173,532 $1,172,519 $ 3,346,051 395,204 180,681 575,885 - 159,797 159,797 900,304 - 900,304 442,669 15,000 457,669 - 16,043 16,043 773,669 - 773,669 A LOC 7^70 1 CAA AAA L nnn A 1 0 4,852,091 486,314 5,338,405 33,189,978 4,773,338 37,963,316 2,173,104 - 2,173,104 40,215,173 5,259,652 45,474,825 A A nnn CC I L On7 Lnn C1 'MA n A 7 LIABILITIES Current Liabilities: Voucher and accounts payable Accrued payables Notes payable due within one year Other current liabilities Total current liabilities Noncurrent Liabilities: Notes payable Total noncurrent liabilities Total liabilities NET ASSETS Net Assets: Invested in capital assets, net of related debt Unrestricted TOTAL NET ASSETS 34,446,501 5,155,366 All Paducah Paducah Component Water Transit Unit Works Authority Totals 1,377,919 1,419,721 2,797,640 - 103,258 103,258 25,000 32,415 57,415 990,047 - 990,047 2,392,966 1,555,394 3,948,360 3,578,635 71,871 3,650,506 3,578,635 71,871 3,650,506 C A1/1 LA1 1 1Cn17 n1cc ^I CAO OLL 34,446,501 5,155,366 39,601,867 4,482,449 21,061 4,503,510 $38,928,950 $5,176,427 $44,105,377 See accompanying notes to the basic financial statements -56- CITY OF PADUCAH, KENTUCKY STATEMENT OF ACTIVITIES COMPONENT UMTS FOR THE YEAR ENDED JUNE 30, 2010 FUNCTIONS/PROGRAMS Authorities: Business -type activities: Paducah Water Works Paducah Transit Authority TOTAL COMPONENT UNITS 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, 2009 NET ASSETS, JUNE 30, 2010 Expenses Exhibit 19 Program Revenues Operating Capital Charges for Grants and Grants and Services Contributions Contributions $ 6,965,498 $7,836,232 4,500,195 1,457,800 $11,465,693 $9,294,032 See accompanying notes to the basic financial statements. -57- 1,708,085 $1,708,085 $ 473,251 3,036,612 $ 3,509,863 Net (Expense) Revenue and Changes in Net Assets Paducah Paducah Water Transit Works Authority Totals $ 1,343,985 $ - $ 1,343,985 - 1,702,302 1,702,302 1,343,985 1,702,302 3,046,287 17,140 198 17,338 2,520 (10,946) (8,426) - 84,560 84,560 19,660 73,812 93,472 1,363,645 1,776,114 3,139,759 37,565,305 3,400,313 40,965,618 $38,928,950 $5,176,427 $44,105,377 -58- CITY OF PADUCAH, KENTUCKY NOTES TO THE FINANCIAL STATEMENTS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 309 2010 THIS PAGE INTENTIONALLY LEFT BLANK CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 1- Summary of Significant Accounting Policies: General Statement The City of Paducah (City) complies with generally accepted accounting principles (GAAP) as applied to governmental units. This requires the use of the accrual basis of accounting for government -wide financial statements and proprietary funds financial statements and a modified accrual basis of accounting for the governmental funds financial statements. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. 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. 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. 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. (Continued) -59- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 1- Summary of Significant Accounting Policies: Discretely Presented Component Units Complete financial statements of the individual component units can be obtained from their respective administrative offices in the following locations: Paducah Water Works Transit Authority of the 401 Washington Street City of Paducah Paducah, Kentucky 42003 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. Paducah Power System — The Paducah Power System (PPS) is a legally separate entity that provides electric utilities to residents in the Paducah area. PPS 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. Mainstreet — Mainstreet is a 501(c)3 established for the promotion of cultural and economic growth in Downtown Paducah. Mainstreet is a legally separate entity and is not financially accountable to the City. This organization is not included as a component unit of the City. (Continued) CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JLTNE 30, 2010 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 Bond Fund — To account for the proceeds from the issuance of the 2010 Build America Bonds used for public improvement projects. Special Revenue Investment Fund — To account for restricted funds from employee license fee used for economic development, community redevelopment and infrastructure capital investments within Paducah. Debt Service Fund — To account for the accumulation of resources and payment of bond and note principal and interest, and capital lease activity. 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) -61- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 1- Summary of Significant Account Policies: Basis of Presentation Fund Financial Statements 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. The 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 -like activities are presented using the economic resources measurement focus as defined in item b. below. In the fund financial statements, the "current financial resources" measurement focus or the "economic resources" measurement focus is used as appropriate: a. All governmental funds utilize a. "current financial resources". measurement focus. Only current financial assets and liabilities are generally included on their balance sheets. Their operating statements present sources and uses of available spendable financial resources during a given period. These funds use fund balance as their measure of available spendable financial resources at the end of the period. b. The proprietary, 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 (Continued) -62- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 1- Summary of Significant Account Policies: Basis of Accounting capital outlay) are recorded when the related fund liability is incurred, except for general obligation bond principal and interest which are reported when due. Agency funds are presented using the accrual basis of accounting. All proprietary, 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. Deferredlunearned revenue The City reports unearned revenue on its government -wide statement of net assets and deferred revenue on the fund financial statements. Deferred/unearned revenues arise when potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period. Deferred/unearned revenues also arise when resources are received by the City before it has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the City has a legal claim to the resources, the liability for deferred/unearned revenue is removed 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 legally 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) -63- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 1- Summary of Significant Accountine Policies: Budgets and Budgetary Accounting 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, 2010. 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 deposit are reported at carrying amount which reasonably estimates fair value. Additional cash and investment disclosures are presented in Note 3. Receivables In the government -wide statements, receivables consist of all revenues earned at year end and not yet received. Major receivable balances for the governmental activities include property taxes, 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. (Continued) CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 1- Summary of Sienificant Accountine Policies: 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, receivables in governmental funds include revenue accruals such as franchise tax, employee earnings taxes, business licenses, insurance and grants and other similar intergovernmental revenues since they are usually both measurable and available. Nonexchange transactions collectible but not available are deferred. 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 receivables include 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. Inventory consists of expendable supplies of $70,966 held for consumption and real property of $1,416,129 held for urban development. 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, $2,500 or more after July 1, 1999, and $3,000 or more after June 24, 2009. Prior to July 1, 2002, governmental funds' infrastructure assets were not capitalized. These assets have been valued at estimated historical cost. (Continued) '1.T.11 CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 1- Summary of Significant Accounting Policies: Capital Assets 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 10-15 Years Buildings 30 Years Building improvements 10-15 Years Infrastructure 15-30 Years Equipment 7-9 Years Furnishings and fixtures 3-5 Years Vehicles 5-7 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. Qualified participants in the County Employee's Retirement System, under certain circumstances, are eligible to convert accrued sick pay benefits into additional credit for years of service upon retirement. 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) -66- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 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 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) -67- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 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 reallocation of resources between funds of the reporting entity are classified as interfund transfers. For the purposes of the Statement of Activities, all interfund transfers between individual governmental funds have been eliminated. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make assumptions that affect reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Stewardship, Compliance, and Accountability By its nature as a local government unit, the City and its component units are subject to various federal, state, and local laws and contractual regulations. An analysis of the City's compliance with significant laws and regulations and demonstration of its stewardship over City resources follows. Fund Accounting Requirements The City complies with all state and local laws and regulations requiring the use of separate funds. Revenue Restrictions The City has various restrictions placed over certain revenue sources from state or local requirements. The primary restricted revenue sources include. Revenue Source Section Eight Housing Choice Voucher Program American Recovery & Reinvestment Act Grants HOME Investment Partnerships Grant Emergency Communication Revenue County Bed Tax Homeland Security Grant Program Kentucky Housing Corporation Other Grants 25% of Employee Earning Tax M Legal Restrictions of Use Subsidize Rental Costs for Low - Income Families Job creation and retention Construction of Low-income Rental Units E-911 Emergency Services Debt Obligations Homeland Security Enhancement Fagade Loans Grant Program Expenditures Economic, Community and Capital Development (Continued) CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 1- Summary of Significant Accounting Policies: Stewardship, Compliance, and Accountability Revenue Restrictions For the year ended June 30, 2010, 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. Subsequent Events In preparing these financial statements, management has evaluated events and transactions for potential recognition or disclosure through December 16, 2010, the date financial statements were available to be issued. Note 2 - Prouerty 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, 2010, are as follows: Description Assessment and enforceable lien Levy Face value amount payment dates Delinquent date - 10% penalty plus 1/2% per month Note 3 - Detail Notes on Transaction Classes/Accounts: Date January 1, 2009 September 25, 2009 1"half by November 1, 2009 2nd half by February 1, 2010 0 half - November 30, 2009 2❑d half - February 28, 2010 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 Commission 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. (Continued) -69- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 3 - Detail Notes on Transaction Classes/Accounts: Deposits 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, 2010, 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 $16,587,472 and $21,251,585, respectively. Investments As of June 30, 2010, the City's reporting entity had the following investments: TOTAL FIDUCIARY AND PRIVATE PURPOSE TRUST FUNDS SE45E515 -70- (Continued) Fair Value/ Average Investment Maturities (In Years) (2) Carrying Credit Quality/ Less Greater Tunes of Investments Amount Ratine (1) Than 1 1-5 6-10 Than 10 Primary Government Money market funds $ 100,778 NA $ 100,778 $ - $ - $ - Certificates of deposit (3) 6,325.000 NA 2,450,000 3,875,000 - - TOTAL PRIMARY GOVERNMENT $6.425.778 Fiduciary and Private Purpose Trust Funds Money market funds $ 230,787 NA $ 230,787 $ - $ - $ - Certificates of deposit (3) 125,000 NA - 125,000 - - Common stock 1,358,418 NA NA NA NA NA Corporate bonds 365,209 AIA- - 365,209 - - U.S. agencies (4) 1,251,053 AAA/A - 1,148,368 102,685 - Mutual funds Equity 3,902,088 NA NA NA NA NA Commodities 504,151 NR NA NA NA NA Fixed 1,568,259 NA NA NA NA NA Index 154,610 NA NA NA NA NA TOTAL FIDUCIARY AND PRIVATE PURPOSE TRUST FUNDS SE45E515 -70- (Continued) CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 3 - Detail Notes on Transaction Classes/Accounts: Investments (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) $125,000 of the fiduciary's certificates of deposit is pooled with the primary government's certificates of deposit. (4) Includes $493,161 of securities callable as of June 30, 2010. 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 Commission 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 Commonwealth 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. 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 overconcentration 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. (Continued) -71- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 3 - Detail Notes on Transaction Classes/Accounts: Investment Policies Pension Trust Policy The City's pension trust is the Police and Firefighters' Pension Fund (PFPF). Investment policy provides 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: Equities Fixed income PFPF Retirement Plan Minimum Target Maximum 35% 50% 65% 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 Al, 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. Capital Assets Capital asset activity for the year ended June 30, 2010, was as follows: (Continued) 10a CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 3 - Detail Notes on Transaction Classes/Accounts: Capital Assets Balance Balance Primary Government: July 1, 2009 Additions Deductions June 30, 2010 Capital assets, not being depreciated: Land $ 6,239,585 $ 941,443 $ - $ 7,181,028 Construction -in -progress 3,610,527 7,127,819 1,641,182 9,097,164 Total capital assets, not being depreciated 9,850,112 8,069,262 1,641,182 16,278,192 Capital assets, being depreciated: Land improvements 3,061,972 - - 3,061,972 Buildings and improvements 15,445,256 - - 15,445,256 Infrastructure 34,918,483 284,396 - 35,202,879 Equipment 8,290,078 782,772 367,154 8,705,696 Furnishings and fixtures 230,312 - 19,332 210,980 Vehicles 7.582,726 1,267,823 1,399,481 7,451,068 Totals at historical cost 69,528,827 2,334.991 1,785,967 70,077,851 Less accumulated depreciation: Land improvements 1,247,124 85,834 - 1,332,958 Buildings and improvements 11,410,888 280,281 - 11,691,169 Infrastructure 19,733,385 2,108,357 - 21,841,742 Equipment 6,615,056 631,258 367,154 6,879,160 Furnishings and fixtures 224,707 1,525 19,333 206,899 Vehicles 5,740,687 500,508 1,368,670 4,872,525 Total accumulated depreciation 44,971,847 3,607.763 1,755,157 46,824,453 Total capital assets, being depreciated, net 24,556,980 (1,272,772) 30,810 23,253,398 PRIMARY GOVERNMENT ACTIVITIES CAPITAL ASSETS, NET 34.407.092 4 1 SL67LM $39.531.590 Balance Balance Business -type Activities: July 1, 2009 Increases Decreases June 30, 2010 Capital assets, not being depreciated: Land $ 65,908 $ - $ 3,756 $ 62,152 Construction -in -progress - - - - Total capital assets, not being depreciated 65,908 - 3,756 62,152 Capital assets, being depreciated: Buildings and improvements 429,254 - - 429,254 Equipment 1,405,469 130,359 18,999 1,516,829 Vehicles 2,559,093 212,370 - 2,771,463 Totals at historical cost 4,393,816 342,729 18,999 4,717,546 (Continued) -73- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 3 - Detail Notes on Transaction Classes/Accounts: Capital Assets Total capital assets, being depreciated, net 1,655.511 (68,458) (3,756) 1,590,809 BUSINESS -TYPE ACTIVITIES CAPITAL ASSETS, NET 1_.721.419 (68.457) $ 1 1.652.961 Depreciation expense was charged to governmental activities as follows: General government: Balance General administration $ 150,115 Balance Business -type Activities: July 1, 2009 Increases Decreases June 30, 2010 Less accumulated depreciation: 1,295 Information systems - Fleet maintenance Buildings and improvements $ 201,876 $ 12,914 $ 3,756 $ 211,034 Equipment 996,492 112,159 18,999 1,089,652 Vehicles 1,539,937 286,114 1,826,051 Total accumulated depreciation 2,738,305 411,187 22,755 3,126,737 Total capital assets, being depreciated, net 1,655.511 (68,458) (3,756) 1,590,809 BUSINESS -TYPE ACTIVITIES CAPITAL ASSETS, NET 1_.721.419 (68.457) $ 1 1.652.961 Depreciation expense was charged to governmental activities as follows: General government: General administration $ 150,115 Finance 2,018 Planning 4,135 Inspections 528 Personnel 1,295 Information systems - Fleet maintenance 10,264 Total general government Public safety: Police Fire Grants Emergency 911 Court awards Fleet Lease Trust Total public safety Public service: Public works Engineering Total public service -74- 168.355 147,040 35,368 58,114 84,540 14,869 503.550 843,481 81,542 247,018 328.560 (Continued) CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 3 - Detail Notes on Transaction Classes/Accounts: Capital Assets Parks and recreation 156,710 Planning and development: - Infrastructure 2,108,786 Grants 1,871 Total planning and development 2,110,657 TOTAL DEPRECIATION EXPENSE — 5,990,903 GOVERNMENTAL ACTIVITIES 3.607.763 Depreciation expense was charged to business -type activities as follows: Solid Waste Fund $ 371,423 Section Eight Housing 7,200 Civic Center 10,495 TISA Fund 22,069 TOTAL DEPRECIATION EXPENSE — 26,670,801 BUSINESS -TYPE ACTIVITIES 4 1 Balance Balance Discretely Presented July 1. 2009 Increases Decreases June 30, 2010 Component Units: Capital assets, not being depreciated: Land $ 486.314 $ $ $ 486.314 Total capital assets, not being - depreciated 486,314 Capital assets, being depreciated: 4,316,372 Buildings and improvements 1,680,992 Equipment 5,990,903 Utility plant 60,913,286 Total capital assets, being depreciated 68,585,181 Less accumulated depreciation: Buildings and improvements 755,074 Equipment 3,894,358 Utility plant 26,670,801 Total accumulated depreciation 31,320,233 Total capital assets, being depreciated, net 37,264,948 COMPONENT UNIT CAPITAL ASSETS, NET 37.751.262 486,314 70,421 - 1,751,413 2,559,558 349,155 8,201,306 5,176,299 77,745 66,011,840 7.806.278 426.900 75.964.559 107,935 - 863,009 756,474 334,460 4,316,372 1,376,715 77,745 27,969,771 2,241,124 412,205 33,149,152 5,565,154 14,695 42,815,407 5,565.154 14 43.301.721 (Continued) CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 3 - Detail Notes on Transaction Classes/Accounts: Capital Assets Depreciation expense, charged to functions/programs of discretely presented major component units as follows: Paducah Water Works $ 1,376,715 Paducah Transit Authority 864,409 TOTAL DEPRECIATION EXPENSE BY ACTIVITY L2,241.124 Accounts Payable Payables in the governmental and proprietary funds are composed of payables to vendors and accrued salaries and benefits. Long -Term Liabilities The City's long-term liabilities are 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, 2010, the governmental long-term liabilities consisted of the following: General obligation bonds: Current portion $ 1,096,492 Noncurrent portion 24,564,948 TOTAL GENERAL OBLIGATION BOND COSTS 25.661.440 Note payable: Current portion $ 1,117,596 Noncurrent portion 4,690,671 TOTAL NOTE PAYABLE PAYMENTS5.808.267 Accrued compensated absences: Current portion $ 975,982 Noncurrent portion 860.665 TOTAL ACCRUED COMPENSATED ABSENCES 1.836.647 Business -type Activities As of June 30, 2010, the long-term liabilities payable from proprietary fund resources consisted of the following: Accrued compensated absences: Current portion $ 71,330 Noncurrent portion 14,782 TOTAL ACCRUED COMPENSATED ABSENCES $ 86.112 (Continued) -76- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 3 - Detail Notes on Transaction Classes/Accounts: Long -Term Liabilities 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 were split evenly between the City and the County. After September 1, 2007, the City and County will pay 2.031% of the bond payments with the remaining amount being made from a sale - lease 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. Series 2008 Bond Issue — The City of Paducah issued general obligation bonds of $2,800,000 in March 2009, to finance the Floodwall Rehabilitation. Interest rates are variable. 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. Series 2010 Bond Issue — The City of Paducah issued general obligation Build America Bonds of $6,645,000 in March 2010, to finance several public improvement projects. Interest rates range from 1.00% to 5.50%, with a Federal subsidy equal to 35% of the interest payments. 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. 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. (Continued) -77- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 3 - Detail Notes on Transaction Classes/Accounts: Long -Term Liabilities Notes Payable Kentucky Association of Counties — The County of McCracken, Kentucky entered into an agreement in the amount of $5,000,000 in March 2009, with the Kentucky Association of Counties to assist with the Julian Carroll Convention Center. Interest rate is variable. The note is required to be fully paid within 20 years from the date of issue and is backed jointly by the full faith and credit of the City and the County. While the 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 February 23, 2009. 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. L. Wayne & Linda Lindsey greement — On December 18, 2009, the City entered into an agreement in the amount of $600,000 with L. Wayne & Linda Lindsey to finance the acquisition of real property to be used for the development of a sports park in the community. The note matures on December 19, 2010 and has an annual interest rate of 2%. Community Financial Services Bank — On February 6, 2009, the City entered into a multiple draw agreement in the amount of $500,000 with Community Financial Service Bank (CFSB) to finance the program activities of the Home Grant Fund. As of June 30, 2010, $273,003 had been drawn on this agreement. Interest rate is 3.95%, fixed. The note matures on February 6, 2011. Changes in Long -Term Liabilities The following is a summary of changes in long-term debt for the year ended June 30, 2010: Type of Liability: Governmental activities: General obligation bonds: Convention and Arts Center Infiniti Media Building Pension Floodwall Rehabilitation Build America Bonds Notes payable: Kentucky League of Cities Kentucky Association of Counties CFSB Lindsey Agreement Accrued compensated absences TOTAL GENERAL LONG- TERM LIABILITIES $26.849.142$'2 $33.306.354 -78- (Continued) Amounts Beginning Ending Due within Balance Additions Reductions Balance One Year $ 7,320,000 $ - $ 290,000 $ 7,030,000 $ 305,000 4,160,000 - 185,000 3,975,000 195,000 5,545,000 - 205,000 5,340,000 215,000 2,774,638 - 103,198 2,671,440 106,492 - 6,645,000 - 6,645,000 275,000 2,672,649 - 154,886 2,517,763 159,592 2,500,000 - 82,500 2,417,500 85,000 14,613 258,391 - 273,004 273,004 - 600,000* - 600,000 600,000 1,862,242 783,001 808.596 1,836.647 975.982 $26.849.142$'2 $33.306.354 -78- (Continued) CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 3 - Detail Notes on Transaction Classes/Accounts: Long -Term Liabilities Changes in Long -Term Liabilities *Acquisition of land for the sports park was financed directly with the seller. This transaction did not create or use current financial resources and, therefore, was not reported as another financing source on the Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds. Business -type activities: Accrued compensated absences $ 91,783 44 1 $ 49.831 (1) The calculation to reconcile amounts in this schedule to the "net assets invested in capital assets, net of related debt" for governmental activities is: Net Capital Assets Less: 19.75% of the outstanding 2001 general obligation bonds Net of the County's portion 78% of the outstanding 2010 general obligation bonds 100% of the outstanding Kentucky League of Cities' note payable Net assets invested in capital assets, net of related debt Annual Debt Service Requirements $39,531,590 $(1,388,425) 694,212 (694,213) (5,183,100) (2,517,763) 31.136.514 The annual debt service requirements to maturity, excluding obligations associated with compensated absences, for long-term debt as of June 30, 2010, are as follows: Year Ending .Tune 30 2011 2012 2013 2014 2015 2016-2020 2021-2025 2026-2030 TOTALS Accrued Compensated Absences 4,468,047 468,175 (116,995) 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, 2010, are as follows: (Continued) -79- Federal Interest Principal Interest Subsidy $ 2,214,088 $ 1,264,527 $ (92,061) 1,389,179 1,232,017 (95,102) 1,435,357 1,183,994 (93,684) 1,499,011 1,132,725 (91,759) 1,555,541 1,077,374 (89,554) 8,833,281 4,391,609 (395,248) 10,075,203 2,324,405 (274,628) 4,468,047 468,175 (116,995) 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, 2010, are as follows: (Continued) -79- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 3 - Detail Notes on Transaction Classes/Accounts: Accrued Compensated Absences Termination Benefits Nine employees, through employment contracts, are entitled to certain termination benefits upon involuntary termination of employment by the City Commission. These benefits include provision for salary payments for three to six months, as well as, certain health, life, dental, and disability insurance coverage for same period of time. As these benefits are only provided for involuntary termination of employment, no provision has been made for these benefits. The City funds these benefits on a pay-as- you-go basis in the period incurred. For the year ended June 30, 2010, $87,415 was paid for termination benefits. In addition, qualified participants in the County Employee's Retirement System (CERS), under certain circumstances are eligible to convert accrued sick pay benefits into additional credit for years of service upon retirement. Costs and notification of payment for these benefits are not calculated by the CERS actuary until a qualified participant submits application for retirement benefits. Accordingly, no provision has been made for these benefits and the City funds these benefits in the period of notification for payment by the CERS. For the year ended June 30, 2010, payments of $13,326 were made for these benefits. 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, 2010, 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. (Continued) 03 Governmental Business -type Activities Activities Accrued sick leave $ 696,424 $20,894 Accrued vacation leave 1,140,223 65,218 Totals 1,836,647 86,112 Less current portion 975,982 71,330 LONG-TERM PORTION 14 Termination Benefits Nine employees, through employment contracts, are entitled to certain termination benefits upon involuntary termination of employment by the City Commission. These benefits include provision for salary payments for three to six months, as well as, certain health, life, dental, and disability insurance coverage for same period of time. As these benefits are only provided for involuntary termination of employment, no provision has been made for these benefits. The City funds these benefits on a pay-as- you-go basis in the period incurred. For the year ended June 30, 2010, $87,415 was paid for termination benefits. In addition, qualified participants in the County Employee's Retirement System (CERS), under certain circumstances are eligible to convert accrued sick pay benefits into additional credit for years of service upon retirement. Costs and notification of payment for these benefits are not calculated by the CERS actuary until a qualified participant submits application for retirement benefits. Accordingly, no provision has been made for these benefits and the City funds these benefits in the period of notification for payment by the CERS. For the year ended June 30, 2010, payments of $13,326 were made for these benefits. 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, 2010, 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. (Continued) 03 CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 3 - Detail Notes on Transaction Classes/Accounts: Interfund Transactions and Balances Interfund transfers during the year ended June 30, 2010, were as follows: Interfund Transfers Out $2,054,996 258,445 3,638,134 3,619,812 322,322 8,112 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, 2010: General Fund Special Revenue Investment Fund Nonmajor Governmental Funds Nonmajor Proprietary Funds Other Trusts TOTALS Note 4 - Pension Plans - City of Paducah: Due From Due To $ 145,839 $ 975,573 975,591 - 100,000 42,581 3,276 11214 1 214 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 three deferred compensation plans. Information regarding these plans follows: Single Employer Defined Benefit Funds (Police and Firefighters' Pension Fund and Appointive Employees Pension Fund) 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, pursuant to formal commitments. Benefits and refunds are recognized when due and payable in accordance with the terms of each plan. (Continued) -81- Interfund Governmental Funds: Transfers In General Fund $ 512,102 Capital Project Fund 6,095,916 Special Revenue Investment Fund 481,635 Special Revenue Bond Fund - Debt Service Fund 1,089,630 Nonmajor Governmental Funds 1,543,569 Internal Service Funds 28,984 Fiduciary Funds: Other trusts 71,092 Proprietary Funds: Nonmajor Proprietary Funds 78,893 TOTALS 1 21 Interfund Transfers Out $2,054,996 258,445 3,638,134 3,619,812 322,322 8,112 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, 2010: General Fund Special Revenue Investment Fund Nonmajor Governmental Funds Nonmajor Proprietary Funds Other Trusts TOTALS Note 4 - Pension Plans - City of Paducah: Due From Due To $ 145,839 $ 975,573 975,591 - 100,000 42,581 3,276 11214 1 214 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 three deferred compensation plans. Information regarding these plans follows: Single Employer Defined Benefit Funds (Police and Firefighters' Pension Fund and Appointive Employees Pension Fund) 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, pursuant to formal commitments. Benefits and refunds are recognized when due and payable in accordance with the terms of each plan. (Continued) -81- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JLTNE 30, 2010 Note 4 - Pension Plans - City of Paducah: Single Employer Defined Benefit Funds (Police and Firefighters' Pension Fund and Appointive Employees Pension Fund) 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. 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. Funding: As of the most recent actuarial valuation dated July 1, 2010, the Plan had an unfunded balance of $4,691,556. A schedule of the funded status and funding progress for the previous six years can be found on page 92, which contains trend information about the changes in actuarial value of the plan assets relative to the actuarially determined liability for benefits over time. Components of annual pension cost for PFPF are as follows: Component Beginning NPO balance ARC Interest on NPO Unfunded ARC adjustment Pension cost Less actual contribution Net change in NPO ENDING NPO BALANCE PERCENTAGE OF PENSION COST CONTRIBUTED Year Ended Year Ended Year Ended June 30, 2010 June 30, 2009 ,Tune 30, 2008 $(5,551,753) $(5,546,740) $(5,552,551) 460,892 183,661 12,887 (444,140) (443,739) (444,204) 488,235 481,122 481,626 504,987 221,044 50,309 465,170 226,057 44,498 39,817 (5,013) 5,811 (5.511.936)(5.551.753) (5.546.740) 92% Q% 88% (Continued) -82- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 4 - Pension Plans - City of Paducah: Police and Firefighters' Pension Fund 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, 2010 Assets: Cash and cash equivalents $ 5,439 Receivables 27,152 Investment at fair value 8,410,971 Total assets 8,443,562 Liabilities: Voucher and accounts payable 266 Net Assets: Held in trust for pension benefits and other purposes 8.443.296 Statement of Changes in Net Assets Police and Firefighters' Retirement Fund For the Year Ended June 30, 2010 Additions: Employer contributions $ 465,170 Plan members' contributions 5,075 Total contributions 470,245 Investment earnings: Net increase in fair value of investments 880,537 Interest and dividends 250,249 Net investment earnings 1,130,786 Total additions 1,601,031 Deductions: Benefits 1,755,944 Administrative expenses 49,310 Total deductions 1,805,254 Change in net assets (204,223) Net assets, July 1, 2009 8,647,519 NET ASSETS, JUNE 30, 2010 8.443.296 (Continued) -83- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 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, 2010. 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. Funding: As of the most recent actuarial valuation dated July 1, 2010, the Plan had an unfunded balance of $116,539. A schedule of the funded status and funding progress for the previous six years can be found on page 92, which contains trend information about the changes in actuarial value of the plan assets relative to the actuarially determined liability for benefits over time. Components of annual pension cost for AEPF are as follows: Year Ended Year Ended Year Ended Component ,Tune 30, 2010 .Tune 30, 2009 June 30, 2008 Beginning NPO balance $(227,510) $(250,893) $(278,827 ARC 17,095 6,278 8,925 Interest on NPO (13,651) (15,054) (16,730) Unfunded ARC adjustment 29,162 32,159 35,739 Pension cost 32,606 23,383 27,934 Less actual contribution - - - Net change in NPO 32,606 23,383 27,934 ENDING NPO BALANCE U194,M 22 (250.893) PERCENTAGE OF PENSION COST CONTRIBUTED __0% The financial statements for the Appointive Employees' Pension Fund are as follows: Statement of Fiduciary Net Assets Appointive Employees' Pension Fund June 30, 2010 Assets: Cash and cash equivalents $ 53,241 Receivables 6 Investment at fair value 125,000 Total assets 178,247 Liabilities: Voucher and accounts payable 2 Net Assets: Held in trust for pension benefits and other purposes 1 24 (Continued) -84- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 4 - Pension Plans - City of Paducah: Appointive Employees' Pension Fund Statement of Changes in Net Assets Appointive Employees' Pension Fund For the Year Ended June 30, 2010 Additions: Interest and dividends $ 2,158 Employer contributions - Total additions 2,158 Deductions: Benefits 43,242 Administrative expenses 6,687 Total deductions 49,929 Change in net assets (47,771) Net assets, July 1, 2009 226,016 NET ASSETS, JUNE 30, 2010 1 24 Single Employer Defined Benefit Funds (Police and Firefighters' Pension Fund and Appointive Employees Pension Fund) Contribution Information A summary of actuarial assumptions at June 30, 2010, the date of the latest actuarial valuation is as follows: Valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases Inflation rates adjustments PFPF AEPF 7/1/10 7/1/10 Entry age normal Aggregate (1) Level dollar closed Level dollar closed 23 Years Market value 8.00% 4.00% 3.00% 10 Years Market value 6.0% (2) (2) (1) The Aggregate Method does not identify or separately amortize the unfunded actuarial liabilities, information about funded status and funding progress is presented using the entry age actuarial cost method for that purpose, and that information presented is intended to serve as a surrogate for the funding progress of the plan. (Continued) -85- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 4 - Pension Plans - City of Paducah: Single Employer Defined Benefit Funds (Police and Firefighters' Pension Fund and Appointive Employees Pension Fund) Contribution Information (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. Membership Information Membership of each plan consisted of the following at June 30, 2010: PFPF AEPF Active participants 1 0 Beneficiaries 44 4 Retired participants 36 3 TOTAL PARTICIPANTS 811 3 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. Under the provisions of Kentucky Revised Statute 61.645, the Board of Trustees of Kentucky Retirement Systems administers the CERS. 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. For employees hired on September 1, 2008, or thereafter, an additional I% must be contributed to a health insurance account. 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, 2010, 2009, and 2008, the City contributed 32.97%, 29.50%, and 33.87%, respectively, of each hazardous employee's creditable compensation and 16.16%, 13.50%, and 16.17%, 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, 2010, 2009, and 2008, were $4,538,848, $4,198,042, and $4,533,944, 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, 2010. (Continued) CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 6 - Component Unit Long -Term Liabilities: Long-term liabilities of the discretely presented component units consists of the following at June 30, 2010: 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 1.59% to 5.19%, with a .2% annual service fee. The annual requirements to amortize the outstanding debt as of June 30, 2010, are as follows: Year Ending .Tune 30 Principal Interest Fee 0.2% Total 2011 $ 30,000 $ 4,521 $ 180 $ 34,701 2012 185,609 37,866 8,819 232,294 2013 187,621 34,744 8,357 230,722 2014 159,597 31,606 7,902 199,105 2015 161,598 30,006 7,501 199,105 2016-2020 838,899 125,301 31,325 995,525 2021-2025 892,830 82,156 20,539 995,525 2026-2030 950,227 36,238 9,060 995,525 2031 197,254 1,481 370 199,105 TOTALS 3.603.635 -94 4 1 Notes Payable, Kentucky Association of Counties (KACO) - Paducah Transit Authority On February 13, 2004, the Transit Authority of the City of Paducah entered into an agreement with the KACO in connection with grant match projects. Interest rate on this agreement is 4.07%. As of June 30, 2010, the outstanding balance was $104,286. 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 2011 $ 32,415 $ 3,572 $ 35,987 2012 36,788 2,446 39,234 2013 35,083 854 35,937 TOTALS 1 2 $ 6 11 (Continued) -87- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 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, 2010, the significant construction commitments were as follows: Cumulative Estimated 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: Costs Incurred Total Costs Floodwall Survey Modification $ 212,891 $ 213,700 Floodwall Restoration Survey 159,855 246,085 Floodwall Pipe Rehabilitation 1,863,312 1,863,312 Olivet Church Road Improvement Project 1,267,635 1,267,635 Riverfront Development - Phase 1 759,576 816,520 Riverfront - Other River Boat Launch Project 284,163 291,075 Greenway Trail Project 57,394 185,825 Pavilion Project 1,628,920 1,628,920 - 2 4Sfi,l13 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: 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, which is based on a formula that considers group census and anticipated claims. As of June 30, 2010, that number was $2,745,465. 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 $228,648 at June 30, 2010. (Continued) -88- Current Year Beginning of Claims and Actual Balance at Fiscal Year Changes in Claim Fiscal Liability Estimates Payments Year End 2007-2008 $ - $69,572 $69,572 $ - 2008-2009 - 76,686 76,686 - 2009-2010 - 46,051 46,051 - 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, which is based on a formula that considers group census and anticipated claims. As of June 30, 2010, that number was $2,745,465. 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 $228,648 at June 30, 2010. (Continued) -88- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 8 - Risk Management and Litigation: The analysis of claims activity is presented below: Current Year Beginning of Claims and Fiscal Year Changes in Liability Estimates 2007-2008 $386,326 $2,726,811 2008-2009 106,364 2,650,054 2009-2010 53,586 2,682,055 Actual Balance at Claim Fiscal Payments Year End $3,006,773 $106,364 2,702,832 53,586 2,506,993 228,648 During the fiscal year ended 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. Note 9 - Lease Agreements: Operating Leases 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 deemed 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 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 2010 totaled $495,565. The following is an analysis of property leased under these leases at June 30, 2010: Land $ 270,000 Buildings 873,250 Equipment 110,126 Total 1,253,376 Less: accumulated depreciation 796,515 NET BOOK VALUE 4 1 Depreciation expense for the year ended June 30, 2010, on leased property was $20,775. (Continued) CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 9 - Lease Agreements: Operating Leases The following is a schedule of future minimum rental income from operating leases at June 30, 2010: Lease Income 2011 268,519 TOTAL MINIMUM LEASE RECEIPTS 2 1 Direct Financing Lease 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 was required during the first three years of the lease term which resulted in a loss of $450,353. For the government -wide statement, the loss is amortized over the life of the lease. Rental payments commenced on September 1, 2007, at a monthly payment of $33,816 and end with the final payment due August 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 lease payments received coincide with debt service payments the City is required to make on bonds maturing annually through year ending June 30, 2024. Future minimum lease payments to be received under the lease agreement for the fiscal year ending June 30 are as follows: Net minimum lease payments 5,681,140 Less amount representing interest (1,883,848) PRESENT VALUE OF MINIMUM LEASE PAYMENTS $ 3.797.292 Note 10 - Restatement of Net Assets: As of June 30, 2009, the General Fund had a grant receivable from FEMA of $655,352 for claims submitted in fiscal year 2009. Of these claims, $162,433 was recorded erroneously. The grant receivable account for the General Fund was adjusted accordingly; the effect of this adjustment on fund balance and net assets are as follows: (Continued) Lease Income 2011 $ 405,796 2012 405,796 2013 405,796 2014 405,796 2015 405,796 2016 through 2024 3,652,160 Net minimum lease payments 5,681,140 Less amount representing interest (1,883,848) PRESENT VALUE OF MINIMUM LEASE PAYMENTS $ 3.797.292 Note 10 - Restatement of Net Assets: As of June 30, 2009, the General Fund had a grant receivable from FEMA of $655,352 for claims submitted in fiscal year 2009. Of these claims, $162,433 was recorded erroneously. The grant receivable account for the General Fund was adjusted accordingly; the effect of this adjustment on fund balance and net assets are as follows: (Continued) CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 Note 10 - Restatement of Net Assets: Governmental Funds: General Fund Governmental -Wide Statement: Governmental Activities Funds Note 11- Subsequent Events: Net Assets As Previously Net Assets Reported Restatement As Restated 10.311.490 1 2 4 10.149.057 46.383.801 ICL62,431) 46.221.36a In July 2010, the City issued bond series 2010B in the amount of $7,165,000. The bonds mature over 16 years starting June 1, 2011 and ending June 1, 2026; with optional redemption prior to maturity at any time on or after June 1, 2020. The interest rates range from 1.00% to 3.25% depending on stated maturity date. This issuance is intended to defease the City's portion of the 2001 bond issue. -91- CITY OF PADUCAH, KENTUCKY REQUIRED SUPPLEMENTARY INFORMATION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 309 2010 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) 7/1/2005 $ 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) 7/1/2008 12,097,054 14,076,843 1,979,789 85.9 56,475 3,505.60 7/1/2009 8,647,519 13,476,007 4,828,488 64.2 55,475 8,641.74 7/1/2010 8,443,296 13,134,852 4,691,556 64.3 63,434 7,395.96 Appointive Employees' Pension Fund (AEPF) (Using Entry Age Actuarial Method) 7/1/2005 $ 328,888 $ 455,526 $ 126,638 72.2 n/a* n/a* 7/1/2006 344,644 443,207 98,563 77.8 n/a* n/a* 7/1/2007 317,575 382,916 65,341 82.9 n/a* n/a* 7/1/2008 271,701 317,849 46,148 85.5 n/a* n/a* 7/1/2009 226,016 306,287 80,271 73.8 n/a* n/a* 7/1/2010 178,245 294,784 116,539 60.5 n/a* n/a* * There are no active participants. Schedules of Employer Contributions -92- PFPF Year Annual Percent Ending Ended Required ARC Net Pension June 30 Contribution (ARC) Contributed Obligation (NPO) 2005 $953,044 100 $ - 2006 719,348 854 (5,425,468) 2007 46,948 446 (5,552,551) 2008 12,887 345 (5,546,740) 2009 183,661 123 (5,551,753) 2010 460,892 109 (5,511,936) AEPF Year Annual Percent Ending Ended Required ARC Net Pension June 30 Contribution (ARC) Contributed Obligation (NPO) 2005 $ 26,328 285 $ (246,269) 2006 17,182 437 (287,297) 2007 13,883 180 (278,827) 2008 8,925 0 (250,893) 2009 6,278 0 (227,510) 2010 17,095 0 (194,904) -92- CITY OF PADUCAH, KENTUCKY SUPPLEMENTARY INFORMATION NONMAJOR GOVERNMENTAL FUNDS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 309 2010 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. PRA - Paducah Renaissance Alliance, to account for the expenditures related to the economic promotion of downtown Paducah, Kentucky. CITY OF PADUCAH, KENTUCKY GENERAL CAPITAL IIVIPROVEMBNTS DETAIL STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2010 Revenues: Grants Interest Miscellaneous Total revenues Expenditures: Capital outlay Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses): Long-term debt issued Operating transfers in Operating transfers out Total other financing sources (uses) Net change in fund balance Fund balance, July 1, 2009 FUND BALANCE, JUNE 30, 2010 See auditors report on pages 12-13. -93- Final Budget 1,112,165 14,040 670,295 1,796,500 8,324,335 Actual 1,112,184 14,043 670,302 1,796,529 Q'27,,'21e) (6,527,835) (6,527,783) 1,176,865 6,095,905 (258,450) 7,014,320 $ 486,485 1,176,866 6,095,916 (258,445) 7,014,337 486,554 1 '7n C '7K4 $ 2,232,320 Exhibit B-1 Variance with Final Budget Positive (Negative) 19 3 7 29 23 52 1 11 5 17 $ 69 CITY OF PADUCAH, KENTUCKY DEBT SERVICE FUND DETAIL STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2010 Revenues: Intergovernmental Expenditures: Principal requirement Interest and fiscal requirement Total expenditures Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses): Capital lease Operating transfers in Total other financing sources (uses) Net change in fund balance Fund balance, July 1, 2009 FUND BALANCE, JUNE 30, 2010 See auditors report on pages 12-13. -94- Exhibit B-2 Variance with Final Budget Final Positive Budget Actual (Negative) $ 601,480 601,487 $ 7 1,020,593 1,020,585 8 1,077,132 1,077,128 4 2,097,725 2,097,713 12 (1,496,245) (1,496,226) 19 405,790 405,796 6 1,089,630 1,089,630 - 1,495,420 1,495,426 6 $ (825) (800) $ 25 93,244 $ 92,444 Exhibit B-3 CITY OF PADUCAH, KENTUCKY COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2010 ASSETS Cash and cash equivalents Investments Receivables, net: Accounts Grants Interest TOTAL ASSETS LIABILITIES AND FUND BALANCES Liabilities: Voucher and accounts payable Accrued payroll and payroll taxes Due to other funds Accrued compensated absences Total liabilities Fund Balances: Reserved for: Unreserved Total fund balances TOTAL LIABILITIES AND FUND BALANCES See auditors report on pages 12-13. Special Revenue Funds 30,319 118,360 - - - - 516 - $575,449 $569,530 $105,305 $ - $138,820 Emergency Court Small Municipal Communication Awards Grant Aid Program Service Fund Fund Fund 545,130 $451,170 $ 54,789 $ - - - 50,000 - 30,319 118,360 - - - - 516 - $575,449 $569,530 $105,305 $ - $138,820 $ 17,075 $ 72,221 $ - - 38,207 - - 138,820 55,282 72,221 - 436,629 514,248 33,084 - 436,629 514,248 33,084 - $575,449 $569,530 $105,305 $ - -95- $12,266 $ 5,284 12,266 5,284 175,403 175,403 $ - $ 12,589 $ 258,255 - 38,207 100,000 100,000 783 783 113,372 397,245 150,923 150,923 $12,266 $180,687 $ - $264,295 .E 1,310,287 1,310,287 $1,707,532 Special Revenue Funds CDBG Home HUD Total Nonmajor Grant Grant Revolving PRA Governmental Fund Fund Grant Fund Fund Funds —T-- $148,080 $ - 107,409 $1,306,578 - - - 100,778 150,778 - - - 56,108 204,787 12,266 32,607 - - 44,873 - - - - 516 $12,266 $180,687 $ - $264,295 $1,707,532 $12,266 $ 5,284 12,266 5,284 175,403 175,403 $ - $ 12,589 $ 258,255 - 38,207 100,000 100,000 783 783 113,372 397,245 150,923 150,923 $12,266 $180,687 $ - $264,295 .E 1,310,287 1,310,287 $1,707,532 Exhibit B-4 CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2010 Revenues: Taxes Charges for services Intergovernmental Grants Interest Miscellaneous Total revenues Expenditures: Current operations: Public safety Public service Planning and development Total expenditures Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses): Capital lease Long-term debt issued Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances, July 1, 2009 FUND BALANCES, JUNE 30, 2010 See auditors report on pages 12-13. Special Revenue Funds 492,123 1,056,648 49,919 30,000 - 1,391,970 32,011 - 1,347,516 - - - - - - 199,375 1,347,516 1,391,970 32,011 199,375 (855,393) Emergency Court Small Municipal Communication Awards Grant Aid Program Service Fund Fund Fund $ - 511,595 -T $ - - 263,109 - - 489,837 - - - 2,286 3,210 918 - - 278,734 49,001 30,000 492,123 1,056,648 49,919 30,000 - 1,391,970 32,011 - 1,347,516 - - - - - - 199,375 1,347,516 1,391,970 32,011 199,375 (855,393) (335,322) 17,908 (169,375) 857,278 335,322 - - - - - (99,505) 857,278 335,322 - (99,505) 1,885 - 17,908 (268,880) 434,744 514,248 15,176 268,880 $ 436,629 $ 514,248 $33,084 $ - -97- - - - - 1,423,981 - - - - 1,347,516 28,933 527,798 11,181 305,983 1,073,270 28,933 527,798 11,181 305,983 3,844,767 - (109,743) Special Revenue Funds (248,062) (1,710,654) CDBG Home HUD 258,391 Total Nonmajor Grant Grant Revolving PRA Governmental Fund Fund Grant Fund Fund Funds $ - $ $ - $ - $ 511,595 - - - - 263,109 - - - - 489,837 28,933 185,200 - - 214,133 - - 514 1,440 8,368 - 232,855 - 56,481 647,071 28,933 418,055 514 57,921 2,134,113 - - - - 1,423,981 - - - - 1,347,516 28,933 527,798 11,181 305,983 1,073,270 28,933 527,798 11,181 305,983 3,844,767 - (109,743) (10,667) (248,062) (1,710,654) - 258,391 - - 258,391 - - - 350,969 1,543,569 - - (199,815) (23,002) (322,322) - 258,391 (199,815) 327,967 1,479,638 - 148,648 (210,482) 79,905 (231,016) - 26,755 210,482 71,018 1,541,303 $ - $ 175,403 $ - $ 150,923 $1,310,287 CITY OF PADUCAH, KENTUCKY MUNICIPAL AID PROGRAM FUND DETAIL STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2010 Revenues: Intergovernmental Interest Total revenues Expenditures: Public service Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses): Operating transfers in Net change in fund balance Fund balance, July 1, 2009 FUND BALANCE, JLTNE 30, 2010 See auditors report on pages 12-13. Exhibit B-5 Variance with Final Budget Final Positive Budget Actual (Negative) 489,835 489,837 2 492,120 492,123 1,347,516 1,347,516 (855,396) 857,275 $ 1,879 (855,393) 1,885 434,744 $ 436,629 3 3 3 $ 6 CITY OF PADUCAH, KENTUCKY EMERGENCY COMMUNICATION SERVICE FUND DETAIL STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2010 Revenues: Taxes Telephone surcharges Interest Miscellaneous Total revenues Expenditures: Public safety Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses): Operating transfers in Net change in fund balance Fund balance, July 1, 2009 FUND BALANCE, JUNE 30, 2010 See auditors report on pages 12-13. -100- Exhibit B-6 (335,380) 335,320 $ (60) (335,322) 58 335,322 514,248 $ 514,248 2 $ 60 Variance with Final Budget Final Positive Budget Actual (Negative) $ 511,595 511,595 $ - 263,105 263,109 4 3,205 3,210 5 278,730 278,734 4 1,056,635 1,056,648 13 1,392,015 1,391,970 45 (335,380) 335,320 $ (60) (335,322) 58 335,322 514,248 $ 514,248 2 $ 60 CITY OF PADUCAH, KENTUCKY COURT AWARDS FUND DETAIL STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2010 Revenues: Court awarded forfeitures Interest Total revenues Expenditures: Public safety Excess (deficiency) of revenues over expenditures Fund balance, July 1, 2009 FUND BALANCE, JUNE 30, 2010 See auditors report on pages 12-13. -101- Final Budget Actual $ 49,420 $49,001 485 918 49,905 49,919 32,015 32,011 $ 17,890 17,908 15,176 $33,084 Exhibit B-7 Variance with Final Budget Positive (Negative) (419) 433 14 4 $ 18 CITY OF PADUCAH, KENTUCKY SMALL GRANT FUND DETAIL STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2010 Revenues: Grants Interest Other Total revenues Expenditures: Planning and development Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses): Operating transfers out Net change in fund balance Fund balance, July 1, 2009 FUND BALANCE, JUNE 30, 2010 See auditors report on pages 12-13. -102- Exhibit B-8 Variance with Final Budget Final Positive Budget Actual (Negative) 30,000 30,000 - 30,000 30,000 - 199,380 199,375 5 (169,380) (169,375) 5 (99,510) (99,505) 5 $ (268,890) (268,880) $ 10 268,880 CITY OF PADUCAH, KENTUCKY CDBG GRANT FUND DETAIL STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2010 Revenues: Grants Miscellaneous Total revenues Expenditures: Planning and development Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses): Operating transfers in Operating transfers out Total other financing sources (uses) Net change in fund balance Fund balance, July 1, 2009 FUND BALANCE, JUNE 30, 2010 See auditors report on pages 12-13. -103- Exhibit B-9 Variance with Final Budget Final Positive Budget Actual (Negative) $28,930 $28,933 $ 3 28,930 28,933 3 28,935 28,933 2 (5) - 5 CITY OF PADUCAH, KENTUCKY HOME GRANT FUND DETAIL STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2010 Revenues: Grants Miscellaneous Total revenues Expenditures: Planning and development Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses): Long-term debt issued Operating transfers in Total other financing sources (uses) Net change in fund balance Fund balance, July 1, 2009 FUND BALANCE, JUNE 30, 2010 See auditors report on pages 12-13. 13 Exhibit B-10 418,055 418,055 - 527,800 527,798 2 (109,745) Variance with 258,390 Final Budget Final Positive Budget Actual (Negative) $ 185,200 $ 185,200 - 232,855 232,855 - 418,055 418,055 - 527,800 527,798 2 (109,745) (109,743) 2 258,390 258,391 1 258,390 258,391 1 $ 148,645 148,648 $ 3 26,755 $ 175,403 CITY OF PADUCAH, KENTUCKY HUD REVOLVING GRANT FUND DETAIL STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2010 Revenues: Interest Other Total revenues Expenditures: Planning and development Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses): Operating transfers out Total other financing sources (uses) Net change in fund balance Fund balance, July 1, 2009 FUND BALANCE, JUNE 30, 2010 See auditors report on pages 12-13. -105- Exhibit B-11 Variance with Final Budget Final Positive Budget Actual (Negative) 510 514 $ 4 510 514 4 11,185 11,181 4 (10,675) (10,667) 8 (199,820) (199,815) 5 (199,820) (199,815) 5 $ (210,495) (210,482) $ 13 nin Aon Revenues: Interest Other Total revenues Exhibit B-12 CITY OF PADUCAH, KENTUCKY PRA FUND DETAIL STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2010 Variance with Final Budget Final Positive Budget Actual (Negative) 1,430 1,440 10 56,475 56,481 6 57,905 57,921 16 Expenditures: Planning and development Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses): Operating transfers in Operating transfers out Total other financing sources (uses) Net change in fund balance Fund balance, July 1, 2009 FUND BALANCE, JUNE 30, 2010 See auditors report on pages 12-13. -106- 306,030 305,983 (248,125) (248,062) 350,965 (23,000) "', "'r -'r $ 79,840 350,969 (23,002) 'Ince nc7 79,905 71,018 $ 150,923 47 63 CITY OF PADUCAH, KENTUCKY SUPPLEMENTARY INFORMATION NONMAJOR PROPRIETARY FUNDS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 309 2010 COMBINING FINANCIAL STATEMENTS NONMAJOR ENTERPRISE FUNDS Section Eight Housing Fund - to account for the housing choice voucher program grant governed by the United States Department of Housing and Urban Development. 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. CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF NET ASSETS NONMAJOR ENTERPRISE FUNDS JUNE 30, 2010 ASSETS Current Assets: Cash and cash equivalents Accounts receivable Grants receivable Prepaid expense Total current assets Noncurrent Assets: Net depreciable capital assets Total assets LIABILITIES Current Liabilities: Voucher and accounts payable Accrued compensated absences Due to other funds Total current liabilities Noncurrent Liabilities: Accrued compensated absences Total liabilities NET ASSETS Invested in capital assets Restricted for: Housing and development projects Unrestricted TOTAL NET ASSETS See auditors report on pages 12-13. Exhibit C-1 Section Civic 1,642 - - Total Nonmajor Eight Center TISA Enterprise Housing Fund Fund Funds $772,693 $ $297,465 $1,070,158 - - 4,198 4,198 - - 6,482 6,482 772,693 - 308,145 1,080,838 22,739 190,224 75,381 288,344 795,432 190,224 383,526 1,369,182 92,888 5,676 6,577 105,141 1,642 - - 1,642 42,581 - - 42,581 137,111 5,676 6,577 149,364 14,782 - - 14,782 151,893 5,676 6,577 164,146 22,739 190,224 75,381 288,344 620,800 - - 620,800 - (5,676) 301,568 295,892 $643,539 $184,548 $376,949 $1,205,036 -107- CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS NONMAJOR ENTERPRISE FUNDS FOR THE YEAR ENDED JUNE 30, 2010 Operating Revenues: Charges for services Miscellaneous Total operating revenues Operating Expenses: Cost of sales and service Depreciation and amortization Total operating expenses Operating income (loss) Non -Operating Revenues (Expenses): Interest and investment income Income (loss) before contributions and operating transfers Contributions and Operating Transfers: Capital contributions Transfers in Transfers out Total contributions and operating transfers Change in net assets Net assets, July 1, 2009 NET ASSETS, JUNE 30, 2010 See auditors report on pages 12-13. Exhibit C-2 Section Civic Total Nonmajor Eight Center TISA Enterprise Housing Fund Fund Funds $2,311,753 32,455 $148,158 $2,492,366 1 515 _ _ 1 515 2,313,268 32,455 148,158 2,054,170 59,059 184,729 7,200 10,495 22,069 2,061,370 69,554 206,798 251,898 (37,099) (58,640) 252,178 (37,099) (58,640) 2,297,958 39,764 2,337,722 156,159 - - 17,047 17,047 - 22,726 56,167 78,893 - 22,726 73,214 95,940 252,178 (14,373) 14,574 252,379 391,361 198,921 362,375 952,657 $ 643,539 $184,548 $376,949 $1,205,036 -108- CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF CASH FLOWS NONMAJOR ENTERPRISE FUNDS FOR THE YEAR ENDED JUNE 30, 2010 Cash Flows from Operating Activities: Cash received from customers Payments to employees Payments to internal service funds Other receipts Other payments Net cash provided (used) by operating activities Cash Flows from Noncapital Financing Activities: Transfers (to) from other funds Cash Flows from Capital and Related Financing Activities: Capital contributions Acquisition and construction of capital assets Net cash used by capital and related financing activities Cash Flows from Investing Activities: Interest on cash and investments Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, July 1, 2009 CASH AND CASH EQUIVALENTS, JUNE 30, 2010 Reconciliation of Operating Income (Loss) to Net Cash Provided by Operating Activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation and amortization Change in assets and liabilities: Receivables Prepaid expense Accrued expenses Accounts payable NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES See auditors report on pages 12-13. Exhibit C-3 Section Civic Total Nonmajor Eight Center TISA Enterprise Housing Fund Fund Funds $ 2,314,431 $ 32,455 $ 161,447 $ 2,508,333 (123,998) - - (123,998) - (2,709) (1,559) (4,268) 1,515 - - 1,515 (1,899,698) (56,313) (156,304) (2,112,315) 292,250 (26,567) 3,584 269,267 17,119 22,726 56,167 96,012 17,047 17,047 (7,946) - (65,190) (73,136) (7,946) - (48,143) (56,089) 1) Rn - - 1) SM 301,703 (3,841) 11,608 309,470 470,990 3,841 285,857 760,688 $ 772,693 $ - $ 297,465 $ 1,070,158 $ 251,898 $ (37,099) $ (58,640) $ 156,159 7,200 10,495 22,069 39,764 2,678 - 13,289 15,967 - - 21,230 21,230 912 - - 912 29,562 37 5,636 35,235 $ 292,250 $ (26,567) $ 3,584 $ 269,267 -109- CITY OF PADUCAH, KENTUCKY SUPPLEMENTARY INFORMATION INTERNAL SERVICE FUNDS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 309 2010 COMBINING FINANCIAL STATEMENTS 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. ASSETS Current Assets: Cash and cash equivalents Investments Receivables, net Prepaid expense Inventories Total current assets Noncurrent Assets: Net depreciable capital assets Total assets LIABILITIES Current Liabilities: Voucher and accounts payable Accrued payroll and payroll taxes Accrued compensated absences Due to other funds Total current liabilities Noncurrent Liabilities: Accrued compensated absences Total liabilities NET ASSETS Invested in capital assets, net of related debt Unrestricted TOTAL NET ASSETS See auditors report on pages 12-13. Exhibit D -I CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF NET ASSETS INTERNAL SERVICE FUNDS JUNE 30, 2010 12,419 15,260 34,600 247,388 309,667 14,030 Health 26,449 Fleet Fleet Lease Insurance Insurance Combined Maintenance Trust Fund Fund Total 718,851 $2,349,724 $307,653 $451,331 $3,127,559 - 1,250,000 - - 1,250,000 - 7,763 17,633 5,378 30,774 - - - 15,000 15,000 70,966 - - - 70,966 89,817 3,607,487 325,286 471,709 4,494,299 29,500 2,632,381 - - 2,661,881 119,317 6,239,868 325,286 471,709 7,156,180 12,419 15,260 34,600 247,388 309,667 14,030 - - - 14,030 26,449 15,260 34,600 247,388 323,697 36,529 - - - 36,529 62,978 15,260 34,600 247,388 360,226 29,500 2,632,381 - - 2,661,881 26,839 3,592,227 290,686 224,321 4,134,073 $56,339 $6,224,608 $290,686 $224,321 $6,795,954 -110- Exhibit D-2 CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2010 Operating Expenses: Vehicle maintenance 566,549 - - Health 566,549 Administrative Fleet Fleet Lease Insurance Insurance Combined Operating Revenues: Maintenance Trust Fund Fund Total Charges for services - internal $ 389,473 $ 766,962 $1,139,338 $3,355,772 $5,651,545 Charges for services - external - - - 245,589 245,589 Total operating revenues 389,473 766,962 1,139,338 3,601,361 5,897,134 Operating Expenses: Vehicle maintenance 566,549 - - - 566,549 Administrative - 6,901 - 318,971 325,872 Insurance - - 1,002,050 3,335,603 4,337,653 Leave expense 3,166 - - - 3,166 Depreciation 10,264 503,550 - - 513,814 Total operating expenses 579,979 510,451 1,002,050 3,654,574 5,747,054 Operating income (loss) (190,506) 256,511 137,288 (53,213) 150,080 Nonoperating Revenues and (Expenses): Interest and investment income 334 50,634 - - 50,968 Gain (loss) on disposal of property and equipment 4,918 59,702 - 64,620 Total nonoperating revenues (expenses) 5,252 110,336 - - 115,588 Income (loss) before operating transfers (185,254) 366,847 137,288 (53,213) 265,668 Contributions and Operating Transfers: Transfers in - 20,000 8,984 28,984 Change in net assets (185,254) 386,847 146,272 (53,213) 294,652 Net assets, July 1, 2009 241,593 5,837,761 144,414 277,534 6,501,302 NET ASSETS, JUNE 30, 2010 $ 56,339 $6,224,608 $ 290,686 $ 224,321 $6,795,954 See auditors report on pages 12-13. -111- CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2010 Cash Flows from Operating Activities: Receipts from other funds for services Payments to suppliers Payments to employees Claims paid Other receipts Other payments Net cash provided (used) by operating activities Cash Flows from Noncapital Financing Activities: Transfers from other funds Cash Flows from Capital and Related Financing Activities: Purchase of capital assets Proceeds from sale of capital assets Net cash used by capital and related financing Cash Flows from Investing Activities: Proceeds from sales and maturities of investments Interest and dividends Purchase of investments Net cash provided (used) by investing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, July 1, 2009 CASH AND CASH EQUIVALENTS, JUNE 30, 2010 Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization Change in assets and liabilities: Receivables Prepaid expense Inventories Due to other funds Accrued expenses Accounts payable NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES See auditors report on pages 12-13. Exhibit D-3 (3,100,439) (3,100,439) - Health (858,113) Fleet Fleet Lease Insurance Insurance Combined Maintenance Trust Fund Fund Total 389,473 $ 827,409 $1,156,755 $3,598,132 $5,971,769 (275,479) - - (275,479) (278,107) - - - (278,107) (3,100,439) (3,100,439) - 306,077 (858,113) (318,971) (871,007) - 60,447 17,417 (3,229) (164,113) 1,133,486 298,642 178,722 1,446,737 1,266,647 2,639 - - - 20,000 8,984 - 28,984 - (801,000) 7,379 - - (1,267,823) - - (1,267,823) 4,918 90,513 - - 95,431 4,918 (1,177,310) - - (1,172,392) - 4,300,000 - - 4,300,000 334 50,634 - - 50,968 - (2,350,000) - - (2,350,000) 334 2,000,634 - - 2,000,968 (158,861) 1,976,810 307,626 178,722 2,304,297 177,712 372,914 27 272,609 823,262 $ 18,851 $ 2,349,724 $ 307,653 $ 451,331 $ 3,127,559 $ (190,506) $ 256,511 $ 137,288 $ (53,213) $ 150,080 10,264 503,550 - - 513,814 - 60,447 17,417 (3,229) 74,635 - 297,907 927,377 41,363 1,266,647 2,639 - - - 2,639 - - (801,000) - (801,000) 7,379 - - - 7,379 6,111 15,071 17,560 193,801 232,543 $(164,113) $ 1,133,486 $ 298,642 $ 178,722 $ 1,446,737 -112- CITY OF PADUCAH, KENTUCKY SUPPLEMENTARY INFORMATION FIDUCIARY FUNDS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 309 2010 COMBINING FINANCIAL STATEMENTS FIDUCIARY FUNDS Pension Trust Funds Police and Firefighters' Retirement Fund and Appointive Employees' Pension Fund — to account for the accumulation of resources to be used for retirement payments at appropriate amounts and times in the future. Resources are contributed by employees and by the City at amounts determined by Kentucky Statutes and/or City Commission decisions. Exhibit E-1 CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS - PENSION TRUST FUNDS JUNE 30, 2010 LIABILITIES Voucher and accounts payable 266 2 268 NET ASSETS Held in trust for pension benefits and other purposes $8,443,296 $178,245 $8,621,541 See auditors report on pages 12-13. -113- Police and Appointive ASSETS Firefighters' Employees' Retirement Fund Pension Fund Total Cash and cash equivalents $ 5,439 $ 53,241 $ 58,680 Receivables: Interest 27,152 6 27,158 Investments at fair value Money market funds 230,787 - 230,787 Certificates of deposit - 125,000 125,000 Common stock 1,358,418 - 1,358,418 Corporate bonds 365,209 - 365,209 U.S. agencies bonds 1,251,053 - 1,251,053 Mortgage backed securities - - - Mutual funds 5,205,504 - 5,205,504 Total assets 8,443,562 178,247 8,621,809 LIABILITIES Voucher and accounts payable 266 2 268 NET ASSETS Held in trust for pension benefits and other purposes $8,443,296 $178,245 $8,621,541 See auditors report on pages 12-13. -113- Exhibit E-2 CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF CHANGES IN NET ASSETS FIDUCIARY FUNDS - PENSION TRUST FUNDS FOR THE YEAR ENDED JUNE 30, 2010 See auditors report on pages 12-13. -114- Police and Appointive Firefighters' Employees' Additions: Retirement Fund Pension Fund Totals Contributions: Employer $ 465,170 $ - $ 465,170 Plan members 5,075 - 5,075 Total contributions 470,245 - 470,245 Investment earnings: Net increase in fair value of investments 880,537 - 880,537 Interest and dividends 250,249 2,158 252,407 Net investment earnings 1,130,786 2,158 1,132,944 Total additions 1,601,031 2,158 1,603,189 Deductions: Benefits 1,755,944 43,242 1,799,186 Administrative expenses 49,310 6,687 55,997 Total deductions 1,805,254 49,929 1,855,183 Change in net assets (204,223) (47,771) (251,994) Net assets, July 1, 2009 8,647,519 226,016 8,873,535 NET ASSETS, JUNE 30, 2010 $8,443,296 $178,245 $8,621,541 See auditors report on pages 12-13. -114- COMBINING FINANCIAL STATEMENTS 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 CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF NET ASSETS FIDUCIARY FUNDS - PRIVATE -PURPOSE TRUST FUNDS JUNE 30, 2010 ASSETS Cash and cash equivalents Accounts receivable Investments at fair value Mutual funds Total assets LIABILITIES Due to other funds NET ASSETS Held in trust for other purposes See auditors report on pages 12-13. -115- Maintenance Other and Rehab Trusts Trust Total 85,454 276 85,730 - 3,000 3,000 923,604 - 923,604 1,009,058 3,276 1,012,334 3,276 3,276 $1,009,058 $ - $1,009,058 Exhibit E-4 CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF CHANGES IN NET ASSETS FIDUCIARY FUNDS - PRIVATE -PURPOSE TRUST FUNDS FOR THE YEAR ENDED JUNE 30, 2010 Additions: Contributions: Intergovernmental revenues Private donations Total contributions Investment earnings: Net increase in fair value of investments Loss on sale of investments Interest and dividends Net investment earnings Total additions Deductions: Capital outlay Administrative expenses Transfers: Interfund transfers in Interfund transfers out Total deductions Change in net assets Net assets, July 1, 2009 NET ASSETS, JUNE 30, 2010 See auditors report on pages 12-13. -116- Maintenance Other and Rehab Trusts Trust Totals $ 2,725 $ 8,000 $ 10,725 10,000 - 10,000 12,725 8,000 20,725 80,246 - 80,246 (5,898) - (5,898) 18,843 - 18,843 93,191 - 93,191 105,916 8,000 113,916 - 893 893 9,558 4,352 13,910 (71,092) (71,092) - 8,112 8,112 (61,534) 13,357 (48,177) 167,450 (5,357) 162,093 841,608 5,357 846,965 $1,009,058 $ - $1,009,058 COMBINING FINANCIAL STATEMENTS 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. Payroll Fund: Assets: Cash and cash equivalents Liabilities: Payroll taxes and withholdings payable See auditors report on pages 12-13. CITY OF PADUCAH, KENTUCKY AGENCY FUND STATEMENT OF CHANGES IN ASSETS AND LIABILITIES FOR THE YEAR ENDED JUNE 30, 2010 Balance July 1, 2009 Additions Deductions $427,615 $427,615 -117- $13,227,774 $13,544,054 $13,227,774 $13,544,054 Exhibit E-5 Balance June 30, 2010 $111,335 $111,335 CITY OF PADUCAH, KENTUCKY STATISTICAL SECTION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 309 2010 STATISTICAL SECTION 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. Contents Page Financial Trends 118-123 These schedules contain trend information to help the reader understand how the City's financial performance and well-being changed over time. Revenue Capacity 124-129 These schedules contain information to help the reader assess the factors affecting the City's ability to generate its property and employee taxes. Debt Capacity 130-133 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. Economic and Demographic Information 134-136 These schedules offer economic and demographic indicators to help the reader understand the environment within which the City's financial activities take place. Operating Information 137-138 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 ended June 30, 2003. Schedules presenting government -wide information include information beginning in that year. Governmental Activities: Invested in capital assets, net of related debt Restricted for: Program purposes Capital projects Unrestricted TOTAL GOVERNMENTAL ACTIVITIES NET ASSETS Business -Type Activities: Invested in capital assets, net of related debt Restricted for: Program purposes Unrestricted TOTAL BUSINESS -TYPE ACTIVITIES NET ASSETS Primary Government: Invested in capital assets, net of related debt Restricted for: Program purposes Capital projects Unrestricted TOTAL PRIMARY GOVERNMENT NET ASSETS TABLE 1 CITY OF PADUCAH, KENTUCKY NET ASSETS BY COMPONENT Last Eight Fiscal Years (1) (accrual basis of accounting) Fiscal Year 2010(3) 2009 2008 2007 2006 2005(2) 2004 2003 $ 31,136,514 $ 31,215,252 $ 31,766,783 $ 32,557,572 $ 30,664,671 $ 29,492,197 $ 27,826,117 $ 27,955,839 1,100,696 2,183,559 1,782,251 1,904,321 1,018,231 727,699 714,538 713,766 5,077,026 4,363,913 5,028,420 4,618,923 2,689,804 940,323 4,031,802 3,583,589 8,165,101 8,621,077 9,432,763 9,057,641 7,718,198 7,419,037 (406,042) 1,571,120 $ 45,479,337 $ 46,383,801 $ 48,010,217 $ 48,138,457 $ 42,090,904 $ 38,579,256 $ 32,166,415 $ 33,824,314 $ 1,652,961 $ 1,721,419 $ 1,863,975 $ 1,491,523 $ 1,277,720 $ 1,463,118 $ 1,463,668 $ 1,425,753 620,800 369,368 579,460 - - - 1,816,705 1,036,093 (19,965) (147,286) 132,090 (27,648) 1,979,494 1,565,100 $ 4,090,466 $ 3,126,880 $ 2,423,470 $ 1,344,237 $ 1,409,810 $ 1,435,470 $ 3,443,162 $ 2,990,853 $ 32,789,475 $ 32,936,671 $ 33,630,758 $ 34,049,095 $ 31,942,391 $ 30,955,315 $ 29,289,785 $ 29,381,592 1,721,496 2,552,927 2,361,711 1,904,321 1,018,231 727,699 714,538 713,766 5,077,026 4,363,913 5,028,420 4,618,923 2,689,804 940,323 4,031,802 3,583,589 9,981,806 9,657,170 9,412,798 8,910,355 7,850,288 7,391,389 1,573,452 3,136,220 $ 49,569,803 $ 49,510,681 $ 50,433,687 $ 49,482,694 $ 43,500,714 $ 40,014,726 $ 35,609,577 $ 36,815,167 (1) 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. (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. (3) Significant change in governmental net assets due to restatement of prior year grant receivables. a d Pages 1 of 3 TABLE 2 CITY OF PADUCAH, KENTUCKY CHANGES IN NET ASSETS Last Eight Fiscal Years (1) (accrual basis of accounting) Program Revenues: Governmental activities: Charges for services: General government Public safety Public service Parks and recreation Planning and development Operating grants and contributions Capital grants and contributions Total governmental activities program revenues $ 993,371 $ 1,303,667 $ 1,415,943 $ 1,730,046 Fiscal Year $ 1,485,005 $ 1,601,414 $ 1,445,383 Expenses: 2010(4) 2009 2008(3) 2007 2006 2005(2) 2004 2003 Governmental activities: 1,111,188 1,150,507 942,355 895,155 986,618 683,119 152,890 180,420 General government $ 9,763,178 $ 12,148,118 $ 10,709,641 $ 9,462,543 $ 9,057,295 $ 8,431,994 $ 7,969,027 $ 7,396,882 Public safety 16,239,042 15,734,557 15,938,831 15,182,704 14,592,756 14,620,938 13,243,912 12,964,120 Public service 7,669,729 12,849,566 9,543,714 8,299,658 8,486,662 6,249,860 8,618,901 7,376,791 Parks and recreation 2,653,474 1,492,306 1,286,955 1,197,072 1,044,361 1,045,024 1,026,293 975,362 Planning and development 970,022 708,827 282,042 1,891,725 2,404,636 2,521,412 5,330,393 3,108,192 Interest on long-term debt 1,099,450 1,029,888 1,066,067 1,134,898 974,101 775,122 496,049 428,578 Total governmental activities expense 38,394,895 43,963,262 38,827,250 37,168,600 36,559,811 33,644,350 36,684,575 32,249,925 Business -type activities: Solid Waste 3,797,097 4,037,845 4,086,747 4,079,684 3,893,013 3,683,954 3,419,464 3,359,731 Section Eight Housing 2,061,370 2,154,360 1,949,899 - - - - - Civic Center 69,537 75,692 84,908 54,562 45,894 39,008 33,181 46,509 TISA 206,798 162,849 156,388 267,192 269,781 170,264 184,166 123,719 Total business -type activities expense 6,134,802 6,430,746 6,277,942 4,401,438 4,208,688 3,893,226 3,636,811 3,529,959 TOTAL PRIMARY GOVERNMENT EXPENSES $ 44,529,697 $ 50,394,008 $ 45,105,192 $ 41,570,038 $ 40,768,499 $ 37,537,576 $ 40,321,386 $ 35,779,884 Program Revenues: Governmental activities: Charges for services: General government Public safety Public service Parks and recreation Planning and development Operating grants and contributions Capital grants and contributions Total governmental activities program revenues $ 993,371 $ 1,303,667 $ 1,415,943 $ 1,730,046 $ 1,618,903 $ 1,485,005 $ 1,601,414 $ 1,445,383 484,754 602,262 268,839 1,024,610 767,086 794,814 1,134,386 94,386 1,197,194 1,220,999 1,111,188 1,150,507 942,355 895,155 986,618 683,119 152,890 180,420 124,606 122,929 103,932 117,317 132,388 131,355 - 1,600 30,627 10,810 20,602 13,501 12,893 15,867 1,813,019 2,119,845 1,340,261 2,797,216 2,988,612 2,452,694 3,290,134 4,176,548 1,390,848 4,889,520 1,297,900 3,681,490 3,302,568 1,100,064 3,221,637 2,213,757 6,032,076 10,318,313 5,589,364 10,517,608 9,744,058 6,858,550 10,379,470 8,760,415 Program Revenues: Business -type activities: Solid Waste Section Eight Housing Civic Center TISA Operating grants and contributions Capital grants and contributions Total business -type activities program revenues TOTAL PRIMARY GOVERNMENT PROGRAM REVENUES Net (Expense)/Revenue: Governmental activities Business -type activities TOTAL PRIMARY GOVERNMENT NET (EXPENSE) General Revenues and Other Changes in Net Assets: Governmental activities: Taxes and licenses: Property taxes, levied for general purposes Insurance premium tax Gross receipts license tax Employee license tax Other taxes Intergovernmental revenue Unrestricted investment earnings Gain on sale of capital assets Transfers Total governmental activities TABLE 2 CITY OF PADUCAH, KENTUCKY CHANGES IN NET ASSETS Last Eight Fiscal Years (1) (accrual basis of accounting) Fiscal Year Pages 2 of 3 2010 (4) 2009 2008 (3) 2007 2006 2005 (2) 2004 2003 $ 4,436,540 $ 4,547,959 $ 4,165,094 $ 3,928,140 $ 3,696,609 $ 3,583,417 $ 3,790,132 $ 3,298,964 32,455 38,577 32,932 31,372 26,378 32,828 36,455 20,825 148,158 148,291 143,833 193,713 106,697 104,087 100,778 93,383 2,340,267 1,965,936 1,785,809 - - - - - 27,239 129,032 9,480 23,969 22,894 14,735 24,990 3,666 6,984,659 6,829,795 6,137,148 4,177,194 3,852,578 3,735,067 3,952,355 3,416,838 $ 13,016,735 $ 17,148,108 $ 11,726,512 $ 14,694,802 $ 13,596,636 $ 10,593,617 $ 14,331,825 $ 12,177,253 (32,362,819) (33,644,949) (33,237,886) (26,650,992) (26,815,753) (26,785,800) (26,305,105) (23,489,510) 849,857 399,049 (140,794) (224,244) (356,110) (158,159) 315,544 (113,121) $ (31,512,962) $ (33,245,900) $ (33,378,680) $ (26,875,236) $ (27,171,863) $ (26,943,959) $ (25,989,561) $ (23,602,631) 4,207,736 3,986,760 4,221,957 4,122,538 4,107,934 3,919,113 4,012,168 3,797,347 4,055,228 4,699,458 4,414,672 39863,953 3,957,289 3,767,864 4,229,102 4,320,850 4,061,587 4,050,057 3,899,432 3,720,784 3,496,438 16,384,509 16,584,636 16,520,523 16,273,966 14,794,217 11,192,445 10,616,223 2,844,154 2,776,407 2,259,956 1,964,101 2,105,014 2,116,403 1,764,140 - - 1,401,400 1,243,028 1,201,973 955,645 871,273 172,213 336,960 540,620 639,702 462,292 290,647 220,992 64,620 68,530 119,200 48,656 8,340 - (1,972) (78,893) (110,838) (96,609) (58,175) (115,754) (133,959) (68,964) 31,620,788 32,018,533 33,728,092 32,698,545 30,327,401 26,018,367 24,678,162 3,893,211 3,580,964 3,404,338 10,301,231 1,893,064 836,132 325,811 125,714 18,666 24,379,131 General Revenues and Other Changes in Net Assets: Business -type activities: Unrestricted investment earnings Gain on sale of capital assets Transfers Total business -type activities Pages 3 of 3 TABLE 2 CITY OF PADUCAH, KENTUCKY CHANGES IN NET ASSETS Last Eight Fiscal Years (1) (accrual basis of accounting) Fiscal Year 2010 (4) 2009 2008 (3) 2007 2006 2005(2)_ 2004 2003 $ 33,724 $ 52,961 $ 73,985 1,112 98,369 127,131 78,893 110,838 96,609 113,729 262,168 297,725 83,854 $ 85,786 16,641 55,337 58,176 115,754 158,671 256,877 $ 51,508 $ 32,826 $ 39,530 27,500 34,975 24,238 133,959 68,964 (18,666) 212,967 136,765 45,102 Change in Net Assets: Governmental activities: (742,031) (1,626,416) 490,206 6,047,553 3,511,648 (767,433) (1,626,943) 889,621 Business -type activities: 963,586 661,217 156,931 (65,573) (99,233) 54,808 452,309 (68,019) TOTAL PRIMARY GOVERNMENT $ 221,555 $ (965,199) $ 647,137 $ 5,981,980 $ 3,412,415 $ (712,625) $ (1,174,634) $ 821,602 N (1) 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. (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. (3) The City began reporting Section Eight Housing fund as a business -type activity previously reported as a governmental fund. Prior years have not been restated. (4) Significant change in governmental net assets due to restatement of prior year grant receivables. General Fund: Reserved for: Encumbrances Unreserved TOTAL GENERAL FUND All Other Governmental Funds: Reserved for: Program purposes Capital improvements Encumbrances Unreserved, reported in: Special revenue funds Debt service funds TOTAL ALL OTHER GOVERNMENTAL FUNDS TABLE 3 CITY OF PADUCAH, KENTUCKY Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year 2010(4) 2009 2008(3) 2007 2006 2005(1) 2004 2003 2002 2001(2) 10,208,678 10,311,490 9,416,427 9,976,079 9,157,310 8,303,702 4,642,073 4,925,982 4,441,662 4,229,377 $10,208,678 $10,311,490 $9,416,427 $9,976,079 $9,157,310 $8,303,702 $4,642,073 $4,925,982 $4,441,662 $ 4,229,377 $ - $ 479,362 $ 497,243 $1,009,522 $ 783,596 $ 498,423 $ 483,423 $ 695,213 $ 567,096 $ 604,021 7,996,497 4,363,913 5,028,420 4,618,923 2,689,804 940,323 3,886,391 3,583,589 4,211,718 9,834,405 1,310,287 1,061,941 631,677 502,189 758,017 1,039,854 770,453 1,080,043 714,972 1,247,619 92,444 93,244 65,048 31,836 32,364 9,805 30,243 46,051 244,724 232,640 $ 9,399,228 $ 5,998,460 $6,222,388 $6,162,470 $4,263,781 $2,488,405 $5,170,510 $5,404,896 $5,738,510 $11,918,685 (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. (3) Significant decrease in reserve for program purpose due to converting governmental fund to proprietary fund. (4) Significant decrease in general fund balance due to restatement of prior year grant receivables. TABLE 4 CITY OF PADUCAH, KENTUCKY Changes in Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year Revenues: 2010 2009 2008 2007 2006 2005 2004 2003(1) 2002 2001 Taxes 6,326,740 5,867,782 6,139,164 6,044,069 6,204,686 6,016,570 5,871,229 5,773,871 5,377,865 4,881,408 Licenses 24,979,768 25,411,112 25,924,562 25,140,615 23,432,565 19,368,765 18,423,244 17,900,739 17,299,400 16,705,030 Charges for services 846,087 866,688 835,105 783,018 654,059 625,281 668,659 743,826 1,452,732 1,332,280 Intergovernmental 1,091,324 1,086,377 1,565,348 1,676,783 1,529,879 1,192,724 1,029,307 1,186,306 590,372 450,412 Grants 2,062,554 5,405,810 1,673,936 6,089,711 5,797,500 3,758,041 4,002,721 4,900,775 3,990,245 3,761,900 Interest 121,246 225,251 419,103 540,204 402,943 251,302 190,350 316,794 541,277 515,299 Miscellaneous 2,653,382 2,250,344 1,944,310 1,832,161 1,844,285 1,377,175 3,781,034 1,803,408 963,956 1,110,447 Total revenues 38,081,101 41,113,364 38,501,528 42,106,561 39,865,917 32,589,858 33,966,544 32,625,719 30,215,847 28,756,776 Expenditures: General government 5,277,916 4,726,435 5,051,374 4,763,839 4,286,431 4,171,662 3,891,251 3,943,031 3,446,408 3,386,330 Public safety 15,999,437 15,599,613 15,696,728 14,759,735 14,366,846 14,376,161 12,963,685 12,535,382 12,293,481 11,579,654 Public service 5,984,115 7,855,846 7,935,188 7,226,542 7,418,656 5,947,105 6,914,523 5,995,396 7,163,787 5,923,130 Parks and recreation 2,582,382 1,490,732 1,298,329 1,192,727 1,044,299 1,045,024 1,026,297 975,361 897,060 738,401 Planning and development 1,868,369 1,811,083 803,976 2,424,198 2,545,227 2,267,774 2,570,473 2,204,395 2,231,628 2,784,725 Other 847,188 514,488 520,611 526,238 481,690 462,099 2,343,844 645,653 323,844 99,657 Capital outlay 8,324,312 8,580,910 4,826,983 6,504,491 5,003,091 4,870,136 10,987,184 4,172,978 7,579,179 3,850,565 Debt service: Principal requirement 1,020,585 830,682 880,887 782,870 594,047 552,938 428,613 379,229 362,275 140,636 Interest and fiscal requirement 1,077,128 1,003,439 1,051,008 1,108,385 949,537 745,676 471,625 428,578 413,364 25,752 Total expenditures 42,981,432 42,413,228 38,065,084 39,289,025 36,689,824 34,438,575 41,597,495 31,280,003 34,711,026 28,528,850 Other Financing Sources (Uses): Bonds issued 6,645,000 1,718,605 - - 6,100,000 - 5,000,000 - - 9,104,211 Long-term debt draws 1,222,390 - - - - - - - - Long-term debt issued 258,391 69,032 - 246,667 275,000 3,500,000 Capital lease 405,796 405,796 371,979 - - - - - - Transfers in 9,722,852 5,928,413 6,241,886 5,209,977 6,034,070 3,394,420 3,939,188 29074,459 1,788,462 3,632,867 Transfers out (9,893,709) (6,150,847) (7,086,517) (5,556,722) (12,681,180) (4,712,171) (5,295,576) (3,167,686) (3,062,056) (4,966,004) Total other financing sources (uses) 8,360,720 1,970,999 (472,652) (100,078) (547,110) (1,042,751) 7,143,612 (1,093,227) (1,273,594) 7,771,074 NET CHANGE IN FUND BALANCES $ 3,460,389 $ 671,135 $ (36,208) $ 2,717,458 $ 2,628,983 $ (2,891,468) $ (487,339) $ 252,489 $ (5,768,773) $ 7,999,000 Capital outlay (2) $ 8,763,073 $ 2,850,717 $ 2,857,189 $ 4,638,045 $ 3,779,542 $ 3,981,143 $ 9,144,907 $ 1,907,998 $ $ - Debt service as a percentage of noncapital expenditures 6.13% 4.64% 5.49% 5.46% 4.69% 4.26% 2.77% 2.75% 2.86% 0.67% (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 Statements of Activities. TABLE 5 CITY OF PADUCAH, KENTUCKY ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS Source: McCracken County Property Valuation Administrator Notes: Property in McCracken county is reassessed once every four years on average. Percent Total Assessed Assessed Value Estimated Direct To Fiscal Real Estate Personal Actual Tax Estimated Year Commercial Residential Property Franchise Total Value Rate Value Exemptions 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 692,018,288 561,151,216 482,481,332 51,455,112 1,787,105,948 1,847,595,428 0.307 96.7% 60,489,480 2008 748,189,877 603,688,455 481,049,523 74,068,797 1,906,996,652 1,970,156,891 0.287 96.8% 63,160,239 2009 776,876,510 645,672,462 526,966,182 56,333,800 2,005,848,954 2,069,450,607 0.288 96.9% 63,601,653 2010 797,902,456 659,381,375 495,273,730 57,459,000 2,010,016,561 2,076,961,686 0.286 96.8% 66,945,125 Source: McCracken County Property Valuation Administrator Notes: Property in McCracken county is reassessed once every four years on average. TABLE 6 CITY OF PADUCAH, KENTUCKY PROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS (PER $100 OF ASSESSED VALUE) LAST TEN FISCAL YEARS Source: McCracken County Property Valuation Administrator and City Tax Levy Ordinance. City Direct Rates Overlapping Rates McCracken Co. City of Paducah Paducah McCracken General Fund School Districts School Districts Junior College County Total Fiscal Real Direct Real Real Real Real Year Estate Personal Rate Estate Personal Estate Personal Estate Personal Estate Personal 2001 0.300 0.390 0.329 0.385 0.385 0.597 0.599 0.022 0.022 0.195 0.223 2002 0.300 0.390 0.328 0.385 0.385 0.600 0.597 0.022 0.022 0.196 0.237 2003 0.300 0.390 0.327 0.396 0.396 0.598 0.603 0.022 0.022 0.196 0.221 N 2004 0.300 0.390 0.326 0.394 0.394 0.617 0.605 0.021 0.021 0.190 0.199 2005 0.300 0.390 0.325 0.448 0.448 0.618 0.617 0.021 0.021 0.196 0.226 2006 0.300 0.390 0.325 0.433 0.433 0.631 0.619 0.020 0.021 0.197 0.236 2007 0.275 0.390 0.307 0.433 0.433 0.628 0.631 0.019 0.019 0.197 0.236 2008 0.250 0.390 0.287 0.488 0.488 0.672 0.635 0.018 0.018 0.189 0.219 2009 0.250 0.390 0.288 0.489 0.491 0.672 0.678 0.021 0.023 0.096 0.106 2010 0.250 0.390 0.286 0.504 0.504 0.678 0.678 0.022 0.022 0.095 0.095 Source: McCracken County Property Valuation Administrator and City Tax Levy Ordinance. Taxpayer Kentucky Oaks Mall South Central Bell Olivet Church 1031 LLC Ducmall LLC Paducah Medical Investors Wal-Mart Real Estate Trust Sams Real Estate Bus Trust Computer Services, Inc. Wal Mart Store Amerisource Lowes H.B. Fuller Firstar Bank Drury Inns, Inc. Duke & Long VMV Union Planters TABLE 7 CITY OF PADUCAH, KENTUCKY PRINCIPAL TAXPAYERS CURRENT YEAR AND NINE YEARS AGO 2010 (1) (1) Percentage of Assessed Total Assessed Valuation Valuation 2001 (2) (2) Percentage of Assessed Total Assessed Valuation Valuation $ 50,900,262 2.54% $ 45,570,900 3.37% 16,221,600 0.81% 10,245,400 0.51% 14,374,800 0.72% 13,440,090 0.67% 10,646,400 0.53% 9,222,955 0.46% 9,083,185 0.45% 12,983,718 0.96% 9,000,000 0.45% 35,688,462 2.64% 29,949,886 1.49% 21,093,262 1.56% 13,845,576 1.02% 14,219,648 1.05% 11,964,595 0.88% 13,629,918 1.01% 11,980,316 0.89% 8,134,403 0.60% 5,960,502 0.44% TOTALS $173,084,578 8.63% $ 195,071,300 (1) Source - Property Valuation Administration; Assessed value as of January 1, 2009. (2) Source - Property Valuation Administration; Assessed value as of January 1, 2000. -126- 14.42% TABLE 8 CITY OF PADUCAH, KENTUCKY SECURED TAX LEVIES AND COLLECTIONS* LAST TEN FISCAL YEARS 2003 3,668,044 Collected within the 93.1% 124,095 3,538,424 96.5% 2004 Fiscal Year of the Levy 3,685,957 Total Collections to Date Fiscal (1) 99.2% 2005 3,834,909 3,762,592 Year Taxes Levied (1) Percent of Collections 2006 Percent of Ended for the Amount of Levy in Subsequent Total Levy June 30, Fiscal Year Collections Collected Years Collections Collected 2001 $ 3,485,185 $ 3,297,284 94.6% $129,425 $ 3,297,284 94.6% 2002 3,636,130 3,449,887 94.9% 152,893 3,602,780 99.1% 2003 3,668,044 3,414,329 93.1% 124,095 3,538,424 96.5% 2004 3,801,229 3,685,957 97.0% 83,740 3,769,697 99.2% 2005 3,834,909 3,762,592 98.1% 71,432 3,834,024 100.0% 2006 4,014,254 3,911,868 97.4% 92,426 4,004,294 99.8% 2007 4,000,988 3,855,679 96.4% 126,527 3,982,206 99.5% 2008 3,975,577 3,814,940 96.0% 124,199 3,939,139 99.1% 2009 4,202,774 4,017,032 95.6% 91,059 4,108,091 97.7% 2010 4,260,852 4,131,454 97.0% - 4,131,454 97.0% (1) Includes current year real and personal property tax. * Source - City of Paducah Finance Department. -127- TABLE 9 CITY OF PADUCAH, KENTUCKY EMPLOYEE LICENSE TAX COLLECTIONS LAST TEN FISCAL YEARS (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%. -128- (1) Direct Fiscal Taxes Tax Year Collected Rate 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% 2008 16,535,542 2.00% 2009 16,584,618 2.00% 2010 16,384,509 2.00% $132,288,367 (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%. -128- TABLE 10 CITY OF PADUCAH, KENTUCKY PRINCIPAL EMPLOYEE LICENSE TAXPAYERS CURRENT YEAR AND ONE YEAR AGO* (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. -129- 2010 (1) Percentage of Taxpayers Number of Percentage Taxes Total Employee By Range Filers of Total Collected License Tax $0-$50,000 1,936 99.38% $11,701,363 71.42% $50,001 - $100,000 8 0.4.1% 1,553,815 9.48% $100,001 - $500,000 4 0.21% 3,129,331 19.10% Greater than $500,000 0 0.00% - 0.00% TOTALS 1,948 100.00% $16,384,509 100.00% (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. -129- 2009 (1) Percentage of Taxpayers Number of Percentage Taxes Total Employee By Range Filers of Total Collected License Tax $0-$50,000 2,012 99.26% $11,630,775 70.13% $50,001 - $100,000 11 0.54% 1,843,411 11.12% $100,001 - $500,000 4 0.20% 3,110,432 18.75% Greater than $500,000 0 0.00% - 0.00% TOTALS 2,027 100.00% $16,584,618 100.00% (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. -129- TABLE 11 CITY OF PADUCAH, KENTUCKY RATIO OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS 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 15 for population data. (3) See Table 15 for personal income data (1) Ratio of (3) Net Net Net Net Net Debt as (2) General Public Public Refunding Total Debt to Percentage Net Fiscal Obligation Improvement Capital Improvement Revenue Primary Actual of Personal Debt Per Year Bonds Debt Lease Debt Bonds Government Value Income Capita 2001 $ 9,057,359 $ - $ 381,330 $ - $ - $ 9,438,689 0.59 1.95% $ 359 2002 8,830,276 - 234,054 - - 9,064,330 0.56 1.87% 345 2003 8,803,949 - 79,825 - - 8,883,774 0.54 1.83% 338 w 2004 13,589,757 3,428,855 - - - 17,018,612 1.02 3.51% 647 0 2005 13,210,195 3,503,274 - - - 16,713,469 0.99 3.45% 635 2006 18,877,636 3,319,227 - - - 22,196,863 1.27 4.58% 844 2007 18,278,164 3,320,522 - - - 21,598,686 1.17 4.46% 821 2008 17,614,952 2,946,303 - - - 20,561,255 1.04 4.24% 782 2009 19,706,394 5,187,262 - - - 24,893,656 1.20 5.14% 946 2010 25,568,996 5,808,267 - - - 31,377,263 1.51 6.48% 1,193 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 15 for population data. (3) See Table 15 for personal income data TABLE 12 CITY OF PADUCAH, KENTUCKY RATIO OF NET GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS 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 15 for population data. (1) General Bonded Debt Outstanding Ratio of Police and Infiniti Public Less Net (2) Convention and Fire Pension Media Floodwall Improvement Resources Bonds to Net Fiscal Art Center Fund Building Rehabilitation Project Restricted for Actual Bonds Per Year Bonds Bonds Bonds Bonds Bonds Debt Service Total Value Capita 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 - - 30,246 13,589,754 0.82 517 W 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 0.99 695 2008 7,600,000 5,740,000 4,340,000 - - 65,048 17,614,952 0.89 670 2009 7,320,000 5,545,000 4,160,000 2,774,638 - 93,244 19,706,394 0.95 749 2010 7,030,000 5,340,000 3,975,000 2,671,440 6,645,000 92,444 25,568,996 1.23 972 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 15 for population data. TABLE 13 CITY OF PADUCAH, KENTUCKY DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT AS OF JUNE 309 2010 City of Paducah Paducah Independent School District McCracken County McCracken County Board of Education Overlapping debt TOTAL DIRECT AND OVERLAPPING DEBT (1) Applicable percentage is determined by ratio of assessed valuation of property subject to taxation in overlapping unit to valuation of property subject to taxation in reporting unit. * Information from finance office at each location. -132- Estimated (1) Share of Percentage Direct and Net Debt Applicable Overlapping Outstanding to the City Debt $31,377,263 100.00% $31,377,263 22,991,414 * 100.00% 22,991,414 12,565,000 * 46.00% 5,779,900 26,576,232 * 31.20% 8,291,784 62,132,646 37,063,098 $93,509,909 $68,440,361 (1) Applicable percentage is determined by ratio of assessed valuation of property subject to taxation in overlapping unit to valuation of property subject to taxation in reporting unit. * Information from finance office at each location. -132- Net assessed value Add exemption Total assessed value Debt limit - 10% of total assessed (1) Debt outstanding: General obligation bonds outstanding Note payable Less debt not subject to limit Gross bonded debt Less amount available in debt service funds wNet bonded indebtedness subject to limit LEGAL DEBT MARGIN Debt limit Total net debt applicable to limit LEGAL DEBT MARGIN Total net debt applicable to the limited as a percentage of debt limit TABLE 14 CITY OF PADUCAH, KENTUCKY LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS $ 25,661,440 5,808,267 31,469,707 92,444 Fiscal Year $2,010,016,561 66,945,125 $2,076,961,686 $207,696,168.6 31,377,263 $ 176,318,906 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 $207,696,169 $206,945,061 $197,015,689 $182,759,543 $175,093,068 $168,349,559 $166,054,868 $164,683,556 $162,287,060 $ 160,284,233 31,377,263 24,893,656 20,561,255 21,598,686 22,196,863 16,713,469 17,018,612 8,883,774 9,064,330 9,438,689 $176,318,906 $182,051,405 $176,454,434 $161,160,857 $152,896,205 $151,636,090 $149,036,256 $155,799,782 $153,222,730 $ 150,845,544 15.11% 12.03% 10.44% 11.82% 12.68% 9.93% 10.25% 5.39% 5.59% 5.89% (1) "Cities shall not be authorized or permitted to incur indebtedness to an amount, including existing indebtedness, in the aggregate exceeding the following names maximum percentages on the value of the taxable property therein, to be estimated by the assessment previous to the incurring of the indebtedness: Cities of the first and second classes, and of the third class having a population exceeding fifteen hundred, ten per centum." TABLE 15 CITY OF PADUCAH, KENTUCKY DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Sources: (1) Bureau of the Census Count - 2000. (2) Board of Education; represents elementary and secondary public schools. (3) Kentucky Cabinet for Human Resources, Department for Employment Services. -134- (3) Unemployment Rate 5.0% 6.3% 7.2% 5.8% 6.4% 5.7% 5.6% 6.1% 9.3% 8.5% (1) (1) (1) (1) (2) Personal Per Capita Median School Fiscal Year Population Income Income Age Enrollment 2000-2001 26,307 $ 484,496,019 $18,417 39.9 3,037 2001-2002 26,307 484,496,019 18,417 39.9 2,909 2002-2003 26,307 484,496,019 18,417 39.9 2,887 2003-2004 26,307 484,496,019 18,417 39.9 2,977 2004-2005 26,307 484,496,019 18,417 39.9 2,819 2005-2006 26,307 484,496,019 18,417 39.9 2,834 2006-2007 26,307 484,496,019 18,417 39.9 2,804 2007-2008 26,307 484,469,019 18,417 39.9 2,832 2008-2009 26,307 484,469,019 18,417 39.9 2,774 2009-2010 26,307 484,469,019 18,417 39.9 2,659 Sources: (1) Bureau of the Census Count - 2000. (2) Board of Education; represents elementary and secondary public schools. (3) Kentucky Cabinet for Human Resources, Department for Employment Services. -134- (3) Unemployment Rate 5.0% 6.3% 7.2% 5.8% 6.4% 5.7% 5.6% 6.1% 9.3% 8.5% N Z§� e- Z§� * * Z§� e O �D Q) O N M N C� V� N F o a W VI) W)oc00000coin 6� 6� O a E W _ L; �D4MN6--�00-� F a E W W u 0 U -135- 00 N V) 00 1 ❑U U H C c� 'O, O +0+ U cl" O Axa �x ctsca v� w � U a� �'O U O O OQ�' N c� s N -135- 00 N V) 00 1 Governmental Activities General Government: General administration Finance Human resources Inspection Information systems Risk management Public Safety: Police Fire Public Service: Streets Facilities Engineering Other Parks and recreation Planning and development Other: Renaissance Fleet maintenance Business -ape Activities Solid waste TOTAL PRIMARY GOVERNMENT * Employee budget census. TABLE 17 CITY OF PADUCAH, KENTUCKY CITY FULL-TIME EMPLOYEES BY FUNCTION* Last Ten Fiscal Years Fiscal Year 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 12 12 12 12 12 11 11 11 12 13 14 17 14 14 14 13 13 13 13 13 0 0 3 3 3 4 3 3 3 4 10 13 13 13 12 12 12 12 13 14 6 4 4 4 3 3 3 3 2 1 1 1 1 1 1 0 0 0 0 0 90 93 93 93 93 96 94 95 94 94 65 69 69 71 76 75 76 76 77 81 23 29 29 30 31 28 28 28 28 29 34 36 35 34 35 38 39 39 38 36 5 8 9 9 9 9 8 8 8 8 4 6 6 6 4 4 2 2 2 0 7 7 7 7 7 9 9 8 8 7 9 10 11 11 11 11 11 11 10 10 3 5 0 0 0 0 0 0 0 0 8 6 7 7 7 7 6 6 6 6 27 27 27 27 29 29 29 29 29 30 318 343 340 342 347 349 344 344 343 346 General Government: Building and electrical permits issued Business licenses issued Public Safety: Police: Adult arrests Murder Rape Robberies Burglary Auto theft Arson Traffic accidents Traffic violations Fire: Emergency responses Fires extinguished Structure fires Incidents with reported losses Medical/rescue Tours/in-services/car seats Training man hours Inspections Refuse Collection: Residential: Refuse collected (tons per day) Customers served Commercial: Refuse collected (tons per day) Customers served Public Service: 911 dispatches Police Fire Other * Information not available. ** Information from city departments. 2005 2004 TABLE 18 2002 2001 CITY OF PADUCAH, KENTUCKY OPERATING INDICATORS BY FUNCTION** * Last Ten Fiscal Years * 2010 2009 2008 2007 2006 1,263 1,179 1,203 1,411 1,362 3,397 3,691 3,507 3,500 3,700 3,859 4,454 4,170 5,012 3,827 1 5 - - - 12 20 15 18 15 56 41 49 42 35 245 169 203 208 211 62 57 60 117 104 7 7 8 16 7 1,774 1,368 1,519 1,949 1,815 7,240 9,143 7,109 7,323 7,468 2,603 3,305 2,603 2,456 2,546 133 136 102 163 181 49 57 49 40 53 89 85 70 80 91 1,690 1,616 1,506 1,369 1,589 676 907 699 485 485 8,493 7,716 4,344 1,183 1,418 985 1,183 1,449 * * 38 32 25 28 34 9,445 9,435 9,446 9,388 9,368 70 75 83 85 84 810 810 821 832 801 79,768 81,525 83,871 76,815 83,348 42,496 40,921 43,420 41,887 47,091 2,702 2,490 2,720 2,399 2,907 34,570 38,114 37,731 32,529 33,350 2005 2004 2003 2002 2001 1,376 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * 3,219 3,638 3,569 2,845 1,665 176 189 198 194 177 49 64 70 72 66 97 106 111 129 102 1,997 2,266 2,290 1,551 370 485 485 485 468 558 1,188 965 1,058 804 1,619 * * * * * * * * * * * * * * * * * * * * * * * * * 85,273 91,408 92,698 88,512 89,645 48,275 53,504 54,521 53,318 53,903 3,424 4,190 4,058 2,467 2,107 33,574 33,714 34,119 32,727 33,635 Public Safety: Police: Stations Fire: Stations Refuse Collection: Collection trucks: Residential Commercial Other Public Works: Streets (miles paved) Sidewalks (miles) w Traffic signals 90 Parks and Recreation: Parks Acreage Community centers Swimming pools Public tennis courts Public golf courses # Information not available. * Information from city departments. TABLE 19 CITY OF PADUCAH, KENTUCKY CAPITAL ASSET STATISTICS BY FUNCTION* Last Ten Fiscal Years Fiscal Year 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 1 1 1 1 1 1 1 1 1 1 5 5 5 5 5 5 5 5 5 5 9 7 10 9 8 8 # # # # 5 4 5 5 4 4 # # # # 218 216 216 216 214 214 213 209 209 209 47 45 45 45 45 45 45 45 45 45 13 12 11 11 11 11 10 0 0 0 27 27 27 27 18 18 18 18 18 18 1290 960 960 960 325 325 325 325 325 325 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 3 3 3 6 6 6 6 6 6 6 6 6 6 2 2 2 2 2 2 2 2 2 2 CITY OF PADUCAH, KENTUCKY SINGLE AUDIT SECTION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2010 CITY OF PADUCAH, KENTUCKY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2010 Federal Grantor/Pass-Through Grantor/ Program Title: Department of Housing and Urban Development: Direct Programs: Section 8 Housing Choice Vouchers Passed -through Kentucky Governors Office for Local Development Community Development Block Grant Passed -through Kentucky Housing Corporation: Home Investment Partnerships Program Total Department of Housing and Urban Development Department of Justice: Direct Programs: Bulletproof Vest Partnership Program Equitable Sharing Program Edward Byrne Memorial Justice Assistance Grant Program ARRA - Edward Byrne Memorial Justice Assistance Grant Program ARRA - Community Oriented Policing Services Passed -through Kentucky Department of Revenue: Project Safe Neighborhoods Passed -through Kentucky Department of State Police: Enforcing Underage Drinking Laws Program Total Department of Justice Department of Agriculture: Direct Programs: Emergency Watershed Protection Program Passed -through Kentucky Department of Education: Summer Food Service Program for Children Total Department of Agriculture -139- Federal CFDA Pass -Through Number Grantor Number Expenditures 14.871 N/A $2,308,775 14.228 KY20070109-0026 28,933 14.239 N/A 180,416 2,518,124 16.607 N/A 6,263 16.000 N/A 31,586 16.738 2009 -DJ -BX -1323 42,543 16.804 2009 -SB -B9-1734 65,793 16.710 2009-RK-WX-0377 121,172 16.609 CT -073-100 1,497 16.727 2008 -AH -FX -0044 7,218 10.923 68-5C16-9-126 13,416 10.559 N/A 8,372 21,788 (Continued) CITY OF PADUCAH, KENTUCKY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2010 Federal Grantor/Pass-Through Grantor/ Program Title: Department of Homeland Security: Direct Programs: Port Security Grant Program Port Security Grant Program Assistance to Fire Fighters Grant Program Passed -through Kentucky Office of Homeland Security: Homeland Security Grant Program Homeland Security Grant Program Homeland Security Grant Program Total Department of Homeland Security Department of Transportation: Passed -through Kentucky Department of State Police: State and Community Highway Safety State and Community Highway Safety Passed -through Kentucky Governor's Office of Local Development: Recreational Trails Program Passed -through to River Heritage Museum Highway Planning and Construction Total Department of Transportation Department of Interior Passed -through National Park Service: Preserve America Grant Program TOTAL EXPENDITURES OF FEDERAL AWARDS Federal CFDA Pass -Through Number Grantor Number Expenditures 97.056 2008GBT80131 4,155 97.056 2009PUT90154 18,847 97.044 EMW-2009-FO-11526 38,174 97.067 P02 094 0800020884 2 121,243 97.067 P02 094 1000002706 1 42,221 97.067 P02 094 1000002679 1 18,000 242,640 20.600 AL -09-33 $ 27,675 20.600 AL -10-23 14,465 20.219 P02 628 0600003374 2,305 20.205 C05024679 30,178 74,623 15.921 21 -08 -AP -4115 35,607 $3,168,854 See accompanying notes to schedule of expenditures of federal awards. -140- CITY OF PADUCAH, KENTUCKY NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2010 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 - Subreciuients: The City of Paducah provided federal awards to subrecipients as follows: Federal CFDA Amount Program Title Number Provided Paducah Board of Education 10.559 $ 8,372 River Heritage Museum 20.205 30,178 -141- THIS PAGE INTENTIONALLY LEFT BLANK WILLIAMS, WILLIAMS & LENTZ, LLP CERTIFIED PUBLIC ACCOUNTANTS 601 JEFFERSON PADucAH, KENTUCKY 42001 J. RICHARD WALKER ROBERT R. ROBERTSON MAILING ADDRESS C. SUZETTE CRONCH POST OFFICE BOX 2500 MICHAEL F. KARNES PADUCAH, KY 42002-2500 MARK A. THOMAS Report on Internal Control Over Financial Reporting ROGER G. HARRIS and on Compliance and other Matters Based on an TELEPHONE 270-443-3643 J. DAVID BAILEY, III Audit of Financial Statements Performed in Accordance G. LEON WILLIAMS, 1926.2004 with Government AuditingStandards fm 270-444-0652 H. WILLIAM LENTZ, 1925-2007 JERRY G. SEVERNS WEBSITE wwlcpa.aom Honorable William F. Paxton, Mayor Members of the Board of Commissioners City of Paducah Paducah, Kentucky We have audited the financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Paducah, Kentucky, as of and for the year ended June 30, 2010, which collectively comprise the City of Paducah, Kentucky's basic financial statements and have issued our report thereon dated December 16, 2010. Our report includes a reference to other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Other auditors audited the financial statements of the Transit Authority of the City of Paducah, a component unit, as described in our report on the City of Paducah, Kentucky's financial statements. This report does not include the results of the other auditor's testing of internal control over financial reporting or compliance and other matters that are reported on separately by those auditors. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City of Paducah, Kentucky's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of Paducah, Kentucky's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City of Paducah, Kentucky's internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. However, we identified certain deficiencies in internal control over financial reporting, described in the accompanying schedule of findings and questioned costs (Part B item number one) that we consider to be significant deficiencies in internal control over financial reporting. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. -142- Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of Paducah, Kentucky's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of management, City Commission, others within the entity, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. / ZZ/0 December 16, 2010 -143- WILLIAMS, WILLIAMS & LENTz, LLP CERTIFIED PUBLIC ACCOUNTANTS 601 JEFFERSON PADUCAH, KENTUCKY 42001 J. RICHARD WALKER ROBERT R. ROBERTSON AILING ADDRESS POSTMOFFICE BOX 2500 C. SUZETTE CRONCH PADUCAH, KY 42002-2500 ANNETTE T. RYAN MICHAEL F. KARNES TELEPHONE MARK A. THOMAS 270-443-3643 ROGER G. HARRIS Report on Compliance with Requirements Applicable J. DAVID BAILEY, III FAX to Each Major Program and On Internal Control Over 270-444 52 G. LEON WILLIAMS, 1926.2004 H. WILLIAM LENTZ, 1925-2007 Compliance in Accordance with OMB Circular A-133 WEBSITE JERRY G. SEVERNS iwkpa.com Honorable William F. Paxton, Mayor Members of the Board of Commissioners City of Paducah Paducah, Kentucky Compliance We have audited the compliance of the City of Paducah, Kentucky, with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each of its major federal programs for the year ended June 30, 2010. The City of Paducah, Kentucky's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs is the responsibility of the City of Paducah, Kentucky's management. Our responsibility is to express an opinion on the City of Paducah, Kentucky's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non -Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform ' the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City of Paducah Kentucky's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of the City of Paducah, Kentucky's compliance with those requirements. In our opinion, the City of Paducah, Kentucky complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended June 30, 2010. Internal Control Over Compliance The management of the City of Paducah, Kentucky, is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs. In planning and performing our audit, we considered the City of Paducah, Kentucky's internal control over compliance with the requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of City of Paducah, Kentucky's internal control over compliance. -144- A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of management, City Commission, others within the entity, federal awarding agencies, and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. December 16, 2010 -145- CITY OF PADUCAH, KENTUCKY SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2010 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 instance of a 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. S. 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 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: 1. Segregation of Duties - The payroll clerk is responsible for the processing of payroll and the direct deposit transmission to employees. At a minimum, someone independent of the payroll function should review the direct deposit transmission to validate the employees being paid and to check the accuracy of the wages transmitted. Management's Response: When management was notified of this finding during audit fieldwork, additional controls were immediately enacted. A staff member independent of the payroll function reviews the payroll file before transmission, examining the payees as well as verifying the transmittal amount. Upon transmittal, this staff member also confirms that the correct amount was transmitted to the bank. C. Findings and Questioned Costs - Major Federal Award Programs: None -146-