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City of Paducah Paducah, Kentucky Comprehensive Annual Financial Report Year Ended June 30,2012 Issued by the Finance Department CITY OF PADUCAH, KENTUCKY COMPREHENSNE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2012 Introductory Section: Letter of Transmittal Organizational Chart Principal Officials GFOA Certificate of Achievement Financial Section: Independent Auditor's Report Required Supplementary Information: TABLE OF CONTENTS Management's Discussion and Analysis Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets Statement of Activities Fund Financial Statements: Governmental Funds: Balance Sheet Reconciliation of the Governmental Funds Balance Sheet to Statement of Net Assets Statement of Revenues, Expenditures and Changes in Fund Balances Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities Budgetary Comparison Statement (Budgetary Basis)- General Fund Budgetary Comparison Statement-Note toRSI-General Fund Budgetary Comparison Statement (Budgetary Basis) - Special Revenue Investment Fund Budgetary Comparison Statement -Note to RSI -Special Revenue Investment Fund Proprietary Funds: Statement of Net Assets Statement of Revenues, Expenses and Changes in Fund Net Assets Statement of Cash Flows Fiduciary Funds: Statement of Net Assets Statement of Changes in Net Assets Component Units Financial Statements: Statement of Net Assets Statement of Activities Notes to Financial Statements Required Supplementary Information: Pension Trust Fund Schedules Exhibit No. Page No. 1-7 8 9 10 11-12 13-27 1 28-29 2 30-31 3 32-33 4 34-35 5 36-37 6 38-39 7 40-43 8 44 9 45 10 46 11 47 12 48 13 49 14 50 15 51 16 52-53 17 54-55 56-90 A-1 91 Exhibit No. Page No. Supplementary Information: General Capital Improvements Detail Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual B-1 92 Debt Service Fund Detail Statement of Revenues, Expenditures, and Changes in Fund Balance-Budget and Actual B-2 93 Nonmajor Governmental Funds: Combining Balance Sheet B-3 94-95 Combining Statement of Revenues, Expenditures and Changes in Fund Balances B-4 96-97 Detail Statement of Revenues, Expenditures, and Changes in Fund Balance-Budget and Actual: Municipal Aid Program Fund B-5 98 Emergency Communication Service Fund B-6 99 Court Awards Fund B-7 100 Small Grant Fund B-8 101 CDBG Grant Fund B-9 102 Special Revenue Bond Fund B-10 103 PRAFund B-11 104 Nonmajor Proprietary Funds: Nonmajor Enterprise Funds: Combining Statement of Net Assets C-1 105 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets C-2 106 Combining Statement of Cash Flows C-3 107 Internal Service Funds: Combining Statement of Net Assets D-1 108 Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets D-2 109 Combining Statement of Cash Flows D-3 110 Fiduciary Funds: Combining Statement of Net Assets -Pension Trust Funds E-1 111 Combining Statement of Changes in Net Assets - Pension Trust Funds E-2 112 Combining Statement of Net Assets - Private-purpose Trust Funds E-3 113 Combining Statement of Changes in Net Assets - Private-purpose Trust Funds E-4 114 Statement of Changes in Assets and Liabilities -Agency Funds E-5 115 Table No. Page No. Statistical Section: Net Assets by Component I 116 Changes in Net Assets 2 117-119 Fund Balances, Governmental Funds 3 120 Changes in Fund Balances, Governmental Funds 4 121 Assessed and Estimated Actual Value of Taxable Property 5 122 Statistical Section: Property Tax Rates -Direct and Overlapping Governments Principal Taxpayers Secured Tax Levies and Collections Employee License Tax Collections Principal Employee License Taxpayers Ratio of Outstanding Debt by Type Ratio of Net General Bonded Debt Outstanding Direct and Overlapping Governmental Activities Debt Legal Debt Margin Information Demographic and Economic Statistics Principal Employers City Full-Time Employees by Function Operating Indicators by Function Capital Asset Statistics by Function Single Audit Section: Schedule of Expenditures of Federal Awards Notes to the Schedule of Expenditures of Federal Awards 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 Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control Over Compliance in Accordance with OMB Circular A-133 Schedule of Findings and Questioned Costs Schedule of Prior Audit Findings Table No. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Page No. 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139-140 141-142 143 144 CITY OF PADUCAH, KENTUCKY INTRODUCTORY SECTION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2012 . 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 11, 2012 We are pleased to submit Paducah's Comprehensive Annual Financial Report for the year ended June 30, 2012. 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, 2012, 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. 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. 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 lllinois 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 673-acre industrial park with rail and river access in western McCracken County. 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, McCracken County School System, Community Christian Academy, and St. Mary's Parochial School System. The availability of higher education in the area is continuing to flourish. West Kentucky Community and Technical College (WKCTC), formerly known as Paducah Community College, is a two-year institution affiliated with the University of Kentucky's community college system. WKCTC also serves as a site for the University of Kentucky extended campus graduate programs, in addition to a four-year engineering college in conjunction with the University of Kentucky. In 2008, WKCTC opened a Paducah School of Art, which is currently holding classes in its temporary location, while the permanent facility is developed. In 2010, a new 65,000 square foot Emergency Technology Center was opened, offering industrial and manufacturing technologies, engineering technology, as well as business and industry training and information technology programs. This is the first state supported new building to be constructed on the WKCTC campus in over 20 years. In 2011, Murray State University entered into an agreement with the City, McCracken County, and the Greater Paducah Economic Council to construct an approximately 40,000 square foot educational building to serve as their Paducah campus. 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 550 beds for medical needs. The two largest hospitals, together, employ approximately 3,300 persons. -2- Recreation And Culture Citizens have available a wide range of recreational and cultural activities which cater to diverse tastes. Area residents may choose from fishing on nearby Kentucky and Barkley Lakes to enjoying the performing arts. City parks provide areas for baseball, softball, golf, football, tennis, disc golf, skate boarding, soccer, 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 LowerTown Art and Music Festival is uniquely showcased within the borders of Paducah's 140-year- old historic neighborhood. The LowerTown Art and Music Festival is an outdoor-juried show in its 1Oth year. The weekend exhibits the work of local artists and 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 Memorial Day through July, businesses remain open late on Saturday night, while street comer musicians of all types entertain. One of Paducah's oldest celebrations is the '8th of August Emancipation Celebration', which features African American family reunions, or a homecoming. It is a time for African Americans to pay tribute to their heritage and roots, and a time of reconciliation. The 'Barbecue on the River' event was started in 1995, as a way for local charities to raise funds. It attracts in excess of 70,000 participants to Paducah's riverfront during the last weekend in September. Over time, this annual event has grown to incorporate other events, including 'Marine Industry Day' and 'Old Market Days'. 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 fourteenth 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. -3- 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 314 full-time employees as of June 30, 2012. 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 Paducah Transit Authority are all included in the City's financial statements because of their financial relationship with the City. The City provides a full range of municipal services, including police and fire protection; maintenance of streets and infrastructure; sanitation services; storm sewer services; cultural events and recreation activities. Accounting System The City's accounting system is organized on the basis of separate funds, each of which is considered to be a separate accounting entity. The financial activities of each fund generate a separate set of self- balancing accounts, which comprise its assets, liabilities, fund equity, revenues, and expenditures/expenses. Municipal resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The City's accounting records for the governmental funds and agency funds are maintained on a modified accrual basis, with revenues being recorded when "measurable and available" and expenditures being -4- 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. 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 FY2012, 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 as well as the minimum actuarially sound contribution annually that would arise from the fund being in a deficit position as of the actuarial date. For FY20I2, this contribution was $392 thousand. This amount was $45I thousand in FY20 II. Refinance 2004 Bond Issue. The City's debt management policy states that periodic reviews of all outstanding debt will be conducted to determine refunding opportunities. The policy also states that refunds will be undertaken when a net present value of savings of at least 5% of the refunded debt can be achieved. In August 20 II, the City refinanced its 2004 Infiniti Media Building bonds, saving the City I3.8% of the refunded debt, or $540,96I (net present value) over the life of the issue. The $3.9I million general obligation bond issue will be paid off in June 2024. As part of the City's annual budget process, financial policies are reviewed and amended as necessary. In FY20 I2, 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 Y2 cent. As a result of the payroll tax increase, the City Commission created the Investment Fund. The Investment Fund is funded with the Y2 cent increase and is dedicated to the following purposes: economic development, community redevelopment, -5- infrastructure capital investment, and property tax relief. During the FY20 12 budget process, the Commission reviewed numerous decision packages proposed for the Investment Fund Budget; expenditures totaling approximately $5 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. In FY2011, the U.S. Army Corps of Engineers (USACE) issued a Feasibility Report, which recommended certain rehabilitation projects to improve the reliability and restore the system performance of the flood wall. The USACE and the City are now ready to initiate Preconstruction Engineering and Design (PED) and prepare plans and specifications for the reconstruction projects as listed within the Feasibility Report. Riverfront Redevelopment Plan. The City's Riverfront Redevelopment Plan includes proposed improvements that will provide public amenities, recreational facilities, and 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. In FY2007, the City was allocated $5.3 million in federal funds for construction of Phase I and the Ohio River Boat Launch Project. Environmental assessment and remediation procedures required by the permitting process temporarily stalled the construction of this phase of the project. However, permits were finally secured and the official groundbreaking for the project was held in November 2012. Once construction is complete, operating costs will be a long-term planning consideration. ECONOMIC CONDITION The City continues to be aggressive in promoting economic development, since new developmental job growth is necessary to ensure the continued stability of the City's tax base. Economic indicators and trends reflect that the area's economy has remained 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 29,827 persons employed (McCracken County) as of June 30, 2012. The June 2012 unemployment rate was 8.0% (McCracken County), which is a decrease from 8.7% in the prior year, and is favorable compared to the June 20I2 federal unemployment rate of 8.2%. 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 ,232 for fiscal year 2012 valued at $54 million, which is down $I 7. 7 million from fiscal year 201 I . 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. -6- 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, 2011. This was the twenty-first consecutive year that the City achieved this prestigious award. In order to be awarded a Certificate of Achievement for Excellence in Financial Reporting, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement for Excellence in Financial Reporting is valid for a period of one year only. We believe our current comprehensive annual financial report continues to meet the Certificate of Achievement Program's requirements; and, we are submitting it to GFOA to determine its eligibility for another certificate. ACKNOWLEDGMENTS The preparation of this report on a timely basis could not be accomplished without the efficient and dedicated services of the entire staff of the Finance Department. We wish to express our appreciation to all members of the Finance Department who assisted and contributed to its preparation, and special thanks to 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. onathan W. Perkins, CPA Finance Directorffreasurer -7- I 00 I I City Clerk Engineering/ Public Works Department Advisory Board and Committees I Police CITY OF PADUCAH, KENTUCKY ORGANIZATIONAL CHART CITIZENS OF PADUCAH I Mayor and Commissioners 1~--------...., City Manager I I I City Attorney I Parks I I Paducah Human Department Fire Department Department Renaissance Resources /Risk Planning Department Finance Department Alliance Paducah Riverfront Development Authority Information Systems Management CITY OF PADUCAH, KENTUCKY PRINCIPAL OFFICIALS BOARD OF COMMISSIONERS Mayor Mayor Pro tern Commissioner Commissioner Commissioner Finance Police Chief Fire Chief City Engineer/Public Works Planning Parks Services Paducah Riverfront Development Authority Information Services Human Resources & Risk Management City Clerk Public Information Paducah Renaissance Alliance CITY MANAGER Jeff Pederson -9- William F. Paxton Gayle Kaler Gerald Watkins Richard Abraham Carol Gault Jonathan Perkins, C.P.A. James Berry Steve Kyle Richard Murphy Stephen Ervin Mark Thompson Steve Doolittle Greg Mueller Cindy Medford Tammy Brock Pam Spencer Lisa Thompson 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, 2011 A Cettificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association ofthe 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. President Executive Director -10- CITY OF PADUCAH, KENTUCKY FINANCIAL SECTION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2012 J. DAVID BAILEY. Ill C. SUZETTE CRONCH ROGER G. HARRIS MICHAEL F. KARNES ROBERT R. ROBERTSON MARK A. THOMAS G. LEON WILLIAMS. 1926-2004 H. WILLIAM LENTZ. 1925·2007 J. RICHARD WALKER JERRY G. SEVERNS WILLIAMS, WILLIAMS & LENTZ, LLP CERTIFIED PUBLIC ACCOUNTANTS 601 JEFFERSON PADUCAH,KENTUCKY42001 Independent Auditor's Report Honorable William F. Paxton, Mayor Members of the Board of Commissioners City of Paducah Paducah, Kentucky MAILING AQQRESS POST OFFICE BOX 2500 PADUCAH. KY 42002·2500 ~ 27().443.3643 EM 270-444-0652 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, 2012, 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 fourteen 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, 2012, 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, 2012, 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. -I 1- In accordance with Government Auditing Standards, we have also issued our report dated December II, 20I2, 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 should be considered in assessing the results of our audit. Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and Pension Trust Fund Schedules on pages I3 through 27 and 9I, 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-I33, 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 do not express an opinion or provide any assurance on them. kl~ 6(/..://. 1'-~ jJ / ~ (/' Z::z. December II, 2012 ' -I2- CITY OF PADUCAH, KENTUCKY REQUIRED SUPPLEMENTARY INFORMATION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2012 CITY OF PADUCAH, KENTUCKY MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 20I2 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, 20 I2. 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 I-7) and the basic financial statements (pages 28-90) 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 $48.2 million at the close of the 20II-20I2 fiscal year. Of this amount, $9.2 million (unrestricted net assets) may be used to meet City government's ongoing obligations to citizens and creditors. • Total net assets decreased $I,564,09I. • At fiscal year end, City governmental funds reported a combined ending fund balance of $I7.4 million. Approximately 23% of this total amount, $4.I million, is restricted or committed for highways/streets and capital improvements. Assigned fund balance comprises II%, or $2 million, of combined fund balance; the majority of which is set aside for capital improvements. • At the end of the current fiscal year, unassigned General Fund fund balance was $II.3 million and is available for spending at the City's discretion. Cash makes up approximately $7.7 million. When compared to actual total appropriations, the General Fund cash balance is 24.6%. II. Overview of Financial Statements This discussion and analysis serves as an introduction to the City's basic financial statements, which consist of four components: I) 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 -I3- 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 Paducah Transit Authority (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 28-31 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: I) 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 eleven ( 11) 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, and Debt Service Funds, all of which are considered to be major funds. Data from the other seven (7) 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 92-104. 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 34-35) and Exhibit 6 (pages 38-39) 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 32-39 of this report. 2) Proprietary Funds. The City maintains two types of proprietary funds: a. Enterprise Funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements and are used to account for operations: • That are financed and operated in a manner similar to private business enterprises where the intent of the governing body is that the costs of providing goods and services to the general public on a continuing basis be financed or recovered primarily through user charges; or -14- • 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 52-55. 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 I 05-1 07 of this report. Individual data for the internal service funds is likewise presented in the form of combining statements on pages 1 08- 11 0 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 111-114 of this report. C. Notes to the Financial Statements The notes provide additional information that is essential to fully understanding data provided in the government-wide and fund financial statements. Notes to the financial statements can be found on pages 56-90 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 94-114 of this report. -15- lll. 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 $48.2 million as of June 30, 2012. For FY2012, the largest portion of the City's net assets (69%) reflects its investment in capital assets (i.e., land, buildings, machinery, equipment, and infrastructure) less outstanding related debt used to acquire those assets. The City uses these capital assets to provide service to citizens and, as a result, these assets are 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 ( 12%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ( 19%) may be used to meet the City's ongoing obligations to citizens and creditors. As of June 30, 2012, 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 2012 2011 $36,580,489 $36,714,968 39,740,080 40,927,948 7.186.182 7.715.136 83.506.751 10,296,274 30.335.518 40.631.792 31,957,381 5,003,581 5.913.997 $42 824 252 85.358.052 11,727,758 29.242.431 40.970.189 32,905,977 7,252,385 4.229.501 $44 382 863 -16- Business-Type Activities 2012 2011 $6,529,327 $6,555,797 1,308,574 1,334,230 7.837.901 473,276 2.076.914 2.550.190 1,308,574 732,817 3.246.320 $5 282 21] 7.890.027 475,439 2.075.690 2.551.129 1,334,230 999,885 3.004.783 $5 338 828 Total Primary Government 2012 2011 $43,109,816 $43,270,765 41,048,654 42,262, I 78 7.186.182 7.715.136 91.344.652 10,769,550 32.412.432 43.181.982 33,265,955 5,736,398 9.160.317 $48 162 620 93.248.079 12,203,197 31 318.121 43.521.318 34,240,207 8,252,270 7.234.284 $42 226 261 The exhibi t below c harts the City's tota l net assets from th e implementation of GASB 34 through the present. 60 ... 50 ~ 40 ~ = -30 20 10 0 ... ...... Government Wide Analysis Total Net Assets ..... ~ ~ 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 A nnu a l increases to total net assets began in FY2005 primarily due to the increase of the City's pay ro ll tax an d the creation of the Inve stment Fund. The add itio na l tax generates approxim ate ly $4 milli o n in revenue each year, w hich is used mostly for capita l investm e nt. Increases h ave leveled off in recent years due to mid-year appropriati ons made by t he Comm ission, reducing the City's unreserved cash balance at J un e 30 to t he minimum requirement of 8% each time. In FY2012, net assets declined by $1.5 mi lli on . This was due to a commitment made by the City to contribute toward the construction of a n edu catio nal facil ity to be occupied by Murray State University. In November 20 II, t he C ity e nte red into a ge neral ob li gation note in the amount of $2.7 mill ion with McCracken County, w ho is managing the p roject and wi ll own the building as it is leased to the University. Because t he Coun ty is retaining the asset, th is transaction is reflected as an expense on the government-wid e financial statements. A. Analysis of the City's Operations The follow in g table provides a su mmary of the City's operations for the years ended June 30, 2012 and 20 II. Governm ental activities decreased t he C ity 's net assets by $1,5 12 ,904. B us iness-type acti v it ies decreased the C ity 's net assets by $5 1,187. -17- City of Paducah, Kentucky Changes in Net Assets June 30 Governmental Activities Business-T):(!e Activities Total Primaa Government Revenues: 2012 2011 2012 2011 2012 2011 Program revenues: Charges for services $ 3,128,991 $ 3,177,615 $4,570,982 $4,648,702 $ 7,699,973 $ 7,826,317 Operating grants/contributions 2,215,247 2,086,625 1,647,981 2,400,540 3,863,228 4,487,165 Capital grants/contributions 533,169 1,767,093 15,266 8,659 548,435 1,775,752 General revenues: Property taxes 4,267,812 4,402,226 4,267,812 4,402,226 Franchise taxes 150,974 140,570 150,974 140,570 Telecommunications tax 710,951 752,147 710,951 752,147 Insurance premium tax 3,690,806 3,476,309 3,690,806 3,476,309 Vehicle tax 614,786 598,509 614,786 598,509 Bank tax 216,829 218,137 216,829 218,137 Gross receipts license tax 4,359,835 4,243,511 4,359,835 4,243,511 Employee license tax 18,095,182 17,345,033 18,095,182 17,345,033 Other taxes 677,409 524,878 677,409 524,878 Intergovernmental revenue 340,975 478,576 340,975 478,576 Unrestricted investment earnings 203,261 264,913 48,806 46,052 252,067 310,965 Gain on sale of capital assets 36,718 62,539 2,443 67,657 39,161 130,196 Insurance recoveries 27448 410.462 27.448 410.462 Total revenues 39.270.393 39.949.143 6.285.478 7.171.610 45.555.871 47.120.753 Expenses: General government 12,937,997 9,786,052 12,937,997 9,786,052 Public safety 17,045,731 18,475,971 17,045,731 18,475,971 Public service 6,163,602 7,328,806 6,163,602 7,328,806 Park and recreation 2,654,098 2,748,333 2,654,098 2,748,333 Planning and development 1,192,952 1,212,103 1,192,952 1,212,103 Interest on long-term debt 1,059,537 1,363,580 1,059,537 1,363,580 Solid Waste 3,900,264 3,832,130 3,900,264 3,832,130 Section Eight Housing 1,921,004 1,956,728 1,921,004 1,956,728 Civic Center 71,069 76,546 71,069 76,546 TISA 173.708 183.546 173.708 183.546 Total expenses 41.053.917 40.914.845 6.066.045 6.048.950 47.119.962 46.963.795 Increase (decrease) in net assets before transfers ( 1 '783,524) (965,702) 219,433 1,122,660 (1,564,091) 156,958 Transfers 270.620 (125.772) (270.620) 125.772 Change in net assets (1,512,904) (1,091,474) (51,187) 1,248,432 (1,564,091) 156,958 Net assets, July 1 44.387.863 45.479.337 5.338.898 4.090.466 49.726.761 49.569.803 NET ASSETS, JUNE 30 $42 814 252 $44 381863 $5 281111 $5 338 828 $48 162 610 $42126161 -18- B. Governmental Activities As with most municipaliti es, th e C ity's governm enta l activ iti es are heav il y s ub sidized by taxes, w ith little or no program revenue for each function. T he c hart below demonstrates t he importance of tax revenu e to essentia l function s of the City. SIS $16 S14 S12 "' SIO c: 0 ~ ::; S8 S6 S4 S2 so Governmental Activities Expenses and Program Revenues General Public safety Public sen1ce Park & Planning & Interest on Government recreation development long-term debt The g raph b e low depicts the breakdown of revenue by source for fi scal year 2012. Governmental Activities Revenue by Source Capital Grants/ Contribntlons 1% Other Ta.xes ---------:::;?..:::iiil 6% Operating Grants/ Contributions 6% Charges for Services 8% Property 11 % <1% Occupational Licenses In fi scal year 20 12, t he C ity deri ved 84% of its revenu e from ta xes/li censes. Occupational li censes, w hi c h include payro ll w ithho ldin g tax, bus in ess li censes, and insurance premium tax , is the largest sourc e of income to the City, totaling $26.1 milli o n . This category of re venu e in creased 4.3% fro m -19- fi sca l year 2 0 I I. In su ra nce pre m i urn t ax experie nced t he largest chan ge percentage-w ise with in th is cat egory w ith an in crease of $2 14 ,497, o r 6 .2%. T hi s is t he fir st time in s urance prem iu m taxes h ave in c reased over th e pr io r year s ince FY20 08. It is beli eved t hat economi c recovery may be d riv in g th e in crease . Altho ug h C ity staff is ho pefu l t hi s revenu e source w i ll cont in ue to g row, receipts are s til l over a mi ll io n d o ll a rs b e low FY20 08 levels, and FY2 0 13 bud get est imates fo r this revenue type are very cons ervative t o re fl ect t he un ce1ta inty. E m p loyee li cen se tax increased $750,149, o r 4.3%, from th e p ri or year. The in crease in em pl oyee l icense tax does not appear to be t h e result of o ne s ig ni fica nt e mp loyer 's activ ity, b ut t he resu lt of several employer s hav in g m oderate increases. Property t axes cont inue t o be a st a b le source of revenue , com prisin g I I % of tota l r evenue in both FY20 12 a nd FY2 011. C. Busin ess-Type Activities T he c ha rt below shows t he o perating results fo r each of t he City 's business-type activ ities. T hese act ivit ies s h o uld break-even; that is, the c harges for services should be large enough t o s usta in o perations. For fisca l year 2012, bu s in ess-ty pe activ iti es as a whole had a d ecre ase in net assets of $5 1,187. The So lid W aste Fund o nce again ha d a positi ve c hange in n et asset s, a lthoug h it was s ig nifi cantly less th a n t he previo us t hree years. T hi s is because th e Solid Waste transferred a pproxim a t e ly $250,000 to t he Gen e ra l Fu nd . T he Ph ase II S t o rm Water Act re q u ires that the C ity ma ke a n effort to c urb soli d waste fro m th e landfi ll /sewer system . As a resu lt, t hree f ull t im e street sweepe rs a nd e ig h tee n ROWs (one d ay a week) have been ass igned to this progra m . Because t hese are Genera l F und em pl oyees, the So lid Waste Fund is m aking m onthl y interfund transfers to t he General Fund to compe nsate fo r t h e ir use. Analys is of t he remain ing business-type activities is in c luded in Secti o n TV -B of this re p o rt . 5.00 4.50 4.00 3 .50 e 3 .00 C> ~ 2.50 2 .00 1.50 1.00 0 .50 Business-Type Acrtvlrtes Expenses and Revenues Solid Wast e Secti on Eight Chic Center TISA Housing IV. Financial An alys is of t he C ity 's F unds A. G overnmen tal F unds ..J Expenses •R evenues T he focus of the C ity's governmental f unds is t o provide in formation on near-term in flows , o utflows a nd ba lances of spenda bl e resources. S uch inform atio n is u sefu l in determi ni ng th e City's financing requiremen ts. Unreserved fun d ba lance serves as a useful measu re of the City's net resources avai lab le fo r s p e nd in g at t he end of th e fi s ca l year. -2 0- At the end of the fiscal year, the C ity governmental funds reported combined ending fund balances of $17.4 million. In FY 20 II , the City implemented GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type D efinitions. T he redefined categorie s of fund balance are described below: • Restricted fund balance h as externa l limitat io ns o n use that may be imposed by cred itors, g rantors, contribu tors, or laws and regulations . At the end of the fiscal year, the City had $1,156,681 of municipal aid fund s , whic h are restricted in use for paving by t he St a te of Kentucky. • Co mmitted fund balance ha s s elf-imposed limitation s enacted by the highest level of decision making that requires formal action at the same leve l to remove the limitations. The C ity had $2,631 ,23 3 in fund balance committed fo r capital im provements in the Investment Fund. • Assigned fund balance has limitations res ultin g from intended use; formal action is not requ ired. Approximately II % of the C ity's fund balance is assigned for various purposes, including capital improvements, publi c safe ty , a nd debt serv ice. • Unassigned fund balance is the total f und balance in the ge neral fu nd in excess of the other fund balance categori es. Governmental Funds Ending Fund Balance Restricted for Highways and Streets 7% Restricted for PubUc Safety <1 o/o R estricted for <1% Capital Committed for Capital Improvements 15% A pproxim ately 65% of tota l fund balance, $1 1.3 milli on is una ss igned General Fund fund balance, which is available for spend in g at t he governme nt 's d iscretion but o nl y up to the a mount represented by cash. At year-end , there was $7.7 milli o n available as cash ; the balance is tied up in other assets including acco un ts receivable and property ta xes co ll ectible. C ity fiscal po licy (O rdin ance 201 1-6- 7825) requires that an amount not less than 8% of the General Fund's budgeted exp e nditures re main undesign ated in t he f und balance, o r $2.5 milli o n, which leaves $8.8 milli o n as unreserved for fi scal y ea r 2012. As a measure of Genera l Fu n d li q ui dity, readers may com pare un ass igned (formerly re ported as "unreserved") f und b a la nce to tota l General Fund expenditures. U nassigned Genera l Fund fund b a lance represents 36.2% of exp e nditures and t ran sfe rs o ut ($3 1.2 mill ion). T hi s has remained s tabl e s in ce th e implementati o n of GASB 34, as i llu strate d in th e tab le be low. -21- 40.00% 35.00% 30.00% 25.00% 20.00% 15 .00% 10.00% 5.00% 0.00% General F und Fund Balance as a % of Expenditures .. ...... ... '""-... ...... ...,.,-~ ~ 2003 2004 2005 2006 2007 2008 2009 2010 2011 20U The Investment Fu nd had a fund balance of $2 .6 m i llion, all of w hich is committed for capita l projects. The Investme nt Fund w as a uthorized by the C ity Commissio n in fi scal yea r 2005-2 006 as a spec ial re venue fund w hose use is re stricted to property tax reduction , economic deve lopment, community re deve lo pm ent, a nd capital and infrastructure proj ect s . The Investment Fund captures a ll manne r o f financial activities re lated t o revenu e fro m the Y2 cent payro ll tax increase, effective October I , 2 00 5. The In vestm e nt Fund 's fund balance in c reased $4 4 tho u sand from prior year to $2.63 milli o n . Revenu e in creased as antic ipated a nd was s ufficient t o f und th e budge ted projects for FY20 12. For FY20 12, jus t a few of those proj ects in c lud e d : econ o mic in centi ves fo r the relocation of Paducah & Louisville Ra ilway nationa l headqua rters faci lity ; continued s upport o f economic d eve lopme nt agenc ies s uc h a s Greater Paduca h Economi c Development Corp. a nd Entre-Pa ducah; debt service payments o n econom ic d evelo pm e nt a nd capita l proj ects ; community d evelopment in the Fountain A venue Di s trict; a nd resurfacing a nd s id ewalk prog rams. Fund bala n ce in the Gene ra l Capital Improve me nts fund decreased by approx imate ly $92 th o usand fro m the prior year to $1.49 milli on. The decrease is due to the utilization of do ll a rs that had been set aside in prev io u s years. Capi ta l improve me nt projects for th e year are d iscussed in Section IV-A of this report. B. Proprietary F u nds The C ity 's proprietary funds provid e the same info rmation found in the governm e nt-w id e fin a nc ial st at e ments, but in more d eta i l. Net assets of the re s pecti ve p roprietary fund s are: So lid Waste Section E ig ht Hous in g C iv ic Center TIS A $ 3 ,682 ,713 745 ,469 16 4 ,547 309 ,5 94 Combined total ne t asset c ha nge for the four funds was a decrease of $85 ,289, broken down as follows: Sol id Was te ($322 thousand in crease), Secti o n E ig ht Housing ($273 t ho usand decrease), C iv ic Center ($1 0 tho usa nd d ecrease), and TISA ($124 thousand decrease). The largest pro prietary fund , So l id Was te , was di scu ssed under B us ine ss Type Activities (Section III-C). Section Eight ha d -22- successfully reduced program expenditures over the past few years to replenish reserves. However, in FY20 12, there was a nationwide HUD recapture effort to reduce housing agency reserves down to an acceptable national average. TISA also experienced a significant loss in FY2012. In mid-fiscal year 2012, TISA's largest partner other than the City, McCracken County, left the agency. Because there is now minimal external revenue flowing into the fund, this fund is in the process of being dissolved. For FY2013 budget projections, user charges have been eliminated and expenditures were folded into the City's Information Systems Department. V. General Fund Budgetary Highlights Differences between the original budget and the final budget resulted in a $560 thousand 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 PRDA Other Appropriations Increase Decrease (In Thousands) $ $ 241 5 1,500 345 39 26 93 55 6 277 329 49 167 8 Appropriations for the Fire Department increased $1.5 million. A lawsuit was filed against the City of Paducah under Wage and Hour Law that affected 71 former and current frrefighters named as Plaintiffs, relating to the way the City administered State Incentive Overtime Pay for the five years preceding filing of the lawsuit. Based on the court's rulings that were entered in April and September 201 I, the City's liability in this lawsuit was established at $1,482,743. This payout, which included back pay and related payroll expense and interest, along with $121,854 in awarded attorney fees were paid out during FY20 12. There was a $241 thousand decrease to appropriations for General Administration. Commission contingency funds in the amount of $250,000 were transferred out of General Administration for various projects during the year. This also explains the increase in appropriations for "Other", which is primarily composed of the inter-fund transfers to those projects. Police, Public Works, and Recreation experienced decreases in excess of $100 thousand. These decreases in appropriations were due to significant salary slippage in these departments. -23- 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, 2012, is $41 million (net of accumulated depreciation). This investment in capital assets includes land, buildings and improvements, vehicles and equipment, park facilities, roads, highways, and bridges, and construction in progress. Capital improvements are included in each department budget until improvements are completed. At the end of the fiscal year, completed projects are capitalized in the Government-wide Statements. During fiscal year 2012, projects and equipment expenditures totaled approximately $1.6 million. Some of the largest capital-type projects, in terms of dollars in fiscal year 2012, are shown in the following table: Vehicle Purchases Pumper Truck (not included in vehicle purchases above) ·Paducah & Louisville Railway Parking Lot Compost Yard Improvements $692,889 407,509 190,369 125,573 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 Business-Tiue Activities 2012 2011 2012 2011 $11,107,875 $ 7,394,561 $ 62,152 $ 62,152 1,902,527 1,643,180 3,797,562 7,150,928 4,910,512 5,251,215 316,061 205,306 13,349,077 14,990,871 1,788,200 2,003,441 331,189 372,097 1,522 2,556 2.882.805 2.491.196 599.172 694.675 $32 740080 $40 221248 $1 308 514 $1 334 230 Total Primaa Government 2012 2011 $11,170,027 $ 7,456,713 1,902,527 1,643,180 3,797,562 7,150,928 5,226,573 5,456,521 13,349,077 14,990,871 2,119,389 2,375,538 1,522 2,556 3.481.977 3.185.871 $4) 0~8 65~ $42 262 118 Additional information on City capital assets can be found in Note 3 in the notes to financial statements on pages 70-73. -24- B. Long-Term Debt At year-end, the City had $33,000,039 in outstanding bonds, accrued compensated absences, and notes payable, compared to $3I, 720,403 at June 30, 20 II with maturities extending through 203I. Kentucky League of Cities -2003 Infiniti Media Building-2004 General Fund accrued compensated absences Police/Firefighter Pension Fund Liability -2006 Floodwall Rehabilitation -2008 Convention Center Renovation -2008 Public Improvement Projects -20 I 0 Refinanced Convention Center-20 I 0 Margaret Hank Agreement -20 II Refinanced lnfiniti Media Building-20 II Murray State University Agreement-20 II TOTALS During the year, the City had two new debt issues: Governmental Activities 2012 2011 $ 2,I93,730 $ 2,358,I7I 2,028,2I8 4,895,000 2,455,2IO 2,276,250 6,IOO,OOO 6,630,000 I76,255 3,57I,283 2.674,093 3,780,000 I,929,7I2 5,I25,000 2,564,948 2,364,039 6,370,000 7,040,000 I88,533 $33.000.039 $3I .720.403 Infiniti Media Building-Refinance. In August 20II, a $3.9I million bond obligation was issued to advance refund $3.78 million of outstanding 2004 series bonds. The 2004 bonds were issued to finance the construction of the lnfiniti Media Building in the Paducah Industrial Park West. The previous agreement with McCracken County was renewed: 50% of the principal amount of the bonds was issued on behalf of McCracken County, Kentucky. Murray State University Agreement. In November 20II, the City entered into a general obligation note in the amount of $2,674,093 with McCracken County to finance the construction of an educational facility to be occupied by Murray State University. Debt issues prior to July I, 20II are described below: Convention and Performing Arts Center -Refinance. In August 20 I 0, a $7 .I65 million general obligation was issued to advance refund $6.725 million of outstanding 200 I series bonds. The 200 I bonds were issued to finance construction of the Luther F. Carson Four Rivers Center for the Performing Arts and the expansion of the Julian Carroll Convention Center. The previous agreement with McCracken County was renewed: 50% of the principal amount of the bond was issued on behalf of McCracken County, Kentucky, and the County has issued the City a general obligation note in a principal amount equal to 50% of the principal amount of the bonds. Margaret Hank Building Agreement. In June 20II, the City entered into an agreement in the amount of $I88,533 with Margaret Hank Memorial Cumberland Presbyterian Church to finance the acquisition of real property to be used for the development of an indoor recreational facility. Public Improvement Projects. In March 20 I 0, 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. 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. -25- Convention Center Renovation. In March 2009, McCracken County 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 SO% of the principal amount through an Interlocal Cooperative Agreement between the City and McCracken County. 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). Infiniti Media Building. In fiscal year 2004, the City sold $5.0 million in bonds to construct the lnfiniti 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 § 1 58 of the Kentucky Constitution is 1 0% of total assessed value of taxable property in Paducah; therefore, the debt limit is $212,207,634. 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 20 12, less than 2% 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 debt can be found in Note 3 in the notes to financial statements on pages 74-78. VIT. 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 matching contribution has increased from approximately $3.6 million in fiscal year 2008 to $4.1 million in fiscal year 2012. The rates for FY20 13 have increased; combined with wage adjustments, this increase caused budgeted figures for the upcoming year to increase another $372,000 compared to what was incurred in FY20 12. The figures above do not include the $166,000 in one-time matching contribution funds paid in FY20 12 as a result of the firefighter lawsuit. 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). Since the 2009 drop, the City has contributed approximately $400,000 annually to meet the actuary's recommended amount toward the unfunded pension liability. The valuation as of July 1, 2012 indicates the amount for FY 2013 will be $462,154. -26- 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. -27- CITY OF PADUCAH, KENTUCKY BASIC FINANCIAL STATEMENTS GOVERNMENT-WIDE FINANCIAL STATEMENTS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2012 THIS PAGE INTENTIONALLY LEFT BLANK Exhibit 1 CITY OF PADUCAH, KENTUCKY STATEMENT OF NET ASSETS JUNE 30, 2012 ASSETS Primary Government Governmental Business-type Component Current Assets: Activities Activities Total Units Cash and cash equivalents $15,056,163 $4,590,124 $19,646,287 $ 2,260,737 Investments 3,050,000 900,000 3,950,000 Receivables, net: Notes 1,116,375 1,116,375 Lease 207,054 207,054 Accounts 5,780,088 550,157 6,330,245 674,531 Grants 222,077 95,569 317,646 558,266 Interest 50,469 8,089 58,558 Property tax 4,676,187 4,676,187 Other 1,064,900 Internal balances (385,388) 385,388 Inventory I, 175,194 I, 175,194 538,352 Prepaid pension obligation 5,586,352 5,586,352 Prepaid expenses Other current assets 45,918 45,918 782,796 Total current assets 36,580,489 6,529,327 43,109,816 5,879,582 Noncurrent Assets: Notes receivable 3,210,000 3,210,000 Lease receivable 3,221,013 3,221,013 Bond issuance costs, net 434,686 434,686 Net capital assets: Land and construction in progress 14,905,437 62,152 14,967,589 2,803,295 Depreciable capital assets 24,834,643 1,246,422 26,081,065 44,806,688 Other assets 320,483 320,483 3,574,738 Total noncurrent assets 46,926,262 1,308,574 48,234,836 51' 184,721 Total assets 83,506,751 7,837,901 91,344,652 57,064,303 -28- LIABILITIES Primary Government Governmental Business-type Component Current Liabilities: Activities Activities Total Units Voucher and accounts payable $ 2,018,213 $ 248,370 $ 2,266,583 $ 1,443,319 Accrued payables 924,908 52,965 977,873 156,385 Due to other taxing agencies Unearned revenue 4,523,454 33,700 4,557,154 Accrued compensated absences 1,008,012 92,323 1,100,335 Accrued interest 165,177 165,177 Notes payable due within one year 366,923 366,923 399,498 Bonds payable due within one year 1,289,587 1,289,587 Other current liabilities 45,918 45,918 1,236,829 Total current liabilities 10,296,274 473,276 10,769,550 3,236,031 Noncurrent Liabilities: Accrued compensated absences 1,020,206 14,414 1,034,620 Landfill post-closure costs 2,062,500 2,062,500 Notes payable 6,953,406 6,953,406 6,627,159 Bonds payable 22,361,906 22,361,906 Total noncurrent liabilities 30,335,518 2,076,914 32,412,432 6,627,159 Total liabilities 40,631,792 2,550,190 43,181,982 9,863,190 NET ASSETS Invested in capital assets, net of related debt 31,957,381 1,308,574 33,265,955 40,620,468 Restricted for: Housing and development projects 897,942 732,817 1,630,759 Capital projects 4,105,639 4,105,639 Unrestricted 5,913,997 3,246,320 9,160,317 6,580,645 TOTAL NET ASSETS $42,874,959 $5,287,711 $48,162,670 $47,201,113 See accompanying notes to the basic financial statements. -29- FUNCTIONS/PROGRAMS Primary Government: Governmental activities: General government Public safety Public service Parks and recreation Planning and development Interest on long-term debt CITY OF PADUCAH, KENTUCKY STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2012 Expenses $12,937,997 17,045,731 6,163,602 2,654,098 1,192,952 1,059,537 Charges for Services $ 1,488,845 509,297 1,032,953 97,896 Total governmental activities (See Note 1) 41,053,917 3,128,991 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 General revenues: 3,900,264 1,921,004 71,069 173,708 6,066,045 $47,119,962 $ 7,579,648 4,325,919 $I I ,905,567 Taxes and licenses: 4,437,341 34,038 99,603 4,570,982 $ 7,699,973 $ 9,585,433 I, 145,997 $10,731,430 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 Insurance recoveries Miscellaneous Total general revenues and special items Transfers Total general revenues, special items and transfers Change in net assets Net assets, July 1, 201 1 Adjustment made by component unit NET ASSETS, JUNE 30,2012 See accompanying notes to the basic financial statements. -30- Program Revenues Operating Grants and Contributions $ 645,860 705,861 185,840 551,890 125,796 2,215,247 1,647,981 1,647,981 $3,863,228 $ 1,740,552 $1,740,552 Exhibit 2 Capital Grants and Contributions $ 11,790 521,379 533,169 15,266 15,266 $ 548,435 $ 247,196 1,277,190 $1,524,386 Net (Expense) Revenue and Changes in Net Assets Primary Government Governmental Business-type Component Activities Activities Total Units $ (10,791 ,502) (15,309,194) (4,944,809) (2,556,202) (641,062) (933,741) (35, 176,51 0) (35, 176,51 0) 4,267,812 150,974 710,951 3,690,806 614,786 216,829 4,359,835 18,095,182 677,409 340,975 203,261 36,718 27,448 33,392,986 270,620 33,663,606 (1,512,904) 44,387,863 $ 42,874,959 $ 552,343 (273,023) (37,03]) (74,105) 168,184 168,184 48,806 2,443 51,249 (270,620) (219,371) (51,187) 5,338,898 $5,287,711 $ (10,791 ,502) (15,309, 194) (4,944,809) (2,556,202) (641,062) (933,741) (35, 176,51 0) 552,343 (273,023) (37,031) (74, 105) 168,184 (35,008,326) 4,267,812 150,974 710,951 3,690,806 614,786 216,829 4,359,835 18,095,182 677,409 340,975 252,067 39,161 27,448 33,444,235 33,444,235 (I ,564,091) 49,726,761 $ 48,162,670 $ 2,252,981 (162,180) 2,090,801 20,342 (14,957) 58,498 63,883 63,883 2,154,684 44,993,885 52,544 $47,20 I, 113 -3 ]- Cash and cash equivalents Investments Accounts receivable: Accounts Grants Interest Propertytaxes(netof ASSETS allowances for uncollectibles) Due from other funds TOTAL ASSETS CITY OF PADUCAH, KENTUCKY BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2012 General Fund $ 6,186,742 1,500,000 6,458,498 189,538 13,481 4,729,187 45,918 $19,123,364 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: Restricted for: Highways and streets Public safety Capital improvements Committed for: Capital improvements Assigned for: Capital improvements Public service Public safety Planning and development Debt service Unassigned: General Fund Total fund balances TOTAL LIABILITIES AND FUND BALANCES See accompanying notes to the basic financial statements. -32- $ 475,777 858,606 I,539,809 4,701,380 226,354 7,80I,926 II ,32I ,438 II,32I,438 $19, I23,364 General Capital Improvements $1,876,876 500,000 3I ,039 4,494 $2,412,409 $ 9I8,471 6,000 924,471 1,487,938 1,487,938 $2,412,409 Exhibit 3 Special Revenue Investment Fund $1,097,740 500,000 4,494 1,028,999 $2,631,233 $ 2,631,233 2,631,233 $2,631,233 Debt Nonmajor Total Service Governmental Governmental Fund Funds Funds $35,088 $2,158,178 $11 ,354,624 2,500,000 33,816 217,999 6,710,313 1,500 222,077 22,469 4,729,187 1,074,917 $68,904 $2,377,677 $26,613,587 $ $ 360,573 $ 1,754,821 50,298 908,904 1,539,809 40,419 4,747,799 226,354 451,290 9,177,687 1 '156,681 1 '156,681 80,099 80,099 286,276 286,276 2,631,233 1,487,938 403,331 403,331 68,904 68,904 11,321,438 68,904 1,926,387 17,435,900 $68,904 $2,377,677 $26,613,587 -33- CITY OF PADUCAH, KENTUCKY RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO STATEMENT OF NET ASSETS JUNE 30,2012 Total fund balance -total governmental funds Amounts reportedfor 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. The long-term notes receivable are not reported in the governmental funds balance sheet since they are not available to pay current period expenditures. 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. Inventory is not a current financial resource, and therefore, is not reported in the governmental funds balance sheet. A prepaid pension obligation is not a current financial resource, and therefore, is not reported in the governmental funds balance sheet. 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. 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. Bond issuance costs used in governmental activities are not current financial resources, and therefore, are not reported in the governmental funds balance sheet. -34- Exhibit 4 $17,435,900 171,345 3,315,000 23,057 1,098,304 5,586,352 39,740,080 320,483 434,686 (Continued) CITY OF PADUCAH, KENTUCKY RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO STATEMENT OF NET ASSETS JUNE 30, 2012 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 ($30,971 ,822) 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 Due after one year $ 1,656,510 29,315,312 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 Total liabilities Net amount allocated to business-type activities $ 4,925,332 (332,437) (385,388) NET ASSETS OF GOVERNMENTAL ACTIVITIES See accompanying notes to the basic financial statements. -35- Exhibit 4 (Continued) $ 3,428,067 (165,177) (I ,748,823) (30,971 ,822) 4,207,507 $42,874,959 Exhibit 5 CITY OF PADUCAH, KENTUCKY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2012 Special General Revenue General Capital Investment Revenues: Fund Improvements Fund Taxes $ 5,910,258 $ $ Licenses 22,291,319 4,462,1I3 Charges for services 568,902 Intergovernmental Grants 830,059 212,323 Interest 124,564 7,418 II ,591 Miscellaneous 1,072,156 383,880 61,560 Total revenues 30,797,258 603,621 4,535,264 Expenditures: Current operations: General government 5,117,194 Public safety 16,860,191 Public service 4,437,020 Parks and recreation 2,677,781 Planning and development 1,364,880 Other 516,534 Capital outlay 2,104,993 Debt service: Principal requirement Interest and fiscal requirement Total expenditures 29,608,720 2,104,993 1,364,880 Excess (deficiency) of revenues over expenditures I, 188,538 (I ,501 ,372) 3,170,384 Other Financing Sources (Uses): Capital lease Proceeds of refunding bond, net Transfer to refunded bond escrow agent Long-term debt draws 101,983 Long-term debt issued Transfers in 834,534 1,822,397 110,988 Transfers out (1,641,755) (514,712) (3,237,151) Total other financing sources (uses) (807,22I) I,409,668 (3, I26, I63) Net change in fund balances 38I ,317 (91 ,704) 44,22I Fund balances, July I, 20 II 10,940,I21 I,579,642 2,587,012 FUND BALANCES, JUNE 30, 2012 $11,321,438 $ 1,487,938 $ 2,631,233 See accompanying notes to the basic financial statements. -36- Debt Nonmajor Total Service Governmental Governmental Fund Funds Funds $ $ 433,350 $ 6,343,608 26,753,432 248,705 817,607 571,924 619,911 1,191,835 657,017 1,699,399 19,007 162,580 5,907 378,572 1,902,075 577,831 2,356,562 38,870,536 5,117,194 1,619,237 18,479,428 I ,159,682 5,596,702 2,677,781 851,785 2,216,665 5I6,534 2,104,993 1,434,246 I,434,246 I, II4,852 I, 114,852 2,549,098 3,630,704 39,258,395 ( 1 ,97I ,267) (1 ,274, I42) (387,859) 405,796 405,796 3,910,000 3,910,000 (3,910,000) (3,91 0,000) 101,983 1,560,103 1,560,825 5,888,847 (4I5,92I) (5,809,539) 1,965,899 1,144,904 587,087 (5,368) (129,238) I99,228 74,272 2,055,625 17,236,672 $ 68,904 $ 1,926,387 $17,435,900 -37- 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, 2012 Net change in fund balances -total governmental funds Amounts reported for governmental activities in the Statemellt of Activities are different because: Inventory purchases require the use of current financial resources, and therefore, are reported as expenditures in governmental funds. Inventory sales provide current financial resources and are reported as revenues in governmental funds. Governmental funds report capital outlays as expenditures. However, in the Statement of Activities, the cost of those assets is a11ocated over their estimated useful lives as depreciation expense. This is the amount of capital outlays in the current period. This amount incJudes Internal Service Fund's capital outlays of $1,033,935. 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 incJudes Internal Service Fund's book value of $21 ,095. Co11ections on long-term notes receivable and related interest receivable are revenues in the governmental funds when co11ected. Delinquent property taxes receivable are not considered "available" revenues in the governmental funds. Direct financing leases receivable are not considered "available" revenues in the governmental funds. The prepayment of a pension obligation requires the use of current financial resources, and therefore, is reported as an expenditure in governmental funds. However, the prepayment does not affect net assets in the government-wide Statement of Activities. 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 incJudes Internal Service Funds' depreciation expense of $578,321. -38- Exhibit 6 $ 199,228 274,328 (429,975) 2,156,290 (21 ,095) (283,972) {5,937) (180,754) (48,580) (3,323,064) (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, 2012 Proceeds from the issuance and draw down of debt provides current financial resources and is reported as an other financing source in 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 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. Governmental funds report the effect of bond refinancing costs when debt is issued; whereas, these amounts are netted with refinancing bonds payable and amortized in the Statement of Activities. 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. Accrued interest payments on debt do not require the use of current financial resources. Accrued interest is reported as an expenditure in the government-wide Statement of Activities. Long-term accrued compensated absences do not require the use of current financial resources, and therefore, are not reported as expenditures in governmental funds. 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. Governmental funds report the litigation judgments in the period in which they are determined. 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 Net of amount allocated to business-type activities Capital Outlays Book value of disposals Depreciation expense $ 397,788 (34, 102) ( 1 ,033,935) 21,095 578,321 CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES See accompanying notes to the basic financial statements. -39- Exhibit 6 (Continued) $ (3,91 0,000) (2,674,093) 5,344,246 58,717 (26,895) 8,659 (45,377) (16,540) 1,482,743 (70,833) $ (1,512,904) Exhibit 7 CITY OF PADUCAH, KENTUCKY BUDGETARY COMPARISON STATEMENT (BUDGETARY BASIS) GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2012 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Beginning budgetary fund balance $I0,940,I21 $I0,940, I 2I $I0,940,12I $ Resources (Inflows): Taxes: Real and personal, current year 4,905,600 4,708,200 4,708,207 7 Real and personal, prior year (net of refunds) 123,000 156,180 156,182 2 Franchise 155,000 I5I,625 151,629 4 Bank taxes 224,500 216,825 216,829 4 In lieu of tax payment 221,490 322,685 322,69I 6 Penalty, interest and advertising 46,770 4I,920 41,928 8 Paducah Junior College tax collections 3I2,790 312,790 Total taxes 5,676,360 5,910,225 5,910,256 3I Licenses: Business licenses 4,202,000 4,359,835 4,359,835 Employee earnings I2,990,000 13,633,065 I3,633,068 3 Comcast fees 305,800 307,455 307,460 5 Penalties I55,000 235,360 235,361 I Alcoholic beverages I25,000 I09,290 109,290 Insurance premium tax 3,552,000 3,690,805 3,690,806 I Building permits I IO,OOO I25,115 I25,118 3 Electrical permits 29,500 36,040 36,044 4 Zoning change fees 8,000 6,310 6,311 I Miscellaneous building and electrical fees 250 5,950 5,868 (82) KJDA payroll rebate (2 I I ,750) (2I7,845) (217,842) 3 Total licenses 21,265,800 22,291,380 22,291,319 (6I) Charges for services: Tax collection fee I53,000 I54,080 I54,080 Administrative charge 266,000 266,000 266,000 Base court revenue 60,000 52,620 52,621 I Recreation fees 82,250 97,885 97,897 I2 Total charges for services 56I,250 570,585 570,598 I3 (Continued) -40- Exhibit 7 (Continued) CITY OF PADUCAH, KENTUCKY BUDGETARY COMPARISON SCHEDULE (BUDGETARY BASIS) GENERAL FUND FOR THE YEAR ENDED JUNE 30,2012 Variance with Final Budget Budgeted Amounts Actual Positive Grants: Original Final Amounts (Negative) Police State Incentive $ 320,500 $ 304,510 $ 304,512 $ 2 Police hiring supplement 185,000 161,175 161,178 3 Fire State Incentive 270,000 264,985 264,989 4 Ronald McDonald Grant 230 234 4 Kentucky League of Counties grants 27,445 27,448 3 Highway safety grant 20,000 57,725 57,728 3 State Justice Cabinet 13,970 13,971 1 Total grants 795,500 830,040 830,060 20 Interest 113,700 124,560 124,564 4 Other: Property rent and sales 643,640 690,480 690,528 48 Property upkeep and maintenance 126,985 112,240 112,246 6 Contractual programs 7,500 4,035 4,039 4 E911-GIS 25,380 25,380 25,344 (36) Miscellaneous 206,615 238,285 238,304 19 Total other I ,01 0,120 1,070,420 1,070,461 41 Other financing sources: Operating transfers in 560,860 809,500 834,534 25,034 Amounts available for appropriation 40,923,711 42,546,831 42,571,913 25,082 Charges to Appropriations (Outflows): General government: General administration: Mayor and Commissioners 190,565 197,450 197,316 134 City Manager 434,055 403,360 403,085 275 City Clerk 177,420 170,945 170,370 575 Corporate Counsel 154,810 194,745 194,703 42 Non-departmental 619,310 678,880 678,545 335 Memberships and contingency 334,355 24,275 24,266 9 Civic beautification 3,810 3,810 3,739 71 Total general administration 1,914,325 1,673,465 1,672,024 1,441 (Continued) -41- Exhibit 7 (Continued) CITY OF PADUCAH, KENTUCKY BUDGETARY COMPARISON SCHEDULE (BUDGETARY BASIS) GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2012 Variance with Final Budget Budgeted Amounts Actual Positive General government: Original Final Amounts (Negative) Finance: Finance administration $ 253,720 $ 265,590 $ 265,274 $ 316 Accounting and payroll 327,020 316,610 316,453 157 Human resources Rental property 31,025 32,475 32,423 52 Radio operations 50,525 40,970 40,940 30 Revenue collection 403,520 371,365 371,201 164 Total finance 1,065,810 1,027,010 1,026,291 719 Planning: Administration 255,875 255,995 255,699 296 Planning 86,090 86,045 86,016 29 Grants 170,450 144,450 144,168 282 Total planning 512,415 486,490 485,883 607 Human rights 48,430 53,565 53,550 15 Inspection: Inspection administration 182,175 182,460 181,948 512 Construction 364,330 379,095 379,025 70 Code enforcement 376,640 268,770 268,330 440 Total inspection 923,145 830,325 829,303 1,022 Information technology 589,350 534,640 534,375 265 Risk management/ Human resources 298,985 292,760 292,451 309 Public safety: Police: Police administration 903,435 914,935 914,188 747 Patrol 6,259,635 5,986,470 5,985,275 I, 195 Investigations 1,958,990 1,943,170 1,942,478 692 Total police 9,122,060 8,844,575 8,841,941 2,634 Fire: Fire administration 235,280 378,845 378,480 365 Suppression 5,967,365 7,336,755 7,336,696 59 Prevention 183,995 183,155 183,025 130 Training 131,675 120,045 I 19,929 116 Total fire 6,518,315 8,018,800 8,018,130 670 (Continued) -42- Exhibit 7 (Continued) CITY OF PADUCAH, KENTUCKY BUDGETARY COMPARISON SCHEDULE (BUDGETARY BASIS) GENERAL FUND FOR THE YEAR ENDED JUNE 30,2012 Variance with Final Budget Budgeted Amounts Actual Positive Public service: Original Final Amounts (Negative) Public works: Street maintenance $ 2,202,475 $ 1,909,505 $ 1,909,170 $ 335 Street lighting 515,000 539,850 539,848 2 Maintenance 988,450 927,040 922,763 4,277 Total public works 3,705,925 3,376,395 3,371,781 4,614 Engineering services: Engineering services 610,480 522,295 521,970 325 GIS operation Flood control 504,450 543,585 543,269 316 Total engineering services 1,114,930 1,065,880 1,065,239 641 Parks and recreation Parks administration 800,665 762,045 761,740 305 Grounds maintenance 1,410,000 1,423,780 1,423,221 559 Pool 169,845 118,465 118,213 252 Recreation programs 466,095 374,740 374,606 134 Total recreation 2,846,605 2,679,030 2,677,780 1,250 PRDA 131,410 123,030 122,935 95 Other: Cable authority 84,030 84,415 84,414 I Mainstreet program 253,975 174,075 173,866 209 Leave expense 45,970 45,967 3 Intergovernmental expense 312,790 312,790 Total other 338,005 617,250 617,037 213 Other financing uses: Operating transfers out 1,586,820 1,653,035 1,641,755 11,280 Total charges to appropriations 30,716,530 31,276,250 31,250,475 25,775 BUDGETARY FUND BALANCE, JUNE 30, 2012 $10,207,181 $11 ,270,581 $11,321,438 $50,857 See accompanying notes to the basic financial statements. -43- CITY OF PADUCAH, KENTUCKY BUDGETARY COMPARISON STATEMENT GENERAL FUND FOR THE YEAR ENDED JUNE 30,2012 Exhibit 8 Note A -Explanation of Differences Between Budgetary Inflows and Outflows and GAAP Revenues and Expenditures Sources/inflows of resources: Actual amounts "available for appropriation" from the budgetary comparison schedule Differences -budget to GAAP: The beginning fund balance is a budgetary resource, but is not a current year revenue for financial reporting purposes Transfers from 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. -44- General Fund $42,571,913 (1 0,940, 121) (834,534) $30,797,258 $31,250,475 (1 ,641,755) $29,608,720 Exhibit 9 CITY OF PADUCAH, KENTUCKY BUDGETARY COMPARISON STATEMENT (BUDGETARY BASIS) SPECIAL REVENUE INVESTMENT FUND FOR THE YEAR ENDED JUNE 30,2012 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Beginning budgetary fund balance $2,587,012 $2,587,012 $2,587,012 $ Resources (Inflows): Licenses: Employee earnings 4,330,000 4,462,110 4,462,113 3 Interest 11,590 11,591 I Miscellaneous 61,560 61,560 Total licenses 4,330,000 4,535,260 4,535,264 4 Other financing sources: Long-term debt issued Operating transfers in 110,985 110,988 3 Total licenses 110,985 110,988 3 Amounts available for appropriation 6,917,012 7,233,257 7,233,264 7 Charges to Appropriations (Outflows): General government: Planning and development: Economic development 1,918,390 1,364,885 1,364,880 5 Other financing uses: Operating transfers out 3,061,610 3,237,155 3,237,151 4 Total charges to appropriations 4,980,000 4,602,040 4,602,031 9 BUDGETARY FUND BALANCE, JUNE 30, 2012 $1,937,012 $2,631,217 $2,631,233 $ 16 See accompanying notes to the basic financial statements. -45- CITY OF PADUCAH, KENTUCKY BUDGETARY COMPARISON STATEMENT SPECIAL REVENUE INVESTMENT FUND FOR THE YEAR ENDED JUNE 30, 2012 Exhibit 10 Note A -Explanation of Differences Between Budgetary Inflows and Outflows and GAAP Revenues and Expenditures Sources/inflows of resources: Actual amounts "available for appropriation" from the budgetary comparison schedule 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. -46- $7,233,264 (2,587,012) (110,988) $4,535,264 $4,602,031 (3,237,151) $ 1,364,880 CITY OF PADUCAH, KENTUCKY STATEMENT OF NET ASSETS PROPRIETARY FUNDS JUNE 30, 2012 Business-type Activities ASSETS Current Assets: Cash and cash equivalents Investments Accounts receivable Grants receivable Interest receivable Due from other funds Prepaid expenses Inventory Total current assets Noncurrent Assets: Net capital assets: Land Depreciable capital assets Total noncurrent assets Total assets LIABILITIES Current Liabilities: Voucher and accounts payable Deferred grant revenue Accrued payroll and payroll taxes Accrued compensated absences Due to other funds Total current liabilities Noncurrent Liabilities: Landfill post-closure costs Accrued compensated absences Total noncurrent liabilities Total liabilities NET ASSETS Invested in capital assets Restricted for: Housing development projects Unrestricted TOTAL NET ASSETS Solid Waste $3,416,035 900,000 549,122 95,568 8,089 4,968,814 62,152 1,030,055 1,092,207 6,061,021 138,422 33,700 52,965 90,721 315,808 2,062,500 2,062,500 2,378,308 1,092,207 2,590,506 $3,682,713 Reconciliation to government-wide statements of net assets: Adjustment to reflect the consolidation of Internal Service Funds' activities related to Enterprise Funds NET ASSETS OF BUSINESS-TYPE ACTIVITIES See accompanying notes to the basic financial statements. -47- Nonmajor Enterprise Funds $1,174,089 1,035 1,175,124 216,367 216,367 1,391,491 109,948 1,601 45,918 157,467 14,414 14,414 171,881 216,367 732,817 270,426 $1,219,610 Totals $4,590,124 900,000 550,157 95,568 8,089 6,143,938 62,152 1,246,422 1,308,574 7,452,512 248,370 33,700 52,965 92,322 45,918 473,275 2,062,500 14,414 2,076,914 2,550,189 1,308,574 732,817 2,860,932 4,902,323 385,388 $5,287,711 Exhibit 11 Governmental Activities Internal Service Funds $3,701,540 550,000 86,093 510,810 76,889 4,925,332 3,093,806 3,093,806 8,019,138 263,392 16,005 279,397 53,040 53,040 332,437 3,093,806 4,592,895 $7,686,701 CITY OF PADUCAH, KENTUCKY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2012 Business-type Activities Operating Revenues: Charges for services -internal Charges for services -external Miscellaneous Total operating revenues Operating Expenses: Cost of sales and service Depreciation and amortization Total operating expenses Operating income (loss) Nonoperating Revenues (Expenses): Interest and investment income Gain (loss) on disposal of property and equipment Total nonoperating revenues (expenses) Income (loss) before contributions and transfers Contributions and Transfers: Capital contributions Transfers in Transfers out Total contributions and transfers Change in net assets Total net assets, July I, 2011 TOTAL NET ASSETS -JUNE 30, 2012 Solid Waste $ 4,393,598 24,907 4,418,505 3,554,098 346,166 3,900,264 518,241 48,587 2,443 51,030 569,271 (247,725) (247,725) 321,546 3,361,167 $3,682,713 Reconciliation to government-wide statements of net assets: Nonmajor Enterprise Funds $ 99,603 1,669,802 12,217 1,781,622 2,116,922 48,955 2,165,877 (384,255) 316 316 (383,939) 27,104 (50,000) (22,896) (406,835) 1,626,445 $1,219,610 Adjustment to reflect the consolidation of Internal Service Funds' activities related to Enterprise Funds CHANGE IN NET ASSETS OF BUSINESS-TYPE ACTIVITIES See accompanying notes to the basic financial statements. -48- Totals $ 99,603 6,063,400 37,124 6,200,127 5,671,020 395,121 6,066,141 133,986 48,903 2,443 51,346 185,332 27,104 (297,725) (270,621) (85,289) 34,102 $ (51,187) Exhibit 12 Governmental Activities Internal Service Funds $6,093,553 272,105 6,365,658 5,658,259 578,321 6,236,580 129,078 40,680 36,717 77,397 206,475 196,462 (5,149) 191,313 397,788 7,288,913 $7,686,701 CITY OF PADUCAH, KENTUCKY STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2012 Business-type Activities Nonmajor Solid Enterprise Cash Flows from Operating Activities: Waste Funds Totals Cash received from customers $4,375,374 $ 1,777.999 $ 6,153.373 Cash received from interfund services provided Payments to suppliers ( 1.578,662) ( 1.578,662) Payments to employees (1,410,012) (133,357) (I ,543,369) Claims paid Payments to internal service funds (598,343) (3,761) (602.104) Other receipts 58,607 12,217 70.824 Other payments ( 1,971 ,935) ( 1,971 ,935) Net cash provided (used) by operating activities 846,964 (318,837) 528,127 Cash Flows from Noncapital Financing Activities: Transfers from other funds Transfers to other funds (247,725) (22,896) (270.621) Net cash provided (used) by noncapital financing activities (247,725) (22,896) (270,621) Cash Flows from Capital and Related Financing Activities: Capital contributions Purchase of capital assets (369,465) (369,465) Proceeds from sale of capital assets 2,443 2,443 Net cash provided (used) by capital and related financing activities (367,022) (367,022) Cash Flows from Investing Activities: Proceeds from sale of investment securities 1,625.000 1,625.000 Interest on cash and investments 48,587 316 48,903 Purchase of investments (900,000) (900.000) Net cash provided (used) by investing activities 773.587 316 773,903 Net increase (decrease) in cash and cash equivalents 1,005,804 (341.417) 664,387 Cash and cash equivalents, July I. 2011 2,410,231 1,515,506 3,925,737 CASH AND CASH EQUIVALENTS, JUNE 30, 2012 $ 3,416,035 $ 1,174,089 $4,590,124 Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating income (loss) $ 518,241 $ (384,255) $ 133.986 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization 346.166 48,955 395,121 Change in assets and liabilities: Receivables (18,224) 8,594 (9.630) Prepaid expenses 9,590 9,590 Deferred grant revenue 33,700 33.700 Due to other funds Accrued expenses 20,412 1,360 21,772 Accounts payable (53,331) (3,081) (56,41 2) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ 846,964 $ (318,837) $ 528,127 See accompanying notes to the basic financial statements. -49- Exhibit 13 Governmental Activities Internal Service Funds $ 6,294,345 (245,090) (269,305) (3,767.220) (2,011 ,648) 1,082 (5.149) 196,462 191,313 (I ,033.935) 57,812 (976,123) 1,500,000 40,680 (550.000) 990,680 206,952 3,494,588 $ 3,701,540 $ 129.078 578,321 (71 ,31 3) 418,130 (I ,064,335) 8,657 2,544 $ 1,082 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 CITY OF PADUCAH, KENTUCKY STATEMENT OF NET ASSETS FIDUCIARY FUNDS JUNE 30, 2012 Exhibit 14 Primary Government Pension Funds $ 60,996 27,690 200,362 50,000 2,552,720 1,527,228 1,472,496 1,782,894 7,674,386 82 82 $7,674,304 $ Private- purpose Trusts 1,106,065 1,106,065 $1,106,065 Agency Funds $684,762 684,762 684,762 $684,762 See accompanying notes to the basic financial statements. -50- Additions: Contributions: Employer Plan members Intergovernmental revenues Private donations 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 Total deductions Change in net assets Net assets, July 1, 2011 NET ASSETS, JUNE 30, 2012 CITY OF PADUCAH, KENTUCKY STATEMENT OF CHANGES IN NET ASSETS FIDUCIARY FUNDS FOR THE YEAR ENDED JUNE 30, 2012 See accompanying notes to the basic financial statements. -51- Exhibit 15 Private- Pension purpose Funds Trusts $ 391,744 $ 7,548 II, 135 3,458 399,292 14,593 (122,860) (61,241) 36,604 247,917 32,000 125,057 7,363 524,349 21,956 1,645,618 56,438 56,853 17,886 1,702,471 74,324 (1,178,122) (52,368) 8,852,426 1,158,433 $7,674,304 $1,106,065 CITY OF PADUCAH, KENTUCKY BASIC FINANCIAL STATEMENTS COMPONENT UNITS FINANCIAL STATEMENTS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2012 THIS PAGE INTENTIONALLY LEFT BLANK Exhibit 16 CITY OF PADUCAH, KENTUCKY STATEMENT OF NET ASSETS COMPONENT UNITS JUNE 30, 2012 All ASSETS Paducah Paducah Component Water Transit Unit Current Assets: Works Authority Totals Cash and cash equivalents $ 2,213,404 $ 47,333 $ 2,260,737 Receivables, net: Accounts 507,083 167,448 674,531 Grants 558,266 558,266 Other 1,064,900 1,064,900 Inventories 528,352 10,000 538,352 Prepaid expenses Other current assets 782,796 782,796 Total current assets 5,096,535 783,047 5,879,582 Noncurrent Assets: Net capital assets: Land and construction in progress 2,316,981 486,314 2,803,295 Depreciable capital assets 40,377,764 4,428,924 44,806,688 Other assets 3,574,738 3,574,738 Total noncurrent assets 46,269,483 4,915,238 51,184,721 Total assets 51,366,018 5,698,285 57,064,303 -52- All LIABILITIES Paducah Paducah Component Water Transit Unit Current Liabilities: Works Authority Totals Voucher and accounts payable $ 722,414 $ 720,905 $ 1,443,319 Accrued payables 156,385 156,385 Notes payable due within one year 364,440 35,058 399,498 Other current liabilities 986,829 250,000 1,236,829 Total current liabilities 2,073,683 1,162,348 3,236,031 Noncurrent Liabilities: Notes payable 6,627,159 6,627,159 Total noncurrent liabilities 6,627,159 6,627,159 Total liabilities 8,700,842 1,162,348 9,863,190 NET ASSETS Net Assets: Invested in capital assets, net of related debt 35,705,230 4,915,238 40,620,468 Unrestricted 6,959,946 (379,301) 6,580,645 TOTAL NET ASSETS $42,665, 176 $4,535,937 $47,201,113 See accompanying notes to the basic financial statements -53- 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, 2011 Adjustment made by component unit NET ASSETS, JUNE 30, 2012 CITY OF PADUCAH, KENTUCKY STATEMENT OF ACTIVITIES COMPONENT UNITS FOR THE YEAR ENDED JUNE 30,2012 Charges for Expenses Services $ 7,579,648 $ 9,585,433 4,325,919 1,145,997 $11 ,905,567 $10,731,430 See accompanying notes to the basic financial statements. -54- Exhibit 17 Program Revenues Operating Capital Grants and Grants and Contributions Contributions $ $ 247,196 1,740,552 1,277,190 $1,740,552 $1,524,386 Net (Expense) Revenue and Changes in Net Assets Paducah Paducah Water Transit Works Authority Totals $ 2,252,981 $ $ 2,252,981 (162,180) (162,180) 2,252,981 (162,180) 2,090,801 20,342 20,342 (14,957) (14,957) 58,498 58,498 20,342 43,541 63,883 2,273,323 (118,639) 2,154,684 40,391,853 4,602,032 44,993,885 52,544 52,544 $42,665,176 $4,535,937 $47,201,113 -55- CITY OF PADUCAH, KENTUCKY NOTES TO THE FINANCIAL STATEMENTS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2012 CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2012 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) -56- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2012 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 401 Washington Street Paducah, Kentucky 42003 Related Organizations Transit Authority of the City of Paducah 850 Harrison Street Paducah, Kentucky 42001 City officials are also responsible for appointing the members of boards of other organizations; but, the City's accountability for these organizations does 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 I, 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 -Main street is a 50 I ( 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) -57- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2012 Note 1 -Summary of Significant Account Policies: Basis of Presentation Government-wide Financial Statements The Statement of Net Assets and Statement of Activities display information about the reporting government as a whole. They include all funds of the reporting entity except for fiduciary funds. The statements distinguish between governmental and business-type activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange revenues. Business-type activities are financed in whole or in part by fees charged to external parties for goods or services. Fund Financial Statements Fund financial statements of the reporting entity are organized into funds, each of which is considered to be separate accounting entities. Each fund is accounted for by providing a separate set of self-balancing accounts that constitute its assets, liabilities, fund equity, revenues, and expenditure/expenses. Funds are organized into three major categories: governmental, proprietary, and fiduciary. An emphasis is placed on major funds within the governmental and proprietary categories. A fund is considered major if it is the primary operating fund of the City or meets the following criteria: a. Total assets, liabilities, revenues, or expenditures/expenses of that individual governmental or enterprise fund are at least ten percent of the corresponding total for all funds of that category or type; and b. Total assets, liabilities, revenues, or expenditures/expenses of the individual governmental fund or enterprise fund are at least five percent of the corresponding total for all governmental and enterprise funds combined. The funds of the financial reporting entity are described below: Governmental funds are those funds through which most governmental functions typically are financed. The measurement focus of governmental funds is on the sources, uses and balance of current financial resources. The City has presented the following major governmental funds: General Fund -To account for resources traditionally associated with governments which are not required to be accounted for in another fund. General Capital Improvements -To account for the acquisition or construction of major capital projects other than those financed by proprietary fund operations and special assessments. Special Revenue Investment Fund -To account for restricted funds from employee license fee used for economic development, 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) -58- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2012 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) -59- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2012 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. Deferred/unearned 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 aJlocates 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) -60- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2012 Note 1 -Summary of Significant Accounting 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, 2012. 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 receivables. Business-type activities report utilities and interest earnings as their major receivables. (Continued) -61- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2012 Note 1 -Summary of Significant Accounting 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 $76,888 held for consumption and real property of $1,098,306 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 I, 1999, $2,500 or more after July I, 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) -62- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2012 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 Buildings Building improvements Infrastructure Equipment Furnishings and fixtures Vehicles Fund Financial Statements 10-15 Years 30 Years 10-15 Years 15-30 Years 7-9 Years 3-5 Years 5-7 Years 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) -63- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2012 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 (I) 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 and displayed in five components: a. Nonspendable fund balance includes amounts that are not in a spendable form or are required to be maintained intact indefinitely. b. Restricted fund balance includes amounts that can be spent only for the specific purpose stipulated by creditors, grantors, contributors, or laws or regulations of other governments. c. Committed fund balance includes amounts that can be used only for the specific purposes determined by the City Commissioners through the approval of City ordinances. Commitments may be changed or lifted only by the City Commissioners making the same formal action that imposed the constraint originally. d. Assigned fund balance comprises the amounts intended to be used for a specific purpose. Intent can be expressed by the City Commissioners or the City Finance Officer, as stated in the Finance Department Accounting Policy (FIN-20). No formal action is required. e. Unassigned fund balance is the residual balance not contained in nonspendable fund balance or restricted fund balance or committed fund balance or assigned fund balance. When both restricted and unrestricted fund balances are available for use, it is the City's policy to use restricted fund balance first, then unrestricted fund balance. Furthermore, committed fund balances are reduced first, followed by assigned amounts, and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of those unrestricted fund balance classifications can be used. 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. (Continued) -64- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2012 Note 1 -Summary of Significant Accounting Policies: Program Revenues Amounts reported as program revenues include I) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Operating and Non-Operating Revenues and Expenses -Proprietary Funds Operating revenues and expenses for proprietary funds are those that result from providing services and producing and delivering goods and/or services. It also includes all revenue and expenses not related to capital and related financing, noncapital financing, or investing activities. Operating expenses for the enterprise and internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. Expenditures/Expenses In the government-wide financial statements, expenses are classified by function for both governmental and business-type activities. In the fund financial statements, expenditures are classified as follows: Governmental Funds -by character: Proprietary Fund -by operating and nonoperating Current (further classified by function) Debt Service Capital Outlay 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. (Continued) -65- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2012 Note 1 -Summary of Significant Accounting Policies: Stewardship, Compliance, and Accountability 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 or contractual agreements. The primary restricted revenue sources include. Revenue Source Section Eight Housing Choice Voucher Program FEMA -Disaster Grants American Recovery & Reinvestment Act Grants HOME Investment Partnerships Grant Emergency Communication Revenue County Bed Tax Homeland Security Grant Program Kentucky Housing Corporation Other Grants Bond Proceeds 25% of Employee Earning Tax Revenue Restrictions Legal Restrictions of Use Subsidize Rental Costs for Low- Income Families Debris Removal and Disaster Recovery Job creation and retention Construction of Low-income Rental Units E-911 Emergency Services Debt Obligations Homeland Security Enhancement Fa~ade Loans Grant Program Expenditures Defeasance of debt and Capital Projects Economic, Community and Capital Development For the year ended June 30, 2012, 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 11, 2012, the date financial statements were available to be issued. Note 2 -Property Taxes: The City bills and collects its own property taxes. The City elects to use the annual property assessment prepared by McCracken County as its base to apply the property tax rate. According to Kentucky Revised Statutes, the assessment date for the City must conform to the assessment date of McCracken County and the annual increase in the property tax levy cannot exceed 4%. City property tax revenues are recorded as a receivable when assessed because the City has an enforceable legal claim to the resources. At this time, the receivable is offset by unearned revenue. Property tax revenues are recognized during the period for which they are levied. (Continued) -66- Note 2 -Property Taxes: CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2012 The due dates and collection period for all property taxes, exclusive of vehicle taxes, for the fiscal year ended June 30, 2012, are as follows: Description Assessment and enforceable lien Levy Face value amount payment dates Delinquent date -I 0% penalty plus 1/2% per month Note 3 • Detail Notes on Transaction Classes/ Accounts: Date January I, 20I1 September 25, 2011 1st half by November I, 20 I1 2nd half by February 1, 20 I2 1st half-November 30, 20I1 2nd half-February 29, 2012 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 10 I% 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. 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, 2012, 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 were $20,392,045 and $20,892,693, respectively. (Continued) -67- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2012 Note 3 -Detail Notes on Transaction Classes/ Accounts: Investments As of June 30, 2012, the City's reporting entity had the following investments: Fair Value/ Average Investment Maturities {In Years} {2} Carrying Credit Quality/ Less Greater TI,~es of Investments Amount Rating {1} Than 1 1-5 6-10 Than 10 Primary Government Certificates of deposit (2) ~3z950z000 NA $3.950.000 $ -$ -$ TOTAL PRIMARY GOVERNMENT $:\250 QQQ Fiduciary and Private Purpose Trust Funds Money market funds $ 200.362 NA $ 200.362 $ -$ -$ Certificates of deposit (I) 50.000 NA 50.000 Common stock 2.552.720 NA NA NA NA NA Corporate bonds 1,527.228 AlA-1.474.003 53,225 U.S. agencies 1,472.496 AAA/A 1,417,337 55.159 Mutual funds Equity 2z888z959 NA NA NA NA NA TOTALFIDUCIARY AND PRIY ATE PURPOSE TRUST FUNDS $8,621165 (I) 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) $50,000 of the fiduciary's certificates of deposit is pooled with the primary government's certificates of deposit. 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; (Continued) -68- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2012 Note 3-Detail Notes on Transaction Classes/Accounts: Investment Policies City Policy 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 4I.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. 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 A I, PI. (Continued) -69- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2012 Note 3 -Detail Notes on Transaction Classes/ Accounts: Investment Policies Pension Trust Policy 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, 2012, was as follows: Primary Government: Capital assets, not being depreciated: Land Construction-in-progress Total capital assets, not being depreciated Capital assets, being depreciated: Land improvements Buildings and improvements Infrastructure Equipment Furnishings and fixtures Vehicles Totals at historical cost Less accumulated depreciation: Land improvements Buildings and improvements Infrastructure Equipment Furnishings and fixtures Vehicles Total accumulated depreciation Total capital assets, being depreciated, net Balance .July 1, 2011 Additions $ 7,394,561 $ 3,713,314 7.150.928 423.010 14.545.489 4.136.324 3,061,972 359,942 17,257,912 38,692,027 6,297 9,509,689 467,815 210,980 726702737 9622288 76.403,317 12796.342 1,418,792 100,595 12,006,697 340,703 23,701,156 1,648,091 7,506,248 679, I 93 208,424 1,034 521792541 553A47 5020202858 3.3232063 262382A59 (125262 721) Balance Deductions J one 30, 2012 $ $11,107,875 3,776.376 3,797.562 3.776.376 14.905.437 3,421,914 17,257,912 38,698,324 215,766 9,761,738 3,150 207,830 4232905 822092120 6422821 7725562838 1,519,387 12,347,400 25,349,247 211,903 7,973,538 3,150 206,308 4062673 523262315 62L726 5227222195 212095 2428342643 PRIMARY GOVERNMENT ACTIVITIES CAPITAL ASSETS, NET $40.927.948 $ 2.609.603 $3 797.471 $39.740.080 (Continued) -70- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2012 Note 3-Detail Notes on Transaction Classes/Accounts: Capital Assets Business-type Activities: Capital assets, not being depreciated: Land Construction-in-progress Total capital assets, not being depreciated Capital assets, being depreciated: Buildings and improvements Equipment Vehicles Totals at historical cost Less accumulated depreciation: Buildings and improvements Equipment Vehicles Total accumulated depreciation Total capital assets, being depreciated, net BUSINESS-TYPE ACTIVITIES CAPITAL ASSETS, NET Balance .July 1, 2011 Increases $ 62,152 $ 62.152 429,254 125,573 1,594,673 105,782 2~6102696 1382110 4.6342623 369.465 223,948 14,818 1,222,576 146,690 129162021 2332613 3,362545 3952121 12722078 (25.656) $ 1 33~b230 $ (25!656) Depreciation expense was charged to governmental activities as follows: General government: General administration Finance Planning Inspections Personnel Information systems Fleet maintenance Total general government Public safety: Police Fire Grants Emergency 911 Court awards Fleet Lease Trust Total public safety -71- Balance Decreases J one 30, 2012 $ $ 62,152 128,588 1732266 301.854 128,588 1732266 301.854 $ 62.152 554,827 1,571,867 225752540 427022234 238,766 1,240,678 12976~368 3.4552812 1246.422 $ 1!308!514 $ 275,153 36,805 4,532 2,708 92903 329.101 240,724 68,955 62,248 11,913 568.418 952258 (Continued) CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2012 Note 3-Detail Notes on Transaction Classes/Accounts: Capital Assets Public service: Public works Engineering Total public service Parks and recreation Planning and development: Infrastructure Grants Total planning and development TOTAL DEPRECIATION EXPENSE- GOVERNMENTAL ACTIVITIES Depreciation expense was charged to business-type activities as follows: Solid Waste Fund Section Eight Housing Civic Center TISA Fund TOTAL DEPRECIATION EXPENSE- BUSINESS-TYPE ACTIVITIES -72- $ 58,019 46.032 104.051 172.900 1,762,882 1.871 1.764.753 $3 323.063 $ 346,166 5,639 10,209 33.107 $ 395.121 (Continued) CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2012 Note 3 -Detail Notes on Transaction Classes/ Accounts: Capital Assets Balance Discretely Presented 1}UII 12 2011 Increases Component Units: Capital assets, not being depreciated: Land $ 486.314 $ Total capital assets, not being depreciated 486.314 Capital assets, being depreciated: Buildings and improvements 1,845,615 31,638 Equipment 7,686,334 1,259,053 Utility plant 69.609.437 2.904.899 Total capital assets, being depreciated 79,141.386 4.195.590 Less accumulated depreciation: Buildings and improvements 972,414 108,814 Equipment 4,228,037 1,018,144 Utility plant 28.337.751 1.481.840 Total accumulated depreciation 33.538.202 2.608.798 Total capital assets, being depreciated, net 45.603.184 1.586.792 COMPONENT UNIT CAPITAL ASSETS, NET $46.089.498 $1.586.792 Balance Decreases June 302 2012 $ $ 486,314 486,314 1,877,253 1,436,994 7,508,393 36.160 72.478.176 1.473.154 81.863.822 1,081,228 1,370,687 3,875,494 36.160 29.783.431 1.406,847 34.740.153 66.307 47.123,669 $ 66.307 $47.609 983 Depreciation expense, charged to functions/programs of discretely presented major component units as follows: Paducah Water Works Paducah Transit Authority TOTAL DEPRECIATION EXPENSE BY ACTNITY Accounts Payable $ 1,481,840 1.126.958 $ 2.608.798 Payables in the governmental and proprietary funds are composed of payables to vendors and accrued salaries and benefits. (Continued) -73- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2012 Note 3-Detail Notes on Transaction Classes/Accounts: 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, 2012, the governmental long-term liabilities consisted of the following: General obligation bonds: Current portion Noncurrent portion TOTAL GENERAL OBLIGATION BOND COSTS Note payable: Current portion Noncurrent portion TOTAL NOTE PAY ABLE PAYMENTS Accrued compensated absences: Current portion Noncurrent portion TOTAL ACCRUED COMPENSATED ABSENCES Business-type Activities $ 1,289,587 22.361.906 $23 651.493 $ 366,923 6.953.406 $ 7.320.329 $ 1,008,012 1.020.206 $ 2 028.218 As of June 30, 2012, the long-term liabilities payable from proprietary fund resources consisted of the following: Accrued compensated absences: Current portion Noncurrent portion TOTAL ACCRUED COMPENSATED ABSENCES -74- $ 92,323 14.414 $ 106.737 (Continued) CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2012 Note 3-Detail Notes on Transaction Classes/Accounts: Long-Term Liabilities General Obligation Bonds 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. Series 2010B Bond Issue-The City of Paducah issued general obligation bonds of $7,165,000 in August 2010 with interest rates ranging between 1% and 3.25%, to advance refund $6,725,000 of outstanding 2001 series bonds with interest rates ranging between 4.5% and 5%. These bonds are required to be fully paid within 16 years from the date of issue and are backed by the full faith and credit of the City. While these 2010B series 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 2011 Bond Issue -The City of Paducah issued general obligation taxable refunding bonds of $3,910,000 in August 2011 with an interest rate of 3.68%, to currently refund $3,780,000 of outstanding 2004 series bonds with interest rates ranging from 2.25% to 6%. These bonds are required to be fully paid within 13 years from the date of issue and are backed by the full faith and credit of the City. The net proceeds were placed in an escrow account and used to call $3,780,000 of outstanding 2004 series bonds. In the Statement of Net Assets, the net costs associated with the early retirement of the issues are deferred and amortized over the remaining life of the defeased debt. The amount deferred is reported as a decrease to the book value of the new debt issued to finance the refunding. Total deferred costs were $66,065. Amortization for the year was $7,347 and is included as a component of interest expense. The City advance refunded the 2004 series bonds to reduce its total debt service payments over the next 13 years by $591,765 and to obtain an economic gain (the difference between the present values of the debt service payments on the old debt and the new debt) of $540,961. (Continued) -75- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 20I2 Note 3 -Detail Notes on Transaction Classes/ Accounts: Long-Term Liabilities General Obligation Bonds Series 20 II Bond Issue -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 and has guaranteed 50% of the principal amount of the bonds. The amounts being collected from a lease with Infiniti Plastic Technologies, Inc is sufficient to cover the entire bond payments due. The County will not be required to make any payments unless Infiniti Plastic Technologies, Inc. defaults on lease payments. Therefore, no receivable from the County has been recorded in the government-wide financial statements. Notes Payable Kentucky League of Cities -On July I, 2003, the City entered into an agreement in the amount of $3,500,000 with the Kentucky League of Cities to finance the acquisition and installation of various public capital projects. Interest is charged at a rate of approximately 2.98%. The note is required to be fully paid within 20 years from the date of issue and is backed by the full faith and credit of the City. Kentucky Association of Counties -The County of McCracken, Kentucky entered into an agreement in the amount of $5,000,000 in March 2009, with the Kentucky Association of Counties to assist with the Julian Carroll Convention Center. The 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. Margaret Hank Agreement -On June 16, 2011, the City entered into an agreement in the amount of $I88,533 with Margaret Hank to finance the acquisition of real property to be used for the development of a an indoor recreational facility. The note matures on July I, 2019 and has an imputed interest rate of 3.25%. Murray State University Paducah Agreement -On November 22, 20 II, the City entered into a general obligation note in the amount of $2,674,093 with McCracken County to finance the construction of an educational facility to be occupied by Murray State University. The note matures on December I, 203I and has interest rates ranging from 1.0% to 3.5%. (Continued) -76- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2012 Note 3-Detail Notes on Transaction Classes/Accounts: Long-Term Liabilities Changes in Long-Term Liabilities The following is a summary of changes in long-term debt for the year ended June 30, 2012: Type of Liability: Governmental activities: General obligation bonds: Infiniti Media Building Pension Floodwall Rehabilitation Build America Bonds Beginning Balance $ 3,780,000 5,125,000 2,564,948 6,370,000 7,040,000 Refinanced Convention Center Refinanced Infiniti Media Building Notes payable: Kentucky League of Cities Kentucky Association of Counties Margaret Hank Agreement Murray State University Agreement Accrued compensated absences 2,358,171 2,364,039 188,533 L929:712 Deferred Cost Additions Reductions Amortization $ -$ 3,780,000 $ 3,910,000 2,674,093* 897:990 230,000 109,738 270,000 410,000 280,000 164,441 87,789 12,278 799,484 (58,717) $ Ending Balance - 4,895,000 2,455,210 6,100,000 6,630,000 3,571,283 2,193,730 2,276,250 176,255 2,674,093 2:028:218 Amounts Due within One Year $ 240,000 113,420 275,000 410,000 251,167 169,437 86,875 110,611 1:008:012 TOTAL GENERAL LONG- TERM LIABILITIES $31 720 403 $ 7.482.083 $ 6 143.730 $ (58 717) $33 000 039 $2.664.522 Business-type activities: Accrued compensated Absences $ 88.626 $ 59,077 $ 40.966 =$ === $ 106.737 $ 92.323 *Assumption of 50% of McCracken County debt for facility construction. 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. ( 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 $39,740,080 Less: 19.75% of the outstanding 2001 general obligation bonds Net of the County's portion 78% of the outstanding 2010 general obligation bonds I 00% of the Margaret Hank Agreement 100% of the outstanding Kentucky League of Cities' note payable Net assets invested in capital assets, net of related debt -77- $(I ,309,425) 654.7II (654,714) (4,758,000) (176,255) (2.193.730) $31.957.38I (Continued) CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2012 Note 3-Detail Notes on Transaction Classes/Accounts: Long-Term Liabilities Annual Debt Service Requirements The annual debt service requirements to maturity, excluding obligations associated with compensated absences, for long-term debt as of June 30, 2012, are as follows: Year Ending .June 30 2013 2014 2015 2016 2017 2018-2022 2023-2027 2028-2032 TOTALS Accrued Compensated Absences Principal $ 1,656,510 1,714,616 1,779,697 1,841,968 1,899,140 10,482,318 8,913,319 2.684.253 $30.971 .821 Interest $ 1,040,986 1,009,656 971,808 920,532 865,998 3,357,528 1,473,398 234.707 $ 9 874.613 Federal Interest Subsidy $ (93,684) (91,759) (89,554) (86,614) (83,315) (351,542) (216,963) (48.437) $(I .061 .868) 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, 2012, are as follows: Accrued Compensated Absences Accrued sick leave Accrued vacation leave Totals Less current portion LONG-TERM PORTION Termination Benefits Governmental Activities $ 774,400 1.253.818 2,028,218 1.008.012 $1.020.206 Business-type Activities $ 36,805 69.932 106,737 92.323 $ 14.414 Ten 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. No termination benefits were paid for the year ended June 30, 2012. (Continued) -78- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2012 Note 3 -Detail Notes on Transaction Classes/ Accounts: 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 an 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, 2012, payments of $5,840 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, 2012, approval had not yet been granted. The County estimated post-closure care costs totaling $4,125,000 or $125,000 per year plus 10% for inflation. Actual costs may be higher due to inflation, changes in technology, or changes in regulations. In the year ending June 30, 2001, the City entered into an inter-local agreement to share equally the costs for post-closure costs and, accordingly, has recorded a long-term liability for 50% of the estimated closure expense. It is anticipated that post-closure costs will be paid out of the Solid Waste Fund to the extent that funds are available with any excess costs being funded using long-term borrowing. Interfund Transactions and Balances lnterfund transfers during the year ended June 30, 2012, were as follows: Interfund Interfund Governmental Funds: Transfers In Transfers Out General Fund $ 834,534 $1,641,755 Capital Project Fund 1,822,397 514,712 Special Revenue Investment Fund 110,988 3,237,151 Special Revenue Bond Fund Debt Service Fund 1,560,103 Nonmajor Governmental Funds 1,560,825 415,921 Internal Service Funds 196,462 5,149 Proprietary Funds: Solid Waste 247,725 Nonmajor Proprietary Funds 27.104 50.000 TOTALS $6 112.413 $6! 112!413 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. (Continued) -79- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2012 Note 3 -Detail Notes on Transaction Classes/ Accounts: Due To/From Balances Due to/from balances used to cover current operating expenses were as follows as of June 30, 2012: General Fund Special Revenue Investment Fund Nonmajor Proprietary Funds Internal Service Funds TOTALS Note 4 -Pension Plans -City of Paducah: Due From $ 45,918 1,028,999 510.810 $1!585!222 Due To $1,539,809 45,918 $1!585!222 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. 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. (Continued) -80- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2012 Note 4 -Pension Plans -City of Paducah: Police and Firefighters' Pension Fund Plan Description: PFPF is a single-employer defined benefit plan. On August 1, 1988, the plan was closed to new entrants and current active duty police and firemen of the City were given a choice of remaining in this plan or transferring into the CERS. Effective August 1, 1988, the PFPF covered 21 active duty members. All other active duty members elected coverage under CERS. PFPF provides retirement, disability, and death benefits to plan members and their beneficiaries. These benefits are determined by Kentucky Revised Statutes (KRS) sections 95.851 to 95.884. PFPF does not issue a separate, stand-alone report. Accordingly, the plan financial statements are included in this audit report. Contributions: Plan members are required to contribute 8% of their annual covered salary. A member reserve is established for member contributions, less amounts transferred to reserves for retirement and disability and amounts refunded to terminated employees. Funding: As of the most recent actuarial valuation dated July 1, 2012, the schedule of funding progress was as follows: Actuarial Actuarial Unfunded Annual UAALasa Value of Accrued AAL Funded Covered Percentage of Assets Liability (AAL) (UAAL) Ratio Payroll Covered (a} (b} (b-a} (alb} (c} ((b-a}/c} $7,567,321 $12,000,339 $4,433,018 63.1 $77,148 5,746.12% A schedule of the funded status and funding progress for the previous six years can be found on page 91, 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: Year Ended Year Ended Year Ended Component June 30~ 2012 ,June 30~ 2011 ,June 30~ 2010 Beginning NPO balance $(5,457 .076) $(5.511.936) $(5.551.753) ARC 361,701 455,139 460,892 Interest on NPO (436,566) (440,955) (444,140) Unfunded ARC adjustment 495.341 492.104 488.235 Pension cost 420,476 506,288 504,987 Less actual contribution 391.744 451.428 465.170 Net change in NPO 28.732 54.860 39.817 ENDING NPO BALANCE $(5 428.344) $(5.457.076) $(5.51 1.936) PERCENTAGE OF PENSION COST CONTRIBUTED 23% _82% 22% (Continued) -81- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2012 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: Assets: Cash and cash equivalents Receivables Investment at fair value Total assets Liabilities: Statement of Fiduciary Net Assets Police and Firefighters' Retirement Fund June 30, 2012 Voucher and accounts payable Net Assets: Held in trust for pension benefits and other purposes Statement of Changes in Net Assets Police and Firefighters' Retirement Fund For the Year Ended June 30, 2012 Additions: Employer contributions Plan members' contributions Total contributions Investment earnings: Net decrease in fair value of investments Interest and dividends Net investment earnings Total additions Deductions: Benefits Administrative expenses Total deductions Change in net assets Net assets, July I, 2011 NET ASSETS, JUNE 30, 2012 -82- $ 4,436 27,241 7.535.700 7,567,377 56 $ 7.567.321 $ 391,744 7.548 399.292 ( 122,860) 246.201 123.341 522.633 1,621,008 49.712 1.670.720 ( 1' 148,087) 8.715.408 $ 7.567.321 (Continued) CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2012 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, 2012. 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, 2012, the schedule of funding progress was as follows: Actuarial Unfunded Annual UAALasa Value of Accrued AAL Funded Covered Percentage of Assets Liability (AAL) (UAAL) Ratio Payroll Covered (a) (b) (b-a) (a/b) (c) ((b-a)/c) $106,983 $154,679 $47,696 69.2 nla* nla* A schedule of the funded status and funding progress for the previous six years can be found on page 91, 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 June 302 2012 .Iune 302 2011 1]une 302 2010 Beginning NPO balance $(177,856) $(194.904) $(227.510) ARC 7,722 3,760 17,095 Interest on NPO (10,671) (11 ,694) (13,651) Unfunded ARC adjustment 22.797 24.982 29.162 Pension cost 19,848 17,048 32,606 Less actual contribution Net change in NPO 19.848 17.048 32.606 ENDING NPO BALANCE $(]58.008) $(177.856) $()94 904) PERCENT AGE OF PENSION COST CONTRffiUTED _Q% _Q% _Q% (Continued) -83- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2012 Note 4 • Pension Plans • City of Paducah: Appointive Employees' Pension Fund The financial statements for the Appointive Employees' Pension Fund are as follows: Assets: Cash and cash equivalents Receivables Investment at fair value Total assets Liabilities: Statement of Fiduciary Net Assets Appointive Employees' Pension Fund June 30, 2012 Voucher and accounts payable Net Assets: Held in trust for pension benefits and other purposes Additions: Interest and dividends Employer contributions Total additions Deductions: Benefits Administrative expenses Total deductions Change in net assets Net assets, July 1, 2011 NET ASSETS, JUNE 30, 2012 Statement of Changes in Net Assets Appointive Employees' Pension Fund For the Year Ended June 30, 2012 $ 56,560 449 50.000 107,009 26 $106.983 $ 1,716 1.716 24,610 7.141 31.751 (30,035) 137.018 $106.983 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, 2012, the date of the latest actuarial valuation is as follows: (Continued) -84- CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2012 Note 4 -Pension Plans -City of Paducah: Single Employer Defined Benefit Funds (Police and Firefighters' Pension Fund and Appointive Employees Pension Fund) Contribution Information PFPF AEPF Valuation date 711112 7/1112 Actuarial cost method Entry age normal Aggregate ( I) Amortization method Level dollar closed Level dollar closed Remaining amortization period 22 Years 10 Years Asset valuation method Market value Market value Actuarial assumptions: Investment rate of return 8.00% 6.0% Projected salary increases 4.00% (2) Inflation rates adjustments 3.00% (2) ( 1) The Aggregate Method does not identify or separately amortize the unfunded actuarial liabilities. 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. (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, 2012: PFPF AEPF Active participants 1 0 Beneficiaries 39 3 Retired participants 32 _1 TOTAL PARTICIPANTS _J_2 _A 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. -85- (Continued) CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2012 Note 4-Pension Plans-City of Paducah: Cost-Sharing Multiple-Employer Defined Benefit Plan County Employees' Retirement System 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 I, 2008, or thereafter, an additional 1% 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, 2012, 201 I, and 2010, the City contributed 35.76%, 33.25%, and 32.97%, respectively, of each hazardous employee's creditable compensation and 18.96%, 16.93%, and 16.16%, 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, 2012, 201 I, and 2010, were $5,114,775, $4,885,288, and $4,538,848, 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, 2012. Note 6 -Component Unit Long-Term Liabilities: Long-term liabilities of the discretely presented component units consist of the following at June 30, 20 I 2: 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 I .00% to 5.19%, with a .25% annual service fee. The annual requirements to amortize the outstanding debt as of June 30, 20 I 2, are as follows: Year Ending June 30 Principal Interest 2013 $ 364,440 $ 68,800 2014 337,793 65,429 2015 341,179 62,043 2016 344,600 58,623 2017 348,054 55,168 2018-2022 1,793,314 222,796 2023-2027 1,885,024 131,086 2028-2031 1.577.195 35.693 TOTALS $6.991.599 $622!638 -86- .25% Service Fee $ 17,195 16,357 I 5,5 I I 14,656 13,792 55,699 32,771 8.923 $114!204 R&M Reserve $ I 8,750 18,750 18,750 18,750 18,750 75,000 $t68a5o Total $ 469,185 438,329 437,483 436,629 435,764 2,146,809 2,048,881 1.621.81 I $8.034!821 (Continued) CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2012 Note 6 -Component Unit Long-Term Liabilities: 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 4.186%. As of June 30, 2012, the outstanding balance was $35,082. The following schedule summarizes the remaining debt service requirements for the Transit Authority of the City of Paducah notes payable: Fiscal Year 2013 Note 7 -Commitments and Contingencies: Grant Contingencies Total Debt Principal Interest Service $35.082 $854 $35.936 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, 2012, the significant construction commitments were as follows: Olivet Church Road Improvement Project Riverfront Development-Phase I Riverfront-Other River Boat Launch Project Greenway Trail Project -87- Cumulative Costs Incurred $1,678,028 1,189,343 284,163 235.658 Estimated Total Costs $1,680,000 3,236,680 291,075 1.240.000 $3.387.192 $6.447.755 (Continued) CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2012 Note 8 -Risk Management and Litigation: The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City obtains coverage from commercial insurance companies to handle the risk of loss. There have been no decreases in insurance coverage from the prior year. There have been no settlements in excess of insurance coverage during the prior three years. An analysis of claims activity is presented below: Current Year Beginning of Claims and Actual Balance at Fiscal Year Changes in Claim Fiscal Liability Estimates Pavments YearEnd 2009-2010 $ $ 46,051 $ 46,051 $ 2010-2011 70,643 70,643 2011 -2012 119,319 117,856 1,463 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, 2012, that number was $2,656,261. 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 $254,926 at June 30, 2012. The analysis of claims activity is presented below: Current Year Beginning of Claims and Actual Balance at Fiscal Year Changes in Claim Fiscal Liability Estimates Pavments YearEnd 2009-2010 $ 53,586 $2,682,055 $2,506,993 $228,648 2010-2011 228,648 2,118,069 2,118,437 228,280 2011 -2012 228,280 3,224,703 3,203,329 249,654 Several lawsuits are pending involving citizens' complaints and the City of Paducah. Various allegations have been made seeking damages which the legal counsel of the City, along with its management, has determined to be immaterial to the City's financial position. (Continued) -88- Note 9 -Lease Agreements: Operating Leases CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2012 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 November 30, 2021. Rental revenue received from leased property during 2012 totaled $438,671. The following is an analysis of property leased under these leases at June 30, 2012: Land $ 270,000 Buildings 873,250 Equipment 110.126 Total 1,253,376 Less: accumulated depreciation 846.375 NET BOOK VALUE $ 401!001 Depreciation expense for the year ended June 30, 2012, on leased property was $29,085. The following is a schedule of future minimum rental income from operating leases at June 30, 2012: 2013 2014 2015 2016 2017 2018-2022 TOTAL MINIMUM LEASE RECEIPTS Direct Financing Lease Lease Income $ 437,943 437,943 257,943 77,943 60,123 265.543 $1.531.438 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 I, 2007, at a (Continued) -89- Note 9 • Lease Agreements: Direct Financing Lease CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2012 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, lnfiniti 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: 2013 2014 2015 2016 2017 20 18 through 2024 Net minimum lease payments Less amount representing interest PRESENT VALUE OF MINIMUM LEASE PAYMENTS -90- Lease Income $ 405,796 405,796 405,796 405,796 405,796 2.840.568 4,869,548 ( 1.44 1.481) $ 3.428 067 CITY OF PADUCAH, KENTUCKY REQUIRED SUPPLEMENTARY INFORMATION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2012 Actuarial Valuation Date Actuarial Value of Assets (a) CITY OF PADUCAH, KENTUCKY REQUIRED SUPPLEMENTARY INFORMATION PENSION TRUST FUNDS SCHEDULES Schedules of Funding Progress Actuarial Accrued Liability (AAL) (b) Unfunded AAL (UAAL) (b-a) Funded Ratio (alb) Annual Covered Payroll (c) Exhibit A-1 UAALasa Percentage of Covered Payroll ((b-a)/c) Police and Firefighters' Pension Fund (PFPF) (Using Entry Age Normal Method) 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 7,395.96 711/2011 8,715,408 12,375,144 3,659,736 70.4 62,915 5,816.95 711/2012 7,567,321 12,000,339 4,433,018 63.1 77,148 5,746.12 Appointive Employees' Pension Fund (AEPF) (Using Entry Age Actuarial Method) 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* 7/1/2011 137,018 161,229 24,211 85.0 n/a* n/a* 7/1/2012 106,983 154,679 47,696 69.2 n/a* n/a* * There are no active participants. Schedules of Employer Contributions PFPF Year Annual Percent Ending Ended Required ARC Net Pension .Iune 30 Contribution {ARC} Contributed Obligation {NPO} 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) 2011 455,139 99 (5,457,076) 2012 361,701 108 (5,428,344) AEPF Year Annual Percent Ending Ended Required ARC Net Pension .Iune 30 Contribution {ARC} Contributed Obligation {NPO} 2007 $ 13,883 180 $ (278,827) 2008 8,925 0 (250,893) 2009 6,278 0 (227,510) 2010 17,095 0 ( 194,904) 2011 3,760 0 (177,855) 2012 7,722 0 (158,008) -91- CITY OF PADUCAH, KENTUCKY SUPPLEMENTARY INFORMATION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2012 CITY OF PADUCAH, KENTUCKY GENERAL CAPITAL IMPROVEMENTS DETAD... STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30,2012 Revenues: Grants Intergovernmental Interest Miscellaneous Total revenues Expenditures: Principal requirement Capital outlay Total expenditures 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, 2011 FUND BALANCE, JUNE 30, 2012 See auditors report on pages 11-12. -92- Final Budget $ 212,315 7,415 383,870 603,600 2,105,015 2,105,015 ( 1,501 ,415) 101,980 1,822,385 (514,720) 1,409,645 $ (91,770) Actual $ 212,323 7,418 383,880 603,621 2,104,993 2,104,993 (1 ,501 ,372) 101,983 1,822,397 (514,712) 1,409,668 (91,704) 1,579,642 $1,487,938 Exhibit B-1 Variance with Final Budget Positive (Negative) $ 8 3 10 21 22 22 43 3 12 8 23 $ 66 CITY OF PADUCAH, KENTUCKY DEBT SERVICE FUND DETAll.. STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 20I2 Final Revenues: Budget Actual Intergovernmental $ 577,820 $ 577,831 Expenditures: Principal requirement I,434,249 1,434,246 Interest and fiscal requirement I,II4,9II 1 '114,852 Total expenditures 2,549,I60 2,549,098 Excess (deficiency) of revenues over expenditures (I ,971 ,340) ( 1,97 I ,267) Other Financing Sources (Uses): Capital lease 405,800 405,796 Operating transfers in I,560,IOO 1,560,I03 Total other financing sources (uses) 1,965,900 1,965,899 Net change in fund balance $ (5,440) (5,368) Fund balance, July I, 20 I 1 74,272 FUND BALANCE, JUNE 30, 20I2 $ 68,904 See auditors report on pages 1 I -12. -93- Exhibit B-2 Variance with Final Budget Positive (Negative) $ I I 3 59 62 73 (4) 3 (I) $ 72 CITY OF PADUCAH, KENTUCKY SUPPLEMENTARY INFORMATION NONMAJOR GOVERNMENTAL FUNDS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2012 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. Bond Fund -to account for revenues associated with bonds issued by the City. 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 revenues associated with the economic promotion of downtown Paducah, Kentucky. Exhibit B-3 CITY OF PADUCAH, KENTUCKY COMB~GBALANCESHEET NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2012 Special Revenue Funds Emergency Court Small ASSETS Municipal Communication Awards Grant Aid Program Service Fund Fund Fund Cash and cash equivalents $1,363,071 $295,171 $173,241 $40,419 Investments Receivables, net: Accounts 56,441 161,558 Grants Interest TOTAL ASSETS $1,419,512 $456,729 $173,241 $40,419 LIABILITIES AND FUND BALANCES Liabilities: Voucher and accounts payable $ 262,831 $ 3,100 $ 93,142 $ Accrued payroll and payroll taxes 50,298 Due to other funds Deferred revenues 40,419 Accrued compensated absences Total liabilities 262,831 53,398 93,142 40,419 Fund Balances: Restricted for: Highways and streets 1 '156,681 Public safety 80,099 Capital improvements Assigned for: Public service Public safety 403,331 Planning and development Total fund balances 1 '156,681 403,331 80,099 TOTAL LIABILITIES AND FUND BALANCES $1,419,512 $456,729 $173,241 $40,419 See auditors report on pages 11-12. -94- Special Revenue Funds CDBG Grant Bond PRA Fund Fund Fund $ $286,276 $ 1,500 $1,500 $286,276 $ $1,500 $ $ 1,500 286,276 286,276 $1,500 $286,276 $ Total Nonmajor Governmental Funds $2,158,178 217,999 1,500 $2,377,677 $ 360,573 50,298 40,419 451,290 1 '156,681 80,099 286,276 403,331 1,926,387 $2,377,677 -95- 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, 2012 Special Revenue Funds Emergency Court Small Municipal Communication Awards Grant Revenues: Aid Program Service Fund Fund Fund Taxes $ $ 433,350 $ $ Charges for services 248,705 Intergovernmental 619,911 Grants 50,107 46,555 Interest 8,808 2,695 I ,811 MisceiJaneous 7,838 348,966 9,797 Total revenues 636,557 1,033,716 51,918 56,352 Expenditures: Current operations: Public safety 1,577,810 41,427 Public service 1,159,682 Planning and development 68,127 Principle requirement Total expenditures 1,159,682 1,577,810 41,427 68,127 Excess (deficiency) of revenues over expenditures (523, 125) (544,094) 10,491 (11 ,775) Other Financing Sources (Uses): Capital lease Proceeds of refunding bond, net Transfer to refunded bond escrow agent Long-term debt issued Transfers in 890,000 448,550 11,775 Transfers out (102,369) Total other financing sources (uses) 787,631 448,550 11,775 Net change in fund balances 264,506 (95,544) 10,491 Fund balances, July I, 20 II 892, I75 498,875 69,608 FUND BALANCES, JUNE 30, 2012 $1,156,681 $ 403,331 $80,099 $ See auditors report on pages I1-12. -96- Special Revenue Funds CDBG Grant Bond PRA Fund Fund Fund $ $ $ 560,355 5,018 675 11,971 560,355 5,018 12,646 560,355 223,303 560,355 223,303 5,018 (210,657) 3,910,000 (3,91 0,000) 210,500 (272,886) (40,666) (272,886) 169,834 (267,868) (40,823) 554,144 40,823 $ $ 286,276 $ Total Nonmajor Governmental $ Funds 433,350 248,705 619,911 657,017 19,007 378,572 2,356,562 1,619,237 1,159,682 851,785 3,630,704 (1 ,274, 142) 3,910,000 (3,91 0,000) 1,560,825 (415,921) I, 144,904 (129,238) 2,055,625 $ 1,926,387 -97- CITY OF PADUCAH, KENTUCKY MUNICIPAL AID PROGRAM FUND DETAIL SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2012 Revenues: Intergovernmental Interest Total revenues Expenditures: Public service Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses): Operating transfers in Operating transfers out Total other financing sources Net change in fund balance Fund balance, July I, 2011 FUND BALANCE, JUNE 30, 2012 See auditors report on pages II-I2. -98- Final Budget $ 627,745 8,805 636,550 I, 159,685 (523,135) 890,000 (102,370) 787,630 $ 264,495 Actual $ 627,749 8,808 636,557 1,159,682 (523,125) 890,000 (102,369) 787,631 264,506 892,175 $1 '156,681 Exhibit B-5 Variance with Final Budget Positive (Negative) $ 4 3 7 3 IO $ II CITY OF PADUCAH, KENTUCKY EMERGENCY COMMUNICATION SERVICE FUND DETAll... SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30,2012 Final Revenues: Budget Actual Taxes $ 433,350 $ 433,350 Telephone surcharges 248,705 248,705 Interest 2,695 2,695 Miscellaneous 348,965 348,966 Total revenues 1,033,715 1,033,716 Expenditures: Public safety 1,578,030 1,577,810 Excess (deficiency) of revenues over expenditures (544,315) (544,094) Other Financing Sources (Uses): Operating transfers in 448,550 448,550 Net change in fund balance $ (95,765) (95,544) Fund balance, July 1, 2011 498,875 FUND BALANCE, JUNE 30, 2012 $ 403,331 See auditors report on pages 11-12. -99- Exhibit B-6 Variance with Final Budget Positive (Negative) $ 220 221 $ 221 CITY OF PADUCAH, KENTUCKY COURT AWARDS FUND DETAIL SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30,2012 Final Revenues: Budget Actual Court awarded forfeitures $ $ Grants 50,075 50,107 Interest 1,810 I ,811 Total revenues 51,885 51,918 Expenditures: Public safety 41,430 41,427 Excess (deficiency) of revenues over expenditures $10,455 10,491 Fund balance, July 1, 2011 69,608 FUND BALANCE, JUNE 30, 2012 $80,099 See auditors report on pages 11-12. -100- Exhibit B-7 Variance with Final Budget Positive (Negative) $ 3 $ 4 CITY OF PADUCAH, KENTUCKY SMALL GRANT FUND DETAil.. SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 20I2 Revenues: Grants Interest Other Total revenues Expenditures: Planning and development Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses): Operating transfers in Operating transfers out Total other financing sources Net change in fund balance Fund balance, July I, 20I I FUND BALANCE, JUNE 30,2012 See auditors report on pages 11-12. -101- Final Budget Actual $46,555 $46,555 9,795 9,797 56,350 56,352 68,I30 68,I27 (1 I,780) (1 I,775) I I,775 I I ,775 I I ,775 I I,775 $ (5) $ Exhibit B-8 Variance with Final Budget Positive (Negative) $ 2 2 3 5 $ 5 CITY OF PADUCAH, KENTUCKY CDBG GRANT FUND DETAIL SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30,2012 Revenues: Grants Misce11aneous Total revenues Expenditures: Planning and development Excess (deficiency) of revenues over expenditures Net change in fund balance Fund balance, July 1, 2011 FUND BALANCE, JUNE 30, 2012 See auditors report on pages 11-12. -102- Final Budget Actual $560,355 $560,355 560,355 560,355 560,360 560,355 (5) $ (5) $ Exhibit B-9 Variance with Final Budget Positive (Negative) $ 5 5 $ 5 Exhibit B-10 CITY OF PADUCAH, KENTUCKY SPECIAL REVENUE BOND FUND DETAIL SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30,2012 Variance with Final Budget Final Actual Positive Budget Amounts (Negative) Revenues: Interest $ 5,015 $ 5,018 $ 3 Expenditures: General government: Planning and development: Bond issuance costs Excess (deficiency) of revenues over expenditures 5,015 5,018 3 Other Financing Sources (Uses): Proceeds of refunding bond, net 3,910,000 3,910,000 Transfer to refunded bond escrow agent (3,91 0,000) (3,910,000) Operating transfers out (272,890) (272,886) 4 Total other financing sources (uses) (272,890) (272,886) 4 Net change in fund balance $ (267,875) (267,868) $ 7 Fund balance, July I, 2011 554,144 FUND BALANCE, JUNE 30,2012 $ 286,276 See auditors report on pages 11-12. -103- CITY OF PADUCAH, KENTUCKY PRAFUND DETAIL SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2012 Revenues: Interest Other Total revenues Expenditures: Planning and development Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses): Operating transfers in Operating transfers out Total other financing sources (uses) Net change in fund balance Fund balance, July 1, 2011 FUND BALANCE, JUNE 30,2012 See auditors report on pages 11-12. -104- Final Budget $ 675 12,030 12,705 223,470 (210,765) 210,500 (40,666) 169,834 $ (40,931) Actual $ 675 11,971 12,646 223,303 (210,657) 210,500 (40,666) 169,834 (40,823) 40,823 $ Exhibit B-12 Variance with Final Budget Positive (Negative) $ (59) (59) 167 108 $ 108 CITY OF PADUCAH, KENTUCKY SUPPLEMENTARY INFORMATION NONMAJOR PROPRIETARY FUNDS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2012 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. Exhibit C-1 CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF NET ASSETS NONMAJOR ENTERPRISE FUNDS JUNE 30, 2012 ASSETS Section Civic Total Nonmajor Eight Center TISA Enterprise Current Assets: Housing Fund Fund Funds Cash and cash equivalents $ 897,126 $ $276,963 $1,174,089 Accounts receivable 1,035 1,035 Prepaid expense Total current assets 897,126 277,998 1,175,124 Noncurrent Assets: Net depreciable capital assets 12,652 169,618 34,097 216,367 Total assets 909,778 169,618 312,095 I ,391,491 LIABILITIES Current Liabilities: Voucher and accounts payable 102,376 5,071 2,501 109,948 Accrued compensated absences 1,601 1,601 Due to other funds 45,918 45,918 Total current liabilities 149,895 5,071 2,501 157,467 Noncurrent Liabilities: Accrued compensated absences 14,414 14,414 Total liabilities 164,309 5,071 2,501 171,881 NET ASSETS Invested in capital assets 12,652 169,618 34,097 216,367 Restricted for: Housing and development projects 732,817 732,817 Unrestricted (5,071) 275,497 270,426 TOTAL NET ASSETS $ 745,469 $164,547 $309,594 $1,219,610 See auditors report on pages 11-12. -105- Exhibit C-2 CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS NONMAJOR ENTERPRISE FUNDS FOR THE YEAR ENDED JUNE 30, 2012 Section Civic Total Nonmajor Eight Center TISA Enterprise Operating Revenues: Housing Fund Fund Funds Charges for services $1,635,764 $ 34,038 $ 99,603 $1,769,405 Miscellaneous 12,217 12,217 Total operating revenues 1,647,981 34,038 99,603 1,781,622 Operating Expenses: Cost of sales and service 1,915,365 60,956 140,601 2,116,922 Depreciation and amortization 5,639 10,209 33,107 48,955 Total operating expenses 1,921,004 71 '165 173,708 2,165,877 Operating income (loss) (273,023) (37,127) (74,105) (384,255) Non-Operating Revenues (Expenses): Interest and investment income 316 316 Income (loss) before contributions and operating transfers (272,707) (37,127) (74,105) (383,939) Contributions and Operating Transfers: Capital contributions Transfers in 27,104 27,104 Transfers out (50,000) (50,000) Total contributions and operating transfers 27,104 (50,000) (22,896) Change in net assets (272,707) (10,023) (124, 105) (406,835) Net assets, July 1, 2011 1,018,176 174,570 433,699 1,626,445 NET ASSETS, JUNE 30, 2012 $ 745,469 $164,547 $309,594 $1,219,610 See auditors report on pages 11-12. -106- CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF CASH FLOWS NONMAJOR ENTERPRISE FUNDS FOR THE YEAR ENDED JUNE 30, 2012 Section Civic Eight Center Cash Flows from Operating Activities: Housing Fund Cash received from customers $ I,635,764 $ 34,038 Payments to employees (133,357) Payments to internal service funds (2,350) Other receipts I2,2I7 Other payments (I ,784,754) (58,899) Net cash provided (used) by operating activities (270,I30) (27,211) Cash Flows from Noncapital Financing Activities: Transfers (to) from other funds 27,104 Cash Flows from Investing Activities: Interest on cash and investments 3I6 Net increase (decrease) in cash and cash equivalents (269,8I4) (107) Cash and cash equivalents, July I, 2011 I,166,940 107 CASH AND CASH EQUIVALENTS, JUNE 30, 2012 $ 897,126 $ Reconciliation of Operating Income (Loss) to Net Cash Provided by Operating Activities: Operating income (loss) $ (273,023) $ (37,127) Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation and amortization 5,639 10,209 Change in assets and Jiabilities: Receivables Prepaid expense Accrued expenses 1,360 Accounts payable (4,106) (293) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ (270,130) $ (27,211) See auditors report on pages 11-12. -I07- Exhibit C-3 Total Nonmajor TISA Enterprise Fund Funds $ 108,197 $ 1,777,999 (133,357) (1,411) (3,761) 12,217 (128,282) (I ,97I ,935) (21,496) (3I8,837) (50,000) (22,896) 3I6 (71,496) (34I,417) 348,459 I,5I5,506 $ 276,963 $ 1,174,089 $ (74,I05) $ (384,255) 33,I07 48,955 8,594 8,594 9,590 9,590 1,360 1,318 (3,081) $ (21,496) $ (3I8,837) CITY OF PADUCAH, KENTUCKY SUPPLEMENTARY INFORMATION INTERNAL SERVICE FUNDS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2012 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 acqutstttons provided by one department or agency to other departments or agencies of the government and to other governmental units, on a cost reimbursement basis. Insurance Fund -to account for the costs of obtaining insurance for other City departments. Health Insurance Fund -to account for the costs associated with the City's health insurance activities. The intent of the City of Paducah is that the cost of providing insurance coverage on a continuing basis be financed primarily through user charges. Exhibit D-1 CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF NET ASSETS INTERNAL SERVICE FUNDS JUNE 30, 2012 ASSETS Health Fleet Fleet Lease Insurance Insurance Combined Current Assets: Maintenance Trust Fund Fund Total Cash and cash equivalents $ 2,910 $2,694,633 $279,939 $724,058 $3,701,540 Investments 550,000 550,000 Receivables, net 4,943 2,376 78,774 86,093 Due from other funds 510,810 510,810 Prepaid expense Inventories 76,889 76,889 Total current assets 79,799 3,760,386 282,315 802,832 4,925,332 Noncurrent Assets: Net depreciable capital assets 22,694 3,071,112 3,093,806 Total assets 102,493 6,831,498 282,315 802,832 8,019,138 LIABILITIES Current Liabilities: Voucher and accounts payable 3,929 4,537 254,926 263,392 Accrued payroll and payroll taxes 16,005 16,005 Accrued compensated absences Due to other funds Total current liabilities 19,934 4,537 254,926 279,397 Noncurrent Liabilities: Accrued compensated absences 53,040 53,040 Total liabilities 72,974 4,537 254,926 332,437 NET ASSETS Invested in capital assets, net of related debt 22,694 3,071,112 3,093,806 Unrestricted 6,825 3,760,386 277,778 547,906 4,592,895 TOTAL NET ASSETS $ 29,519 $6,831,498 $277,778 $547,906 $7,686,701 See auditors report on pages 11-12. -108- 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, 2012 Health Fleet Fleet Lease Insurance Insurance Combined Operating Revenues: Maintenance Trust Fund Fund Total Charges for services-internal $375,582 $ 812,993 $909,892 $3,995,086 $6,093,553 Charges for services -external 272,105 272,105 Total operating revenues 375,582 812,993 909,892 4,267,191 6,365,658 Operating Expenses: Vehicle maintenance 511,172 511,172 Administrative 26,229 362,827 389,056 Insurance 965,518 3,785,353 4,750,871 Leave expense 7,160 7,160 Depreciation 9,903 568,418 578,321 Total operating expenses 528,235 594,647 965,518 4,148,180 6,236,580 Operating income (loss) (152,653) 218,346 (55,626) 119,011 129,078 Nonoperating Revenues and (Expenses): Interest and investment income 26 40,654 40,680 Gain (loss) on disposal of property and equipment 2,299 34,418 36,717 Total nonoperating revenues (expenses) 2,325 75,072 77,397 Income (loss) before operating transfers (150,328) 293,418 (55,626) 119,011 206,475 Contributions and Operating Transfers: Transfers in 146,623 49,839 196,462 Transfers out (5,149) {5, 149) Change in net assets (3,705) 288,269 (5,787) 119,011 397,788 Net assets, July I, 2011 33,224 6,543,229 283,565 428,895 7,288,913 NET ASSETS, JUNE 30,2012 $ 29,519 $6,831,498 $277,778 $ 547,906 $7,686,701 See auditors report on pages 11-12. -109- Exhibit D-3 CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2012 Health Fleet Fleet Lease Insurance Insurance Combined Cash Flows from Operating Activities: Maintenance Trust Fund Fund Total Receipts from other funds for services $ 375,582 $ 822,449 $ 907,629 $4,188,685 $ 6,294,345 Payments to suppliers (245,090) (245,090) Payments to employees (269,305) (269,305) Claims paid (3,767,220) (3,767,220) Other receipts Other payments (3.525) (133,909) (961,387) (912,827) (2,011 ,648) Net cash provided (used) by operating activities (142,338) 688,540 (53,758) (491 ,362) 1,082 Cash Flows from Noncapital Financing Activities: Transfers to other funds {5,149) (5.149) Transfers from other funds 146,623 49,839 196,462 Net cash provided (used) by noncapita1 financing activities 146.623 (5,149) 49,839 191,313 Cash Flows from Capital and Related Financing Activities: Purchase of capital assets (4,000) (I ,029,935) ( 1 ,033,935) Proceeds from sale of capital assets 2,299 55,513 57,812 Net cash used by capital and related financing (1,701) (974,422) (976,123) Cash Flows from Investing Activities: Proceeds from sales and maturities of investments 1,500,000 1,500,000 Interest and dividends 26 40,654 40,680 Purchase of investments (550,000) (550,000) Net cash provided (used) by investing activities 26 990,654 990,680 Net increase (decrease) in cash and cash equivalents 2.610 699,623 (3.919) (491.362) 206,952 Cash and cash equivalents. July 1, 2011 300 1,995,010 283,858 1.215,420 3.494,588 CASH AND CASH EQUIVALENTS, JUNE 30, 2012 $ 2,910 $ 2,694,633 $ 279,939 $ 724,058 $ 3,701,540 Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating income (loss) $ (152.653) $ 218,346 $ (55,626) $ 119,011 $ 129.078 Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization 9,903 568,418 578.321 Change in assets and liabilities: Receivables 9,456 (2,263) (78,506) (7 1.313) Prepaid expense 403,130 15,000 418.130 Inventories Due to other funds (3,525) (510,810) (550,000) (I ,064,335) Accrued expenses 8,657 8,657 Accounts payable (4,720) 4,131 3,133 2.544 NET CASH PROVIDED (USED) BY OPERATING ACfiVITIES $ (142,338) $ 688,540 $ (53,758) $ (491,362) $ 1,082 See auditors report on pages I 1-12. -110- CITY OF PADUCAH, KENTUCKY SUPPLEMENTARY INFORMATION FIDUCIARY FUNDS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2012 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. CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS-PENSION TRUST FUNDS JUNE 30,2012 ASSETS Cash and cash equivalents Receivables: 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 NET ASSETS Held in trust for pension benefits and other purposes See auditors report on pages 11-12. Police and Appointive Firefighters' Employees' Retirement Fund Pension Fund $ 4,436 $ 56,560 27,241 449 200,362 50,000 2,552,720 1,527,228 1,472,496 1,782,894 7,567,377 107,009 56 26 $7,567,321 $106,983 -111- Exhibit E-1 Total $ 60,996 27,690 200,362 50,000 2,552,720 1,527,228 1,472,496 1,782,894 7,674,386 82 $7,674,304 CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF CHANGES IN NET ASSETS FIDUCIARY FUNDS-PENSION TRUST FUNDS FOR THE YEAR ENDED JUNE 30,2012 Additions: Contributions: Employer Plan members Total contributions Investment earnings: Net increase in fair value of investments Interest and dividends Net investment earnings Total additions Deductions: Benefits Administrative expenses Total deductions Change in net assets Net assets, July 1, 2011 NET ASSETS, JUNE 30, 2012 See auditors report on pages 11-12. Police and Firefighters' Retirement Fund $ 391,744 7,548 399,292 (122,860) 246,201 123,341 522,633 1,621,008 49,712 1,670,720 (l' 148,087) 8,715,408 $7,567,321 -112- Appointive Employees' Pension Fund $ 1,716 1,716 1,716 24,610 7,141 31,751 (30,035) 137,018 $106,983 Exhibit E-2 Totals $ 391,744 7,548 399,292 (122,860) 247,917 125,057 524,349 1,645,618 56,853 1,702,471 (1,178,122) 8,852,426 $7,674,304 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. ASSETS Investments at fair value Mutual funds Total assets LIABILITIES Due to other funds NET ASSETS CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF NET ASSETS FIDUCIARY FUNDS -PRIVATE-PURPOSE TRUST FUNDS JUNE 30, 2012 Other Trusts $1,106,065 1,106,065 Maintenance and Rehab Trust $ Held in trust for other purposes $1,106,065 $ See auditors report on pages 11-12. -113- Exhibit E-3 Total $1,106,065 1,106,065 $1,106,065 CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF CHANGES IN NET ASSETS FIDUCIARY FUNDS -PRIVATE-PURPOSE TRUST FUNDS FOR THE YEAR ENDED JUNE 30,2012 Maintenance Other and Rehab Additions: Trusts Trust Contributions: Intergovernmental revenues $ 3,135 $8,000 Private donations 3,458 Total contributions 6,593 8,000 Investment earnings: Net increase in fair value of investments (61 ,241) Loss on sale of investments 36,604 Interest and dividends 32,000 Net investment earnings 7,363 Total additions 13,956 8,000 Deductions: Capital outlay 52,434 4,004 Administrative expenses 13,775 4, Ill Total deductions 66,209 8,115 Change in net assets (52,253) ( 115) Net assets, July 1, 2011 I, 158,318 115 NET ASSETS, JUNE 30, 2012 $1,106,065 $ See auditors report on pages 11-12. -1 14- Exhibit E-4 Totals $ 11' 135 3,458 14,593 (61 ,241) 36,604 32,000 7,363 21,956 56,438 17,886 74,324 (52,368) 1,158,433 $1,106,065 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 11-12. CITY OF PADUCAH, KENTUCKY AGENCY FUND STATEMENT OF CHANGES IN ASSETS AND LIABll.JTIES FOR THE YEAR ENDED JUNE 30,2012 Balance July 1, 2011 $133,077 $133,077 -115- Additions $14,714,099 $14,714,099 Deductions $14,162,414 $14,162,414 Exhibit E-5 Balance June 30, 2012 $684,762 $684,762 CITY OF PADUCAH, KENTUCKY STATISTICAL SECTION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2012 STATISTICAL SECTION This part of the City of Paducah's comprehensive annual financial report presents detailed information as a context for undemanding what the information in the financial statements, note disclosures, and required supplementary information say about the City's overall financial health. Contents Financial Trends These schedules contain trend information to help the reader understand how the City's financial performance and well-being changed over time. Revenue Capacity 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 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 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 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. Page 116-121 122-127 128-131 132-134 135-136 .!.. "!' TABLE I CITY OF PADUCAH, KENTUCKY NET ASSETS BY COMPONENT Last Ten Fiscal Years (accrual basis of accowrtinx) Fiscal Year 2012 2011 2010 (2) 2009 2008 2007 Governmental Activities: Invested in capital assets, net of related debt $31,957,381 $32,905,977 $31,136,514 $31,215,252 $31,766,783 $32,557,572 Restricted for: Program purposes 897,942 1,264,986 1,100,696 2,183,559 1,782,251 1,904,321 Capital projects 4,105,639 5,987,399 5,077,026 4,363,913 5,028.420 4,618,923 Unrestricted 5,913,997 4,229,501 8,165,101 8,621,077 9,432,763 9,057,641 TOTAL GOVERNMENTAL ACTIVITIES NET ASSETS $42,874,959 $44,387,863 $45,479,337 $46,383,801 $48,010,217 $48,138,457 Business· Type Activities: Invested in capital assets, net of related debt $ 1.308,574 $ 1,334,230 $ 1,652,961 $ 1,721,419 $ 1,863,975 $ 1,491.523 Restricted for: Program purposes 732,817 999,885 620,800 369,368 579,460 Unrestricted 3,246,320 3,004,783 1,816,705 1,036,093 (19,965) (147,286) TOTAL BUSINESS-TYPE ACTIVITIES NET ASSETS $ 5,287,711 $ 5,338,898 $ 4,090,466 $ 3,126,880 $ 2,423.470 $ 1,344,237 Primary Government: Invested in capital assets, net of related debt $33,265,955 $34,240,207 $32,789,475 $32,936,671 $33,630.758 $34,049,095 Restricted for: Program purposes 1,630,759 2,264.871 1,721,496 2,552,927 2,361,711 1,904,321 Capital projects 4.105,639 5,987.399 5,077,026 4,363,913 5,028,420 4,618,923 Unrestricted 9,160,317 7,234,284 9,981,806 9,657,170 9.412,798 8,910,355 TOTAL PRIMARY GOVERNMENT NET ASSETS $48,162,670 $49,726,761 $49,569,803 $49,510,681 $50,433,687 $49.482,694 (I) Significant change in governmental and business-type net assets due to reclassification for prior year omitted receivables, capital assets, and post-closure landfill expenses. (2) Significant change in governmental net assets due to restatement of prior year grant receivables. 2006 2005 (1) 2004 2003 $30,664,671 $29,492,197 $27,826,1 17 $27,955,839 1,018,231 727,699 714,538 713,766 2,689,804 940,323 4,031,802 3,583,589 7,718.198 7,419,037 (406,042) 1,571,120 $42,090,904 $38,579,256 $32,166,415 $33,824,314 $ 1,277,720 $ 1,463,118 $ 1,463,668 $ 1,425,753 132,090 (27,648) 1,979,494 1,565,100 $ 1,409,810 $ 1,435,470 $ 3,443,162 $ 2,990,853 $31,942,391 $30,955,315 $29,289,785 $29,381,592 1,018,231 727,699 714,538 713,766 2,689,804 940,323 4,031.802 3.583,589 7,850,288 7,391,389 1,573.452 3.136,220 $43,500,714 $40,014,726 $35,609,577 $36,815,167 Pages 1 of3 TABLE2 CITY OF PADUCAH, KENTUCKY CHANGES IN NET ASSETS Last Ten Fiscal Years (accrual basi ... of accountin~:) Fiscal Year Expenses: 2012 2011 2010 (3) 2009 2008 (2) 2007 2006 2005 (1) 2004 2003 Governmental activities: General government $ 12.937.997 $ 9,786,052 $ 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 17.045,731 16,993.228 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 6.163,602 7.328,806 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 2.654,098 2.748.333 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 1.192,952 1.212.103 970.022 708.827 282,042 1.891.725 2.404.636 2,521.412 5.330.393 3,108.192 Interest on long-term debt 1.059,537 1,363,580 1.099,450 1.029.888 1.066,067 1.134,898 974.101 775.122 496,049 428.578 Total governmental activities expense 41,053,917 39.432,102 38,394,895 43,963,262 38,827,250 37,168,600 36,559,811 33,644,350 36,684,575 32,249,925 Bu ... iness-type ac:tivirie.<;: Solid Waste 3,900,264 3.832.130 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 1.921.004 1,956,728 2.061,370 2.154,360 1.949,899 Civic Center 71.069 76.546 69,537 75.692 84,908 54.562 45.894 39.008 33,181 46,509 TISA 173.708 183.546 206.798 162.849 156,388 267.192 269.781 170.264 184,166 123,719 .!... 7"' Total business-type activities expense 6,066,045 6,048,950 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 $ 47.119,962 $ 45.481,052 $ 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: Gm•emmental activirie.f: Charges for services: General government $ 1.488.845 $ 1,051,509 $ 993.371 $ 1.303.667 $ 1.415.943 $ 1.730,046 $ 1.618.903 $ 1.485,005 $ 1,601.414 $ 1.445,383 Public safety 509,297 790,650 484.754 602,262 268.839 1.024.610 767.086 794,814 1,134,386 94,386 Public service 1.032,953 1,205,666 1.197,194 1.220,999 1,111,188 1,150,507 942.355 895,155 986,618 683,119 Parks and recreation 97.896 129.790 152,890 180.420 124,606 122,929 103,932 117,317 132,388 131,355 Planning and development 1.600 30,627 10,810 20,602 13.501 12,893 15,867 Operating grants and contributions 2.215,247 2.086,625 1.813.019 2.119,845 1,340,261 2.797.216 2.988,612 2.452,694 3,290.134 4.176.548 Capital grants and contributions 533,169 1.767,093 1,390,848 4,889,520 1,297.900 3,681.490 3.302,568 1.100,064 3,221,637 2,213.757 Total governmental activities program revenues 5,877,407 7,031.333 6,032.076 10,318,313 5.589,364 10,517,608 9,744,058 6,858,550 10,379,470 8,760,415 Pages2of3 TABLE2 CITY OF PADUCAH, KENTUCKY CHANGES IN NET ASSETS Last Ten Fiscal Years (accrual basi.o; of accmmting) Fiscal Year Program Revenues: 2012 2011 2010 (3) 2009 2008 (2) 2007 2006 2005 (1) 2004 2003 Bu.'iine.'is-l)pe actb•ities: Solid Waste $ 4.437.341 $ 4.476.139 $ 4.436.540 $ 4.547.959 $ 4,165.094 $ 3,928.140 $ 3.696.609 $ 3.583.417 $ 3.790.132 $ 3,298,964 Section Eight Housing Civic Center 34.038 33.766 32.455 38,577 32.932 31.372 26.378 32,828 36.455 20,825 TIS A 99.603 138,797 148.158 148.291 143.833 193,713 106.697 104.087 100.778 93,383 Operating grants and contributions 1,647.981 2.400,540 2.340,267 1.965,936 1.785,809 Capital grants and contributions 15,266 8,659 27,239 129,032 9.480 23,969 22,894 14,735 24,990 3,666 Total business-type activities program revenues 6,234.229 7,057,901 6,984,659 6,829,795 6,137,148 4,177.194 3.852.578 3,735,067 3,952,355 3,416,838 TOTAL PRIMARY GOVERNMENT PROGRAM REVENUES $ 12,111,636 $ 14.089,234 $ 13.016.735 $ 17.148,108 $ 11.726.512 $ 14.694,802 $ 13.596.636 $ I 0,593,617 $ 14,331,825 $ 12.177.253 Net (Expense)IRevenue: Governmental activities: (35.176.510) (32.400,769) (32.362.819) (33.644.949) (33.237.886) (26,650,992) (26,815.753) (26,785.800) (26.305,105) (23.489.51 0) .!.. Busine.'is-type acti,•ities: 168,184 1,008,951 849,857 399,049 (140,794) (224.244) (356.110) (158,159) 315.544 (113.121) ~ TOTAL PRIMARY GOVERNMENT NET (EXPENSE) $ (35,008,326) $ (31,391,818) $ (31,512,962) $ (33.245,900) $ (33.378,680) $ (26,875,236) $ (27.171,863) $ (26,943,959) $ (25,989,561) $ (23,602,631) General Revenues and Other Changes in Net Assets: Governmemal activitie.'i: Taxes and licenses: Property taxes. levied for general purposes $ 4,267,812 $ 4.402.226 $ 4.207.736 $ 3,986,760 $ 4.221.957 $ 4.122,538 $ 4.107.934 $ 3,919.113 $ 4.012.168 $ 3,893,211 Insurance premium tax 3.690.806 3.476.309 3.797.347 4,055,228 4.699.458 4,414,672 3.863,953 3,957.289 3.767.864 3.580,964 Gross receipts license tax 4,359,835 4.243,511 4.229.102 4,320,850 4,061.587 4,050,057 3,899.432 3,720.784 3.496,438 3.404,338 Employee license tax 18,095,182 17.345,033 16.384.509 16.584,636 16,520.523 16,273,966 14.794.217 11.192,445 10.616,223 10,301,231 Other taxes 2.711.924 2,712,817 2,844.154 2,776,407 2.259,956 1,964,101 2,105,014 2,116,403 1.764,140 1,893,064 Intergovernmental revenue 1.401.400 1.243,028 1.201,973 955,645 871,273 836,132 Unrestricted investment earnings 203,261 264.913 172.213 336,960 540,620 639,702 462.292 290,647 220,992 325.811 Gain on sale of capital assets 36,718 62.539 64.620 68.530 119,200 48,656 8.340 (1,972) 125.714 Insurance recoveries 27,448 410.462 Litigation settlement ( 1.482.743) Transfers 270,620 (125.772) (78.893) (110,838) (96.609) (58,175) (115.754) (133,959) (68.964) 18,666 Total governmental activities 33.663,606 31.309.295 31.620.788 32,018,533 33.728.092 32,698,545 30,327.401 26,018,367 24,678.162 24.379,131 .!.. TABLE2 CITY OF PADUCAH, KENTUCKY CHANGES IN NET ASSETS Last Ten Fiscal Years (accrual basis of ac:cmmti11g) Fiscal Year General Revenues and Other Changes 2012 2011 2010 (3) 2009 2008 (2) 2007 in Net Assets: Bu.~i11ess-type tlc:ti••ities: Unrestricted investment earnings $ 48.806 $ 46.052 $ 33.724 $ 52.961 $ 73.985 $ 83.854 $ Gain on sale of capital assets 2.443 67,657 1.112 98,369 127.131 16,641 Transfers (270,620) 125,772 78.893 110,838 96,609 58,176 Total business-type activities (219.371) 239.481 113.729 262.168 297.725 158,671 Change in Net Assets: Govemmentaltlctivitie.~: (1.512.904) (1.091,474) (742.031) ( 1.626.416) 490.206 6.047,553 Busine.\·.Hype acti••ities: (51.187) 1.248.432 963.586 661.217 156.931 (65,573) TOTAL PRIMARY GOVERNMENT $ ( 1,564,091) $ 156,958 $ 221.555 $ (965,199) $ 647,137 $ 5.981.980 $ ( 1) Significant change in governmental and business-type net assets due to reclassification for prior year omitted receivables. capital assets. and post-closure landfill expenses. (2) 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. (3) Significant change in governmental net assets due to restatement of prior year grant receivables. Pages3of3 2006 2005 (1) 2004 2003 85.786 $ 51.508 $ 32.826 $ 39.530 55,337 27,500 34,975 24,238 115.754 133,959 68,964 (18,666) 256.877 212,967 136.765 45.102 3.511.648 (767,433) ( 1,626,943) 889.621 (99,233) 54,808 452.309 (68,019) 3.412.415 $ (712,625) $ (1,174,634) $ 821.602 .!... N 9 General Fund: Unassigned TOTAL GENERAL FUND All Other Governmental Funds: Restricted for: Program purposes Capital improvements Committed for: Capital improvements Assigned for: Program purposes Capital improvements TOTAL ALL OTHER GOVERNMENTAL FUNDS 2012 $11,321,438 $11,321,438 $ 1,236,780 286,276 2,631,233 472,235 1,487,938 $ 6,114,462 2011 $10,940,121 $10,940,121 $ 2,587,012 683,578 2,133,786 $ 5,404,376 TABLE3 CITY OF PADUCAH, KENTUCKY FUND BALANCES, GOVERNMENT FUNDS Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year 2010 (3) 2009 2007 $10,208,678 $ 10,31 I ,490 2008 (2) $9,416,427 $9,976,079 $10,208,678 $10,311 ,490 $9,416,427 $9,976,079 $ $ $ $ 2,844,706 2,618,147 2,081,280 1,692,872 1,402,731 1,634,547 1,193,968 1,543,547 5,151,791 1.745,766 2,947,140 2.926,051 $ 9,399,228 $ 5,998,460 $6,222,388 $6,162,470 2006 $9,157,310 2005 (1) $8,303,702 $9,157,310 $8,303,702 $ $ 719,801 1,573,977 1,548,082 1,970,003 940,323 $4,263,781 $2,488,405 ( 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 decrease in reserve for program purpose due to converting governmental fund to proprietary fund. (3) Significant decrease in general fund balance due to restatement of prior year grant receivables. 2004 $4,642,073 $4,642,073 $ 1,284,119 3,886,391 $5,170,510 2003 $4,925,982 $4,925,982 $ 1,821,307 3,583,589 $5,404,896 TABLE4 CITY OF PADUCAH, KENTUCKY CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year Revenues: 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 (1) Taxes $ 6,343,608 $ 6,223,511 $ 6,326,740 $ 5,867,782 $ 6,139,164 $ 6,044,069 $ 6,204,686 $ 6,016,570 $ 5,871,229 $ 5,773,871 Licenses 26,753,432 25,704,849 24,979,768 25,411,112 25,924,562 25,140,615 23,432,565 19,368,765 18,423,244 17,900,739 Charges for services 817,607 811,590 846,087 866,688 835,105 783,018 654,059 625,281 668,659 743,826 Intergovernmental 1,191,835 1,148,362 1,091,324 1,086,377 1,565,348 1,676,783 1,529,879 1,192,724 1,029,307 1,186,306 Grants 1,699,399 2,992,519 2,062,554 5,405,810 1,673,936 6,089,711 5,797,500 3,758,041 4,002,721 4,900,775 Interest 162,580 205,837 121,246 225,251 419,103 540.204 402,943 251,302 190,350 316,794 Miscellaneous 1,902,075 1,790,890 2,653,382 2,250,344 1,944,310 1,832,161 1,844,285 1,377,175 3,781,034 1,803,408 Total revenues 38,870,536 38,877,558 38,081,101 41.113,364 38,501,528 42,106,561 39,865,917 32,589,858 33,966,544 32,625,719 Expenditures: General government 5,117,194 5,151,370 5,277,916 4,726,435 5,051,374 4,763,839 4,286,431 4,171.662 3,891,251 3,943,031 Public safety 18,479,428 16,854,136 15,999,437 15,599,613 15.696,728 14,759.735 14,366,846 14,376,161 12,963,685 12.535,382 Public service 5,596,702 6,446,503 5,984,115 7,855,846 7,935,188 7,226,542 7,418,656 5,947,105 6,914,523 5,995,396 Parks and recreation 2,677,781 2,781,663 2.582,382 1,490,732 1,298,329 1,192,727 1,044,299 1,045,024 1,026,297 975,361 Planning and development 2,216,665 1.680,297 1,868,369 1,811,083 803.976 2,424.198 2,545.227 2,267,774 2,570,473 2,204,395 Other 516,534 486,239 847,188 514,488 520,611 526,238 481,690 462,099 2,343,844 645,653 !.. Capital outlay 2,104,993 5,121,682 8,324,312 8,580,910 4.826.983 6,504,491 5,003,091 4,870,136 10,987,184 4,172,978 N I Debt service: Principal requirement 1,434.246 2,233,588 1,020,585 830,682 880,887 782,870 594.047 552.938 428,613 379,229 Interest and fiscal requirement 1,114,852 1,519,329 1.077,128 1,003,439 1,051,008 1.108,385 949,537 745,676 471,625 428,578 Total expenditures 39,258,395 42,274,807 42,981,432 42,413,228 38,065,084 39,289,025 36,689,824 34,438,575 41,597,495 31,280,003 Other Financing Sources (Uses): Bonds issued 6,645,000 1,718,605 6,100,000 5,000,000 Long-term debt draws 101,983 366,039 1,222,390 Long-term debt issued 258,391 69,032 246,667 275,000 3,500,000 Capital lease 405,796 405,796 405,796 405,796 371,979 Transfers in 5,888,847 8,455,433 9.722,852 5.928,413 6,241,886 5,209,977 6,034,070 3,394,420 3,939,188 2,074,459 Transfers out (5,809,539) (8,201,253) (9,893,709) (6,150,847) (7 ,086,517) (5,556,722) (12,681 '180) (4,712,171) (5,295,576) (3,167,686) Total other financing sources (uses) 587,087 1,026,015 8,360,720 1,970,999 (472,652) (100,078) (547,110) (1,042,751) 7,143,612 ( 1 ,093,227) NET CHANGE IN FUND BALANCES $ 199,228 $ (2,371 ,234) $ 3,460,389 $ 671,135 $ (36,208) $ 2,717,458 $ 2,628,983 $ (2,891 ,468) $ (487,339) $ 252,489 Capital outlay (2) $ 2,156,290 $ 4,833,547 $ 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 6.87% 10.02% 6.13% 4.64% 5.49% 5.46% 4.69% 4.26% 2.77% 2.75% (1) The City implemented GASB 34, the new reponing standard, in fiscal year 2003. (2) For repons after fiscal year 2002, capital outlay is reported on the Reconciliation of tire Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to tire Statements of Activitie.~. I -N N I TABLES CITY OF PADUCAH, KENTUCKY ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS Assessed Value Estimated Fiscal Real Estate Personal Actual Year Commercial Residential Property Franchise Total Value 2003 $ 592,033,879 $461,336,810 $453,327,389 $79,952,984 $ I ,586,65 I ,062 $1 ,647,809,422 2004 602,788,179 484,958,897 438,024,336 73,121,063 I ,598,892,475 I ,661 ,522,546 2005 622,478,658 500,350,485 425,304,684 74,460,202 I ,622,594,029 I ,684,469,469 2006 636,606,837 525,613,365 452,475,748 74,683,129 1,689,379,079 1 '750,930,676 2007 692,018,288 56 I , 151 ,216 482,481,332 51,455,1 I2 I,787,105,948 I ,847,595,428 2008 748,189,877 603,688,455 481 ,049,523 74,068,797 1 ,906,996,652 I ,970,156,891 2009 776,876,510 645,672,462 526,966,182 56,333,800 2,005,848,954 2,069,450,607 2010 797,902,456 659,381,375 495,273,730 57,459,000 2,0 I 0,0 16,561 2,076,961 ,686 2011 780,357,859 670,841 ,459 536,894,082 46,722,282 2,034,815,682 2,1 03, I 20,249 2012 781,685,815 685,984,380 524,400,400 61,500,830 2,053,571 ,425 2,122,076,341 Source: McCracken County Property Valuation Administrator Notes: Property in McCracken county is reassessed once every four years on average. Percent Total Assessed Direct To Tax Estimated Rate Value Exemptions 0.327 96.3% $60,184,497 0.326 96.2% 61,656,208 0.325 96.3% 60,901,557 0.325 96.5% 61,551,597 0.307 96.7% 60,489,480 0.287 96.8% 63,160,239 0.288 96.9% 63,601,653 0.286 96.8% 66,945,125 0.288 96.8% 68,304,567 0.287 96.8% 68,504,916 TABLE6 CITY OF PADUCAH, KENTUCKY PROPERTY TAX RATES-DIRECT AND OVERLAPPING GOVERNMENTS (PER $100 OF ASSESSED VALUE) LAST TEN FISCAL YEARS City Direct 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 2003 0.300 0.390 0.327 0.396 0.396 0.598 0.603 0.022 0.022 0.196 0.221 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 I -N 0.390 0.433 0.619 0.020 0.021 0.197 0.236 v.> 2006 0.300 0.325 0.433 0.631 I 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 2011 0.250 0.390 0.288 0.504 0.504 0.711 0.711 0.016 0.020 0.095 0.098 2012 0.250 0.390 0.287 0.504 0.504 0.747 0.747 0.018 0.030 0.098 0.119 Source: McCracken County Property Valuation Administrator and City Tax Levy Ordinance. Taxpayer Kentucky Oaks Mall Ducmall LLC Paducah Medical Investors Wai-Mart Real Estate Business Sams Real Estate Business Trust Computer Services Inc Wal-Mart Store USF Propco I LLC Lowes Home Centers, Inc. Brooks Properties, Inc. Lourdes Medical Pavilion Drury Inns, Inc. Lowe's TOTALS TABLE7 CITY OF PADUCAH, KENTUCKY PRINCIPAL TAXPAYERS -PROPERTY TAX CURRENT YEAR AND NINE YEARS AGO (1) Assessed Valuation 2012 (1) Percentage of Total Assessed Valuation (2) Assessed Valuation $ 50,900,262 14,374,800 13,440,090 10,646,400 2.48% 0.70% 0.65% 0.52% 0.45% 0.44% 0.44% 0.40% 0.40% 0.38% 0.00% 0.00% 0.00% $ 41,626,900 9,222,955 9,083,185 9,000,000 8,156,900 8,134,350 7,800,000 $140,758,942 6.86% 13,440,090 14,257,212 33,851,922 19,511,911 13,266,765 13,669,186 $149,623,986 (1) Source-Property Valuation Administration; Assessed value as of January 1, 2011. (2) Source-Property Valuation Administration; Assessed value as of January I, 2002. -124- 2003 (2) Percentage of Total Assessed Valuation 2.99% 0.00% 0.97% 0.00% 0.00% 1.03% 2.43% 0.00% 0.00% 0.00% 1.40% 0.95% 0.98% 10.75% TABLES CITY OF PADUCAH, KENTUCKY SECURED TAX LEVIES AND COLLECTIONS* LAST TEN FISCAL YEARS Collected within the Fiscal Year of the Levy Total Collections to Date Fiscal (1) Year Taxes Levied (1) Percent of Collections Percent of Ended for the Amount of Levy in Subsequent Total Levy June 30, Fiscal Year Collections Collected Years Collections Collected 2003 $3,667,689 $3,414,329 93.1% $ 244,649 $ 3,658,978 99.8% 2004 3,800,967 3,685,957 97.0% 105,579 3,791,536 99.8% 2005 3,834,706 3,762,592 98.1% 62,532 3,825,124 99.8% 2006 4,014,042 3,911,868 97.5% 90,078 4,001,946 99.7% 2007 4,000,362 3,855,679 96.4% 130,291 3,985,970 99.6% 2008 3,974,933 3,814,940 96.0% 144,682 3,959,622 99.6% 2009 4,201,796 4,017,032 95.6% 156,868 4,173,900 99.3% 2010 4,258,210 4,131,454 97.0% 94,305 4,225,759 99.2% 2011 4,199,308 4,110,973 97.9% 41,447 4,152,420 98.9% 2012 4,233,693 4,119,689 97.3% 4,119,689 97.3% (I) Includes current year rea] and persona] property tax. * Source -City of Paducah Finance Department. -125- TABLE9 CITY OF PADUCAH, KENTUCKY EMPLOYEE LICENSE TAX COLLECTIONS LAST TEN FISCAL YEARS Fiscal Year 2003 2004 2005 2006 2007 2008 2009 20IO 20II 20I2 (1) Taxes Collected $ 10,30I ,23I 10,6I6,222 II,l83,I57 I4,947,835 16,258,946 16,535,542 16,584,618 16,384,509 17,345,034 18,095,I82 $I48,252,276 Direct Tax Rate 1.50% 1.50% 1.50% 2.00% (2) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% (I) Source -City of Paducah Finance Department -Actual collections during the fiscal year. (2) Effective October I, 2005, employee license tax rate increased from 1.5% to 2.0%. -I26- Taxpayers By Range $0-$50,000 $50,00 1 -$100,000 $100,001 -$500,000 Greater than $500,000 TOTALS Taxpayers By Range $0-$50,000 $50,001 -$100,000 $100,001 -$500,000 Greater than $500,000 TOTALS TABLE 10 CITY OF PADUCAH, KENTUCKY PRINCIPAL EMPLOYEE LICENSE TAXPAYERS CURRENT YEAR AND SIX YEARS AGO* 2012 (1) Number of Percentage Taxes Filers of Total Collected 2,466 97.82% $ 8,496,955 31 1.23% 2,198,285 22 0.87% 4,363,850 2 0.08% 3,036,092 2,521 100.00% $18,095,182 2006 (1) Number of Percentage Taxes Filers of Total Collected 1,603 97.80% $ 7,462,359 19 1.16% 1,326,451 15 0.92% 2,907,406 2 0.12% 1,879,464 1,639 100.00% $13,575,680 ( 1) Source -City of Paducah Finance Department -Actual collections during the fiscal year. *Principal employee license taxpayers six years ago is the earliest date this statistic is available. -127- Percentage of Total Employee License Tax 46.96% 12.15% 24.11% 16.78% 100.00% Percentage of Total Employee License Tax 54.97% 9.77% 21.42% 13.84% 100.00% I -N 00 I Net General Public Fiscal Obligation Improvement Year Bonds Debt 2003 $ 8,803,949 $ 2004 13,589,757 3,428,855 2005 13,210,195 3,503,274 2006 18,877,636 3,319,227 2007 18,278,164 3,320,522 2008 17,614,952 2,946,303 2009 19,706,394 5,187,262 2010 25,568,996 5,808,267 2011 24,805,676 4,910,742 2012 23,616,405 7,320,328 TABLE 11 CITY OF PADUCAH, KENTUCKY RATIO OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS Net Net Public Refunding Total Capital Improvement Revenue Primary Lease Debt Bonds Government $79,825 $ $ $ 8,883,774 17,018,612 16,713,469 22,196,863 21,598,686 20,561,255 24,893,656 31,377,263 29,716,418 30,936,733 Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements. (1) Ratio of Net Debt to Actual Value 0.54 1.02 0.99 1.27 1.17 1.04 1.20 1.51 1.41 1.46 (I) 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 (3) Net Debt as (2) Percentage Net of Personal Debt Per Income Capita 1.83% $ 338 3.51% 647 3.45% 635 4.58% 844 4.46% 821 4.24% 782 5.14% 946 6.48% I ,193 5.91% 1,188 6.15% 1,236 ~ N 'P Police and Convention and Fire Pension Fiscal Art Center Fund Year Bonds Bonds 2003 $8,850,000 $ 2004 8,620,000 2005 8,380,000 2006 8,130,000 6,100,000 2007 7,870,000 5,925,000 2008 7,600,000 5,740,000 2009 7,320,000 5,545,000 2010 7,030,000 5,340,000 2011 7,040,000 5,125,000 2012 6,630,000 4,895,000 TABLE12 CITY OF PADUCAH, KENTUCKY RATIO OF NET GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS General Bonded Debt Outstanding Infiniti Public Less Media Flood wall Improvement Resources Building Rehabilitation Project Restricted for Bonds Bonds Bonds Debt Service $ $ $ $ 46,051 5,000,000 30,246 4,840,000 9,805 4,680,000 32,364 4,515,000 31,836 4,340,000 65,048 4,160,000 2,774,638 93,244 3,975,000 2,671,440 6,645,000 92,444 3,780,000 2,564,948 6,370,000 74,272 3,571,283 2,455,210 6,100,000 35,088 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) Ratio of Net (2) Bonds to Net Actual Bonds Per Total Value Capita $ 8,803,949 0.53 $ 335 13,589,754 0.82 517 13,210,195 0.78 502 18,877,636 1.08 718 18,278,164 0.99 695 17,614,952 0.89 670 19,706,394 0.95 749 25,568,996 1.23 972 24,805,676 1.18 991 23,616,405 1.1 1 944 TABLE 13 CITY OF PADUCAH, KENTUCKY DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT AS OF JUNE 30, 2012 (1) Percentage Net Debt Applicable Outstanding to the City City of Paducah $ 30,936,733 100.00% Paducah Independent School District 4 7,227,403 * 100.00% McCracken County 19,768,049 * 45.60% McCracken County Board of Education 77,347,922 * 30.90% Overlapping debt 144,343,374 TOTAL DIRECT AND OVERLAPPING DEBT $175,280,107 Estimated Share of Direct and Overlapping Debt $ 30,936,733 47,227,403 9,014,230 23,900,508 80,142,141 $111,078,874 ( 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. -130- Net assessed value Add exemption Total assessed value Debt limit -I 0% of total assessed (I) Debt outstanding: General obligation bonds outstanding Note payable Less debt not subject to limit Gross bonded debt Less amount available in debt service funds Net bonded indebtedness subject to limit LEGAL DEBT MARGIN 2012 2011 2010 TABLE14 CITY OF PADUCAH, KENTUCKY LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS Fiscal Year 2009 2008 2007 2006 2005 $ 23.651 ,493 7,320,328 30,971,821 35.088 2004 $ 2,053,571 ,425 68,504,916 $2.122,076,341 $ 212,207,634 30,936,733 $ 181,270,901 2003 Debt limit $ 212.207,634 $ 210,312,025 $ 207,696,169 $ 206,945,061 $ 197,015,689 $ 182,759,543 $ 175,093,068 $ 168,349,559 $ 166,054,868 $ 164,683.556 Total net debt applicabletolimit 30,936,733 29,716.418 31.377,263 24,893,656 20,561,255 21.598,686 22.196,863 16,713,469 17,018,612 8,883,774 LEGAL DEBT MARGIN $ 181.270,901 $ 180,595,607 $ 176,318,906 $ 182,051,405 $ 176,454,434 $ 161, 160,857 $ 152,896,205 $ 151 ,636,090 $ 149,036,256 $ 155,799,782 Total net debt applicable to the limited as a percentage of debt limit 14.58% 14.13% 15.11% 12.03% 10.44% 11.82% 12.68% 9.93% 10.25% (I) "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." 5.39% TABLE 15 CITY OF PADUCAH, KENTUCKY DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS (1) (1) (1) (1) (2) (3) Personal Per Capita Median School Unemployment Fiscal Year Population Income Income Age Enrollment Rate 2002-2003 26,307 $484,496,0 19 $I8,417 39.9 2,887 7.2% 2003-2004 26,307 484,496,0 19 I8,417 39.9 2,977 5.8% 2004-2005 26,307 484,496,019 I8,417 39.9 2,8I9 6.4% 2005-2006 26,307 484,496,0 I9 18,4I7 39.9 2,834 5.7% 2006-2007 26,307 484,496,0 I9 18,417 39.9 2,804 5.6% 2007-2008 26,307 484,469,019 18,417 39.9 2,832 6.I% 2008-2009 26,307 484,469,0I9 I8,4I7 39.9 2,774 9.3% 2009-20IO 26,307 484,469,0 19 I8,417 39.9 2,659 8.5% 2010-2011 25,024 503,179,300 20,430 41.4 2,789 8.7% 20II-20I2 25,024 503,179,300 20,430 41.4 2,682 8.0% Sources: (I) Bureau of the Census Count -20 I 0, 2000 (2) Board of Education; represents elementary and secondary public schools. (3) Kentucky Cabinet for Human Resources, Department for Employment Services. -132- I -VJ VJ I Employer Western Baptist Hospital Lourdes Hospital Wai-Mart Paducah Public Schools West Kentucky Community and Technical College City of Paducah State of Kentucky LYNX Services Paxton Media Group Computer Services, Inc. TOTALS (I) Source -City of Paducah Finance Department TABLE 16 CITY OF PADUCAH, KENTUCKY PRINCIPAL EMPLOYERS CURRENT YEAR AND SIX YEARS AGO* Employees (1) 1794 1541 1098 554 507 391 322 266 249 237 6,959 2012 Percentage of Total Employment (2) 6.03% 5.18% 3.69% 1.86% 1.70% 1.31% 1.08% 0.89% 0.84% 0.80o/o 23.38% Employees (1) 1,660 1,500 570 600 270 380 390 390 285 280 6,325 (2) State of Kentucky -Office of Employment and Training. Ratio based on employment within County of McCracken. * Principal employers six years ago is the earliest date this statistic is available. 2006 Percentage of Total Employment (2) 5.55% 5.01% 2.01% 1.91% 0.90% 1.27% 1.30% 1.30% 0.95% 0.94% 21.14% TABLE17 CITY OF PADUCAH, KENTUCKY CITY FULL-TIME EMPLOYEES BY FUNCTION* Last Ten Fiscal Years Fiscal Year 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 Governmental Activities General government General administration 12 12 12 12 12 12 12 11 11 11 Finance 11 14 14 17 14 14 14 13 13 13 Inspection 11 11 10 13 13 13 12 12 12 12 Information systems 6 6 6 4 4 4 3 3 3 3 Risk/Human resources 3 1 1 1 4 4 4 4 3 3 Public safety Police 90 90 90 93 93 93 93 96 94 95 Fire 64.5 64 65 69 69 71 76 75 76 76 Public service Streets 23 23 23 29 29 30 31 28 28 28 I Facilities 11.5 14 34 36 35 34 35 38 39 39 -w ~ Engineering 7.6 7 5 8 9 9 9 9 8 8 I Other 5 6 4 6 6 6 4 4 2 2 Parks and recreation 24 24 7 7 7 7 7 9 9 8 Planning and development 9 9 9 10 11 I I 11 1 I 11 11 Other Paducah Riverfront Dev. Authority I 0 0 0 0 0 0 0 0 0 Renaissance 4 5 3 5 0 0 0 0 0 0 Fleet maintenance 6.5 6 8 6 7 7 7 7 6 6 Business-tJ!.ee Activities Solid waste 25.4 26 27 27 27 27 29 29 29 29 TOTAL PRIMARY GOVERNMENT 314.5 318 318 343 340 342 347 349 344 344 * Employee budget census. TABLEtS CITY OF PADUCAH, KENTUCKY OPERATING INDICATORS BY FUNCTION** Last Ten Fiscal Years 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 General government Building and electrical permits issued 1,232 1,239 1,263 I, 179 1,203 1,411 1,362 1,376 * * Business licenses issued 3,956 3,254 3,397 3,691 3,507 3,500 3,700 * * * Public safety Police Adult arrests 2,753 3,564 3,859 4,454 4,170 5,012 3,827 * * * Murder 3 3 I 5 * * * Rape 14 22 12 20 15 18 15 * * * Robberies 14 31 56 41 49 42 35 * * * Burglary 123 155 245 169 203 208 211 * * * Auto theft 47 54 62 57 60 117 104 * * * Arson 7 6 7 7 8 16 7 * * * Traffic accidents 1,666 1,762 1,774 1,368 1,519 1,949 1,815 * * * Traffic violations 8,573 7,701 7,240 9,143 7,109 7,323 7,468 * * * Fire Emergency responses 3,164 3,181 2,603 3,305 2,603 2,456 2,546 3,219 3,638 3,569 !.. Fires extinguished 138 122 133 136 102 163 181 176 189 198 w "f Structure fires 53 37 49 57 49 40 53 49 64 70 Incidents with reported losses 89 73 89 85 70 80 91 97 106 111 Medical/rescue 2,270 2,133 1,690 1,616 1,506 1,369 1,589 1,997 2,266 2,290 Tours/in-services/car seats 524 671 676 907 699 485 485 485 485 485 Training man hours 7,232 7,033 8,493 7,716 4,344 1,183 I ,418 1,188 965 1,058 Inspections I ,417 1,063 985 1,183 1,449 * * * * * Refuse collection Residential Refuse collected (tons 34 34 38 32 25 28 34 * * * per day) Customers served 9,488 9,568 9,445 9,435 9,446 9,388 9,368 * * * Commercial Refuse collected (tons 71 71 70 75 83 85 84 * * * per day) Customers served 803 806 810 810 821 832 801 * * * Public service 911 dispatches 79,333 82,268 79,768 81,525 83,871 76,815 83,348 85,273 91,408 92,698 Police 43,686 44,794 42,496 40,921 43,420 41,887 47,091 48,275 53,504 54,521 Fire 3,189 3,226 2,702 2,490 2,720 2,399 2,907 3,424 4,190 4,058 Other 32,458 34,248 34,570 38,114 37,731 32,529 33,350 33,574 33,714 34,119 * Information not available. ** Information from city departments. TABLE19 CITY OF PADUCAH, KENTUCKY CAPITAL ASSET STATISTICS BY FUNCTION* Last Ten Fiscal Years Fiscal Year 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 Public safety Police Stations Fire Stations 5 5 5 5 5 5 5 5 5 5 Refuse collection Collection trucks Residential IO 9 9 7 10 9 8 8 # # Commercial 4 4 5 4 5 5 4 4 # # Other public works Streets (miles paved) 2I8 218 2I8 216 216 2I6 214 2I4 213 209 I Sidewalks (miles) 47 47 47 45 45 45 45 45 45 -45 w 0\ Traffic signals 13 13 13 12 1I II I1 I1 10 0 I Parks and recreation Parks 27 27 27 27 27 27 18 18 18 18 Acreage 1290 1290 1290 960 960 960 325 325 325 325 Community centers 2 2 1 1 I 1 1 I 1 1 Swimming pools 1 1 1 1 1 I I 1 1 3 Public tennis courts 6 6 6 6 6 6 6 6 6 6 Public golf courses 2 2 2 2 2 2 2 2 2 2 # Information not available. * Information from city departments. CITY OF PADUCAH, KENTUCKY SINGLE AUDIT SECTION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2012 CITY OF PADUCAH, KENTUCKY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2012 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 Edward Byrne Memorial Justice Assistance Grant Program ARRA -Community Oriented Policing Services Total Department of Justice Department of Homeland Security: 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 Transportation: State and Community Highway Safety State and Community Highway Safety Total Department of Transportation Department of Interior: Passed-through National Park Service: Preserve America Grant Program Total Department of Interior TOTAL EXPENDITURES OF FEDERAL AWARDS Federal CFDA Number 14.871 14.228 14.239 16.607 16.738 16.710 97.067 97.067 97.067 20.600 20.600 15.904 See accompanying notes to schedule of expenditures of federal awards. -137- Pass-Through Grantor Number N/A 05-019 GF12-0198-01 N/A 20 11-DJ-BX-3048 2009-RK-WX-0377 P02 094 1000002706 I P02 094 1 000002289 1 P02 094 1000002967 1 PT-11-36 PT-12-40 21-11-31924 Amount Expenditures $1,631,929 560,355 38,000 2,230,284 3,163 23,121 146,857 173,141 54,848 13,041 60,000 127,889 19,887 37,840 57,727 4,950 4,950 $2,593,991 CITY OF PADUCAH, KENTUCKY NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL A WARDS FOR THE YEAR ENDED JUNE 30, 2012 Note 1-Basis ofPresentation: The accompanying schedule of expenditures of federal awards includes the federal grant activity of the City of Paducah and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the financial statements. Note 2 -Subrecipients: The City of Paducah provided federal awards to subrecipients as follows: Program Title Four Rivers Recovery Center -138- Federal CFDA Number 14.228 Amount Provided $560,355 THIS PAGE INTENTIONALLY LEFT BLANK J. DAVID BAILEY. Ill c. SUZETTE CRONCH ROGER G. HARRIS MICHAEL F. KARNES ROBERT R. ROBERTSON MARK A. THOMAS G. LEON WILLIAMS. 1926-2004 H. WILLIAM LENTZ. 1925-2007 J. RICHARD WALKER JERRY G. SEVERNS WILLIAMS, WILLIAMS & LENTZ, LLP CERTIFIED PUBLIC ACCOUNTANTS 601 JEFFERSON PADUCAH,KENTUCKY42001 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 Honorable William F. Paxton, Mayor Members of the Board of Commissioners City of Paducah Paducah, Kentucky MAILING AQQRESS POST OFFICE BOX 2500 PADUCAH, KY 42002·2500 ~ 270-443-3643 EM 270-444·0652 We have audited the financial statements of the governmental acttvtttes, 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, 2012, which collectively comprise the City of Paducah, Kentucky's basic financial statements and have issued our report thereon dated December 11, 2012. 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 Management of the City of Paducah, Kentucky, is responsible for establishing and maintaining effective 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. -139- 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. We noted certain matters that we reported to management of the City of Paducah, Kentucky, in a separate letter dated December 11 , 20 12. 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. H~ttJ~~ ~.z.;tJ / d' December 11, 20 12 -140- J. DAVID BAILEY. Ill C. SUZETTE CRONCH ROGER G. HARRIS MICHAEL F. KARNES ROBERT R. ROBERTSON MARK A. THOMAS G.LEONWILUAMS. 1926-2004 H. WILLIAM LENTZ. 1925-2007 J. RICHARD WALKER JERRY G. SEVERNS WILLIAMS, WILLIAMS & LENTZ, LLP CERTIFIED PUBLIC ACCOUNT ANTS 601 JEFFERSON PADUCAH, KENTUCKY 42001 Independent Auditor's Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control Over Compliance in Accordance with OMB Circular A-133 Honorable William F. Paxton, Mayor Members of the Board of Commissioners City of Paducah Paducah, Kentucky Compliance MAILING AQQRESS POST OFFICE BOX 2500 PADUCAH. KY 42002-2500 ~ 27().443.3643 w 270-444·0652 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, 2012. 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 compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 20 12. 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. -141- 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. IU'~~~,;~.z~ / t:YI December II, 20 12 -142- CITY OF PADUCAH, KENTUCKY SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30,2012 A. Summary of Audit Results: 1. The auditor's report expresses an unqualified opinion on the basic financial statements of the City of Paducah, Kentucky. 2. No instances of a significant control deficiency were disclosed during the audit of the basic financial statements of the City of Paducah, Kentucky. 3. No instances of noncompliance material to the basic financial statements of the City of Paducah, Kentucky were disclosed during the audit. 4. No instances of significant deficiencies were disclosed during the audit of the major federal award programs. 5. The auditor's report on compliance for the major federal award programs for the City of Paducah, Kentucky expresses an unqualified opinion. 6. There are no audit findings relative to the major federal awards program to be reported. 7. The programs tested as major programs included: Name Section 8 Housing Choice Vouchers Community Development Block Grant 8. The threshold for distinguishing Types A and B programs was $300,000. 9. The City of Paducah, Kentucky was determined to be a low-risk auditee. B. Findings -Basic Financial Statements Audit: None C. Findings and Questioned Costs -Major Federal Award Programs: None -143- CFDA# 14.871 14.228 CITY OF PADUCAH, KENTUCKY SCHEDULE OF PRIOR AUDIT FINDINGS FOR THE YEAR ENDED JUNE 30, 2012 Findings -Financial Statements Audit: None Findings and Questioned Costs -Major Federal Awards Programs: None -144-