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HomeMy WebLinkAboutJune-30-2014 CITY OF PADUCAH, KENTUCKY COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2014 FINANCE DEPARTMENT CITY OF PADUCAH, KENTUCKY City of Paducah Paducah, Kentucky Comprehensive Annual Financial Report Year Ended June 30, 2014 Issued by the Finance Department CITY OF PADUCAH, KENTUCKY COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2014 TABLE OF CONTENTS Exhibit No. Page No. Introductory Section: Letter of Transmittal 1 - 7 Organizational Chart 8 Principal Officials 9 GFOA Certificate of Achievement 10 Financial Section: Independent Auditor’s Report 11-12 Required Supplementary Information: Management’s Discussion and Analysis 13-28 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position 1 29-30 Statement of Activities 2 31-32 Fund Financial Statements: Governmental Funds: Balance Sheet 3 33-34 Reconciliation of the Governmental Funds Balance Sheet to Statement of Net Position 4 35-36 Statement of Revenues, Expenditures and Changes in Fund Balances 5 37-38 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 6 39-40 Statement of Revenues, Expenditures and Changes - Budget and Actual - General Fund 7 41-44 Statement of Revenues, Expenditures and Changes - Budget and Actual - Special Revenue Investment Fund 8 45 Proprietary Funds: Statement of Net Position 9 46 Statement of Revenues, Expenses and Changes in Fund Net Position 10 47 Statement of Cash Flows 11 48 Fiduciary Funds: Statement of Net Position 12 49 Statement of Changes in Net Position 13 50 Notes to Financial Statements 51-85 Required Supplementary Information: Schedule of Changes in the Police and Firefighters’ Pension Trust Fund’s Net Pension Liability and Related Ratio A-1 86 Schedule of Changes in the Appointive Employees’ Pension Trust Fund’s Net Pension Liability and Related Ratio A-2 87 Schedule of Police and Firefighters’ Pension Trust Fund Contributions and Investment Returns A-3 88 Schedule of Changes in the Appointive Employees’ Pension Trust Fund Contributions and Investment Returns A-4 89 Exhibit No. Page No. Supplementary Information: General Capital Improvements Detail Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual B-1 90 Debt Service Fund Detail Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual B-2 91 Nonmajor Governmental Funds: Combining Balance Sheet B-3 92-93 Combining Statement of Revenues, Expenditures and Changes in Fund Balances B-4 94-95 Detail Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual: Municipal Aid Fund B-5 96 Emergency Communication Service Fund B-6 97 Court Awards Fund B-7 98 Small Grant Fund B-8 99 CDBG Grant Fund B-9 100 Home Grant Fund B-10 101 Special Revenue Bond Fund B-11 102 Nonmajor Proprietary Funds: Nonmajor Enterprise Funds: Combining Statement of Net Position C-1 103 Combining Statement of Revenues, Expenses and Changes in Fund Net Position C-2 104 Combining Statement of Cash Flows C-3 105 Internal Service Funds: Combining Statement of Net Position D-1 106 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position D-2 107 Combining Statement of Cash Flows D-3 108 Fiduciary Funds: Combining Statement of Net Position - Pension Trust Funds E-1 109 Combining Statement of Changes in Net Position - Pension Trust Funds E-2 110 Combining Statement of Net Position - Private-purpose Trust Funds E-3 111 Combining Statement of Changes in Net Position - Private-purpose Trust Funds E-4 112 Statement of Changes in Assets and Liabilities - Agency Funds E-5 113 Table No. Page No. Statistical Section: Net Position by Component 1 114 Changes in Net Position 2 115-116 Fund Balances, Governmental Funds 3 117 Changes in Fund Balances, Governmental Funds 4 118 Assessed and Estimated Actual Value of Taxable Property 5 119 Table No. Page No. Statistical Section: Property Tax Rates - Direct and Overlapping Governments 6 120 Principal Taxpayers 7 121 Secured Tax Levies and Collections 8 122 Employee License Tax Collections 9 123 Principal Employee License Taxpayers 10 124 Ratio of Outstanding Debt by Type 11 125 Ratio of Net General Bonded Debt Outstanding 12 126 Direct and Overlapping Governmental Activities Debt 13 127 Legal Debt Margin Information 14 128 Demographic and Economic Statistics 15 129 Principal Employers 16 130 City Full-Time Employees by Function 17 131 Operating Indicators by Function 18 132 Capital Asset Statistics by Function 19 133 Single Audit Section: Schedule of Expenditures of Federal Awards 134 Notes to the Schedule of Expenditures of Federal Awards 135 Independent Auditor’s 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 136-137 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-133 138-139 Schedule of Findings and Questioned Costs 140 Schedule of Prior Audit Findings 141 CITY OF PADUCAH, KENTUCKY INTRODUCTORY SECTION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2014 December 8, 2014 Honorable Mayor and Commissioners City of Paducah Paducah, Kentucky We are pleased to submit Paducah's Comprehensive Annual Financial Report for the year ended June 30, 2014. 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, 2014, 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. CITY OF PADUCAH Finance Department P.O. Box 2267 Paducah, KY 42002-2267 270-444-8512 - 2 - Economic Development Activities Paducah Economic Development (PED) 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, PED 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, PED 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 Illinois Central). The park is located within the southwest quadrant of the I-24/Cairo Road interchange. In 2007, PED began assembling property to establish Riverport West, an industrial park with rail and river access in western McCracken County. So far, 229 acres have been purchased. Churches And Schools A relatively strong religious base is evident in the community, as demonstrated by the many churches in Paducah. Numerous churches, representing many of the major denominations, are located within the City. Several area churches offer televised activities as a convenience to those who do not attend church. Elementary and secondary education in Paducah is provided by the Paducah Independent School System, the McCracken County School System, Community Christian Academy, and by the St. Mary’s Parochial School System. 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. In 2010, a new 65,000 square feet 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 Paducah Economic Development to construct an approximately 40,000 square foot educational building to serve as their Paducah campus. Classes began at the Paducah campus in 2014. 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 over 3,000 persons. - 3 - 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 12th 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 corner 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 $35,000 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. - 4 - The ‘Luther F. Carson Four Rivers Center for the Performing Arts’ 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 supplement this community resource. 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 307 full-time employees as of June 30, 2014. 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 City has one component unit that has been presented as a discrete unit to emphasize that it is legally separate from the City. Paducah Water Works is included in the City’s financial statements because of its financial relationship with the City. The City provides a full range of municipal services, including police and fire protection; maintenance of streets and infrastructure; sanitation services; storm sewer services; cultural events and recreation activities. Accounting System The City’s accounting system is organized on the basis of separate funds, each of which is considered to be a separate accounting entity. The financial activities of each fund generate a separate set of self- balancing accounts, which comprise its assets, liabilities, fund equity, revenues, and expenditures/expenses. Municipal resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The City’s accounting records for the governmental funds and agency funds are maintained on a modified accrual basis, with revenues being recorded when “measurable and available” and expenditures being recorded when the services or goods are received and the liabilities are incurred. Accounting records for - 5 - 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. Because the cost of a control should not exceed the benefits to be derived, the objective of these internal controls is to provide reasonable, rather than absolute assurance that the financial statements are free of any material misstatements. 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 FY2014, a few 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 FY2014 this contribution was $417 thousand. This amount was $477 thousand in FY2013. Reserve Requirement. As part of the City’s annual budget process, financial policies are reviewed and amended as necessary. In FY2014, in conjunction with the approval of the annual budget, the General Fund restricted reserve requirement was raised from 8% to 10%. LONG-TERM FINANCIAL PLANNING On October 1, 2005, the City’s payroll tax was increased ½ cent. As a result of the payroll tax increase, the City Commission created the Investment Fund. The Investment Fund is funded with the ½ cent increase and is dedicated to the following purposes: community redevelopment, economic development, infrastructure capital investment, and property tax relief. During the FY2014 budget process, the Commission reviewed numerous decision packages proposed for the Investment Fund Budget; expenditures totaling approximately $5 million were appropriated. - 6 - 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 and levee system protecting a large portion of the Paducah-McCracken area is approaching 70 years of age. It is still in good condition long beyond its design life; however, it is in need of necessary repairs. 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 floodwall. It is anticipated the USACE will cover 65% of the expenses incurred and the City will be responsible for the remainder 35% by payment or credited by in-kind services. The USACE and the City are now initiating Preconstruction Engineering and Design (PED) and preparing plans and specifications for the reconstruction projects as listed within the Feasibility Report. The estimated City’s portion for the total project costs is approximately $6 million. In FY2009, the City proceeded with making the seriously needed repairs to the corrugated metal pipes under the Floodwall by borrowing around $2 million, of which the USACE will allow in-kind credit for this expense. Riverfront Redevelopment Plan. The City’s Riverfront Redevelopment Plan includes proposed improvements that will provide public amenities, recreational facilities & public spaces that will tie the City’s downtown to the Ohio River. The plan includes a public marina, boat ramp, recreational trails and shoreline enhancements, and a steamboat landing, just to name a few. In FY2007 the City was allocated $5.3 million in federal funds for construction of Phase 1 and the Ohio River Boat Launch Project. Environmental assessment and remediation procedures required by the permitting process 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. The boat launch portion of the project has been completed. As of June 30, 2014, Phase 1a of the riverfront development project, which consists of installation of the pilings and the placement of stone for mass fill, was completed. At this time, plans and specifications for Phase 1b are being finalized. This phase will include the gangway, transient dock, wave attenuator, and the completion of the mass fill. Construction for this portion of the project will be bid out during this winter. Once construction is complete, operating costs will be a long- term planning consideration. City Hall Structure. In May 2014, the City Commission heard the findings of an engineering firm they engaged to perform an assessment of City Hall’s structure, layout, security, seismic upgrade requirements, and renovation possibilities. This study shows that the 61,000 square foot building which opened in 1964 is showing significant deterioration in its concrete roof canopy and with many of its electrical and mechanical systems. With these impending costly repairs, the Commission now faces the decision of whether to renovate the existing City Hall building or design a new facility. Either decision that is made will have a significant financial impact. 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 decreased slightly in comparison to the prior year, with 28,469 persons employed (McCracken County) as of June 30, 2014. The June 2014 unemployment rate was 8.2% (McCracken County), which is a decrease from 8.4% in the prior year, and exceeds the June 2014 federal unemployment rate of 6.1%. 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 1,251 for fiscal year 2014 valued at $54 million, which is up nearly $5 million from fiscal year 2013. - 7 - INDEPENDENT AUDIT Kentucky Revised Statute 91 A-040 requires an annual audit of each fund of the City by an auditor of public accounts or a certified public accountant. The independent certified public accounting firm of Kemper CPA Group, LLP, has conducted this audit and their opinion has been included in this report. The City is also subject to the Single Audit Act Amendments of 1996 reporting requirements. The Single Audit Report is included within this report. CERTIFICATE OF ACHIEVEMENT The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Paducah, Kentucky for its comprehensive annual financial report for the fiscal year ended June 30, 2013. This was the twenty-third consecutive year that the City achieved this prestigious award. In order to be awarded a Certificate of Achievement for Excellence in Financial Reporting, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement for Excellence in Financial Reporting is valid for a period of one year only. We believe our current comprehensive annual financial report continues to meet the Certificate of Achievement Program’s requirements, and we are submitting it to GFOA to determine its eligibility for another certificate. ACKNOWLEDGMENTS The preparation of this report on a timely basis could not be accomplished without the efficient and dedicated services of the entire staff of the Finance Department. We wish to express our appreciation to all members of the Finance Department who assisted and contributed to its preparation, and special thanks to Kemper CPA Group, LLP. We also thank the Mayor, 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. CITY OF PADUCAH, KENTUCKY ORGANIZATIONAL CHART CITIZENS OF PADUCAH CITIZENS OF PADUCAH Mayor and Commissioners Advisory Board and Committees City Manager City Attorney Finance Department City Clerk Paducah Riverfront Development Authority Parks Department Fire Department Police Department Planning Department Engineering/ Public Works Department -8- Information Systems Human Resources /Risk Management Paducah Renaissance Alliance CITY OF PADUCAH, KENTUCKY PRINCIPAL OFFICIALS BOARD OF COMMISSIONERS Mayor Gayle Kaler Mayor Pro tem Sandra Wilson Commissioner Richard Abraham Commissioner Carol Gault Commissioner Allan Rhodes, Jr. CITY MANAGER Jeff Pederson Finance Jonathan Perkins, C.P.A. Police Chief Brandon Barnhill Fire Chief Steve Kyle City Engineer/Public Works Richard Murphy Planning Stephen Ervin Parks Services Mark Thompson Paducah Riverfront Development Authority Steve Doolittle Information Services Greg Mueller City Clerk Tammy Brock Human Resources/Risk Manager Cindy Medford Public Information Pam Spencer -9- -10- CITY OF PADUCAH, KENTUCKY FINANCIAL SECTION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2014 INDEPENDENT AUDITOR’S REPORT Honorable Gayle Kaler, Mayor Members of the Board of Commissioners City of Paducah Paducah, Kentucky Report on the Financial Statements 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, as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the following component unit: Paducah Water Works, which represent 100 percent, 100 percent, and 100 percent, respectively, of the assets, net position and revenues of the Component Units column. These financial statements were audited by another auditor whose report has been furnished to us, and our opinions, insofar as it relates to the amounts included for Paducah Water Works, discretely presented component unit, is based solely on the reports of the other 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 financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Paducah, Kentucky, as of June 30, 2014, and the respective changes in financial position, and, where applicable, cash flows thereof and the respective budgetary comparison for the General Fund and the Special Revenue Investment Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. 333 Broadway Suite 1001 Paducah, KY 42001 Phone: (270)443-4400 Fax: (270)443-0963 kempercpa.com Other Matters Required Supplementary Information 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 13-28 and 86-89 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. 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. Other Information 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, budgetary comparison schedules, combining and individual nonmajor fund, budgetary comparison for the nonmajor funds, nonmajor enterprise, internal service and fiduciary financial statements, and statistical section, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the basic financial statements. The budgetary comparison schedules, combining and individual nonmajor fund, budgetary comparison for the nonmajor funds, nonmajor enterprise, internal service and fiduciary financial statements and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the budgetary comparison schedules, combining and individual nonmajor fund, budgetary comparison for the nonmajor funds, nonmajor enterprise, internal service and fiduciary financial statements and the schedule of expenditures of federal awards are fairly stated in all material respects in relation to the basic financial statements 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 8, 2014, on our consideration of the City of Paducah, Kentucky’s internal control over financial reporting and on 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering City of Paducah, Kentucky’s internal control over financial reporting and compliance. Certified Public Accountants and Consultants Paducah, Kentucky December 8, 2014 -12- CITY OF PADUCAH, KENTUCKY REQUIRED SUPPLEMENTARY INFORMATION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2014 - 13 - CITY OF PADUCAH, KENTUCKY MANAGEMENT’S DISCUSSION AND ANALYSIS JUNE 30, 2014 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, 2014. To fully understand the entire scope of the City’s financial activities, this information should be read in conjunction with the letter of transmittal (pages 1-7) and the basic financial statements (pages 29-85) 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 $61.1 million at the close of the 2013-2014 fiscal year. Of this amount, $17.2 million (unrestricted net position) may be used to meet City government’s ongoing obligations to citizens and creditors. Total net position increased $7,689,420. At fiscal year end, City governmental funds reported a combined ending fund balance of $20.8 million. Approximately 19% of this total amount, $3.9 million, is restricted or committed for highways/streets and capital improvements. Assigned fund balance also comprises 19% 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 balance was $12.7 million and is available for spending at the City’s discretion. Cash makes up approximately $8.6 million. When compared to final total appropriations, the General Fund cash balance is 27%. II. Overview of Financial Statements This discussion and analysis serves as an introduction to the City’s basic financial statements, which consist of four components: 1) government-wide financial statements, 2) fund financial statements, 3) component unit financial statements, and 4) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements. A. Government-Wide Financial Statements Government-wide financial statements are designed to provide readers with a broad overview of City finances in a manner similar to private-sector business. The Statement of Net Position presents information on all City assets and liabilities, with the difference between assets and liabilities reported as net position. Monitoring increases and/or decreases in net position 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 position changed during the fiscal year. All net position changes are reported as soon as the underlying event giving rise to the change occurs regardless of the timing of related cash flows. Revenues and expenses are reported in the Statement of Activities for some items that will only result in cash flows in the future (e.g., uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish City functions that are primarily supported by taxes and intergovernmental revenues (governmental activities) from other City functions that are intended to recover all or a significant portion of their costs through user fees and - 14 - 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, and the Civic Center. Government-wide financial statements include not only the City (the primary government), but also a legally separate Paducah Water Works (component unit) for which the City is financially accountable. Financial information for the component unit is reported separately from the financial information presented for the primary government itself. The government-wide financial statements can be found on pages 29-32 of this report. B. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over segregated resources for specific activities or objectives. The City of Paducah, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. City funds can be divided into three categories: 1) Governmental Funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. Unlike government-wide financial statements, however, governmental fund financial statements focus on current sources and uses of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. This information may be useful in evaluating a city’s near- term financing requirements. The City maintains 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 92-102. Readers may better understand the long-term impact of the City’s near-term financing decisions by comparing the narrow-focus governmental funds financial statements with governmental activities in the government-wide financial statements. Exhibit 4 (pages 35-36) and Exhibit 6 (pages 39-40) provide a reconciliation to ease comparison between the fund financial statements and the government-wide statements. The basic governmental fund financial statements can be found on pages 33-40 of this report. 2) 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 - 15 - Where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability or other purposes. The City uses three enterprise funds to account for Solid Waste, Section Eight Housing, and Civic Center. Civic Center receives subsidy from the General Fund. The City’s component unit enterprise is the Paducah Water Works. This component unit, which has its own board of directors, is also an enterprise fund and is shown on pages 29-32. 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 103-105 of this report. Individual data for the internal service funds is likewise presented in the form of combining statements on pages 106- 108 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 three (3) fiduciary funds (Appointive Employees’ Pension, Police and Firefighters’ Retirement, and Cemetery and Parks Trusts Funds) are presented in the form of combining statements on pages 109-112 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 51-85 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 92-112 of this report. - 16 - III. Government-Wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of the City’s financial position. City assets exceeded liabilities by $61.1 million as of June 30, 2014. For FY2014, the largest portion of the City’s net position (67%) 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 position (5%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position (28%) may be used to meet the City’s ongoing obligations to citizens and creditors. As of June 30, 2014, the City reports positive balances of net position, both for the government as a whole, as well as for its separate governmental and business-type activities. City of Paducah, Kentucky Net Position June 30 Governmental Activities Business-Type Activities Total Primary Government 2014 2013 (Restated) 2014 2013 2014 2013 (Restated) Current Assets $ 42,910,707 $ 42,403,160 $ 6,867,521 $ 6,387,185 $ 49,778,228 $ 48,790,345 Capital Assets 50,620,162 42,383,943 1,210,415 1,232,735 51,830,577 43,616,678 Other noncurrent assets 4,333,300 4,906,745 - - 4,333,300 4,906,745 Total Assets 97,864,169 89,693,848 8,077,936 7,619,920 105,942,105 97,313,768 Deferred Outflows of Resources 124,131 49,884 -- 124,131 49,884 Current Liabilities 12,051,940 12,462,807 482,116 468,277 12,534,056 12,931,084 Noncurrent liabilities 30,335,342 28,931,282 2,110,888 2,104,756 32,446,230 31,036,038 Total liabilities 42,387,282 41,394,089 2,593,004 2,573,033 44,980,286 43,967,122 Net position: Invested in capital assets, net of related debt 39,844,772 33,365,112 1,210,415 1,232,735 41,055,187 34,597,847 Restricted 2,374,180 1,586,181 437,483 385,885 2,811,663 1,972,066 Unrestricted 13,382,066 13,398,350 3,837,034 3,428,267 17,219,100 16,826,617 TOTAL NET POSITION $ 55,601,018 $ 48,349,643 $ 5,484,932 $ 5,046,887 $ 61,085,950 $ 53,396,530 - 17 - The exhibit below charts the City’s total net position from the implementation of GASB 34 through the present. Annual increases to total net position began in FY2005 primarily due to the increase of the City’s payroll tax and the creation of the Investment Fund. The additional tax generates approximately $4.5 million in revenue each year, which is used mostly for capital investment and economic development related activities. For FY2014, the City had a significant increase in net position of $7.7 million. The bulk of that increase occurred for the following reasons: This is the second consecutive year of heavy capital development that was funded primarily with grant funding. Over $3.5 million dollars was received and expended in FY2014 for riverfront development activities, including a new boat launch and transient boat dock. At the end of FY2014 the boat launch and Phase 1A of the transient boat dock were substantially complete. In FY2014, the City and McCracken County began the construction of a 30,000 square foot building to be leased to TeleTech Services Corporation. The City borrowed $1.35 million for the project and is acting as the “agent” on this project. The County and Paducah Economic Development together have contributed nearly $2 million toward the project, leading to an increase in net position. A. Analysis of the City’s Operations The following table provides a summary of the City’s operations for the years ended June 30, 2014 and 2013. Governmental activities increased the City’s net position by $7,251,375. Business-type activities increased the City’s net position by $438,045. - 18 - City of Paducah, Kentucky Changes in Net Position June 30 Governmental Activities Business-Type Activities Total Primary Government Revenues: 2014 2013 (Restated) 2014 2013 2014 2013 (Restated) Program revenues: Charges for services $ 3,002,214 $ 2,950,117 $ 4,451,325 $ 4,410,325 $ 7,453,539 $ 7,360,442 Operating grants/ contributions 5,419,715 3,273,483 1,956,995 1,727,238 7,376,710 5,000,721 Capital grants/ contributions 4,136,749 2,165,548 - - 4,136,749 2,165,548 General Revenues: Property taxes 4,622,292 4,502,276 - - 4,622,292 4,502,276 Franchise taxes 178,729 199,134 - - 178,729 199,134 Telecommunications tax 691,916 709,852 - - 691,916 709,852 Insurance premium tax 3,831,792 3,863,464 - - 3,831,792 3,863,464 Vehicle tax 658,289 626,772 - - 658,289 626,772 Bank tax 225,373 243,203 - - 225,373 243,203 Gross receipts license tax 4,444,440 4,391,352 - - 4,444,440 4,391,352 Employee license tax 18,114,396 18,336,124 - - 18,114,396 18,336,124 Other taxes 656,828 654,734 - - 656,828 654,734 Intergovernmental revenue 374,198 365,348 - - 374,198 365,348 Unrestricted investment earnings 232,204 211,306 48,255 49,382 280,459 260,688 Gain on sale of capital assets (482,137) 383,370 13,422 52,710 (468,715) 436,080 Miscellaneous - (82,992)103,260 82,992 103,260 - Total revenues 46,106,998 42,793,091 6,573,257 6,322,647 52,680,255 49,115,738 Expenses: General Government 8,005,619 8,189,896 - - 8,005,619 8,189,896 Public safety 18,439,670 18,204,945 - - 18,439,670 18,204,945 Public service 6,982,536 6,167,510 - - 6,982,536 6,167,510 Park & recreation 2,750,531 2,710,659 - - 2,750,531 2,710,659 Planning & development 1,805,379 1,463,659 - - 1,805,379 1,463,659 Interest on long-term debt 1,084,016 1,066,876 - - 1,084,016 1,066,876 Solid Waste - - 3,985,233 3,967,490 3,985,233 3,967,490 Section Eight Housing - - 1,855,869 2,032,843 1,855,869 2,032,843 Civic Center - - 81,982 78,000 81,982 78,000 TISA - - - - - - Total expenses 39,067,751 37,803,545 5,923,084 6,078,333 44,990,835 43,881,878 Increase (decrease) in Net position before transfers 7,039,247 4,989,546 650,173 244,314 7,689,420 5,233,860 Transfers 212,128 485,138 (212,128) (485,138) - - Change in net position 7,251,375 5,474,684 438,045 (240,824) 7,689,420 5,233,860 Net position, July 1, restated 48,349,643 42,874,959 5,046,887 5,287,711 53,396,530 48,162,670 NET POSITION, JUNE 30 $ 55,601,018 $ 48,349,643 $ 5,484,932 $ 5,046,887 $ 61,085,950 $ 53,396,530 - 19 - B. Governmental Activities As with most municipalities, the City’s governmental activities are heavily subsidized by taxes, with little or no program revenue for each function. The chart below demonstrates the importance of tax revenue to essential functions of the City. The graph below depicts the breakdown of revenue by source for fiscal year 2014. - 20 - In fiscal year 2014, the City derived 72% of its revenue from taxes/licenses. Occupational licenses, which include payroll withholding tax, business licenses, and insurance premium tax is the largest source of income to the City, totaling $26.4 million. This category of revenue decreased .8% from fiscal year 2013. All revenue sources within this category were fairly flat compared to the prior year. Business license was the one category that increased, which was by $53,088 or 1.2%. Insurance premium tax and payroll withholding tax both decreased, by $31,672 (.8%) and $221,728 (1.2%), respectively. None of these changes appear to be the result of one significant taxpayer’s activity, but the result of multiple entities having modest increases/decreases. Property taxes continue to be a stable source of revenue, comprising 10% of total revenue in FY2014. C. Business-Type Activities The chart below shows the operating results for each of the City’s business-type activities. These activities should break-even; that is, the charges for services should be large enough to sustain operations. For fiscal year 2014, business-type activities as a whole had an increase in net position of $438,045. The Solid Waste Fund once again had a positive change in net assets that is consistent with the prior year. Beginning in FY2012, an annual transfer of approximately $250,000 is made from Solid Waste to the General Fund. The Phase II Storm Water Act requires that the City make an effort to curb solid waste from the landfill/sewer system. As a result, three full time street sweepers and eighteen right of way maintenance employees (one day a week) have been assigned to this program. Because these are General Fund employees, the Solid Waste Fund is making monthly interfund transfers to the General Fund to compensate for their use. Analysis of the remaining business-type activities is included in Section IV-B of this report. - 21 - IV. Financial Analysis of the City’s Funds A. Governmental Funds The focus of the City’s governmental funds is to provide information on near-term inflows, outflows and balances of spendable resources. Such information is useful in determining the City’s financing requirements. Unreserved fund balance serves as a useful measure of the City’s net resources available for spending at the end of the fiscal year. At the end of the fiscal year, the City governmental funds reported combined ending fund balances of $20.8 million. In FY2011, the City implemented GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. The redefined categories of fund balance are described below: Restricted fund balance has external limitations on use that may be imposed by creditors, grantors, contributors, or laws and regulations. For example, at the end of the fiscal year, the City had $904,252 of municipal aid funds, which are restricted in use for paving by the State of Kentucky. Committed fund balance has self-imposed limitations enacted by the highest level of decision making that requires formal action at the same level to remove the limitations. The City had $1,758,934 in fund balance committed for capital improvements in the Investment Fund. Assigned fund balance has limitations resulting from intended use; formal action is not required. Approximately 19% of the City’s fund balance is assigned for various purposes, including capital improvements, public safety, and debt service. Unassigned fund balance is the total fund balance in the General Fund in excess of the other fund balance categories. Approximately 61% of total fund balance, $12.7 million is unassigned General Fund fund balance, which is available for spending at the government’s discretion but only up to the amount represented by cash. At year-end there was $8.6 million available as cash; the balance is tied up in other assets including accounts receivable and property taxes collectible. City fiscal policy (Ordinance 2013-6- 8042) requires that an amount not less than 8% of the General Fund’s budgeted expenditures remain - 22 - undesignated in the fund balance, or $2.5 million, which leaves $10.2 million as unreserved for fiscal year 2014. As a measure of General Fund liquidity, readers may compare unassigned (formerly reported as “unreserved”) fund balance to total General Fund expenditures. Unassigned General Fund fund balance ($12.7 million) represents 40% of expenditures and transfers out ($31.4 million). This has remained stable since the implementation of GASB 34, as illustrated in the table below. The Investment Fund had a fund balance of $1.8 million, all of which is committed for capital projects. The Investment Fund was authorized by the City Commission in fiscal year 2005-2006 as a special revenue fund whose use is restricted to property tax reduction, economic development, community redevelopment and capital and infrastructure projects. The Investment Fund captures all manner of financial activities related to revenue from the ½ cent payroll tax increase, effective October 1, 2005. The original FY2014 budget included appropriations in excess of anticipated revenue by $791 thousand to fulfill ongoing commitments as well as fund several large multi-year projects, including future hotel site development, riverfront development, continued support of economic development agencies, street & sidewalk resurfacing, and community development in the Fountain Avenue neighborhood. Actual results of an $830 thousand decrease in fund balance reflect the net result of a few different issues. First of all, payroll tax revenue was slightly less than anticipated, coming in at approximately $147 thousand under the original budget. Secondly, there were a few budgeted expenditures that did not take place, including a $100,000 appropriation for a contractual agreement that did not occur due to the lack of performance by the other party. Fund balance in the General Capital Improvements fund increased by approximately $151 thousand from the prior year to $3.2 million. The increase is due to funds set aside to complete capital projects in FY2015. Capital improvement projects for the year are discussed in Section VI-A of this report. B. Proprietary Funds The City’s proprietary funds provide the same information found in the government-wide financial statements, but in more detail. - 23 - Net position of the respective proprietary funds are: Solid Waste $4,341,775 Section Eight Housing 440,619 Civic Center 142,182 Combined total net asset change for the three funds was an increase of $346,069, broken down as follows: Solid Waste ($311 thousand increase), Section Eight Housing ($48 thousand increase), and Civic Center ($13 thousand decrease). The largest proprietary fund, Solid Waste, was discussed under Business Type Activities (Section III-C). V. General Fund Budgetary Highlights Differences between the original budget and the final budget resulted in a $705 thousand increase in appropriations and can be briefly summarized as follows: Appropriations Department Increase Decrease (In Thousands) General Administration $ - $ 122 Finance - 29 Planning 16 - Radio and Rental Property - 88 Human Rights - 4 Information Systems - 62 Human Resources/Risk Management - 7 Police - 74 Fire - 154 Public Works - 87 Engineering Services 66 - Recreation - 103 PRDA - 4 Other 881 - General Administration had a decrease in appropriations of $122 thousand. The majority of this decrease was due to unutilized contingency funds. Fire and Recreation both experienced decreases in excess of $100 thousand. Recreation had some programs that were below capacity. In addition, they only had their after-school program for the first semester and used year-round employees to staff the program rather than part-time labor. Fire’s decrease resulted from the combination of several line items from their operating budget including a renegotiated phone contract and fewer than expected fleet repair charges, to name a few. Engineering had an increase in appropriations of $66 thousand. There were unanticipated repairs to one of the floodwall pump stations totaling over $160 thousand. This was partially offset by an unfilled position in the administrative division. The primary components of the “Other” department category are operating transfers out, which are typically made to the capital project fund. Large unanticipated interfund transfers were made this year to fund a downtown development project ($200,000) and establish funding for an upcoming hotel project loan fund ($200,000). A transfer was also made to increase the cash reserve in the debt service fund in the amount of $150,000. - 24 - 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, 2014, is $52 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 2014, project and equipment additions totaled over $16 million, with $10 million of that remaining in Construction in Progress at year-end. Some of the largest capital-type projects, in terms of dollars in fiscal year 2014, are shown in the following table: Transient Boat Dock (Construction in Progress) $3,799,187 TeleTech Building (Construction in Progress) 3,057,435 Riverfront – Boat Launch 2,903,021 Noble Park Pool Renovation 1,386,325 (2) Pumper Trucks 838,693 Olivet Church Road ROW & Utility Relocation (Construction in Progress) 517,150 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, City-owned facility improvements, continued neighborhood revitalization, and street and sidewalk rehabilitation are among the projects to be addressed. City of Paducah, Kentucky Capital Assets (Net of Accumulated Depreciation) June 30 Governmental Activities Business-Type Activities Total Primary Government 2014 2013 2014 2013 2014 2013 Land $ 10,408,932 $ 10,376,432 $ 62,152 $ 62,152 $ 10,471,084 $ 10,438,584 Land improvements 3,716,137 2,509,348 - - 3,716,137 2,509,348 Construction in progress 12,299,347 6,527,866 - - 12,299,347 6,527,866 Buildings and improvements 6,162,826 6,868,297 283,659 299,337 6,446,485 7,167,634 Infrastructure 13,413,098 11,905,517 - - 13,413,098 11,905,517 Equipment 1,337,857 1,468,264 463,695 285,541 1,801,552 1,753,805 Furnishings and fixtures 16,165 1,265 - - 16,165 1,265 Vehicles 3,265,800 2,726,954 400,909 585,705 3,666,709 3,312,659 TOTALS $ 50,620,162 $ 42,383,943 $ 1,210,415 $ 1,232,735 $ 51,830,577 $43,616,678 Additional information on City capital assets can be found in Note 3 in the notes to financial statements on pages 66-69. - 25 - B. Long-Term Debt At year-end, the City had $31,225,647 in outstanding bonds and notes payable, compared to $29,275,256 at June 30, 2013 with maturities extending through 2032. Governmental Activities 2014 2013 Kentucky League of Cities – 2003 $1,849,709 $2,024,294 Police/Firefighter Pension Fund Liability – 2006 4,400,000 4,655,000 Floodwall Rehabilitation – 2008 2,224,863 2,341,790 Convention Center Renovation – 2008 2,081,250 2,181,250 Public Improvement Projects – 2010 - 5,825,000 Refinanced Convention Center – 2010 5,805,000 6,220,000 Margaret Hank Agreement – 2011 136,637 151,812 Refinanced Infiniti Media Building – 2011 3,100,000 3,370,000 Murray State University Agreement – 2011 2,451,760 2,563,482 Public Pool Renovations – 2013 1,120,000 - Economic Development – 2013 2,475,000 - Refinanced Public Projects – 2014 5,460,000 - Discounts/Premiums - Net 121,428 (57,372) TOTALS $31,225,647 $29,275,256 During the year, the City had the following new debt issues: Public Improvement Projects – Refinance. In May 2014, a $5.46 million general obligation was issued to refund $5.545 million of outstanding 2010 series bonds. The 2010 bonds were 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 the public portion of a hotel purchase. Economic Development. In September 2013, $2.475 million in general obligation taxable bonds were issued to finance a portion of construction of 1) improvements to an industrial distribution center and 2) an approximately 30,000 square foot building. Each of these buildings are being utilized for separate economic development projects. Public Pool Renovations. In September 2013, $1.12 million in general obligation bonds were issued to finance Noble Park’s pool renovation project. Debt issues prior to July 1, 2013 are described below: Murray State University (MSU) Agreement. In November 2011, the City entered into a general obligation note in the amount of $2,674,093 with McCracken County and MSU to finance the construction of an educational facility to be occupied by Murray State University. Infiniti Media Building – Refinance. In August 2011, a $3.91 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 Infiniti 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. - 26 - Margaret Hank Building Agreement. In June 2011, the City entered into an agreement in the amount of $188,533 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. Convention and Performing Arts Center – Refinance. In August 2010, a $7.165 million general obligation was issued to advance refund $6.725 million of outstanding 2001 series bonds. The 2001 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. 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 50% of the principal amount through an Interlocal Cooperative Agreement between the City and McCracken County. 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. 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. 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). The City’s legal debt limit under §158 of the Kentucky Constitution is 10% of total assessed value of taxable property in Paducah; therefore, the debt limit is $227,059,775. The City’s latest bond rating by Standard & Poor’s is AA-. The City has a relatively 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 2014, only 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 70-74. VII. Other Potentially Significant Matters. A. Police and Fire Pension Bonds – Refinance. In July 2014, the City issued advance refunding bond Series 2014B for refunding of the Police and Firefighters Pension Plan Series 2005 bonds maturing on or after November 1, 2016. B. Hotel/Showroom Renovation. In January 2015, the City plans to issue $2.265 million (Series 2014C) in in general obligation bonds to finance the renovation of convention center space (formerly known as “the showroom”) located at the Julian Carroll Convention Center. Also, in January 2015, the City plans to issue $4.325 million (Series 2014D) in taxable general obligation - 27 - bonds to pay a portion of the costs of the acquisition and construction of a hotel to be located adjacent to the Julian Carroll Convention Center. This hotel will be leased to Paducah Convention Hotel, LLC. C. Post-employment Benefits. Over the years, the City’s contribution to the Kentucky Retirement System (CERS) has seen a substantial rise in costs that has significantly impacted the City’s operating budget. The table and graph below show the actual cost of the City’s contributions to CERS for both Non-Hazardous and Hazardous employees for selected fiscal years 1995, 2005, and 2014. CERS Employer Contributions Non-Hazardous Hazardous FY Rate Amount % Chg Rate Amount % Chg 1995 8.82% $396,690 18.46% $879,995 2005 8.48% $584,660 47% 22.08% $1,541,057 75% 2014 18.89% $1,415,877 142% 35.70% $2,974,471 93% In early spring 2013, the State passed a pension reform bill (Senate Bill 2) to prevent pension costs from escalating even higher. This legislation established a hybrid cash balance plan for participants entering the plan after January 1, 2014, that provides a retirement benefit based on an individual’s accumulated account balance. It also reset the amortization period to a new 30-year period beginning with FY2015. Other highlights include the elimination of automatic cost of living increases for retirees and provisions for retirement “spiking.” However, employer contribution rates will not differ for employees beginning participation after January 1, 2014. The contribution rates will be determined based on all CERS membership, and any excess funds contributed on new employees will be used to pay down the system’s unfunded liability. The City is hopeful that the enactment of this legislation will reduce its required contribution over time. D. Police & Fire Pension Fund (PFPF) Unfunded Liability. In fiscal year 2006, the City issued $6.1 million in general obligation bonds to eliminate the unfunded pension liability. With the sharp decline in value of the national stock market in 2009, the PFPF’s equity investment dropped accordingly. PFPF net assets dropped in 2009 by nearly $3.5 million, or 28.5% of the beginning net assets (July 1, 2008). The Fund still remains in an unfunded position due to these events. The July - 28 - 2014 actuary study shows that the PFPF unfunded pension liability is approximately $3.8 million as the following chart displays. 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, 2014, indicates the minimum actuarially sound contribution for FY2015 will be $391,468. VIII. Requests for Information This financial report is designed to provide a general financial overview for those interested in the City of Paducah government finances. Questions or requests for additional financial information may be addressed to Jonathan Perkins, Finance Director, City of Paducah, 300 South 5th Street, Paducah, KY 42003. CITY OF PADUCAH, KENTUCKY BASIC FINANCIAL STATEMENTS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2014 Exhibit 1 Component Unit Paducah Governmental Business-type Water Works Current Assets:Activities Activities Total Authority Cash and cash equivalents 22,517,630$ 5,599,630$ 28,117,260$ 1,254,787$ Receivables, net: Notes 1,261,375 - 1,261,375 - Accounts 7,064,776 549,858 7,614,634 591,627 Grants 385,872 - 385,872 - Interest 11,492 - 11,492 - Property tax 5,004,528 - 5,004,528 - Accrued unbilled revenues - - - 1,099,201 Internal balances (560,356) 560,356 - - Inventory 1,562,395 - 1,562,395 630,723 Prepaid pension obligation 5,410,532 - 5,410,532 - Prepaid expenses 203,677 157,677 361,354 104,397 Other current assets 48,786 - 48,786 873,089 Total current assets 42,910,707 6,867,521 49,778,228 4,553,824 Noncurrent Assets: Notes receivable 4,333,300 - 4,333,300 - Capital assets: Land and construction in progress 22,708,279 62,152 22,770,431 2,685,360 Depreciable capital assets 27,911,883 1,148,263 29,060,146 45,858,423 Other assets - - - 4,561,661 Total noncurrent assets 54,953,462 1,210,415 56,163,877 53,105,444 Total assets 97,864,169 8,077,936 105,942,105 57,659,268 Deferred Outflows of Resources: Deferred charges on refunding 124,131 - 124,131 Total deferred outflows of resources 124,131 - 124,131 - CITY OF PADUCAH, KENTUCKY STATEMENT OF NET POSITION JUNE 30, 2014 ASSETS -29- Primary Government Component Unit Paducah Governmental Business-type Water Works Current Liabilities:Activities Activities Total Authority Voucher and accounts payable 2,636,630 251,830 2,888,460 747,382 Cash deficit - - - - Line of credit 279,301 - 279,301 - Accrued payables 1,012,302 60,587 1,072,889 782,946 Unearned revenue 4,926,350 79,190 5,005,540 - Accrued compensated absences 1,015,737 90,509 1,106,246 239,106 Accrued interest 103,092 - 103,092 - Notes payable due within one year 417,876 - 417,876 341,179 Bonds payable due within one year 1,660,652 - 1,660,652 - Other current liabilities - - - 233,235 Total current liabilities 12,051,940 482,116 12,534,056 2,343,848 Noncurrent Liabilities: Accrued compensated absences 1,188,223 48,388 1,236,611 - Landfill post-closure costs - 2,062,500 2,062,500 - Notes payable 6,101,480 - 6,101,480 5,948,187 Bonds payable 23,045,639 - 23,045,639 - Total noncurrent liabilities 30,335,342 2,110,888 32,446,230 5,948,187 Total liabilities 42,387,282 2,593,004 44,980,286 8,292,035 Invested in capital assets, net of related debt 39,844,772 1,210,415 41,055,187 42,254,417 Restricted for: Housing and development projects 83,792 437,483 521,275 - Capital projects & infrastructure 2,168,201 - 2,168,201 - Public safety 122,187 - 122,187 - Unrestricted 13,382,066 3,837,034 17,219,100 7,112,816 TOTAL NET POSITION 55,601,018$ 5,484,932$ 61,085,950$ 49,367,233$ See accompanying notes to the basic financial statements. -30- LIABILITIES NET POSITION Primary Government Exhibit 2 FUNCTIONS/PROGRAMS Operating Charges for Grants and Primary Government:Expenses Services Contributions Governmental activities: General government 8,005,619 1,672,552 697,183$ 3,596,995$ Public safety 18,439,670 264,143 769,079 539,754 Public service 6,982,536 960,271 1,468,652 - Parks and recreation 2,750,531 105,248 - - Planning and development 1,805,379 - 2,332,436 - Interest on long-term debt 1,084,016 - 152,365 - Total governmental activities (See Note 1) 39,067,751 3,002,214 5,419,715 4,136,749 Business-type activities: Solid Waste 3,985,233 4,410,059 55,112 - Section Eight Housing 1,855,869 - 1,901,883 - Civic Center 81,982 41,266 - - Total business-type activities 5,923,084 4,451,325 1,956,995 - TOTAL PRIMARY GOVERNMENT 44,990,835$ 7,453,539$ 7,376,710$ 4,136,749$ Component Unit: Paducah Water Works Authority 8,983,272$ 10,387,966$ -$ 430,100$ TOTAL COMPONENT UNITS 8,983,272$ 10,387,966$ -$ 430,100$ General revenues: Taxes and licenses: Property taxes, levied for general purposes Franchise tax Telecommunications tax Insurance premium tax Vehicle tax Bank tax Gross receipts license tax Employee license tax Other taxes Transient room tax Unrestricted investment earnings Gain (loss) on sale of capital assets Miscellaneous Total general revenues Transfers Total general revenues and transfers Change in net position Net position - beginning as restated (Note 10) Net position - ending See accompanying notes to the basic financial statements. CITY OF PADUCAH, KENTUCKY Grants and Contributions FOR THE YEAR ENDED JUNE 30, 2014 STATEMENT OF ACTIVITIES Program Revenues Capital -31- Component Unit Governmental Business-type Paducah Water Activities Activities Total Works Authority (2,038,889)$ -$ (2,038,889)$ -$ (16,866,694) - (16,866,694) - (4,553,613) - (4,553,613) - (2,645,283) - (2,645,283) - 527,057 - 527,057 - (931,651) - (931,651) - (26,509,073) - (26,509,073) - - 479,938 479,938 - - 46,014 46,014 - - (40,716) (40,716) - - 485,236 485,236 - (26,509,073) 485,236 (26,023,837) - - - - 1,834,794 - - - 1,834,794 4,622,292 - 4,622,292 - 178,729 - 178,729 - 691,916 - 691,916 - 3,831,792 - 3,831,792 - 658,289 - 658,289 - 225,373 - 225,373 - 4,444,440 - 4,444,440 - 18,114,396 - 18,114,396 - 656,828 - 656,828 - 374,198 - 374,198 - 232,204 48,255 280,459 15,849 (482,137) 13,422 (468,715) 60,017 - 103,260 103,260 3,759 33,548,320 164,937 33,713,257 79,625 212,128 (212,128) - - 33,760,448 (47,191) 33,713,257 79,625 7,251,375 438,045 7,689,420 1,914,419 48,349,643 5,046,887 53,396,530 47,452,814 55,601,018$ 5,484,932$ 61,085,950$ 49,367,233$ Net (Expense) Revenue and Changes in Net Assets Primary Government -32- Exhibit 3 Special General Fund Assets Cash and cash equivalents 8,610,392$ 1,041,762$ 4,076,872$ Receivables: Accounts 6,767,832 - 914,669 Grants 63,983 - 105,606 Property taxes (net of allowances for uncollectibles)5,073,528 - - Due from other funds 221,069 1,117,172 - Total Assets 20,736,804$ 2,158,934$ 5,097,147$ Liabilities Voucher and accounts payable 660,847$ -$ 1,081,066$ Line of credit - - 164,669 Accrued payroll and payroll taxes 939,410 - - Due to other funds 1,117,172 400,000 500,000 Unearned revenue - other 2,084 - 145,000 Accrued compensated absences 337,499 - - Total liabilities 3,057,012 400,000 1,890,735 Deferred Inflows of Resources Unavailable revenue-property taxes 4,985,182 - - Fund Balances: Restricted for: Highways and streets - - - Public safety - - - Program purposes - - - Capital improvements - - - Committed for: Capital improvements - 1,758,934 - Assigned for: Capital improvements - - 3,206,412 Public safety - - - Debt service - - - Unassigned: General Fund 12,694,610 - - Total fund balances 12,694,610 1,758,934 3,206,412 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES 20,736,804$ 2,158,934$ 5,097,147$ See accompanying notes to the basic financial statements. -33- Fund Improvements CITY OF PADUCAH, KENTUCKY BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2014 Revenue Investment General Capital Debt Service Fund 503,817$ 2,754,276$ 16,987,119$ - 260,612 7,943,113 - 216,283 385,872 - - 5,073,528 - 500,000 1,838,241 503,817$ 3,731,171$ 32,227,873$ -$ 716,257$ 2,458,170$ - 114,633 279,302 - 54,943 994,353 - 172,283 2,189,455 - - 147,084 - - 337,499 - 1,058,116 6,405,863 - - 4,985,182 - 904,252 904,252 - 122,187 122,187 - 83,792 83,792 - 1,263,949 1,263,949 - - 1,758,934 - - 3,206,412 - 298,875 298,875 503,817 - 503,817 - - 12,694,610 503,817 2,673,055 20,836,828 503,817$ 3,731,171$ 32,227,873$ -34- Governmental Nonmajor Governmental Funds Total Funds Exhibit 4 Total fund balance - total governmental funds 20,836,828$ Amounts reported for governmental activities in the Statement of Net Position are different because: 160,038 4,452,500 11,492 1,497,659 5,410,532 50,620,162 2,703 (1,808,457) (Continued) The portion of accrued compensatedabsences not due and payable in the current period, and therefore, not reported in the governmental funds balance sheet. Inventory is not a current financial resource and, therefore, is not reported in the governmental funds balance sheet. -35- Premiums, discounts and deferred charges on refunding debt used in governmental activities are not current financial resources and, therefore, are not reported in the governmental funds balance sheet. Capital assets used in governmentalactivities are not current financial resources and, therefore, are not reported in the governmentalfunds balance sheet. This amount includescapital assets of Internal Service Funds. A prepaid pension obligation is not a current financial resource, and therefore, is not reported in the governmental funds balance sheet. CITY OF PADUCAH, KENTUCKY RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO STATEMENT OF NET POSITION Delinquent property taxes receivable are not reported in the governmental funds balance sheet since they are not considered "available" revenues. Interest receivableon the long-termnotes receivableis not reported on the governmentalfunds balance sheet since neither the note receivable nor the interest is available to pay current period expenditures. JUNE 30, 2014 The long-term notes receivable are not reported in the governmental funds balance sheet since they are not available to pay current period expenditures. Exhibit 4 (Continued) (103,092)$ $ 2,078,528 29,025,692 (31,104,220) 6,462,761$ (277,532) (560,356) 5,624,873 NET POSITION OF GOVERNMENTAL ACTIVITIES 55,601,018$ See accompanying notes to the basic financial statements JUNE 30, 2014 Accrued interest payments on debt are not due and payable in the current period and, therefore, are not reported in the governmental funds balance sheet. business-type activities Long-term liabilities of ($31,104,220) are not due and payable in the current period and, therefore, they are not reported in the governmentalfunds balance sheet. See Note 3 for detail. The long- term liabilities are: CITY OF PADUCAH, KENTUCKY RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO STATEMENT OF NET POSITION -36- Due within one year Due after one year Current assets Net amount allocated to Internal service funds are used by managementto charge the costs of certain activities, such as insurance and fleet management, to individual funds. The assets and liabilities of the Internal Service Funds (net of amount allocated to business-type activities) not included in other reconciling items are: Current liabilities Exhibit 5 Special Revenue General General Investment Capital Revenues:Fund Fund Improvements Taxes 6,297,086$ -$ -$ Licenses 22,517,253 4,469,857 - Charges for services 587,071 - - Intergovernmental - - 1,350,029 Grants 723,957 - 4,050,116 Interest 167,379 - - Property upkeep, rentals, sales and other 1,009,510 3,701 1,314,048 Total revenues 31,302,256 4,473,558 6,714,193 Expenditures: Current operations: General government 4,311,103 - - Public safety 16,802,514 - - Public service 4,802,274 - - Parks and recreation 2,763,773 - - Planning and development - 718,199 - Intergovernmental and other 640,452 - - Capital outlay - - 11,926,435 Debt service: Principal requirement - - - Debt issuance costs - - - Interest requirement - - - Total expenditures 29,320,116 718,199 11,926,435 Excess (deficiency) of revenues over expenditures 1,982,140 3,755,359 (5,212,242) Other Financing Sources (Uses): Proceeds from debt issued - - - Payment to refunded bond escrow agent - - - Premium on debt issued - - - Discount on debt issued - - - Transfers in 490,000 2,500 5,363,404 Transfers out (2,089,095) (4,588,024) - Total other financing sources (uses)(1,599,095) (4,585,524) 5,363,404 Net change in fund balances 383,045 (830,165) 151,162 Fund balances - beginning 12,311,565 2,589,099 3,055,250 Fund balances - ending 12,694,610$ 1,758,934$ 3,206,412$ See accompanying notes to the basic financial statements. -37- CITY OF PADUCAH, KENTUCKY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2014 Debt Service Fund -$ 416,803$ 6,713,889$ - - 26,987,110 - 264,009 851,080 677,255 597,079 2,624,363 84,467 1,065,111 5,923,651 - 32,204 199,583 202,898 741,703 3,271,860 964,620 3,116,909 46,571,536 - - 4,311,103 - 1,672,957 18,475,471 - 1,521,207 6,323,481 - - 2,763,773 - 1,368,328 2,086,527 - - 640,452 - - 11,926,435 1,748,233 - 1,748,233 - 109,292 109,292 1,078,357 8,509 1,086,866 2,826,590 4,680,293 49,471,633 (1,861,970) (1,563,384) (2,900,097) - 9,055,000 9,055,000 - (5,627,447) (5,627,447) - 220,683 220,683 - (53,529) (53,529) 2,011,970 1,280,887 9,148,761 - (2,522,000) (9,199,119) 2,011,970 2,353,594 3,544,349 150,000 790,210 644,252 353,817 1,882,845 20,192,576 503,817$ 2,673,055$ 20,836,828$ -38- Governmental Total FundsFunds Nonmajor Governmental Exhibit 6 Net change in fund balances - total governmental fund 644,252$ Amounts reported for governmental activities in the Statement of Activities are different because: 834,152 (672,725) 11,814,543 (337,954) (27,278) (108,567) (9,055,000) (522,218) (Continued) Proceeds of the issuance of debt provides current financial resources and is reported as an other financing source in governmental funds. CITY OF PADUCAH, KENTUCKY RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES Inventorypurchases require the use of current financial resources and, therefore, are reported as expenditures in governmental funds. Payments on property taxes recognized as revenues when received in the governmental funds. Inventory sales provide current financial resources and are reported as revenues in 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. Only the loss on the disposal of capital assets is reported in the Statement of Activities, whereas in the governmental funds, the proceeds from the sale increases financial resources. Thus, the change in net position differs by the net book value of capital assets disposed. FOR THE YEAR ENDED JUNE 30, 2014 Collections on long-term notes receivables and related interest receivable are revenues in the government funds when collected. Governmental funds report capital outlays as expenditures. However, in the Statement of Activities, the cost of those assets is allocated over their estimated useful lives as depreciationexpense. This is the amount of capital outlays in the current period. This amount includes Internal Service Fund's capital outlays of $970,817. -39- Exhibit 6 (Continued) (3,054,114)$ 7,283,408 31,023 (94,444) (104,555) 1,063,814$ (91,976) Capital Outlays (970,817) 619,832 620,853 CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES 7,251,375$ See accompanying notes to the basic financial statements. -40- Internal service funds are used by management to charge the costs of certain activities, such as insurance and fleet management,to individualfunds. The net revenueof the Internal Service Funds is reported with governmentalactivitiesnet of the amount allocated to business-type activities and depreciation expense. These amounts are as follows: Change in net assets business-type activities Depreciation expense Governmental funds report the effect of bond premiums,discounts and refunding costs when debt is issued, whereas these amounts are deferred and amortized in the Statement of Activities. Net of amount allocated to CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2014 CITY OF PADUCAH, KENTUCKY RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND Long-term accrued compensated absences do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Depreciation expense on capital assets is reported in the government-wide Statementof Activitiesand Changesin Net Assets, but doesnot requirethe use of current financialresources. Therefore,depreciationexpenseis not reported as an expenditurein governmentalfunds. This amount includesInternal ServiceFunds' depreciation expense of $619,832. Principal payments of debt require the use of current financial resources and, therefore, are reported as expenditures in governmental funds. However, principal payments of debt do not affect net assets in the government-wide Statement of Activities. TO THE STATEMENT OF ACTIVITIES Accrued interest payments on debt do not require the use of current financial resources. Accruedinterest is reported as an expenditurein the government-wide Statement of Activities. Exhibit 7 Variance with Final Budget Positive Original Final (Negative) Revenues: Taxes: Real and personal, current year 4,905,500$ 5,096,280$ 5,096,289$ 9$ Real and personal, prior year 145,000 139,865 139,866 1 Franchise 156,000 178,725 178,729 4 Bank taxes 240,000 225,370 225,373 3 In lieu of tax payment 312,000 299,360 299,367 7 Penalty, interest and advertising 44,000 54,990 54,998 8 Paducah Junior College tax collections - 302,460 302,463 3 Total taxes 5,802,500 6,297,050 6,297,085 35 Licenses: Business licenses 4,400,000 4,444,435 4,444,440 5 Employee earnings 13,850,000 13,644,535 13,644,540 5 Comcast fees 302,000 301,850 301,854 4 Penalties 170,000 202,920 202,920 - Alcoholic beverages 121,000 143,660 143,660 - Insurance premium tax 3,500,000 3,831,790 3,831,792 2 Building permits 125,000 130,400 130,401 1 Electrical permits 35,000 29,010 29,010 - Zoning change fees 6,500 5,240 5,244 4 Miscellaneous building and electrical fees 4,250 6,000 6,000 - KJDA payroll rebate (227,000) (222,610) (222,607) 3 Total licenses 22,286,750 22,517,230 22,517,254 24 Charges for services: Tax collection fee 161,000 163,535 163,537 2 Administrative charge 261,720 271,090 271,095 5 Base court revenue 56,000 47,190 47,191 1 Recreation fees 100,000 105,240 105,248 8 Total charges for services 578,720 587,055 587,071 16 (Continued) ActualBudgeted Amounts -41- CITY OF PADUCAH, KENTUCKY GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2014 Amounts STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL Exhibit 7 (Continued) Variance with Final Budget Actual Positive Original Final Amounts (Negative) Grants: Police State Incentive 326,000$ 310,010$ 310,014$ 4$ Fire State Incentive 265,000 260,280 260,281 1 Police supplemental grants 53,500 153,645 153,662 17 Total grants 644,500 723,935 723,957 22 Interest 111,000 167,375 167,379 4 Other: Property rent and sales 685,565 686,230 686,238 8 Property upkeep and maintenance 103,585 121,325 121,328 3 Contractual programs 5,000 3,365 3,369 4 E911 - GIS 26,880 26,880 26,883 3 Miscellaneous 163,000 171,555 171,693 138 Total other 984,030 1,009,355 1,009,511 156 Total revenues 30,407,500 31,302,000 31,302,257 257 Expenditures: General government: General administration: Mayor and Commissioners 182,090 187,625 187,565 60 City Manager 422,725 411,780 411,928 (148) City Clerk 120,670 120,830 120,981 (151) Corporate Counsel 172,520 163,795 163,743 52 Non-departmental 796,845 787,175 787,172 3 Memberships and contingency 123,750 25,605 25,599 6 Civic beautification 3,500 3,205 3,196 9 Total general administration 1,822,100 1,700,015 1,700,184 (169) PRDA 123,725 119,840 119,630 210 Finance: Finance administration 254,275 254,375 254,398 (23) Accounting and payroll 331,250 320,405 320,232 173 Revenue collection 394,055 376,205 375,951 254 Total finance 979,580 950,985 950,581 404 (Continued) CITY OF PADUCAH, KENTUCKY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN Budgeted Amounts GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2014 FUND BALANCE - BUDGET AND ACTUAL -42- Exhibit 7 (Continued) Variance with Final Budget Actual Positive General government:Original Final Amounts (Negative) Planning: Administration 266,475$ 267,930$ 267,783$ 147$ Planning 89,610 88,435 88,413 22 Grants 143,450 137,630 137,367 263 Economic development - 21,660 21,596 64 Total planning 499,535 515,655 515,159 496 Radio and rental property 175,845 88,005 87,972 33 Human rights 41,970 37,460 37,369 91 Information systems 668,170 605,695 605,538 157 Human resources/risk management 302,290 294,940 294,670 270 Total general government 4,613,215 4,312,595 4,311,103 1,492 Public safety: Police: Police administration 833,300 826,970 826,563 407 Patrol 6,343,705 6,240,690 6,240,444 246 Investigations 2,080,445 2,116,270 2,116,236 34 Total police 9,257,450 9,183,930 9,183,243 687 Fire: Fire administration 479,075 473,005 472,910 95 Suppression 6,229,925 6,064,165 6,063,841 324 Prevention and inspection 163,845 164,125 163,925 200 Training 140,130 137,515 137,541 (26) Construction 386,695 379,390 379,347 43 Code enforcement 374,925 401,980 401,707 273 Total fire 7,774,595 7,620,180 7,619,271 909 Total public safety 17,032,045 16,804,110 16,802,514 1,596 Public service: Public works: Street maintenance 1,955,530 1,769,690 1,769,575 115 Street lighting 630,000 764,985 764,983 2 Landscape maintenance 1,126,355 1,090,610 1,090,377 233 Total public works 3,711,885 3,625,285 3,624,935 350 (Continued) STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL CITY OF PADUCAH, KENTUCKY Budgeted Amounts GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2014 -43- Exhibit 7 (Continued) Variance with Final Budget Actual Positive Public service:Original Final Amounts (Negative) Engineering services: Engineering services 561,630$ 476,555$ 476,429$ 126$ Flood control 550,690 701,270 700,910 360 Total engineering services 1,112,320 1,177,825 1,177,339 486 Total public service 4,824,205 4,803,110 4,802,274 836 Parks and recreation: Parks and recreation administration 790,365 784,395 784,232 163 Grounds maintenance 1,481,570 1,457,615 1,457,591 24 Pools and recreation programs 595,495 522,325 521,950 375 Total parks and recreation 2,867,430 2,764,335 2,763,773 562 Intergovernmental and other: Cable authority 81,595 84,050 84,041 9 Mainstreet progra m 448,320 168,615 168,538 77 Leave expense - 85,410 85,409 1 Intergovernmental expense - 302,465 302,463 2 Total intergovernmental and other 529,915 640,540 640,451 89 Total expenditures 29,866,810 29,324,690 29,320,115 4,575 Excess (deficiency) of revenues over expenditures 540,690 1,977,310 1,982,142 4,832 Other financing sources (uses): Operating transfers in 515,000 490,000 490,000 - Operating transfers out (1,228,610) (2,089,105) (2,089,096) 9 Total other financing sources (uses) (713,610) (1,599,105) (1,599,096) 9 Net change in fund balance (172,920) 378,205 383,046 4,841 Fund balance - beginning 12,311,565 12,311,565 12,311,565 - Fund balance - ending 12,138,645$ 12,689,770$ 12,694,611$ 4,841$ See accompanying notes to the basic financial statements. STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL -44- CITY OF PADUCAH, KENTUCKY Budgeted Amounts GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2014 Exhibit 8 Variance with Final Budget Positive Original Final (Negative) Revenues: Licenses: Employee earnings 4,617,000$ 4,469,855$ 4,469,857$ 2$ Total licenses 4,617,000 4,469,855 4,469,857 2 Other: Miscellaneous - 3,700 3,701 1 Total other - 3,700 3,701 1 Total revenues 4,617,000 4,473,555 4,473,558 3 Expenditures: General government: Planning and development: Economic development 886,000 718,200 718,200 - Total expenditures 886,000 718,200 718,200 - Excess (deficiency) of revenues over expenditures 3,731,000 3,755,355 3,755,358 3 Other financing sources (uses): Operating transfers in - 2,500 2,500 - Operating transfers out (4,521,680) (4,588,030) (4,588,024) 6 Total other financing sources (uses) (4,521,680) (4,585,530) (4,585,524) 6 Net change in fund balance (790,680) (830,175) (830,166) 9 Fund balance - beginning 2,589,099 2,589,099 2,589,099 - Fund balance - ending 1,798,419$ 1,758,924$ 1,758,933$ 9$ See accompanying notes to the basic financial statements. ActualBudgeted Amounts -45- Amounts CITY OF PADUCAH, KENTUCKY SPECIAL REVENUE INVESTMENT FUND FOR THE YEAR ENDED JUNE 30, 2014 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL Exhibit 9 Nonmajor Solid Enterprise Current Assets: Waste Funds Totals Cash and cash equivalents 4,971,751$ 627,879$ 5,599,630$ 5,530,512$ Accounts receivable 549,858 - 549,858 263,839 Due from other funds - - - 400,000 Prepaid expenses 157,677 - 157,677 203,677 Inventory - - - 64,733 Total current assets 5,679,286 627,879 6,307,165 6,462,761 Noncurrent Assets: Net capital assets: Land 62,152 - 62,152 - Depreciable capital assets 995,552 152,711 1,148,263 3,265,133 Total noncurrent assets 1,057,704 152,711 1,210,415 3,265,133 Total assets 6,736,990 780,590 7,517,580 9,727,894 Current Liabilities: Voucher and accounts payable 125,388 77,656 203,044 178,459 Accrued payroll and payroll taxes 60,587 - 60,587 17,948 Accrued compensated absences 88,613 1,896 90,509 40,344 Unearned revenue 26,800 52,390 79,190 23,122 Due to other funds - 48,786 48,786 - Total current liabilities 301,388 180,728 482,116 259,873 Noncurrent Liabilities: Landfill post-closure costs 2,062,500 - 2,062,500 - Accrued compensated absences 31,327 17,061 48,388 17,659 Total noncurrent liabilities 2,093,827 17,061 2,110,888 17,659 Total liabilities 2,395,215 197,789 2,593,004 277,532 Invested in capital assets 1,057,704 152,711 1,210,415 3,265,133 Restricted - Housing - 437,483 437,483 - Unrestricted 3,284,071 (7,393) 3,276,678 6,185,229 TOTAL NET POSITION 4,341,775$ 582,801$ 4,924,576 9,450,362$ Reconciliation to government-wide statements of net position: Adjustment to reflect the consolidation of Internal Service Funds' activities related to Enterprise Funds 560,356 NET POSITION OF BUSINESS-TYPE ACTIVITIES 5,484,932$ See accompanying notes to the basic financial statements. -46- Business-type Activities ASSETS LIABILITIES NET POSITION Funds Service Internal Governmental Activities CITY OF PADUCAH, KENTUCKY STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2014 Exhibit 10 Nonmajor Solid Enterprise Operating Revenues: Waste Funds Totals Charges for services - internal -$ 41,266$ 41,266$ 5,288,401$ Charges for services - external 4,410,059 - 4,410,059 286,492 Miscellaneous 9,643 1,639 11,282 - Total operating revenues 4,419,702 42,905 4,462,607 5,574,893 Operating Expenses: Cost of sales and service 3,682,041 1,923,951 5,605,992 4,223,092 Depreciation and amortization 303,192 13,898 317,090 619,832 Total operating expenses 3,985,233 1,937,849 5,923,082 4,842,924 Operating income (loss)434,469 (1,894,944) (1,460,475) 731,969 Nonoperating Revenues (Expenses): Grants - program purpose 55,112 1,901,883 1,956,995 - Interest and investment income 48,189 66 48,255 32,622 Gain (loss) on disposal of property and equipment 13,422 - 13,422 36,737 Total nonoperating revenues (expenses)116,723 1,901,949 2,018,672 69,359 Income (loss) before contributions and transfers 551,192 7,005 558,197 801,328 Contributions and Transfers: Transfers in - 27,872 27,872 270,986 Transfers out (240,000) - (240,000) (8,500) Total contributions and transfers (240,000) 27,872 (212,128) 262,486 Change in net position 311,192 34,877 346,069 1,063,814 Total net position (as restated), July 1, 2013 4,030,583 547,924 8,386,548 TOTAL NET POSITION - JUNE 30, 2014 4,341,775$ 582,801$ 9,450,362$ Reconciliation to government-wide statements of net position: Adjustment to reflect the consolidation of Internal Service Funds' activities related to Enterprise Funds 91,976 CHANGE IN NET POSITION OF BUSINESS-TYPE ACTIVITIES 438,045$ See accompanying notes to the basic financial statements. CITY OF PADUCAH, KENTUCKY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2014 Governmental Internal Service Funds -47- ActivitiesBusiness-type Activities Exhibit 11 Nonmajor Solid Enterprise Cash Flows from Operating Activities: Waste Funds Totals Cash received from customers 4,378,498$41,266$ 4,419,764$ -$ Cash received from interfund services provided - - - 5,611,044 Payments to suppliers (2,489,823)- (2,489,823) (226,502) Payments to employees (970,534) (146,544) (1,117,078) (311,983) Claims paid - - - (2,198,521) Payments to internal service funds (398,914) (2,338) (401,252) - Other receipts 9,643 1,639 11,282 - Other payments - (1,769,257) (1,769,257) (1,394,345) Net cash provided (used) by operating activities 528,870 (1,875,234) (1,346,364) 1,479,693 Cash Flows from Noncapital Financing Activities: Grants - program purpose 55,112 1,908,795 1,963,907 - Transfers from other funds - 27,872 27,872 270,986 Transfers to other funds (240,000) - (240,000) (8,500) Net cash provided (used) by noncapital financing activities (184,888) 1,936,667 1,751,779 262,486 Cash Flows from Capital and Related Financing Activities: Purchase of capital assets (294,770) - (294,770) (970,817) Proceeds from sale of capital assets 13,422 - 13,422 38,730 Net cash provided (used) by capital and related financing activities (281,348) - (281,348) (932,087) C h Fl f I ti A ti iti CITY OF PADUCAH, KENTUCKY STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2014 Governmental Activities Internal Service Business-type Activities Funds Cash Flows from Investing Activities: Interest on cash and investments 48,189 66 48,255 32,622 Net cash provided (used) by investing activities 48,189 66 48,255 32,622 Net increase (decrease) in cash and cash equivalents 110,823 61,499 172,322 842,714 Cash and cash equivalents, July 1, 2013 4,860,928 566,380 5,427,308 4,687,798 CASH AND CASH EQUIVALENTS, JUNE 30, 2014 4,971,751$627,879$ 5,599,630$ 5,530,512$ Reconciliation of Operating Income (Loss) to Net Cash Provided by Operating Activities: Operating income (loss) 434,469$ (1,894,944)$(1,460,475)$ 731,969$ Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization 303,192 13,898 317,090 619,832 Change in assets and liabilities: Receivables (58,361) - (58,361) (211,638) Prepaid expenses (157,677) - (157,677) 658,106 Inventories - - - (3,721) Unearned revenues 26,800 (6,912) 19,888 - Due to other funds - - - (400,000) Account and accrued payables (19,553) 12,724 (6,829) 85,145 NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 528,870$ (1,875,234)$ (1,346,364)$ 1,479,693$ See accompanying notes to the basic financial statements. -48- Exhibit 12 Private- Pension purpose Agency Funds Trusts Funds Cash and cash equivalents 52,557$ 6,280$ 563,646$ Receivables: Interest 17,299 - - Investments at fair value Money market funds 139,544 - - Common stock 2,969,572 - - Corporate bonds 954,013 - - U.S. agencies bonds 253,006 - - Mortgage backed securities - - - Mutual funds 2,797,666 1,207,517 - Total assets 7,183,657 1,213,797 563,646$ Payroll taxes and withholdings payable - - 563,646$ Total liabilities - - 563,646$ Held in trust for pension benefits and other purposes 7,183,657$ 1,213,797$ See accompanying notes to the basic financial statements NET POSITION Primary Government -49- ASSETS LIABILITIES CITY OF PADUCAH, KENTUCKY STATEMENT OF NET POSITION FIDUCIARY FUNDS JUNE 30, 2014 Exhibit 13 Private- Pension purpose Additions: Funds Trusts Contributions: Employer 420,834$ -$ Plan members 5,354 - Private donations - 2,615 Total contributions 426,188 2,615 Investment income: Net increase (decrease) in fair value of investments 877,920 115,525 Interest and dividends 180,403 59,541 Net investment income 1,058,323 175,066 Total additions 1,484,511 177,681 Deductions: Benefits 1,466,232 - Capital outlay - 47,771 Administrative expenses 55,889 14,396 Total deductions 1,522,121 62,167 Change in net position (37,610) 115,514 Net position - beginning 7,221,267 1,098,283 Net position - ending 7,183,657$ 1,213,797$ See accompanying notes to the basic financial statements. -50- STATEMENT OF CHANGES IN NET POSITION CITY OF PADUCAH, KENTUCKY FIDUCIARY FUNDS FOR THE YEAR ENDED JUNE 30, 2014 CITY OF PADUCAH, KENTUCKY NOTES TO THE FINANCIAL STATEMENTS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2014 - 51 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 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. The pension fund is reported as a fiduciary fund and does not issue separate financial statements. Discretely Presented Component Units The component unit column in the basic financial statements includes the financial data of the City’s other component unit. It is reported in a separate column to emphasize that it is legally separate from the City. The following component unit is included in the reporting entity because of its financial relationship with the City; and, the City is able to impose its will on the organization. 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. Complete financial statements of the individual component unit can be obtained from its respective administrative office at the following location: Paducah Water Works 1801 N. 8th Street Paducah, Kentucky 42003 (Continued) - 52 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 1 - Summary of Significant Accounting Policies: Related Organizations City officials are also responsible for appointing the members of boards of other organizations; but, the City’s accountability for these organizations do not extend beyond appointing authority. The organizations listed below are notable related organizations which have not been included as component units in the City’s report. Transit Authority of the City of Paducah – The Transit Authority is a legally separate entity that provides for transit operations both within and outside the City. The Transit Authority is not financially accountable to the City. 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. 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. Joint Sewer Agency – As of July 1, 1999, the assets and liabilities of the Wastewater/Stormwater Fund were transferred to the Paducah-McCracken County Joint Sewer Agency pursuant to a municipal order dated June 29, 1999. The Paducah-McCracken County Joint Sewer Agency is a legally separate entity and is not financially accountable to the City. 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. 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. Mainstreet – Mainstreet is a 501(c)3 established for the promotion of cultural and economic growth in Downtown Paducah. Mainstreet is a legally separate entity and is not financially accountable to the City. (Continued) - 53 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 1 - Summary of Significant Account Policies: Basis of Presentation Government-wide Financial Statements The Statement of Net Position 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, deferred outflows of resources, liabilities, deferred inflows of resources, fund equity, revenues, and expenditure or 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. 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. 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. 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. (Continued) - 54 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 1 - Summary of Significant Account Policies: Basis of Presentation Fund Financial Statements 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. 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 Employees' 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 Position 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. (The City’s deferred outflows of resources and deferred inflows of resources are noncurrent) 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 position (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 position. 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 Position 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. (Continued) - 55 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 1 - Summary of Significant Account Policies: Basis of Accounting In the fund financial statements, governmental funds are presented on the modified accrual basis of accounting. Under this modified accrual basis of accounting, revenues are recognized when “measurable and available.” Measurable means knowing or being able to reasonably estimate the amount. Available means collectible within the current period or within sixty days after year end. Expenditures (including capital outlay) are recorded when the related fund liability is incurred, except for general obligation bond principal and interest which are reported when due. Agency funds are presented using the accrual basis of accounting. All proprietary, 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. Unearned revenue The City reports unearned revenue on its government-wide statement of net position and the fund financial statements. Unearned revenues arise when potential revenue does not meet both the "measurable” and “available” criteria for recognition in the current period. Unearned revenues also arise when resources are received by the City before it has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the City has a legal claim to the resources, the liability for unearned revenue is removed and revenue is recognized. Allocation of Indirect Expenses The City allocates indirect expenses primarily comprised of fleet management services and various self- funded insurance coverage provided to departments and employees of the City not directly allocated. Allocations are charged to functions based on use by weighted-average methodology. (Continued) - 56 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 1 - Summary of Significant Accounting Policies: 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: 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, 2014. 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. The pension trust fund has investment policies separately approved by their oversight board. The private purpose trust has not adopted a deposit and investment policy. For the purpose of the Statement of Net Position, “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. (Continued) - 57 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 1 - Summary of Significant Accounting Policies: Receivables In the government-wide statements, receivables consist of all revenues earned at year end and not yet received. Major receivable balances for the governmental activities include property taxes, employee earnings taxes, business licenses, insurance premiums taxes, franchise taxes, grant revenue, and interlocal note receivables. Business-type activities report utilities and interest earnings as their major receivables. Interlocal note receivables include an outstanding loan of $911,375 at the end of the fiscal year due from the Greater Paducah Economic Development Council, Inc. related to development and construction of an intermodal industrial park. The note is non-interest bearing, secured by real property within the industrial park, and due in full by June 30, 2015. The City expects full collection of the receivable. 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 Position. 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 $64,733 held for consumption and real property of $1,497,662 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. (Continued) - 58 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 1 - Summary of Significant Accounting Policies: Capital Assets Government-wide Statement In the government-wide financial statements, property, plant and equipment are accounted for as capital assets. All capital assets are valued at historical cost or estimated historical cost if actual is unavailable, except for donated capital assets which are recorded at their estimated fair value at the date of donation. Estimated historical cost was used to value the majority of the assets acquired prior to June 30, 2004. Assets capitalized have an original cost of $500 or more prior to July 1, 1999, $2,500 or more after July 1, 1999, and $3,000 or more after June 24, 2009. Prior to July 1, 2002, governmental funds’ infrastructure assets were not capitalized. These assets have been valued at estimated historical cost. Capital assets of the primary government are depreciated over the estimated useful lives using the straight- line method. The estimated useful lives are as follows: Land improvements 10-15 Years Buildings 30 Years Building improvements 10-15 Years Infrastructure 15-30 Years Equipment 7-9 Years Furnishings and fixtures 3-5 Years Vehicles 5-7 Years Fund Financial Statements In the fund financial statements, capital assets used in governmental fund operations are accounted for as capital outlay expenditures of the governmental fund upon acquisition. Capital assets used in proprietary fund operations are accounted for the same as in the government-wide statements. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents the consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The government has only one item that qualifies for reporting in the category. It is the deferred charge on refunding reported in the government- wide statement of net position. A deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. A summary of change in deferred charge on refunding is as follows: Balance July 1, 2013 Additions Reductions Balance June 30, 2014 Deferred charge on refunding $ 49,884 $ 82,447 $ (8,200) $ 124,131 In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. (Continued) - 59 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 1 - Summary of Significant Accounting Policies: Deferred Outflows/Inflows of Resources The government has only one type of item, which arises only under a modified accrual basis of account, which qualifies for reporting in the category. Accordingly, the item, unavailable revenue, is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues for one source: property taxes. This amount is deferred and recognized as an inflow of resources in the period that the amount becomes available. 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. 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 Employees’ 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. Equity Classifications Government-wide Statements Equity is classified as net position 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. (Continued) - 60 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 1 - Summary of Significant Accounting Policies: Equity Classifications b. Restricted net position – Consists of net assets with constraints placed on the use either by (1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments; or (2) law through constitutional provisions or enabling legislation. c. Unrestricted net position – 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. Program Revenues Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. (Continued) - 61 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 1 - Summary of Significant Accounting Policies: 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 function: Current (further classified by character) Debt Service Capital Outlay Proprietary Fund – by operating and nonoperating In the fund financial statements, governmental funds report expenditures of financial resources. Proprietary funds report expenses relating to use of economic resources. Interfund Transfers Permanent reallocation of resources between funds of the reporting entity are classified as interfund transfers. For the purposes of the Statement of Activities, all interfund transfers between individual governmental funds have been eliminated. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make assumptions that affect reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Stewardship, Compliance, and Accountability By its nature as a local government unit, the City and its component units are subject to various federal, state, and local laws and contractual regulations. An analysis of the City’s compliance with significant laws and regulations and demonstration of its stewardship over City resources follows. Fund Accounting Requirements The City complies with all state and local laws and regulations requiring the use of separate funds. (Continued) - 62 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 1 - Summary of Significant Accounting Policies: Stewardship, Compliance, and Accountability 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 Legal Restrictions of Use Section Eight Housing Choice Voucher Program Subsidize Rental Costs for Low- Income Families FEMA - Disaster Grants Debris Removal and Disaster Recovery HOME Investment Partnerships Grant Construction of Low-income Rental Units Emergency Communication Revenue E-911 Emergency Services County Bed Tax Debt Obligations Homeland Security Grant Program Homeland Security Enhancement Kentucky Housing Corporation Façade Loans Other Grants Grant Program Expenditures Bond Proceeds Defeasance of debt and Capital Projects 25% of Employee Earning Tax Economic, Community and Capital Development Revenue Restrictions For the year ended June 30, 2014, 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. 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) - 63 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 2 - Property Taxes: The due dates and collection period for all property taxes, exclusive of vehicle taxes, for the fiscal year ended June 30, 2014, are as follows: Description Date Assessment and enforceable lien January 1, 2014 Levy September 25, 2014 Face value amount payment dates 1st half by November 1, 2014 2nd half by February 1, 2015 Delinquent date - 10% penalty plus 1/2% per month 1st half - November 30, 2014 2nd half - February 28, 2015 Note 3 - Detail Notes on Transaction Classes/Accounts: The following notes present detail information to support the amounts reported in the basic financial statements for its various assets, liabilities, equity, revenues, and expenditures/expenses. Deposits Custodial credit risk for deposits is the risk that in the event of a bank failure, the City's deposits may not be returned or the City will not be able to recover collateral securities in the possession of an outside party. The City's investment policy requires all investments be made in accordance with applicable legal requirements with consideration of investment safety. Accordingly, the City maintains collateral agreements with its financial institutions. Deposits are 101% secured with collateral valued at market or par, whichever is lower, less the amount of the Federal Deposit Insurance Corporation insurance (FDIC). The City 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 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, 2014, 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 $28,739,743 and $29,437,648, respectively. (Continued) - 64 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 3 - Detail Notes on Transaction Classes/Accounts: Investments As of June 30, 2014, the City's reporting entity had the following investments: Fair Value/ Average Investment Maturities (In Years) (2) Carrying Credit Quality/ Less Greater Types of Investments Amount Rating (1) Than 1 1-5 6-10 Than 10 Fiduciary and Private Purpose Trust Funds Money market funds $ 139,544 NA NA NA NA NA Common stock 2,969,572 NA NA NA NA NA Corporate bonds 954,013 AA-/A $ - $ 496,595 $ 457,418 $ - U.S. agencies 253,006 Aaa 30,464 222,542 - - Mutual funds Equity 4,005,183 NA NA NA NA NA TOTAL FIDUCIARY AND PRIVATE PURPOSE TRUST FUNDS $8,321,318 (1) Ratings are provided where applicable to indicate associated Credit Risk. NA indicates not applicable. NR indicates that instrument is not rated. (2) Maturities are provided for debt instruments with maturity dates. NA indicates not applicable. 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) - 65 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 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 41.240(4) of the Kentucky Revised Statutes; 6. Securities issued by a state or local government, or any instrumentality or agency thereof, in the United States, and rated in one of the three highest categories by a national recognized rating agency. Interest Rate Risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The City policy provides that, to the extent practicable, investments are matched with anticipated cash flows. Investments are diversified to minimize the risk of loss resulting from overconcentration of assets in a specific maturity period, a single issuer, or an individual class of securities. Unless matched to a specific cash flow, investments are not, in general, made in securities maturing more than five years from the date of purchase. Surplus cash may be invested in securities exceeding five years if the maturity of such investments is made to coincide as nearly as practicable with the expected use of the investment. Concentration of credit risk is the risk of loss attributed to the magnitude of the City's investment in a single issuer. The City policy does not specifically address concentration of credit risk. 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: PFPF Retirement Plan Minimum Target Maximum Equities 45% 55% 65% Fixed income 35% 45% 55% The retirement plan addresses credit risk and concentration of credit risk with a policy that prohibits investment of more than 5% of its assets in the securities of any one issuer with the exception of U.S. government. Policy further prohibits investment of more than 20% in any one market sector. No more than 10% of corporate debt securities in the fixed income portfolio may be rated below-investment grade. Commercial paper must be rated A1, P1. (Continued) - 66 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 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, 2014, was as follows: Balance Balance Primary Government: July 1, 2013 Additions Deductions June 30, 2014 Capital assets, not being depreciated: Land $10,376,432 $ 225,000 $ 192,500 $10,408,932 Construction-in-progress 6,527,866 10,060,826 4,289,345 12,299,347 Total capital assets, not being depreciated 16,904,298 10,285,826 4,481,845 22,708,279 Capital assets, being depreciated: Land improvements 4,140,668 1,386,325 - 5,526,993 Buildings and improvements 19,392,594 - 488,153 18,904,441 Infrastructure 38,714,275 2,911,711 - 41,625,986 Equipment 10,562,665 349,638 765,015 10,147,288 Furnishings and fixtures 207,830 15,534 5,428 217,936 Vehicles 8,236,680 1,154,856 762,968 8,628,568 Totals at historical cost 81,254,712 5,818,064 2,021,564 85,051,212 Less accumulated depreciation: Land improvements 1,631,320 179,536 - 1,810,856 Buildings and improvements 12,524,297 376,952 159,634 12,741,615 Infrastructure 26,808,758 1,404,129 - 28,212,887 Equipment 9,094,401 478,845 763,815 8,809,431 Furnishings and fixtures 206,565 635 5,428 201,772 Vehicles 5,509,726 614,017 760,975 5,362,768 Total accumulated depreciation 55,775,067 3,054,114 1,689,852 57,139,329 Total capital assets, being depreciated, net 25,479,645 2,763,950 331,712 27,911,883 PRIMARY GOVERNMENT ACTIVITIES CAPITAL ASSETS, NET $42,383,943 $13,049,776 $4,813,557 $50,620,162 (Continued) - 67 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 3 - Detail Notes on Transaction Classes/Accounts: Capital Assets During the year ended June 30, 2014, a vehicle was transferred to business-type activities from governmental activities. Accordingly, business-type capital asset activities reflect vehicle and related accumulated depreciation additions of $18,000 and $18,000, respectively. Balance Balance Business-type Activities: July 1, 2013 Increases Decreases June 30, 2014 Capital assets, not being depreciated: Land $ 62,152 $ - $ - $ 62,152 Construction-in-progress - - - - Total capital assets, not being depreciated 62,152 - - 62,152 Capital assets, being depreciated: Buildings and improvements 554,827 - - 554,827 Equipment 1,179,348 294,770 108,815 1,365,303 Vehicles 2,391,481 18,000 - 2,409,481 Totals at historical cost 4,125,656 312,770 108,815 4,329,611 Less accumulated depreciation: Buildings and improvements 255,490 15,678 - 271,168 Equipment 893,807 116,616 108,815 901,608 Vehicles 1,805,776 202,796 - 2,008,572 Total accumulated depreciation 2,955,073 335,090 108,815 3,181,348 Total capital assets, being depreciated, net 1,170,583 (22,320) - 1,148,263 BUSINESS-TYPE ACTIVITIES CAPITAL ASSETS, NET $ 1,232,735 $ (22,320) $ - $ 1,210,415 (Continued) - 68 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 3 - Detail Notes on Transaction Classes/Accounts: Capital Assets Depreciation expense was charged to governmental activities as follows: General government: General administration $ 278,749 Finance 12,990 Planning 21,512 Inspections - Human resources/risk management - Information systems 11,222 Fleet maintenance 10,480 Total general government 334,953 Public safety: Police 216,414 Fire 51,619 Grants - Emergency 911 24,596 Court awards - Fleet Lease Trust 609,352 Total public safety 901,981 Public service: Public works 47,664 Engineering 12,090 Total public service 59,754 Parks and recreation 236,391 Planning and development: Infrastructure 1,519,164 Grants 1,871 Total planning and development 1,521,035 TOTAL DEPRECIATION EXPENSE – GOVERNMENTAL ACTIVITIES $3,054,114 Depreciation expense was charged to business-type activities as follows: Solid Waste Fund $ 303,192 Section Eight Housing 3,877 Civic Center 10,021 TOTAL DEPRECIATION EXPENSE – BUSINESS-TYPE ACTIVITIES $ 317,090 (Continued) - 69 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 3 - Detail Notes on Transaction Classes/Accounts: Capital Assets Balance Balance Discretely Presented July 1, 2013 Increases Decreases June 30, 2014 Component Units: Capital assets, not being depreciated: Land & construction in progress $ 2,093,776 $ 591,584 $ - $ 2,685,360 Total capital assets, not being depreciated 2,093,776 591,584 - 2,685,360 Capital assets, being depreciated: Utility plant 78,230,189 3,168,191 604,417 80,793,963 Total capital assets, being depreciated 78,230,189 3,168,191 604,417 80,793,963 Less accumulated depreciation: Utility plant 33,495,229 1,828,770 388,459 34,935,540 Total accumulated depreciation 33,495,229 1,828,770 388,459 34,935,540 Total capital assets, being depreciated, net 44,734,960 1,339,421 215,958 45,858,423 COMPONENT UNIT CAPITAL ASSETS, NET $ 46,828,736 $ 1,931,005 $ 215,958 $ 48,543,783 Depreciation expense, charged to functions/programs of discretely presented major component units as follows: Paducah Water Works $ 1,828,770 TOTAL DEPRECIATION EXPENSE BY ACTIVITY $ 1,828,770 Accounts Payable Payables in the governmental and proprietary funds are composed of payables to vendors and accrued expenditures. (Continued) - 70 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 3 - Detail Notes on Transaction Classes/Accounts: Short-Term Liabilities On May 21, 2014, the City renewed an agreement with Banterra Bank for a fixed rate line of credit not to exceed $350,000 for construction of new residential homes for the Fountain Avenue Neighborhood Program. Short-term debt activity for the year ended June 30, 2014, was as follows: Beginning Ending Governmental Activities Balance Additions Payments Balance Home Grant Fund Line of Credit $ 308,112 $ 598,728 $ 627,539 $279,301 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, 2014, the governmental long-term liabilities consisted of the following: General obligation bonds: Current portion $ 1,660,652 Noncurrent portion 23,045,639 TOTAL GENERAL OBLIGATION BOND COSTS, NET OF PREMIUMS AND DISCOUNTS $ 24,706,291 Note payable: Current portion $ 417,876 Noncurrent portion 6,101,480 TOTAL NOTE PAYABLE PAYMENTS $ 6,519,356 Accrued compensated absences: Current portion $ 1,015,737 Noncurrent portion 1,188,223 TOTAL ACCRUED COMPENSATED ABSENCES $ 2,203,960 Business-type Activities As of June 30, 2014, the long-term liabilities payable from proprietary fund resources consisted of the following: Accrued compensated absences: Current portion $ 90,509 Noncurrent portion 48,388 TOTAL ACCRUED COMPENSATED ABSENCES $ 138,897 (Continued) - 71 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 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 of approximately 3.13%. 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%. The 2001 series bonds were issued to finance construction of the Performing Arts Center and Convention Center expansion. 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 Position. 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 refund $3,780,000 of outstanding 2004 series bonds issued for an economic development project in the Industrial Park West 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. 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. This note receivable is reflected in the government-wide Statement of Net Position. In accordance with an Interlocal Cooperation Agreement between the City and McCracken County, Kentucky (the County), principal and interest payments on the bonds are supported by an operating lease collected by the City. The rental revenues collected from the lease during the current year cover $202,898 of the bond and interest payments due with the remaining amount of $191,116 shared equally by the City and County. Series 2013A Bond Issue – The City of Paducah issued general obligation bonds of $1,120,000 in September 2013, to finance the municipality pool renovations. Interest rates range from 0.70% to 3.60%. These bonds are required to be fully paid within 15 years from the date of issue and are backed by the full faith and credit of the City. (Continued) - 72 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 3 - Detail Notes on Transaction Classes/Accounts: Long-Term Liabilities General Obligation Bonds Series 2013B Bond Issue – The City of Paducah issued general obligation taxable bonds of $2,475,000 in September 2013, to finance a portion of the costs of the construction of improvements to an industrial/distribution facility and a portion of the costs of the acquisition, construction, installation and equipping of an approximately 30,000 square foot building for the economic development. Interest rates range from 0.60% to 4.00%. These bonds are required to be fully paid within 15 years from the date of issue and are backed by the full faith and credit of the City. Series 2014A Bond Issue – The City of Paducah issued general obligation refunding bonds of $5,460,000 in May 2014 with interest rates ranging from 2.00% to 3.50%, to refund $5,545,000 of outstanding 2010 series bonds issued to finance several public improvement projects with interest rates ranging from 1.00% to 5.50%. 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. Current Refunding On May 21, 2014, the City issued general obligation refunding bonds of $5,460,000 with interest rates varying from 2.00% to 3.50% to current refund 2010 series Build America Bonds with interest rates varying from 1.00% to 5.50%. The net proceeds of the new issue were deposited into an irrevocable trust with an escrow agent to redeem outstanding 2010 series Build America Bonds maturing on or after March 1, 2015 in the principle amount of $5,545,000 on June 27, 2014 at the redemption price of 100%. As a result, the refunded bonds are considered to be defeased and the liability has been removed from the statement of net position. The reacquisition price exceeded the net carrying amount of the old debt by $82,447. This amount was deferred and amortized over the remaining life of the refunded debt. This current refunding was undertaken to reduce future total debt service payments over the next 16 years by $380,692 with a resulting net economic gain of $356,383. As of June 30, 2014, none of these defeased bonds were still outstanding with applicable assets held in trust for future payoff. Notes Payable Kentucky League of Cities – On July 1, 2003, the City entered into an agreement in the amount of $3,500,000 with the Kentucky League of Cities to finance the acquisition and installation of various public capital projects. Interest is charged at a rate of approximately 2.98%. The note is required to be fully paid within 20 years from the date of issue and is backed by the full faith and credit of the City. Kentucky Association of Counties – The County of McCracken, Kentucky entered into an agreement in the amount of $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. (Continued) - 73 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 3 - Detail Notes on Transaction Classes/Accounts: Long-Term Liabilities Notes Payable Margaret Hank Cumberland Presbyterian Church Agreement – On June 16, 2011, the City entered into an agreement in the amount of $188,533 with Margaret Hank Cumberland Presbyterian Church to finance the acquisition of real property to be used for the development of an indoor recreational facility. The note matures on July 1, 2019 and has an imputed interest rate of 3.25%. Murray State University Paducah Agreement – On November 22, 2011, 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 1, 2031 and has interest rates ranging from 1.0% to 3.5%. Changes in Long-Term Liabilities The following is a summary of changes in long-term debt for the year ended June 30, 2014: Beginning Ending Due within Type of Liability: Balance Additions Reductions Balance One Year Governmental activities: General obligation bonds: Pension $ 4,655,000 $ - $ (255,000) $ 4,400,000 $ 270,000 Floodwall Rehabilitation 2,341,790 - (116,927) 2,224,863 120,652 Build America Bonds (BABS) 5,825,000 - (5,825,000) - - Refinanced Convention Center 6,220,000 - (415,000) 5,805,000 420,000 Refinanced Infiniti Media Building 3,370,000 - (270,000) 3,100,000 280,000 Public Pool Renovations - 1,120,000 - 1,120,000 65,000 Economic Development - 2,475,000 - 2,475,000 145,000 Refinancing BABS Public Projects - 5,460,000 - 5,460,000 360,000 Premiums - 220,683 - 220,683 - Discounts (57,372) (53,529) 11,646 (99,255) - Total bonds payable 22,354,418 9,222,154 (6,870,281) 24,706,291 1,660,652 Notes payable: Kentucky League of Cities 2,024,294 - (174,585) 1,849,709 179,889 Kentucky Association of Counties 2,181,250 - (100,000) 2,081,250 104,583 Margaret Hank Agreement 151,812 - (15,175) 136,637 20,559 Murray State University Agreement 2,563,482 - (111,722) 2,451,760 112,845 Total notes payable 6,920,838 - (401,482) 6,519,356 417,876 Accrued Compensated Absences 2,018,813 1,429,146 (1,243,999) 2,203,960 1,015,737 TOTAL GENERAL LONG- TERM LIABILITIES $31,294,069 $10,651,300 $ (8,515,762) $33,429,607 $ 3,094,265 Business-type activities: Accrued compensated Absences $ 128,538 $ 92,548 $ (82,188) $ 138,897 $ 90,509 (Continued) - 74 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 3 - Detail Notes on Transaction Classes/Accounts: Long-Term Liabilities Changes in Long-Term Liabilities (1) The calculation to reconcile amounts in this schedule to the "net position invested in capital assets, net of related debt" for governmental activities is: Net Capital Assets $50,620,162 Less: 19.75% of the outstanding 2010B general obligation bonds $ (1,146,488) 100% of the outstanding 2011 General obligation bonds (3,100,000) Net of the County's portion 2,123,244 (2,123,244) 78% of the outstanding 2014A general obligation bonds (4,258,800) 100% of the outstanding 2013A general obligation bonds (1,120,000) 52% of the outstanding 2013B general obligation bonds (1,287,000) 100% of the Margaret Hank Agreement (136,637) 100% of the outstanding Kentucky League of Cities' note payable (1,849,709) Net position invested in capital assets, net of related debt $39,844,772 Annual Debt Service Requirements The annual debt service requirements to maturity for bonds and notes as of June 30, 2014, are as follows: Year Ending June 30 Principal Interest 2015 $ 2,078,528 $ 923,093 2016 2,065,160 923,319 2017 2,146,669 867,269 2018 2,209,386 807,173 2019 2,228,864 741,501 2020-2024 11,860,439 2,609,100 2025-2029 7,616,248 779,061 2030-2032 898,925 40,074 TOTALS $31,104,219 $ 7,690,589 (Continued) - 75 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 3 - Detail Notes on Transaction Classes/Accounts: Accrued Compensated Absences Compensated absence obligations arise from amounts due to City employees for vested amounts of vacation pay and sick pay which will be payable in the future. Typically, the compensated absence obligations have been paid by the General Fund, Emergency Communication Service Fund, Section Eight Housing Fund, Solid Waste Fund, and Fleet Maintenance Fund. Amounts accrued at June 30, 2014, are as follows: Accrued Compensated Absences Governmental Business-type Activities Activities Accrued sick leave $ 788,601 $ 50,478 Accrued vacation leave 1,415,359 88,419 Totals 2,203,960 138,897 Less current portion 1,015,737 90,509 LONG-TERM PORTION $1,188,223 $ 48,388 Termination Benefits 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, 2014. 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, 2014, $11,715 of payments was 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, 2014, approval had not yet been granted. The County estimated post-closure care costs totaling $4,125,000 or $125,000 per year plus 10% for inflation. Actual costs may be higher due to inflation, changes in technology, or changes in regulations. In the year ending June 30, 2001, the City entered into an inter-local agreement to share equally the costs for post-closure costs and, accordingly, has recorded a long-term liability for 50% of the estimated closure expense. It is anticipated that post-closure costs will be paid out of the Solid Waste Fund to the extent that funds are available with any excess costs being funded using long-term borrowing. (Continued) - 76 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 3 - Detail Notes on Transaction Classes/Accounts: Interfund Transactions and Balances Interfund transfers during the year ended June 30, 2014, were as follows: Interfund Interfund Governmental Funds: Transfers In Transfers Out General Fund $ 490,000 $2,089,095 Special Revenue Investment Fund 2,500 4,588,024 Special Revenue Municipal Aid Fund 513,000 - Capital Project Fund 5,363,404 Debt Service Fund 2,011,970 - Nonmajor Governmental Funds 767,887 2,522,000 Internal Service Funds 270,986 8,500 Proprietary Funds: Solid Waste - 240,000 Nonmajor Proprietary Funds 27,872 - TOTALS $9,447,619 $9,447,619 Transfers are used to (a) move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them and to (b) use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. Due To/From Balances Due to/from balances used to cover current operating expenses were as follows as of June 30, 2014: Due From Due To General Fund $ 221,069 $1,117,172 Special Revenue Investment Fund 1,117,172 400,000 Capital Project Fund - 500,000 Nonmajor Governmental Funds 500,000 172,283 Nonmajor Proprietary Funds - 48,786 Internal Service Funds 400,000 - TOTALS $2,238,241 $2,238,241 Note 4 - Pension Plans - City of Paducah: The City provides retirement benefits to its employees through three pension funds. Two of these funds are single-employer defined benefit funds and are administered by the City. These funds are Police and Firefighters’ Pension Fund (PFPF) and Appointive Employees’ 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: (Continued) - 77 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 4 - Pension Plans - City of Paducah: Cost-Sharing Multiple-Employer Defined Benefit Plan County Employees’ Retirement System Plan Description: The City is a participant in the County Employees Retirement System (CERS), a cost sharing, multi-employer public employee retirement system. CERS provides retirement, disability, and death benefits to plan members. Retirement benefits may be extended to beneficiaries of plan members under certain circumstances. Cost-of-living adjustments are provided at the discretion of the State legislature. Under the provisions of Kentucky Revised Statute 61.645, the Board of Trustees of Kentucky Retirement Systems administers the CERS. Kentucky Retirement Systems issues a publicly available financial report that includes financial statements and required supplementary information for CERS. That report may be obtained by writing to Kentucky Retirement Systems, Perimeter Park West, 1260 Louisville Road, Frankfort, Kentucky 40601-6124 or by calling 1-502-564-4646. Funding Policy: Hazardous position employees are required to contribute 8% to the plan and nonhazardous position employees are required to contribute 5% of their creditable compensation by State statute. For employees hired on September 1, 2008, or thereafter, an additional 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, 2014, 2013, and 2012, the City contributed 35.70%, 37.60%, and 35.76%, respectively, of each hazardous employee’s creditable compensation and 18.89%, 19.55%, and 18.96%, respectively, of each nonhazardous employee’s creditable compensation. These actuarially determined rates are set by the Board of Trustees of Kentucky Retirement Systems. Total contributions to CERS for the years ending June 30, 2014, 2013, and 2012, were $5,428,734, $5,517,201, and $5,114,775, of which $4,364,052, $4,471,077 and $4,144,624 were made by the employer and $1,062,830, $1,046,124 and $970,151 were made by employees, respectively, equal to the required contributions for each year. Single Employer Defined Benefit Funds - Police and Firefighters' Pension Fund (PFPF) and Appointive Employees’ Pension Fund (AEPF) 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. Administration – The Appointive Employees’ Pension Fund Board and the City of Paducah Police and Firefighters’ 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. See investment policies in Note 3 for the pension trusts. Plan Administration – Management of the PFPF, as authorized by Kentucky Revised Statute 95.869, is vested in the PFPF Board of Trustees, which consist of the Mayor, City Treasurer, an active firefighter, a retired firefighter and a retired police officer. Management of the AEPF, as authorized by Kentucky Revised Statute 90.400, is vested in the AEPF Board of Trustees, which consists of the Mayor, City Manager and an elected retired employee. (Continued) - 78 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 4 - Pension Plans - City of Paducah: Single Employer Defined Benefit Funds - Police and Firefighters' Pension Fund (PFPF) and Appointive Employees’ Pension Fund (AEPF) 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 does not issue a separate, stand-alone report. Accordingly, the plan financial statements are included in this audit report. 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, 2014. AEPF does not issue a separate, stand-alone report. Accordingly, the plan financial statements are included in this audit report. Membership Information: Membership of each plan consisted of the following at June 30, 2014: PFPF AEPF Active participants 1 0 Beneficiaries 27 3 Retired participants 34 1 TOTAL PARTICIPANTS 62 4 These plans are closed to new members. Benefits provided: PFPF provides retirement, disability, and death benefits. These benefits are determined by Kentucky Revised Statutes (KRS) sections 95.851 to 95.884. Retirement benefits for general plan members are 2½% of average salary times years of service up to and including 30 years. The maximum is 75% of average salary. Average salary is the highest average salary of the member for any 3 consecutive years of service. Retirement allowed any time after attainment of age 50, provided that at least 20 years of service have been completed. Occupational disability benefits equal to 70% of the members’ final rate of pay. Non-occupational disability benefits are available after completing 10 years of service and are determined in a similar manner as retirement benefits subject to a maximum of 50% of average salary. Surviving beneficiaries may receive death benefits per the terms of the plan. Benefit terms provide for an annual cost-of-living adjustment up to 5% a year provided the adjustment is supportable on an actuarially sound basis. Kentucky Revised Statute 95.859(2) provides that the widow’s minimum benefit shall be increased by the same percentage as the increase in Social Security benefits, not to exceed 5%. AEPF provides retirement, disability, and death benefits. Retirement allowed any time after attainment of age 60, provided that at least 20 years of service have been completed. Retirement benefits for general plan members are 50% of monthly salary at the time of retirement. Occupational disability benefits equal to 50% of the members’ final rate of pay. Surviving beneficiaries may receive death benefits per the terms of the plan. Effective January 1, 1998, all persons receiving benefits received a one-time increase of 10%. (Continued) - 79 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 4 - Pension Plans - City of Paducah: Single Employer Defined Benefit Funds - Police and Firefighters' Pension Fund (PFPF) and Appointive Employees’ Pension Fund (AEPF) Funding policy: PFPF - 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. AEPF - 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. Annual pension cost (APC) and Net pension asset (NPA) – The City’s APC and NPA for the PFPF and AEPF are as follows: PFPF AEPF Total Annual required contribution (ARC) $ 421,933 $ 10,779 $ 432,712 Interest on NPA (403,806) (8,101) (411,907) Adjustment to the ARC 491,290 17,306 508,596 Annual pension cost (APC) $ 509,417 $ 19,984 $ 529,401 Contributions made (420,834) - (420,834) Decrease in net pension asset 88,583 19,984 108,567 Net pension asset, beginning of year (5,384,081) (135,018) (5,519,099) Net pension asset, end of year $ (5,295,498) $ (115,034) $ (5,410,532) The City’s APC, percentage of APC contributed, and NPA for the plans for the current and each of the two preceding years were as follows: Police and Firefighters’ Pension Fund Annual Percentage Net Fiscal Year Pension of APC Pension June 30, Cost (APC) Contributed Asset 2014 $ 509,417 82.61% $ (5,295,498) 2013 521,214 91.51% (5,384,081) 2012 420,476 93.17% (5,428,344) Appointive Employees' Pension Fund Annual Percentage Net Fiscal Year Pension of APC Pension June 30, Cost (APC) Contributed Asset 2014 $ 19,984 n/a $ (115,034) 2013 22,990 n/a (135,018) 2012 19,848 n/a (158,008) (Continued) - 80 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 4 - Pension Plans - City of Paducah: Single Employer Defined Benefit Funds - Police and Firefighters' Pension Fund (PFPF) and Appointive Employees’ Pension Fund (AEPF) Funding status and funding progress - As of the most recent actuarial valuation dated July 1, 2014, the funding statuses of the plans were as follows: PFPF AEPF Total Actuarial accrued liability (AAL) $10,975,910 $ 104,709 $11,080,619 Actuarial value of plan assets 7,135,789 47,868 7,183,657 Unfunded actuarial accrued liability (UAAL) $ 3,840,121 $ 56,841 $ 3,896,962 Funded ratio (actuarial value of plan assets/AAL) 65.0% 45.7% 64.8% Covered payroll (annual payroll of active Employees covered by the plan) $ 66,982 $ - $ 66,982 UAAL as a percentage of covered payroll 5,737.6% n/a 5,817.9% The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing relative to the actuarial accrued liability for benefits. Actuarial assumption PFPF AEPF Valuation date 7/1/14 7/1/14 Actuarial cost method Entry age normal Aggregate (1) Amortization method Level dollar closed Level dollar closed Remaining amortization period 20 Years 10 Years Asset valuation method Market value Market value Actuarial assumptions: Investment rate of return 7.25% (3) 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. (3) 7.25% Effective July 1, 2014 (Continued) - 81 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 4 - Pension Plans - City of Paducah: Single Employer Defined Benefit Funds - Police and Firefighters' Pension Fund (PFPF) and Appointive Employees’ Pension Fund (AEPF) Actuarial assumption Post-retirement mortality – The mortality rates for the plans were based as follows: PFPF 1971 Group annuity mortality (GAM) table UP-1984 table set forward 5 years for participants retiring due to disability AEPF GAM 1983 Male GAM 1983 Female Rate of return – Investment return is anticipated to be the major source of additional funds for payment of benefits. The assumed rate of return is a long-term average. The fund’s rate of return is determined primarily by the asset allocation – the classes in which it is invested, and the performance of the associated markets. For the July 1, 2013 PFPF plan year, the assumed rate of return was 7.50%. Beginning with the July 1, 2014 plan year, the assumed rate of return was changed to 7.25%. For the AEPF July 1, 2013 and 2014 plan years, the assumed rate of return was 6%. Discount Rate – The projection of cash flows used to determine the discount rate assumed that the plan member contributions will be made at the current contribution rate and that City contributions will be made equal to the difference between actuarially determined contribution and the member contribution. The pension plans’ fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plans investment was applied to all periods of projected benefit payments to determine the total pension liability. The discount rate used to measure the total pension liability as of July 1, 2014 was as follows: PFPF 7.25% - changed from 7.50% for the prior plan year. AEPF 6.00% Sensitivity of the net pension liability to changes in the discount rate – The following presents the net pension liability of the City’s plans would be if it were calculated using a discount rate that is 1% point lower or 1% point higher than the current rate: 1% Current 1% Decrease Rate Increase PFPF Net Pension Liability $ 4,604,430 $ 3,840,121 $ 3,168,291 AEPF Net Pension Liability $ 62,447 $ 56,841 $ 51,804 Note 5 - Appropriations Deficit: No departments that adopted budgets annually had excess expenditures over appropriations for the fiscal year ended June 30, 2014. (Continued) - 82 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 6 - Component Unit Long-Term Liabilities: Long-term liabilities of the discretely presented component units consist of the following at June 30, 2014: 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 rate is 1.00%, with a .25% annual service fee. The annual requirements to amortize the outstanding debt as of June 30, 2014, are as follows: .25% Year Ending Service R & M June 30 Principal Interest Fee Reserve Total 2015 $ 341,179 $ 62,043 $ 15,511 $ 18,750 $ 437,483 2016 344,600 58,623 14,656 18,750 436,629 2017 348,054 55,168 13,792 18,750 435,764 2018 351,543 51,679 12,920 18,750 434,892 2019 355,068 48,155 12,039 18,750 434,012 2020-2024 1,829,450 186,660 46,665 37,500 2,100,275 2025-2029 1,923,008 93,102 23,275 - 2,039,385 2030-2031 796,464 9,980 2,495 - 808,939 TOTALS $6,289,366 $565,410 $141,353 $131,250 $7,127,379 Note 7 - Commitments and Contingencies: Grant Contingencies Amounts received from grantor agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time although the government expects such amounts, if any, to be immaterial. Construction Commitments The City has various on-going contracts for construction, renovations, paving materials, equipment, and labor. As of June 30, 2014, the significant construction commitments were as follows: Cumulative Estimated Costs Incurred Total Costs Greenway Trail Projects – Phase II $ 471,335 $ 756,402 Noble Park Lake Bank Stabilization 23,110 215,700 $ 494,445 $ 972,102 (Continued) - 83 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 7 - Commitments and Contingencies: Loan Guarantee The City of Paducah and McCracken County Fiscal Court (County) are co-guarantors for a Greater Paducah Economic Development Council, Inc. (GPEDC) commercial loan for development of the Information Age Park. The balance outstanding as of fiscal year end is $341,438 of which the City and County have equally guaranteed. The GPEDC is current on required payments and is expected to make full restitution of the loan. Note 8 - Risk Management and Litigation: The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City obtains coverage from commercial insurance companies to handle the risk of loss. There have been no decreases in insurance coverage from the prior year. There have been no settlements in excess of insurance coverage during the prior three years. An analysis of claims activity is presented below: Current Year Beginning of Claims and Actual Balance at Fiscal Year Changes in Claim Fiscal Liability Estimates Payments Year End 2011 - 2012 $ - $ 119,319 $ 117,856 $ 1,463 2012 - 2013 1,463 29,551 31,014 - 2013 - 2014 - 35,888 35,888 - 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 $175,000 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, 2014, that amount was $2,774,791. 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 $157,941 at June 30, 2014. The analysis of claims activity is presented below: Current Year Beginning of Claims and Actual Balance at Fiscal Year Changes in Claim Fiscal Liability Estimates Payments Year End 2011 - 2012 $ 228,280 $ 3,224,703 $3,203,329 $249,654 2013 - 2013 249,654 2,700,338 2,865,390 84,602 2013 - 2014 84,602 1,662,555 1,589,216 157,941 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) - 84 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 9 - Lease Agreements: Operating Leases The City is leasing land and building to the Luther F. Carson Four Rivers Center for the Performing Arts (Center) for a primary term of 99 years. No rental revenue is being collected from this lease. The rental for the primary term of the lease is the construction of the performing arts center. The building is deemed the property of the City; however, for financial reporting, the building is reported with the Luther F. Carson Four Rivers Center financial records. In December 2003, with the authorization of the City, the Center secured financing of $6.5 million subject to a mortgage against the leasehold and real property on which the performing arts center is located. The City also consented to an assignment of the lease as security for the loan. The City also leases certain other property to various lessees under non-cancelable agreements that have various expiration dates through November 30, 2021. Rental revenue received from leased property during 2014 totaled $650,573. The following is an analysis of property leased under these leases at June 30, 2014: Land $ 480,000 Buildings 3,422,261 Equipment 110,126 Total 4,012,387 Less: accumulated depreciation (1,000,996) NET BOOK VALUE $3,011,391 Depreciation expense for the year ended June 30, 2014, on leased property was $81,466. The following is a schedule of future minimum rental income from operating leases at June 30, 2014: Lease Income 2014 $ 448,185 2015 263,955 2016 65,024 2017 60,123 2018 60,123 2019-2022 75,154 TOTAL MINIMUM LEASE RECEIPTS $ 972,564 (Continued) - 85 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Note 10 – Restatement of Fund Balance and Net Position: During the year ended June 30, 2014, the City corrected classification of short-term borrowing and recorded related receivables for the non-major special revenue Home Grant Fund for the year ended June 30, 2013. The net effect of the correction reduced beginning non-major governmental funds balance by $102,210 and increased beginning net position by $205,902. During the year ended June 30, 2014, the City implemented Governmental Accounting Standards Board (GASB) Statement No. 65, Items Previously Reported as Assets and Liabilities, effective for years beginning after June 15, 2013. This GASB statement reclassified certain items that were previously reported as assets and liabilities as deferred inflows and outflows of resources, or current-period outflows and inflows. Implementation of the new statement reclassified certain bond issue costs previously reported as an asset in the City’s statement of net position. The effect of the new statement reduced beginning net position by $346,756. Beginning fund balance and net position restatement are as follows: Home Grant Fund Non-major Governmental Funds Government- Wide Governmental Activities Fund balance/net position – as previously stated $ 225,665 $ 683,634 $ 48,490,497 Home Grant Fund receivables 205,902 205,902 205,902 Reclassification for short-term borrowing (308,112) (308,112) - Reclassification for expensing bond issue costs - - (346,756) Fund balance/net position – as restated $ 123,455 $ 581,424 $ 48,349,643 Note 11 – Subsequent Events: In July of 2014, the City issued advance refunding bond series 2014B of $4,225,000. The series 2014B bonds were issued for refunding the Pension bond series 2005 maturing on or after November 1, 2016. In preparing these financial statements, management has evaluated events and transactions for potential recognition or disclosure through December 8, 2014, the date financial statements were available to be issued. CITY OF PADUCAH, KENTUCKY REQUIRED SUPPLEMENTARY INFORMATION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2014 2014 Total pension liability Service cost 5$ Interest 792 Changes in benefit terms - Differences between expected and actual experience 151 Changes in assumptions 176 Benefit payments/refunds (1,445) Net change in total pension liability (321) Total pension liability - beginning 11,297 Total pension liability - ending (a)10,976$ Plan fiduciary net position Contributions - employer 421$ Contributions - member 5 Net investment income 1,058 Benefit payments/refunds (1,445) Administrative expenses (48) Other - Net change in plan fiduciary net position (9) Plan fiduciary net position - beginning 7,145 Plan fiduciary net position - ending (b)7,136$ Net pension liability ending (a) - (b)3,840$ Plan fiduciary net position as a percentage of total pension liability 65% Covered-employee payroll 67$ Net pension liability as a percentage of covered-employee payroll 5738% (1) Additional ten year of supplementary information will be provided as this information becomes available. -86- Exhibit A-1 CITY OF PADUCAH, KENTUCKY REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN THE POLICE AND FIREFIGHTERS' PENSION Last Fiscal Year Ending June 30 (1) (dollar amounts in thousands) TRUST FUND'S NET PENSION LIABILITY AND RELATED RATIOS 2014 Total pension liability Service cost -$ Interest 8.3 Changes in benefit terms - Differences between expected and actual experience (30.6) Changes in assumptions - Benefit payments/refunds (21.2) Net change in total pension liability (43.5) Total pension liability - beginning 148.2 Total pension liability - ending (a)104.7$ Plan fiduciary net position Contributions - employer -$ Contributions - member - Net investment income 0.6 Benefit payments/refunds (21.1) Administrative expenses (7.5) Other - Net change in plan fiduciary net position (28.0) Plan fiduciary net position - beginning 75.9 Plan fiduciary net position - ending (b)47.9$ Net pension liability ending (a) - (b)56.8$ Plan fiduciary net position as a percentage of total pension liability 45.7% Covered-employee payroll n/a Net pension liability as a percentage of covered-employee payroll n/a (1) Additional ten year of supplementary information will be provided as this information becomes available. (dollar amounts in thousands) -87- Exhibit A-2 CITY OF PADUCAH, KENTUCKY REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN THE APPOINTIVE EMPLOYEES' PENSION TRUST FUND'S NET PENSION LIABILITY AND RELATED RATIOS Last Fiscal Year Ending June 30 (1) 2014 Actuarially determined contribution 422$ Contributions in relation to the actuarially determined contribution 421 Contribution deficiency (excess)1$ Covered-employee payroll 67$ Contributions as a percentage of covered-employee payroll 628% 2014 Annual money-weighted rate of return, net of investment expense 15.95% (1) Additional ten year of supplementary information will be provided as this information becomes available. Exhibit A-3 CITY OF PADUCAH, KENTUCKY REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF POLICE AND FIREFIGHTERS' PENSION TRUST FUND CONTRIBUTIONS AND INVESTMENT RETURNS Last Fiscal Year Ending June 30 (1) (dollar amounts in thousands) Schedule of Contributions Schedule of Investment Returns -88- 2014 Actuarially determined contribution 10.8$ Contributions in relation to the actuarially determined contribution - Contribution deficiency (excess)10.8$ Covered-employee payroll n/a Contributions as a percentage of covered-employee payroll n/a 2014 Annual money-weighted rate of return, net of investment expense 0.97% (1) Additional ten year of supplementary information will be provided as this information becomes available. (dollar amounts in thousands) -89- Schedule of Contributions Schedule of Investment Returns Last Fiscal Year Ending June 30 (1) Exhibit A-4 CITY OF PADUCAH, KENTUCKY REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF APPOINTIVE EMPLOYEES' PENSION TRUST FUNDS CONTRIBUTIONS AND INVESTMENT RETURNS CITY OF PADUCAH, KENTUCKY SUPPLEMENTARY INFORMATION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2014 Exhibit B-1 Variance with Final Budget Final Positive Budget (Negative) Revenues: Intergovernmental and grants Intergovernmental 1,350,025$ 1,350,029$ 4$ Grants 4,050,100 4,050,116 16 Interest - - - Miscellaneous 1,314,035 1,314,047 12 Total revenues 6,714,160 6,714,192 32 Expenditures: Capital outlay 11,926,460 11,926,435 25 Excess (deficiency) of revenues over expenditures (5,212,300) (5,212,243) 57 Other Financing Sources (Uses): Long-term debt issued - - - Operating transfers in 5,363,390 5,363,404 14 Actual CITY OF PADUCAH, KENTUCKY DETAIL SCHEDULE OF REVENUES, EXPENDITURES, AND GENERAL CAPITAL IMPROVEMENTS FUND FOR THE YEAR ENDED JUNE 30, 2014 CHANGES IN FUND BALANCE - BUDGET AND ACTUAL Operating transfers in 5,363,390 5,363,404 14 Operating transfers out - - - Total other financing sources 5,363,390 5,363,404 14 Net change in fund balance 151,090$ 151,161 71$ Fund balance, July 1, 2013 3,055,250 FUND BALANCE, JUNE 30, 2014 3,206,411$ See auditors report on pages 11-12. -90- Exhibit B-2 Variance with Final Budget Final Positive Budget Actual (Negative) Revenues: Intergovernmental 677,250$ 677,255$ 5$ Grants* - 84,467 84,467 Property upkeep, rentals, sales and other 202,895 202,898 3 Total revenues 880,145 964,620 84,475 Expenditures: Debt service: Principal requirement 1,748,240 1,748,233 7 Interest and fiscal requirement*993,925 1,078,357 (84,432) Total expenditures 2,742,165 2,826,590 (84,425) Excess (deficiency) of revenues over expenditures (1,862,020) (1,861,970) 50 Other Financing Sources (Uses): FOR THE YEAR ENDED JUNE 30, 2014 CITY OF PADUCAH, KENTUCKY DEBT SERVICE FUND DETAIL SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL Other Financing Sources (Uses): Operating transfers in 2,011,965 2,011,970 5 Total other financing sources 2,011,965 2,011,970 5 Net change in fund balance 149,945$ 150,000 55$ Fund balance, July 1, 2013 353,817 FUND BALANCE, JUNE 30, 2014 503,817$ * Non-cash federal interest subsidies are not budgeted. See auditors report on pages 11-12. -91- CITY OF PADUCAH, KENTUCKY SUPPLEMENTARY INFORMATION NONMAJOR GOVERNMENTAL FUNDS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2014 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. Exhibit B-3 Court Small Awards Grant Fund Fund Cash and cash equivalents 1,473,393$ 243,565$ 206,314$ -$ Receivables, net: Accounts 51,846 121,396 - - Grants - - - - Due from other funds - - - - TOTAL ASSETS 1,525,239$364,961$ 206,314$ -$ Liabilities: Voucher and accounts payable 620,987$ 11,143$ 84,127$ -$ Line of credit - - - Accrued payroll and payroll taxes - 54,943 - - Due to other funds - - - - Total liabilities 620,987 66,086 84,127 - Fund Balances: Restricted for: Highway and streets 904,252 - - - Public safety - - 122,187 - Capital Improvements - - - - Program purposes - - - - Assigned for: Public safety 298,875 Unrestricted - - - - Total fund balances 904,252 298,875 122,187 - TOTAL LIABILITIES AND FUND BALANCES 1,525,239$364,961$ 206,314$ -$ See auditors report on pages 11-12. NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2014 FUND BALANCES Municipal Aid Program Special Revenue Funds CITY OF PADUCAH, KENTUCKY COMBINING BALANCE SHEET ASSETS -92- Emergency AND LIABILITIES Service Fund Communication CDBG Home Grant Grant Bond Fund Fund Fund -$ 67,055$ 763,949$ 2,754,276$ - 87,370 - 260,612 172,283 44,000 - 216,283 - - 500,000 500,000 172,283$ 198,425$ 1,263,949$ 3,731,171$ -$ -$ -$ 716,257$ - 114,633 - 114,633 - - - 54,943 172,283 - - 172,283 172,283 114,633 - 1,058,116 - - - 904,252 - - - 122,187 - - 1,263,949 1,263,949 - 83,792 - 83,792 298,875 - - - - - 83,792 1,263,949 2,673,055 172,283$ 198,425$ 1,263,949$ 3,731,171$ Funds Total Nonmajor Special Revenue Funds -93- Governmental Exhibit B-4 Court Small Awards Grant Revenues: Fund Fund Taxes -$ 416,803$ -$ -$ Charges for services - 264,009 - - Intergovernmental 597,079 - - - Grants - - 82,704 21,500 Interest 13,959 2,341 1,954 - Miscellaneous - 395,445 - - Total revenues 611,038 1,078,598 84,658 21,500 Expenditures: Current operations: Public safety - 1,651,391 21,566 - Planning and development - - - 21,500 Capital Outlay - - - - Debt Service: Debt issuance costs Interest and fiscal requirement - - - - Total expenditures 1,521,207 1,651,391 21,566 21,500 Excess (deficiency) of revenues over expenditures (910,169) (572,793) 63,092 - Other Financing Sources (Uses): Proceeds of debt - - - - Payment to refunded bond escrow agent Premium on debt issued Discount on debt issued Transfers in 513,000 472,794 - - Transfers out - - - - Total other financing sources (uses) 513,000 472,794 - - Net change in fund balances (397,169) (99,999) 63,092 - Fund balances (as restated), July 1, 2013 1,301,421 398,874 59,095 - FUND BALANCES, JUNE 30, 2014 904,252$ 298,875$ 122,187$ -$ See auditors report on pages 11-12. Municipal Aid Program Special Revenue Funds Communication CITY OF PADUCAH, KENTUCKY FOR THE YEAR ENDED JUNE 30, 2014 NONMAJOR GOVERNMENTAL FUNDS AND CHANGES IN FUND BALANCES COMBINING STATEMENT OF REVENUES, EXPENDITURES -94- Emergency Service Fund CDBG Home Grant Grant Bond Fund Fund Fund -$ -$ -$ 416,803$ - - - 264,009 - - - 597,079 802,907 158,000 - 1,065,111 - - 13,950 32,204 75,903 270,355 - 741,703 878,810 428,355 13,950 3,116,909 - - - 1,672,957 878,810 468,018 - 1,368,328 - - - - 109,292 109,292 - - 8,509 8,509 878,810 468,018 117,801 4,680,293 - (39,663) (103,851) (1,563,384) - - 9,055,000 9,055,000 (5,627,447) (5,627,447) 220,683 220,683 (53,529) (53,529) - - 295,093 1,280,887 - - (2,522,000) (2,522,000) - - 1,367,800 2,353,594 - (39,663) 1,263,949 790,210 - 123,455 - 1,882,845 -$ 83,792$ 1,263,949$ 2,673,055$ Governmental -95- Special Revenue Funds Funds Total Nonmajor Exhibit B-5 Variance with Final Budget Final Positive Budget Actual (Negative) Revenues: Intergovernmental 597,075$ 597,079$ 4$ Interest 13,955 13,959 4 Other - - - Total revenues 611,030 611,038 8 Expenditures: Public service 1,521,210 1,521,207 3 Excess (deficiency) of revenues over expenditures (910,180) (910,169) 11 Other Financing Sources (Uses): Operating transfers in 513,000 513,000 - Operating transfers out - - - Total other financing sources (uses)513,000 513,000 - Net change in fund balance (397,180) (397,169) 11 Fund balance, July 1, 2013 1,301,421 1,301,421 - FUND BALANCE, JUNE 30, 2014 904,241$ 904,252$ 11$ See accompanying notes to the basic financial statements. -96- FOR THE YEAR ENDED JUNE 30, 2014 CITY OF PADUCAH, KENTUCKY MUNICIPAL AID PROGRAM FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL Exhibit B-6 Variance with Final Budget Final Positive Budget Actual (Negative) Revenues: Local contributions 416,800$ 416,803$ 3$ Telephone surcharges 264,005 264,009 4 Interest 2,340 2,341 1 Miscellaneous 395,440 395,445 5 Total revenues 1,078,585 1,078,598 13 Expenditures: Public safety 1,651,525 1,651,391 134 Excess (deficiency) of revenues over expenditures (572,940) (572,793) 147 Other Financing Sources (Uses): Operating transfers in 472,790 472,794 4 Operating transfers out - - - Total other financing sources (uses)472,790 472,794 4 Net change in fund balance (100,150)$ (99,999) 151$ Fund balance, July 1, 2013 398,874 FUND BALANCE, JUNE 30, 2014 298,875$ See auditors report on pages 11-12. -97- FOR THE YEAR ENDED JUNE 30, 2014 CITY OF PADUCAH, KENTUCKY EMERGENCY COMMUNICATION SERVICE FUND DETAIL SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL Exhibit B-7 Variance with Final Budget Final Positive Budget Actual (Negative) Revenues: Grants 82,700$ 82,704$ 4$ Interest 1,950 1,954 4 Total revenues 84,650 84,658 8 Expenditures: Public safety 21,570 21,566 4 Excess (deficiency) of revenues over expenditures 63,080 63,092 12 Net change in fund balance 63,080$ 63,092 12$ Fund balance, July 1, 2013 59,095 FUND BALANCE, JUNE 30, 2014 122,187$ See auditors report on pages 11-12. -98- 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, 2014 Exhibit B-8 Variance with Final Budget Final Positive Budget Actual (Negative) Revenues: Grants 21,500$ 21,500$ -$ Other - - - Total revenues 21,500 21,500 - Expenditures: Planning and development 21,500 21,500 - 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, 2013 - FUND BALANCE, JUNE 30, 2014 -$ See auditors report on pages 11-12. -99- FOR THE YEAR ENDED JUNE 30, 2014 CITY OF PADUCAH, KENTUCKY SMALL GRANT FUND DETAIL SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL Exhibit B-9 Variance with Final Budget Final Positive Budget Actual (Negative) Revenues: Grants 802,900$ 802,907$ 7$ Other 75,900 75,903 3 Total revenues 878,800 878,810 10 Expenditures: Planning and development 878,815 878,810 5 Excess (deficiency) of revenues over expenditures (15) - 5 Net change in fund balance (15)$ - 5$ Fund balance, July 1, 2013 - FUND BALANCE, JUNE 30, 2014 -$ See auditors report on pages 11-12. -100- FOR THE YEAR ENDED JUNE 30, 2014 CITY OF PADUCAH, KENTUCKY CDBG FUND DETAIL SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL Exhibit B-10 Variance with Final Budget Final Positive Budget Actual (Negative) Revenues: Grants 158,000$ 158,000$ -$ Other 270,355 270,355 - Total revenues 428,355 428,355 - Expenditures: Planning and development 468,020 468,018 2 Excess (deficiency) of revenues over expenditures (39,665) (39,663) 2 Other Financing Sources (Uses): Proceeds from line of credit - - - Operating transfers in - - - Operating transfers out - - - FOR THE YEAR ENDED JUNE 30, 2014 CITY OF PADUCAH, KENTUCKY HOME GRANT FUND DETAIL SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL Net change in fund balance (39,665)$ (39,663) 2$ Fund balance, July 1, 2013 123,455 FUND BALANCE, JUNE 30, 2014 83,792$ See auditors report on pages 11-12. -101- Exhibit B-11 Variance with Final Budget Final Positive Budget Actual (Negative) Revenues: Grants -$ -$ -$ Interest 13,945 13,950 5 Total revenues 13,945 13,950 5 Expenditures: Debt issuance costs 109,295 109,292 3 Interest and fiscal requirement 8,510 8,509 1 Total expenditures 117,805 117,801 4 Excess (deficiency) of revenues over expenditures (103,860) (103,851) 9 Other Financing Sources (Uses): Proceeds of debt 9,054,995 9,055,000 5 Payment to refunded bond escrow agent (5,627,450) (5,627,447) 3 Premium on debt issued 220,680 220,683 3 Discount on debt issued (53,530) (53,529) 1 Operating transfers in 295,095 295,093 (2) Operating transfers out (2,522,000) (2,522,000) - Total other financing sources (uses)1,367,790 1,367,800 (2) Net change in fund balance 1,263,930$ 1,263,949 7$ Fund balance, July 1, 2013 - FUND BALANCE, JUNE 30, 2014 1,263,949$ See auditors report on pages 11-12. -102- FOR THE YEAR ENDED JUNE 30, 2014 CITY OF PADUCAH, KENTUCKY BOND FUND DETAIL SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL CITY OF PADUCAH, KENTUCKY SUPPLEMENTARY INFORMATION NONMAJOR PROPRIETARY FUNDS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2014 COMBINING FINANCIAL STATEMENTS NONMAJOR PROPRIETARY 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. Exhibit C-1 Civic Center Current Assets: Fund Cash and cash equivalents 627,878$ 1$ 627,879$ Receivables, net - - - Prepaid expense - - - Total current assets 627,878 1 627,879 Noncurrent Assets: Net depreciable capital assets 3,136 149,575 152,711 Total assets 631,014 149,576 780,590 Current Liabilities: Voucher and accounts payable 70,262 7,394 77,656 Accrued compensated absences 1,896 - 1,896 Unearned revenues 52,390 - 52,390 Due to other funds 48,786 - 48,786 CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF NET POSITION NONMAJOR PROPRIETARY FUNDS JUNE 30, 2014 ASSETS LIABILITIES Total Nonmajor Enterprise Funds Section Eight Housing Total current liabilities 173,334 7,394 180,728 Noncurrent Liabilities: Accrued compensated absences 17,061 - 17,061 Total liabilities 190,395 7,394 197,789 Invested in capital assets 3,136 149,575 152,711 Restricted - Housing 437,483 - 437,483 Unrestricted - (7,393) (7,393) TOTAL NET POSITION 440,619$ 142,182$ 582,801$ See auditors report on pages 11-12. NET POSITION -103- Exhibit C-2 Civic Center Operating Revenues: Fund Charges for services -$ 41,266$ 41,266$ Miscellaneous 1,639 - 1,639 Total operating income 1,639 41,266 42,905 Operating Expenses: Cost of sales and service 1,851,990 71,961 1,923,951 Depreciation and amortization 3,877 10,021 13,898 Total operating expenses 1,855,867 81,982 1,937,849 Operating income (loss)(1,854,228) (40,716) (1,894,944) Non-Operating Revenues (Expenses): Grants - program purpose 1,901,883 - 1,901,883 Interest and investment income 66 - 66 Gain (loss) on disposal of property and equipment - - - Total nonoperating revenues (expenses)1,901,949 - 1,901,949 Income (loss) before contributions and transfers 47,721 (40,716) 7,005 Contributions and Operating Transfers: Transfers in - 27,872 27,872 Transfers out - - - Total contributions and operating transfers - 27,872 27,872 Change in net position 47,721 (12,844) 34,877 Net position, July 1, 2013 392,898 155,026 547,924 NET POSITION, JUNE 30, 2014 440,619$ 142,182$ 582,801$ See auditors report on pages 11-12. Eight Housing COMBINING STATEMENT OF REVENUES, EXPENSES CITY OF PADUCAH, KENTUCKY Total Nonmajor Enterprise -104- FOR THE YEAR ENDED JUNE 30, 2014 NONMAJOR PROPRIETARY FUNDS AND CHANGES IN NET POSITION Funds Section Exhibit C-3 Civic Center Cash Flows from Operating Activities: Fund Cash received from customers -$ 41,266$ 41,266$ Payments to employees (146,544) - (146,544) Payments to internal service funds - (2,338) (2,338) Other receipts 1,639 - 1,639 Housing assistance and other payments (1,702,076) (67,181) (1,769,257) Net cash provided (used) by operating activities (1,846,981) (28,253) (1,875,234) Cash Flows from Noncapital Financing Activities: Grants - program purpose 1,908,795 - 1,908,795 Transfers from other funds - 27,872 27,872 Transfers to other funds - - - Net cash provided (used) by noncapital financing activities 1,908,795 27,872 1,936,667 Cash Flows from Investing Activities: Interest on cash and investments 66 - 66 Net increase (decrease) in cash and cash equivalents 61,880 (381) 61,499 Cash and cash equivalents, July 1, 2013 565,998 382 566,380 CASH AND CASH EQUIVALENTS, JUNE 30, 2014 627,878$ 1$ 627,879$ Reconciliation of Operating Income (Loss) to Net Cash Provided by Operating Activities: Operating income (loss)(1,854,228)$ (40,716)$ (1,894,944)$ Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation and amortization 3,877 10,021 13,898 Change in assets and liabilities: Unearned revenues (6,912) - (6,912) Accounts payable and accrued expenses 10,282 2,442 12,724 NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (1,846,981)$ (28,253)$ (1,875,234)$ See auditors report on pages 11-12. Funds CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF CASH FLOWS NONMAJOR PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2014 -105- Section Eight Housing Total Nonmajor Enterprise CITY OF PADUCAH, KENTUCKY SUPPLEMENTARY INFORMATION INTERNAL SERVICE FUNDS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2014 COMBINING FINANCIAL STATEMENTS INTERNAL SERVICE FUNDS Fleet Maintenance – to account for costs of operating a maintenance facility for automotive equipment used by other City departments. Fleet Lease Trust – to account for the financing of vehicle acquisitions provided by one department or agency to other departments or agencies of the government and to other governmental units, on a cost reimbursement basis. Insurance Fund – to account for the costs of obtaining insurance for other City departments. Health Insurance Fund – to account for the costs associated with the City’s health insurance activities. The intent of the City of Paducah is that the cost of providing insurance coverage on a continuing basis be financed primarily through user charges. Exhibit D-1 Health Fleet Lease Insurance Insurance Combined Current Assets: Trust Fund Fund Total Cash and cash equivalents 6,926$ 3,116,171$ 349,404$ 2,058,011$ 5,530,512$ Investments - - - - - Receivables, net - 217,500 - 46,339 263,839 Due from other funds - 400,000 - - 400,000 Prepaid expense - 183,732 - 19,945 203,677 Inventories 64,733 - - - 64,733 Total current assets 71,659 3,917,403 349,404 2,124,295 6,462,761 Noncurrent Assets: Net depreciable capital assets 18,264 3,246,869 - - 3,265,133 Total assets 89,923 7,164,272 349,404 2,124,295 9,727,894 Current Liabilities: Voucher and accounts payable 13,972 - 6,546 157,941 178,459 Accrued payroll and payroll taxes 17 948 17 948 CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF NET POSITION INTERNAL SERVICE FUNDS JUNE 30, 2014 LIABILITIES ASSETS Fleet Maintenance Accrued payroll and payroll taxes 17,948 - - - 17,948 Accrued compensated absences 40,344 - - - 40,344 Deferred revenue - - - 23,122 23,122 Total current liabilities 72,264 - 6,546 181,063 259,873 Noncurrent Liabilities: Accrued compensated absences 17,659 - - - 17,659 Total liabilities 89,923 - 6,546 181,063 277,532 Invested in capital assets, net of related debt 18,264 3,246,869 - - 3,265,133 Unrestricted (18,264) 3,917,403 342,858 1,943,232 6,185,229 TOTAL NET POSITION -$ 7,164,272$ 342,858$ 1,943,232$ 9,450,362$ See auditors report on pages 11-12. -106- NET POSITION Exhibit D-2 Health Fleet Lease Insurance Insurance Combined Trust Fund Fund Total Operating Revenues: Charges for services - internal 355,011$721,421$ 929,614$ 3,282,355$ 5,288,401$ Charges for services - external - - - 286,492 286,492 Total operating revenues 355,011 721,421 929,614 3,568,847 5,574,893 Operating Expenses: Vehicle maintenance 540,382 - - - 540,382 Administrative - 28,501 - 416,622 445,123 Insurance - - 950,949 2,281,344 3,232,293 Leave expense 5,294 - - - 5,294 Depreciation 10,480 609,352 - - 619,832 Total operating expenses 556,156 637,853 950,949 2,697,966 4,842,924 Operating income (loss)(201,145) 83,568 (21,335) 870,881 731,969 Nonoperating Revenues and (Expenses): Interest and investment income 25 32,597 - - 32,622 Gain (loss) on disposal of property and equipment - 36,737 - - 36,737 Total nonoperating revenues (expenses)25 69,334 - - 69,359 Income (loss) before transfers (201,120) 152,902 (21,335) 870,881 801,328 Contributions and Transfers: Transfers in 163,829 8,500 98,657 - 270,986 Transfers out - - (8,500) - (8,500) Total contributions and operating transfers 163,829 8,500 90,157 - 262,486 Change in net position (37,291) 161,402 68,822 870,881 1,063,814 Net position, July 1, 2013 37,291 7,002,870 274,036 1,072,351 8,386,548 NET POSITION, JUNE 30, 2014 -$ 7,164,272$342,858$ 1,943,232$ 9,450,362$ See auditors report on pages 11-12. -107- Fleet Maintenance CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2014 Exhibit D-3 Health Fleet Lease Insurance Insurance Combined Cash Flows from Operating Activities: Trust Fund Fund Total Receipts from other funds for services 355,011$ 752,543$ 929,997$ 3,573,493$ 5,611,044$ Payments to suppliers (226,502) - - - (226,502) Payments to employees (311,983) - - - (311,983) Claims paid - - - (2,198,521) (2,198,521) Other payments - (28,536) (949,187) (416,622) (1,394,345) Net cash provided (used) by operating activities (183,474) 724,007 (19,190) 958,350 1,479,693 Cash Flows from Noncapital Financing Activities: Transfers from other funds 163,829 8,500 98,657 - 270,986 Transfers to other funds - - (8,500) - (8,500) Net cash provided (used) by noncapital financing activities 163,829 8,500 90,157 - 262,486 Cash Flows from Capital and Related Financing Activities: Proceeds from sale of capital assets - 38,730 - - 38,730 Purchase of capital assets - (970,817) - - (970,817) Net cash used by capital and related financing - (932,087) - - (932,087) Cash Flows from Investing Activities: Interest and dividends 25 32,597 - - 32,622 Net cash used by investing activities 25 32,597 - - 32,622 Net increase (decrease) in cash and cash equivalents (19,620) (166,983) 70,967 958,350 842,714 Cash and cash equivalents, July 1, 2013 26,546 3,283,154 278,437 1,099,661 4,687,798 CASH AND CASH EQUIVALENTS, JUNE 30, 2014 6,926$ 3,116,171$349,404$ 2,058,011$ 5,530,512$ Reconciliation of Operating Income (Loss) to Net Cash Provided by Operating Activities: Operating income (loss)(201,145)$83,568$ (21,335)$ 870,881$ 731,969$ Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization 10,480 609,352 - - 619,832 Change in assets and liabilities: Receivables - (217,500) 383 5,479 (211,638) Prepaid expense - 648,622 - 9,484 658,106 Inventories (3,721) - - - (3,721) Due form other funds - (400,000) - - (400,000) Accounts payable and accrued expenses 10,912 (35) 1,762 72,506 85,145 NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (183,474)$724,007$ (19,190)$ 958,350$ 1,479,693$ See auditors report on pages 11-12. -108- Fleet Maintenance CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2014 CITY OF PADUCAH, KENTUCKY SUPPLEMENTARY INFORMATION FIDUCIARY FUNDS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2014 COMBINING FINANCIAL STATEMENTS FIDUCIARY FUNDS Pension Trust Funds Police and Firefighters’ Retirement Fund and Appointive Employees’ Pension Fund – to account for the accumulation of resources to be used for retirement payments at appropriate amounts and times in the future. Resources are contributed by employees and by the City at amounts determined by Kentucky Statutes and/or City Commission decisions. Exhibit E-1 Total Cash and cash equivalents 4,689$ 47,868$ 52,557$ Receivables: Interest 17,299 - 17,299 Prepaid expenses - - - Investments at fair value Money market funds 139,544 - 139,544 Certificates of deposits - - - Common stock 2,969,572 - 2,969,572 Corporate bonds 954,013 - 954,013 U.S. agencies bonds 253,006 - 253,006 Mortgage backed securities - - - Mutual funds 2,797,666 - 2,797,666 Total assets 7,135,789 47,868 7,183,657 Voucher and accounts payable - - - Held in trust for pension benefits and other purposes 7,135,789$ 47,868$ 7,183,657$ See auditors report on pages 11-12. AppointivePolice and CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS - PENSION TRUST FUNDS JUNE 30, 2014 ASSETS LIABILITIES NET POSITION -109- Employees' Retirement Fund Pension Fund Firefighters' Exhibit E-2 Additions:Totals Contributions: Employer 420,834$ -$ 420,834$ Plan members 5,354 - 5,354 Total contributions 426,188 - 426,188 Investment earnings: Net change in fair value of investments 877,920 - 877,920 Interest and dividends 179,806 597 180,403 Net investment earnings 1,057,726 597 1,058,323 Total additions 1,483,914 597 1,484,511 Deductions: Benefits 1,445,080 21,152 1,466,232 Administrative expenses 48,406 7,483 55,889 Total deductions 1,493,486 28,635 1,522,121 FIDUCIARY FUNDS - PENSION TRUST FUNDS FOR THE YEAR ENDED JUNE 30, 2014 COMBINING STATEMENT OF CHANGES IN NET POSITION CITY OF PADUCAH, KENTUCKY Police and Appointive Retirement Fund Pension Fund Employees'Firefighters' Total deductions 1,493,486 28,635 1,522,121 Change in net position (9,572) (28,038) (37,610) Net position - beginning 7,145,361 75,906 7,221,267 Net position - ending 7,135,789$ 47,868$ 7,183,657$ See auditors report on pages 11-12. -110- COMBINING FINANCIAL STATEMENTS FIDUCIARY FUNDS Private-purpose Trust Funds Cemetery and Park Trusts - to account for assets held by the City in the capacity of trustee for specified purposes. Exhibit E-3 Cemetery and Park Trusts Cash and cash equivalents 6,280$ Investments at fair value Money market funds - Mutual funds 1,207,517 Total assets 1,213,797 Accounts payable - Held in trust for other purposes 1,213,797$ FIDUCIARY FUNDS - PRIVATE-PURPOSE TRUST FUNDS STATEMENT OF NET POSITION CITY OF PADUCAH, KENTUCKY ASSETS LIABILITIES NET POSITION JUNE 30, 2014 See auditors report on pages 11-12. -111- Exhibit E-4 Cemetery and Park Additions:Trusts Contributions: Intergovernmental revenues -$ Private donations 2,615 Total contributions 2,615 Investment earnings: Change in fair value of investments 115,525 Interest and dividends 59,541 Net investment earnings 175,066 Interfund transfers - Total additions 177,681 Deductions: Capital outlay 47,771 Administrative expenses 14,396 Total deductions 62,167 Change in net position 115,514 Net position - beginning 1,098,283 Net position - ending 1,213,797$ See auditors report on pages 11-12. STATEMENT OF CHANGES IN NET POSITION CITY OF PADUCAH, KENTUCKY -112- FOR THE YEAR ENDED JUNE 30, 2014 FIDUCIARY FUNDS - PRIVATE-PURPOSE TRUST FUNDS 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. Exhibit E-5 Payroll Fund: Additions Deductions Assets: Cash and cash equivalents 532,049$ 14,245,555$ 14,213,958$ 563,646$ Liabilities: Payroll taxes and withholdings payable 532,049$ 14,245,555$ 14,213,958$ 563,646$ See auditors report on pages 11-12. CITY OF PADUCAH, KENTUCKY AGENCY FUND IN ASSETS AND LIABILITIES STATEMENT OF CHANGES -113- FOR THE YEAR ENDED JUNE 30, 2014 Balance Balance July 1, 2013 June 30, 2014 CITY OF PADUCAH, KENTUCKY STATISTICAL SECTION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2014 STATISTICAL SECTION Contents Page Financial Trends 114-118 Revenue Capacity 119-124 Debt Capacity 125-128 Economic and Demographic Information 129-130 Operating Information 131-133 These schedules offer economic and demographic indicators to help the reader understand the environment within which the City's financial activities take place. These schedules contain service and infrastructure data to help the reader understand how the information in the City's financial report relates to the services the City provides and the activities it performs. Sources:Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The City implemented the new reporting model in the fiscal year ending June 30, 2003. Schedules presenting government- wide information include information beginning in that year. This part of the City of Paducah's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information say about the City's overall financial health. These schedules contain trend information to help the reader understand how the City's financial performance and well-being changed over time. These schedules contain information to help the reader assess the factors affecting the City's ability to generate its property and employee taxes. These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future. 2014201320122011 2010 (2) 20092008200720062005 (1)Governmental activities:Invested in Capital Assets, Net of Related Debt39,844,772$ 33,365,112$ 31,957,381$ 32,905,977$ 31,136,514$ 31,215,252$ 31,766,783$ 32,557,572$ 30,664,671$ 29,492,197$ Restricted for:Program purposes205,979 284,760 897,942 1,264,986 1,100,696 2,183,559 1,782,251 1,904,321 1,018,231 727,699 Capital projects2,168,201 1,301,421 4,105,639 5,987,399 5,077,026 4,363,913 5,028,420 4,618,923 2,689,804 940,323 Unrestricted13,382,066 13,539,204 5,913,997 4,229,501 8,165,101 8,621,077 9,432,763 9,057,641 7,718,198 7,419,037 Total governmental activities net position55,601,018$ 48,490,497$ 42,874,959$ 44,387,863$ 45,479,337$ 46,383,801$ 48,010,217$ 48,138,457$ 42,090,904$ 38,579,256$ Business-type activities:Invested in Capital Assets, Net of Related Debt1,210,415 1,232,735 1,308,574 1,334,230 1,652,961 1,721,419 1,863,975 1,491,523 1,277,720 1,463,118 Restricted for:Program purposes437,483 385,885 732,817 999,885 620,800 369,368 579,460 - - - Unrestricted3,837,034 3,428,267 3,246,320 3,004,783 1,816,705 1,036,093 (19,965) (147,286) 132,090 (27,648) Total business-type activities net postion5,484,932$ 5,046,887$ 5,287,711$ 5,338,898$ 4,090,466$ 3,126,880$ 2,423,470$ 1,344,237$ 1,409,810$ 1,435,470$ Primary government:Invested in Capital Assets, Net of Related Debt41,055,187 34,597,847 33,265,955 34,240,207 32,789,475 32,936,671 33,630,758 34,049,095 31,942,391 30,955,315 Restricted for:Program purposes643,462 670,645 1,630,759 2,264,871 1,721,496 2,552,927 2,361,711 1,904,321 1,018,231 727,699 Capital projects2,168,201 1,301,421 4,105,639 5,987,399 5,077,026 4,363,913 5,028,420 4,618,923 2,689,804 940,323 Unrestricted17,219,100 16,967,471 9,160,317 7,234,284 9,981,806 9,657,170 9,412,798 8,910,355 7,850,288 7,391,389 Total primary government net position61,085,950$ 53,537,384$ 48,162,670$ 49,726,761$ 49,569,803$ 49,510,681$ 50,433,687$ 49,482,694$ 43,500,714$ 40,014,726$ (1) Significant change in governmental and business-type net position due to reclassification for prior year omitted receivables, capital assets and post-closure landfill expenses. (2) Significant change in governmental net position due to reclassification for prior year grant receivables. Fiscal YearTABLE 1CITY OF PADUCAH, KENTUCKYNET POSITION BY COMPONENTLast Ten Fiscal Years (accrual basis of accounting)-114- Pages 1 of 22014 2013 2012 2011 2010 (3) 2009 2008 (2) 2007 2006 2005 (1)ExpensesGovernmental activities:General government 8,005,619$ 7,843,140$ 12,937,997$ 9,786,052$ 9,763,178$ 12,148,118$ 10,709,641$ 9,462,543$ 9,057,295$ 8,431,994$ Public safety 18,439,670 18,204,945 17,045,731 16,993,228 16,239,042 15,734,557 15,938,831 15,182,704 14,592,756 14,620,938 Public service 6,982,536 6,167,510 6,163,602 7,328,806 7,669,729 12,849,566 9,543,714 8,299,658 8,486,662 6,249,860 Parks and recreation 2,750,531 2,710,659 2,654,098 2,748,333 2,653,474 1,492,306 1,286,955 1,197,072 1,044,361 1,045,024 Planning and development 1,805,379 1,463,659 1,192,952 1,212,103 970,022 708,827 282,042 1,891,725 2,404,636 2,521,412 Interest on long-term debt 1,084,016 1,066,876 1,059,537 1,363,580 1,099,450 1,029,888 1,066,067 1,134,898 974,101 775,122 Total governmental activities expenses39,067,751 37,456,789 41,053,917 39,432,102 38,394,895 43,963,262 38,827,250 37,168,600 36,559,811 33,644,350 Business-type activities:Solid Waste3,985,233 3,967,490 3,900,264 3,832,130 3,797,097 4,037,845 4,086,747 4,079,684 3,893,013 3,683,954 Section Eight Housing1,855,869 2,032,843 1,921,004 1,956,728 2,061,370 2,154,360 1,949,899 - - - Civic Center81,982 78,000 71,069 76,546 69,537 75,692 84,908 54,562 45,894 39,008 TISA- - 173,708 183,546 206,798 162,848 156,388 267,192 269,781 170,264 Total business-type activities expenses5,923,084 6,078,333 6,066,045 6,048,950 6,134,802 6,430,745 6,277,942 4,401,438 4,208,688 3,893,226 Total primary government expenses44,990,835$ 43,535,122$ 47,119,962$ 45,481,052$ 44,529,697$ 50,394,007$ 45,105,192$ 41,570,038$ 40,768,499$ 37,537,576$ Program RevenuesGovernmental activities:Charges for services:General government 1,672,552$ 1,525,212$ 1,488,845$ 1,051,509$ 993,371$ 1,303,667$ 1,415,943$ 1,730,046$ 1,618,903$ 1,485,005$ Public safety 264,143 354,829 509,297 790,650 484,754 602,262 268,839 1,024,610 767,086 794,814 Public service 960,271 963,893 1,032,953 1,205,666 1,197,194 1,220,999 1,111,188 1,150,507 942,355 895,155 Parks and recreation 105,248 106,183 97,896 129,790 152,890 180,420 124,606 122,929 103,932 117,317 Planning and development - - - - - 1,600 30,627 10,810 20,602 13,501 Operating grants and contributions 5,419,715 3,067,581 2,215,247 2,086,625 1,813,019 2,119,845 1,340,261 2,797,216 2,988,612 2,452,694 Capital grants and contributions 4,136,749 2,165,548 533,169 1,767,093 1,390,848 4,889,520 1,297,900 3,681,490 3,302,568 1,100,064 Total governmental activities program revenues 12,558,678 8,183,246 5,877,407 7,031,333 6,032,076 10,318,313 5,589,364 10,517,608 9,744,058 6,858,550 Business-type activities:Solid Waste 4,410,059$ 4,372,060$ 4,437,341$ 4,476,139$ 4,436,540$ 4,547,959$ 4,165,094$ 3,928,140$ 3,696,609$ 3,583,417$ Section Eight Housing- - - - - - - - - - Civic Center 41,266 38,265 34,038 33,766 32,455 38,577 32,932 31,372 26,378 32,828 TISA99,603 138,797 148,158 148,291 143,833 193,713 106,697 104,087 Operating grants and contributions 1,956,995 1,727,238 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 Total business-type activities program revenues 6,408,320 6,137,563 6,234,229 7,057,901 6,984,659 6,829,795 6,137,148 4,177,194 3,852,578 3,735,067 Total primary government program revenues 18,966,998$ 14,320,809$ 12,111,636$ 14,089,234$ 13,016,735$ 17,148,108$ 11,726,512$ 14,694,802$ 13,596,636$ 10,593,617$ TABLE 2CITY OF PADUCAH, KENTUCKYCHANGES IN NET POSITIONLast Ten Fiscal Years (accrual basis of accounting)Fiscal Year-115- Pages 2 of 22014 2013 2012 2011 2010 (3) 2009 2008 (2) 2007 2006 2005 (1)Net (Expense)/RevenueGovernmental activities(26,509,073)$ (29,273,543)$ (35,176,510)$ (32,400,769)$ (32,362,819)$ (33,644,949)$ (33,237,886)$ (26,650,992)$ (26,815,753)$ (26,785,800)$ Business-type activities485,236 59,230 168,184 1,008,951 849,857 399,050 (140,794) (224,244) (356,110) (158,159) Total primary government net (expense) (26,023,837)$ (29,214,313)$ (35,008,326)$ (31,391,818)$ (31,512,962)$ (33,245,899)$ (33,378,680)$ (26,875,236)$ (27,171,863)$ (26,943,959)$ General Revenues and Other Changesin Net PositionGovernmental activities:Taxes and licenses:Property taxes, levied for general purpose4,622,292 4,502,276 4,267,812 4,402,226 4,207,736 3,986,760$ 4,221,957 4,122,538$ 4,107,934$ 3,919,113$ Insurance premium tax 3,831,792 3,863,464 3,690,806 3,476,309 3,797,347 4,055,228 4,699,458 4,414,672 3,863,953 3,957,289 Gross receipts license tax 4,444,440 4,391,352 4,359,835 4,243,511 4,229,102 4,320,850 4,061,587 4,050,057 3,899,432 3,720,784 Employee license tax 18,114,396 18,336,124 18,095,182 17,345,033 16,384,509 16,584,636 16,520,523 16,273,966 14,794,217 11,192,445 Other taxes 2,785,333 2,799,043 2,711,924 2,712,817 2,844,154 2,776,407 2,259,956 1,964,101 2,105,014 2,116,403 Intergovernmental revenue - - - - - - 1,401,400 1,243,028 1,201,973 955,645 Unrestricted investment earnings 232,204 211,306 203,261 264,913 172,213 336,960 540,620 639,702 462,292 290,647 Gain on sale of capital assets (482,137) 383,370 36,718 62,539 64,620 68,530 119,200 48,656 8,340 - Miscellaneous - (82,992) Insurance recoveries - - 27,448 410,462 - - - - - - Litigation settlement- - - (1,482,743) - - - - - - Transfers in/out212,128 485,138 270,620 (125,772) (78,893) (110,838) (96,609) (58,175) (115,754) (133,959) Total governmental activities33,760,448 34,889,081 33,663,606 31,309,295 31,620,788 32,018,533 33,728,092 32,698,545 30,327,401 26,018,367 Business-type activities:Unrestricted investment earnings48,255 49,382 48,806 46,052 33,724 52,961 73,985 83,854 85,786 51,508 Gain on sale of capital assets13,422 52,710 2,443 67,657 1,112 98,369 127,131 16,641 55,337 27,500 Miscellaneous103,260 82,992 Transfers(212,128) (485,138) (270,620) 125,772 78,893 110,838 96,609 58,176 115,754 133,959 Total business-type activities(47,191) (300,054) (219,371) 239,481 113,729 262,168 297,725 158,671 256,877 212,967 Change in Net PositionGovernmental activities:7,251,375 5,615,538 (1,512,904) (1,091,474) (742,031) (1,626,416) 490,206 6,047,553 3,511,648 (767,433) Business-type activities:438,045 (240,824) (51,187) 1,248,432 963,586 661,218 156,931 (65,573) (99,233) 54,808 Total primary government 7,689,420$ 5,374,714$ (1,564,091)$ 156,958$ 221,555$ (965,198)$ 647,137$ 5,981,980$ 3,412,415$ (712,625)$ (1) Significant change in governmental and business-type net position 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-tpye activity previously reported as a governmental fund. Prior years have not been restated.(3) Significant change in governmental net position due to restatement of prior year grant receivables.TABLE 2(accrual basis of accounting)CHANGES IN NET POSITION-116-Fiscal YearCITY OF PADUCAH, KENTUCKYLast Ten Fiscal Years 2014201320122011 2010 (3) 2009 2008 (2) 20072006 2005 (1)General FundUnassigned12,694,610$ 12,311,565$ 11,321,438$ 10,940,121$ 10,208,678$ 10,311,490$ 9,416,427$ 9,976,079$ 9,157,310$ 8,303,702$ Total general fund12,694,610$ 12,311,565$ 11,321,438$ 10,940,121$ 10,208,678$ 10,311,490$ 9,416,427$ 9,976,079$ 9,157,310$ 8,303,702$ All Other Governmental FundsRestricted for:Program purposes205,979$ 284,760$ 1,236,780$ -$ -$ -$ -$ -$ -$ -$ Capital improvements2,168,201 1,301,421 286,276 - - - - - - - Committed for:Capital improvements1,758,934 2,589,099 2,631,233 2,587,012 2,844,706 2,618,147 2,081,280 1,692,872 719,801 - Assigned for:Program purposes802,692 752,691 472,235 683,578 1,402,731 1,634,547 1,193,968 1,543,547 1,573,977 1,548,082 Capital improvements3,206,412 3,055,250 1,487,938 2,133,786 5,151,791 1,745,766 2,947,140 2,926,051 1,970,003 940,323 Total all other governmental funds 8,142,218$ 7,983,221$ 6,114,462$ 5,404,376$ 9,399,228$ 5,998,460$ 6,222,388$ 6,162,470$ 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 $3,870,992. (2) Significant decrease in reserve for program purpose due to converting governmental fund to proprietary fund.(3) Significant decrease in general fund balance due to restatement of prior year grant receivables-117-Fiscal YearTABLE 3CITY OF PADUCAH, KENTUCKYFund Balances, Governmental FundsLast Ten Fiscal Years (modified accrual basis of accounting) 2014201320122011201020092008200720062005Revenues:Taxes6,713,889$ 6,583,690$ 6,343,608$ 6,223,511$ 6,326,740$ 5,867,782$ 6,139,164$ 6,044,069$ 6,204,686$ 6,016,570$ Licenses26,987,110 27,197,290 26,753,432 25,704,849 24,979,768 25,411,112 25,924,562 25,140,615 23,432,565 19,368,765 Charges for services851,080 815,791 817,607 811,590 846,087 866,688 835,105 783,018 654,059 625,281 Intergovernmental2,624,363 1,240,312 1,191,835 1,148,362 1,091,324 1,086,377 1,565,348 1,676,783 1,529,879 1,192,724 Grants5,923,651 3,737,402 1,699,399 2,992,519 2,062,554 5,405,810 1,673,936 6,089,711 5,797,500 3,758,041 Interest199,583 175,371 162,580 205,837 121,246 225,251 419,103 540,204 402,943 251,302 Other3,271,860 2,743,698 1,902,075 1,790,890 2,653,382 2,250,344 1,944,310 1,832,161 1,844,285 1,377,175 Total revenues46,571,536 42,493,554 38,870,536 38,877,558 38,081,101 41,113,364 38,501,528 42,106,561 39,865,917 32,589,858 Expenditures:General government4,311,103 4,481,485 5,117,194 5,151,370 5,277,916 4,726,435 5,051,374 4,763,839 4,286,431 4,171,662 Public safety18,475,471 18,174,349 18,479,428 16,854,136 15,999,437 15,599,613 15,696,728 14,759,735 14,366,846 14,376,161 Public service6,323,481 5,710,018 5,596,702 6,446,503 5,984,115 7,855,846 7,935,188 7,226,542 7,418,656 5,947,105 Parks and recreation2,763,773 2,664,164 2,677,781 2,781,663 2,582,382 1,490,732 1,298,329 1,192,727 1,044,299 1,045,024 Planning and development2,086,527 1,776,897 2,216,665 1,680,297 1,868,369 1,811,083 803,976 2,424,198 2,545,227 2,267,774 Other640,452 766,847 516,534 486,239 847,188 514,488 520,611 526,238 481,690 462,099 Capital outlay11,926,435 4,324,821 2,104,993 5,121,682 8,324,312 8,580,910 4,826,983 6,504,491 5,003,091 4,870,136 Debt service:Principal requirement1,748,233 1,698,468 1,434,246 2,233,588 1,020,585 830,682 880,887 782,870 594,047 552,938 Debt issuance costs109,292 - - - - - - - - - Interest and fiscal requirement 1,086,866 1,089,447 1,114,852 1,519,329 1,077,128 1,003,439 1,051,008 1,108,385 949,537 745,676 Total expenditures49,471,633 40,686,496 39,258,395 42,274,807 42,981,432 42,413,228 38,065,084 39,289,025 36,689,824 34,438,575 Other Financing Sources (Uses):Bonds issued9,055,000 - - - 6,645,000 1,718,605 - - 6,100,000 - Payment to bond escrow agent(5,627,447) - - - - - - - - - Premium on debt issued220,683 - - - - - - - - - Discount on debt issued(53,529) - - - - - - - - - Long-term debt draws/issued- 308,112 101,983 366,039 1,480,781 69,032 - 246,667 - 275,000 Capital lease- 405,796 405,796 405,796 405,796 405,796 371,979 - - - Transfers in9,148,761 7,462,944 5,888,847 8,455,433 9,722,852 5,928,413 6,241,886 5,209,977 6,034,070 3,394,420 Transfers out(9,199,119) (7,125,024) (5,809,539) (8,201,253) (9,893,709) (6,150,847) (7,086,517) (5,556,722) (12,681,180) (4,712,171) Total other financing sources (uses)3,544,349 1,051,828 587,087 1,026,015 8,360,720 1,970,999 (472,652) (100,078) (547,110) (1,042,751) Net change in fund balances644,252$ 2,858,886$ 199,228$ (2,371,234)$ 3,460,389$ 671,135$ (36,208)$ 2,717,458$ 2,628,983$ (2,891,468)$ Capital outlay (1)10,843,726$ 4,034,424$ 2,156,290$ 4,833,547$ 8,763,073$ 2,850,717$ 2,857,189$ 4,638,045$ 3,779,542$ 3,981,143$ Debt service as a percentageof noncapital expenditures7.34%7.61%6.87%10.02%6.13%4.64%5.49%5.46%4.69%4.26%(1) Capital outlay is reported on the Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities.-118-Fiscal Year(modified accrual basis of accounting)TABLE 4CITY OF PADUCAH, KENTUCKYChanges in Fund Balances, Governmental FundsLast Ten Fiscal Years TotalEstimated DirectFiscalPersonalActual Tax Year Commercial Residential Property FranchiseTotalValue RateExemptions2005 622,478,658 500,350,485 425,304,684 74,460,202 1,622,594,029 1,684,469,469 0.325 96.3% 60,901,557 2006 636,606,837 525,613,365 452,475,748 74,683,129 1,689,379,079 1,750,930,676 0.325 96.5% 61,551,597 2007 692,018,288 561,151,216 482,481,332 51,455,112 1,787,105,948 1,847,595,428 0.307 96.7% 60,489,480 2008 748,189,877 603,688,455 481,049,523 74,068,797 1,906,996,652 1,970,156,891 0.287 96.8% 63,160,239 2009 776,876,510 645,672,462 526,966,182 56,333,800 2,005,848,954 2,069,450,607 0.288 96.9% 63,601,653 2010 797,902,456 659,381,375 495,273,730 57,459,000 2,010,016,561 2,076,961,686 0.286 96.8% 66,945,125 2011 780,357,859 670,841,459 536,894,082 46,722,282 2,034,815,682 2,103,120,249 0.288 96.8% 68,304,567 2012 781,685,815 685,984,380 524,400,400 48,227,212 2,040,297,807 2,108,802,723 0.287 96.8% 68,504,916 2013 787,762,105 731,842,861 564,154,697 60,279,730 2,144,039,393 2,214,978,356 0.288 96.8% 70,938,963 2014 826,805,152 743,249,074 585,142,381 41,487,586 2,196,684,193 2,270,597,754 0.292 96.7% 73,913,561 Source: McCracken County Property Valuation AdministratorNotes: Property in McCracken county is reassessed once every four years on average.-119-TABLE 5CITY OF PADUCAH, KENTUCKYASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTYLAST TEN FISCAL YEARSEstimatedValuePercentAssessedToAssessed ValueReal Estate TotalFiscal RealDirect RealRealRealRealYear Estate Personal Rate Estate Personal Estate Personal Estate Personal Estate Personal2005 0.300 0.390 0.325 0.448 0.448 0.618 0.617 0.021 0.021 0.196 0.226 2006 0.300 0.390 0.325 0.433 0.433 0.631 0.619 0.020 0.020 0.197 0.236 2007 0.275 0.390 0.307 0.433 0.433 0.628 0.631 0.019 0.019 0.197 0.236 2008 0.250 0.390 0.287 0.488 0.488 0.672 0.635 0.018 0.018 0.189 0.219 2009 0.250 0.390 0.288 0.489 0.491 0.672 0.678 0.018 0.018 0.096 0.106 2010 0.250 0.390 0.286 0.504 0.504 0.678 0.678 0.018 0.018 0.095 0.095 2011 0.250 0.390 0.288 0.504 0.504 0.711 0.711 0.018 0.018 0.095 0.098 2012 0.250 0.390 0.287 0.504 0.504 0.747 0.747 0.018 0.018 0.098 0.119 2013 0.250 0.390 0.288 0.504 0.504 0.747 0.747 0.017 0.017 0.096 0.102 2014 0.255 0.390 0.292 0.504 0.504 0.767 0.767 0.017 0.017 0.095 0.101 Source: McCracken County Property Valuation Administrator and City Tax Levy Ordinance.TABLE 6CITY OF PADUCAH, KENTUCKYPROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS(PER $100 OF ASSESSED VALUE)LAST TEN FISCAL YEARSGeneral FundCity Direct RatesMcCracken Co.City of Paducah-120-McCracken PaducahSchool DistrictsSchool DistrictsJunior CollegeCounty (1)(2) (1)(2) Assessed Assessed Taxpayer Valuation Valuation Kentucky Oaks Mall 50,900,262$ 2.37%42,611,499$ 3.07% Paducah Medical Investors 13,440,090 0.63%13,440,090 0.97% Ducmall LLC 13,119,800 0.61%14,225,000 1.03% Woodstone Enterprises LP 12,429,000 0.58% Paducah Hospitality Partners 11,000,000 0.51% Wal Mart Real Estate Business 10,646,400 0.50% Sams Real Estate Business Trust 9,222,955 0.43% Computer Services Inc 9,083,185 0.42%9,083,185 0.66% Wal Mart Store 9,000,000 0.42%33,968,895 2.45% USF Propco I LLC 8,156,900 0.38% Lowe's 12,136,826 0.88% Sams East Inc 14,711,574 1.06% Lourdes Medical Pavilion 15,982,400 1.15% TOTALS 146,998,592$ 6.85%156,159,469$ 11.27% (1) Source - Property Valuation Administration; Assessed value as of January 1, 2013. (2) Source - Property Valuation Administration; Assessed value as of January 1, 2004. TABLE 7 CITY OF PADUCAH, KENTUCKY PRINCIPAL TAXPAYERS - PROPERTY TAX CURRENT YEAR AND NINE YEARS PRIOR 2014 2005 -121- Percentage of Percentage of Total Assessed Total Assessed Valuation Valuation Total Collections to Date (1) (1) Percent of Percent of Amount of Levy Total Levy Collections Collected Collections Collected 3,832,923 3,762,592 98.2% 64,191 3,826,783 99.8% 4,011,918 3,911,868 97.5% 92,180 4,004,048 99.8% 3,998,236 3,855,679 96.4% 132,926 3,988,605 99.8% 3,972,547 3,814,940 96.0% 147,896 3,962,836 99.8% 4,198,580 4,017,032 95.7% 165,599 4,182,631 99.6% 4,255,451 4,131,454 97.1% 104,155 4,235,609 99.5% 4,195,341 4,110,973 98.0% 59,398 4,170,371 99.4% 4,225,290 4,119,689 97.5% 72,679 4,192,368 99.2% 4,438,878 4,334,698 97.7% 58,410 4,393,108 99.0% 4,607,868 4,509,874 97.9%- 4,509,874 97.9% (1) Includes current year real and personal property tax. * Source - City of Paducah Finance Department. TABLE 8 CITY OF PADUCAH, KENTUCKY SECURED TAX LEVIES AND COLLECTIONS* LAST TEN FISCAL YEARS June 30, Ended Year Fiscal Year Collections in Subsequent Years -122- 2013 2005 Collected within the Fiscal Year of the Levy Taxes Levied Fiscal for the 2006 2007 2014 2011 2012 2008 2009 2010 (1)Direct Fiscal Taxes Tax Year Collected Rate 2005 11,183,157 1.50% 2006 14,947,835 2.00% (2) 2007 16,258,946 2.00% 2008 16,535,542 2.00% 2009 16,584,618 2.00% 2010 16,384,509 2.00% 2011 17,345,034 2.00% 2012 18,095,182 2.00% 2013 18,336,124 2.00% 2014 18,114,396 2.00% 163,785,343 (1) Source - City of Paducah Finance Department - Actual collections during the fiscal year. (2) Effective October 1, 2005, employee license tax rate increased from 1.5% to 2.0%. -123- TABLE 9 CITY OF PADUCAH, KENTUCKY EMPLOYEE LICENSE TAX COLLECTIONS LAST TEN FISCAL YEARS (1)Percentage of Number of Percentage Taxes Total Employee Filers of Total Collected License Tax $0 - $50,000 2,479 98.10% 8,768,786 48.41% $50,001 - $100,000 23 0.91% 1,721,032 9.50% $100,001 - $500,000 23 0.91% 4,761,329 26.28% Greater than $500,000 2 0.08% 2,863,249 15.81% TOTALS 2,527 100.00% 18,114,396$ 100.00% (1)Percentage of Number of Percentage Taxes Total Employee Filers of Total Collected License Tax $0 - $50,000 1,603 97.80% 7,462,359 54.97% $50,001 - $100,000 19 1.16% 1,326,451 9.77% $100,001 - $500,000 15 0.92% 2,907,406 21.42% Greater than $500,000 2 0.12% 1,879,464 13.84% TOTALS 1,639 100.00% 13,575,680$ 100.00% (1) Source - City of Paducah Finance Department - Actual collections during the fiscal year. *Principal employee license taxpayers eight years prior is the earliest date this statistic is available. 2014 2006 TABLE 10 CITY OF PADUCAH, KENTUCKY PRINCIPAL EMPLOYEE LICENSE TAXPAYERS CURRENT YEAR AND EIGHT YEARS PRIOR* -124- Taxpayers By Range Taxpayers By Range (1)Ratio of (3)Reported Net Net Net Debt as (2)General Refunding Total Debt to Percentage NetFiscal Obligation Capital Revenue Primary Actual of Personal Debt PerYear Bonds Lease Bonds GovernmentValue Income Capita2005 13,210,195 3,503,274 - - - 16,713,469 0.99 3.45% 635 2006 18,877,636 3,319,227 - - - 22,196,863 1.27 4.58% 844 2007 18,278,164 3,320,522 - - - 21,598,686 1.17 4.46% 821 2008 17,614,952 2,946,303 - - - 20,561,255 1.04 4.24% 782 2009 19,706,394 5,187,262 - - - 24,893,656 1.20 5.14% 946 2010 25,568,996 5,808,267 - - - 31,377,263 1.51 6.48% 1,193 2011 24,805,676 4,910,742 - - - 29,716,418 1.41 5.91% 1,188 2012 23,616,405 7,320,328 - - - 30,936,733 1.47 6.15% 1,236 2013 22,037,960 6,920,838 - - - 28,958,798 1.31 5.76% 1,157 2014 24,202,474 6,519,356 - - - 30,721,830 1.35 6.11% 1,228 Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements.(1) See Table 5 for estimated actual property value. This ratio is calculated using estimated property value for the prior year.(2) See Table 16 for population data.(3) See Table 16 for personal income data-125-ImprovementDebtNetPublicDebtImprovementTABLE 11CITY OF PADUCAH, KENTUCKYRATIO OF OUTSTANDING DEBT BY TYPELAST TEN FISCAL YEARSPublic (1)Ratio ofInfinitiPublicNetConvention & Media Floodwall ImprovementPublic PoolEconomicBonds toFiscal Art CenterBuildingRehabilitation ProjectRenovation DevelopmentActualYear Bonds Bonds Bonds Bonds Bonds Bonds Total Value2005 8,380,000 - 4,840,000 - - - - 9,805 13,210,195 0.78 502 2006 8,130,000 6,100,000 4,680,000 - - - - 32,364 18,877,636 1.08 718 2007 7,870,000 5,925,000 4,515,000 - - - - 31,836 18,278,164 0.99 695 2008 7,600,000 5,740,000 4,340,000 - - - - 65,048 17,614,952 0.89 670 2009 7,320,000 5,545,000 4,160,000 2,774,638 - - - 93,244 19,706,394 0.95 749 2010 7,030,000 5,340,000 3,975,000 2,671,440 6,645,000 - - 92,444 25,568,996 1.23 972 2011 7,040,000 5,125,000 3,780,000 2,564,948 6,370,000 - - 74,272 24,805,676 1.18 991 2012 6,630,000 4,895,000 3,630,000 2,455,210 6,100,000 - - 35,088 23,675,122 1.12 946 2013 6,220,000 4,655,000 3,370,000 2,341,790 5,825,000 - - 316,458 22,095,332 1.00 883 2014 5,805,000 4,400,000 3,100,000 2,224,863 5,460,000 1,120,000 2,475,000 503,817 24,081,046 1.06 962 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 yea(2) See Table 16 for population data.-126-TABLE 12CITY OF PADUCAH, KENTUCKYRATIO OF NET GENERAL BONDED DEBT OUTSTANDINGLAST TEN FISCAL YEARSCapitaLessResourcesAvailable forDebt Service(2)NetBonds PerPolice andFire PensionFundBonds Estimated (1) Share of Reported Percentage Direct and Debt Applicable Overlapping Outstanding to the City Debt City of Paducah 28,958,798$ 100.00% 28,958,798$ Paducah Independent School District 49,054,401 * 100.00% 49,054,401 McCracken County 27,208,678 * 46.00% 12,515,992 McCracken County Board of Education 71,350,973 * 31.60% 22,546,907 Overlapping debt 147,614,052 84,117,300 TOTAL DIRECT AND OVERLAPPING DEBT 176,572,850$113,076,098$ (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. -127- TABLE 13 CITY OF PADUCAH, KENTUCKY DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT AS OF JUNE 30, 2014 Net assessed value2,196,684,193$ Add exemption73,913,561 Total assessed value2,270,597,754$ Debt limit - 10% of total assessed (1)227,059,775$ Debt outstanding:General obligation bonds outstanding24,706,291$ Note payable6,519,356 Less debt not subject to limit- Gross bonded debt31,225,647 Less amount available in debt servicefunds503,817 Net bonded indebtedness subject tolimit30,721,830 LEGAL DEBT MARGIN196,337,945$ 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005Debt limit 227,059,775$ 221,497,836$ 212,207,634$ 210,312,025$ 207,696,169$ 206,945,061$ 197,015,689$ 182,759,543$ 175,093,068$ 168,349,559$ Total net debt applicable to limit 30,721,830 28,966,286 30,936,733 29,716,418 31,377,263 24,893,656 20,561,255 21,598,686 22,196,863 16,713,469 LEGAL DEBTMARGIN196,337,945$ 192,531,550$ 181,270,901$ 180,595,607$ 176,318,906$ 182,051,405$ 176,454,434$ 161,160,857$ 152,896,205$ 151,636,090$ Total net debtapplicable to thelimited as a percentage ofdebt limit 13.53% 13.08% 14.58% 14.13% 15.11% 12.03% 10.44% 11.82% 12.68% 9.93%(1) "Cities shall not be authorized or permitted to incur indebtedness to an amount, including existing indebtedness, in the aggregate exceeding the following names maximum percentages on the valu 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."-128-Fiscal YearTABLE 14CITY OF PADUCAH, KENTUCKYLEGAL DEBT MARGIN INFORMATIONLAST TEN FISCAL YEARS (1)(1) Personal Income 26,307 484,496,019 18,417 39.9 2,819 6.4% 26,307 484,496,019 18,417 39.9 2,834 5.7% 26,307 484,496,019 18,417 39.9 2,804 5.6% 26,307 484,469,019 18,417 39.9 2,832 6.1% 26,307 484,469,019 18,417 39.9 2,774 9.3% 26,307 484,469,019 18,417 39.9 2,659 8.5% 25,024 503,179,300 20,430 41.4 2,789 8.7% 25,024 503,179,300 20,430 41.4 2,682 8.0% 25,024 503,179,300 20,430 41.4 2,744 8.4% 25,024 503,179,300 20,430 41.4 3,138 8.2% Income 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Fiscal Year Population 2011-2012 2012-2013 2013-2014 TABLE 15 CITY OF PADUCAH, KENTUCKY DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS (1) (1) (2)(3) Per Capita Median School Unemployment Enrollment RateAge Sources: (1) Bureau of the Census Count - 2000, 2010 (2) Board of Education; represents elementary and secondary public schools. (3) Kentucky Cabinet for Human Resources, Department for Employment Services. -129- Percentage ofPercentage ofTotalTotalEmployees (1) Employment (2) Employees (1) Employment (2)Western Baptist Hospital 1,636 5.75% 1,660 5.55%Lourdes Hospital 1,511 5.31% 1,500 5.01%Wal Mart 1,002 3.52% 570 2.01%Paducah Public Schools 591 2.08% 600 1.91%West Kentucky Community and Technical College 532 1.87% 270 0.90%City of Paducah 307 1.08% 353 1.27%State of Kentucky 346 1.22% 390 1.30%Parkview Convalescent Center3001.05%LYNX Services3121.10%3901.30%Paxton Media Group2440.86%2850.95%Computer Services, Inc.2490.87%2800.94%TOTALS7,03024.69%6,29821.14%(1) Source - City of Paducah Finance Department(2) State of Kentucky - Office of Employment and Training. Ratio based on employment within County of McCracken.* Principal employers eight years prior is the earliest date this statistic is available.-130-EmployerTABLE 16CITY OF PADUCAH, KENTUCKYPRINCIPAL EMPLOYERSCURRENT YEAR AND EIGHT YEARS PRIOR*20062014 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005Governmental ActivitiesGeneral governmentGeneral administration 11 12 12 12 12 12 12 12 12 11Finance 11 11 11 14 14 17 14 14 14 13Inspection 0 0 11 11 10 13 13 13 12 12Information systems5666644433Risk/Human resources3331114444Public safetyPolice 87 88 90 90 90 93 93 93 93 96Fire 76 74 64.5 64 65 69 69 71 76 75Public serviceStreets 20 20 23 23 23 29 29 30 31 28Facilities 13.5 13.5 11.5 14 34 36 35 34 35 38Engineering 6.6 7.6 7.67589999Other5556466644Parks and recreation24242424777779Planning and development999991011111111OtherPaducah Riverfront Dev. Authority1110000000Renaissance3345350000Fleet maintenance 6.5 6.5 6.5 6.5867777Business-type ActivitiesSolid waste25.4 25.4 25.4 26 27 27 27 27 29 29TOTAL PRIMARY GOVERNMENT307309314.5318318343340342347349* Employee budget census.-131-Fiscal YearTABLE 17CITY OF PADUCAH, KENTUCKYCITY FULL-TIME EMPLOYEES BY FUNCTION*Last Ten Fiscal Years 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005General governmentBuilding and electrical permits issued1,251 1,202 1,232 1,239 1,263 1,179 1,203 1,411 1,362 1,376 Business licenses issued 3,717 3,966 3,956 3,254 3,397 3,691 3,507 3,500 3,700 *Public safetyPoliceAdult arrests 2,546 2,508 2,753 3,564 3,859 4,454 4,170 5,012 3,827 *Murder 3 - 3 3 1 5 - - - *Rape17 16 14 22 12 20 15 18 15 *Robberies36 38 14 31 56 41 49 42 35 *Burglary127 142 123 155 245 169 203 208 211 *Auto theft60 41 47 54 62 57 60 117 104 *Arson3 5 7 6 7 7 8 16 7 *Traffic accidents1,664 1,573 1,666 1,762 1,774 1,368 1,519 1,949 1,815 *Traffic violations 6,821 10,168 8,573 7,701 7,240 9,143 7,109 7,323 7,468 *FireEmergency responses2,935 3,054 3,164 3,181 2,603 3,305 2,603 2,456 2,546 3,219 Fires extinguished 115 105 138 122 133 136 102 163 181 176 Structure fires 35 33 53 37 49 57 49 40 53 49 Incidents with reportedlosses56 55 89 73 89 85 70 80 91 97 Medical/rescue2,080 2,151 2,270 2,133 1,690 1,616 1,506 1,369 1,589 1,997 Tours/in-services/carseats378 570 524 671 676 907 699 485 485 485 Training man hours 8,959 9,155 7,232 7,033 8,493 7,716 4,344 1,183 1,418 1,188 Inspections 1,710 1,157 1,417 1,063 985 1,183 1,449 ** *Refuse collectionResidentialRefuse collected (tons 36 36 34 34 38 32 25 28 34 *per day)Customers served9,600 9,478 9,488 9,568 9,445 9,435 9,446 9,388 9,368 *CommercialRefuse collected (tons61 65 71 71 70 75 83 85 84 *per day)Customers served927 805 803 806 810 810 821 832 801 *Public service911 dispatches83,614 92,786 79,333 82,268 79,768 81,525 83,871 76,815 83,348 85,273Police43,877 51,131 43,686 44,794 42,496 40,921 43,420 41,887 47,091 48,275Fire3,517 4,747 3,189 3,226 2,702 2,490 2,720 2,399 2,907 3,424 Other36,220 36,908 32,458 34,248 34,570 38,114 37,731 32,529 33,350 33,574* Information not available.** Information from city departments.-132-Fiscal YearTABLE 18CITY OF PADUCAH, KENTUCKYOPERATING INDICATORS BY FUNCTION**Last Ten Fiscal Years 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005Public safetyPoliceStations1111111111FireStations5555555555Refuse collectionCollection trucksResidential 10 10 1099710988Commercial4444545544Other public worksStreets (miles paved) 218 218 218 218 218 216 216 216 214 214Sidewalks (miles) 47 47 47 47 47 45 45 45 45 45Traffic signals 13 13 13 13 13 12 11 11 11 11Parks and recreationParks 28 27 27 27 27 27 27 27 18 18Acreage 960 960 1125 1125 1125 960 960 960 325 325Community centers2222111111Swimming pools1111111111Public tennis courts6666666666Public golf courses2222222222* Information from city departments.-133-Fiscal YearTABLE 19CITY OF PADUCAH, KENTUCKYCAPITAL ASSET STATISTICS BY FUNCTION*Last Ten Fiscal Years CITY OF PADUCAH, KENTUCKY SINGLE AUDIT SECTION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2014 Federal CFDA Pass-Through Program Title: Number Grantor Number Department of Housing and Urban Development: Direct Programs: Section 8 Housing Choice Vouchers 14.871 N/A 1,851,991$ Economic Development Initiative Special Project 14.251 B06NIKY0016 1,891,291 Pass-through Kentucky Governors Office for Local Development: Community Development Block Grants 14.228 10-109 656,227 14.228 13-005 156,055 Passed-through Kentucky Housing Corporation: Home Investment Partnerships Program 14.239 HB12-198-01 158,000 Total Department of Housing and Urban Development 4,713,564 Department of Justice: Direct Programs: Bulletproof Vest Partnership Program 16.607 N/A 7,436 Edward Byrne Memorial Justice Assistance Grant Program 16.738 N/A 13,382 Total Department of Justice 20,818 Department of Homeland Security: Direct Programs: Ait tFifiht G t 97 044 N/A 49 040 Expenditures CITY OF PADUCAH, KENTUCKY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2014 Federal Grantor/Pass-Through Grantor/ Assistance to Firefighters Grant 97.044 N/A 49,040 Passed-through Kentucky Division of Emergency Management: Hazardous Mitigation Grant Program 97.039 PON2 095 1200003957 1 5,037 Passed-through Kentucky Office of Homeland Security: Homeland Security Grant Program 97.067 PO2 094 1400002736 1 32,000 Total Department of Homeland Security 86,077 Department of Transportation: Passed-through Kentucky Transportation Cabinet State and Community Highway Safety 20.600 PT-13-52 25,172 State and Community Highway Safety 20.600 PT-14-36 23,215 Highway Planning and Construction 20.205 DD-13-05 10,000 Highway Planning and Construction 20.205 DD-14-08 30,000 Highway Planning and Construction 20.205 DD-14-40 3,838 Highway Planning and Construction 20.205 P02-628-0600003374 213,949 Highway Planning and Construction 20.205 1400001907 1,646,936 Total Department of Transportation 1,953,110 TOTAL EXPENDITURES OF FEDERAL AWARDS 6,773,569$ See accompanying notes to schedule of expenditures of federal awards. -134- CITY OF PADUCAH, KENTUCKY NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2014 Note 1 - Basis of Presentation: The accompanying schedule of expenditures of federal awards includes the federal grant activity of the City of Paducah and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the financial statements. Note 2 - Subrecipients: The City of Paducah provided federal awards to subrecipients as follows: Federal CFDA Amount Program Title Number Provided Four Rivers Recovery Center 14.228 $156,055 -135- INDEPENDENT AUDITOR’S 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 Gayle Kaler, Mayor Members of the Board of Commissioners City of Paducah Paducah, Kentucky We have audited, in accordance with the 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, the financial statements of the governmental activities, the business- type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Paducah, Kentucky, as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise City of Paducah, Kentucky’s basic financial statements, and have issued our report thereon dated December 8, 2014. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered City of Paducah, Kentucky’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of City of Paducah, Kentucky’s internal control. Accordingly, we do not express an opinion on the effectiveness of City of Paducah, Kentucky’s internal control. 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. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether City of Paducah, Kentucky’s financial statements are free from 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. 333 Broadway Suite 1001 Paducah, KY 42001 Phone: (270)443-4400 Fax: (270)443-0963 kempercpa.com Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Certified Public Accountants and Consultants Paducah, Kentucky December 8, 2014 -137- INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 Honorable Gayle Kaler, Mayor Members of the Board of Commissioners City of Paducah Paducah, Kentucky Report on Compliance for Each Major Federal Program We have audited City of Paducah, Kentucky’s compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of City of Paducah, Kentucky’s major federal programs for the year ended June 30, 2014. 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. Management’s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of City of Paducah, Kentucky’s major federal programs based on our audit of the types of compliance requirements referred to above. 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 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 on compliance for each major federal program. However, our audit does not provide a legal determination of City of Paducah, Kentucky’s compliance. Opinion on Each Major Federal Program In our opinion, City of Paducah, Kentucky, complied, in all material respects, with the types of 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, 2014. Report on Internal Control Over Compliance Management of City of Paducah, Kentucky, is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered City of Paducah, Kentucky’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, 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. 333 Broadway Suite 1001 Paducah, KY 42001 Phone: (270)443-4400 Fax: (270)443-0963 kempercpa.com 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. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance 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 compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. Certified Public Accountants and Consultants Paducah, Kentucky December 8, 2014 -139- CITY OF PADUCAH, KENTUCKY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2014 Section I – Summary of Auditor’s Results 1. The independent auditor’s report expresses an unmodified opinion on the financial statements of the City of Paducah, Kentucky. 2. No significant deficiencies or material weaknesses relating to the audit of the financial statements are reported. 3. No instances of noncompliance material to the financial statements of the City of Paducah, Kentucky were disclosed during the audit. 4. No significant deficiencies or material weaknesses relating to the audit of major federal award programs are reported. 5. The auditor’s report on compliance for the major federal award programs for the City of Paducah, Kentucky expresses an unmodified opinion. 6. There are no findings to be reported in accordance with Section 510(a) of OMB Circular A-133. 7. The programs tested as major programs included: Name CFDA Section 8 Housing Choice Vouchers 14.871 8. The threshold used for distinguishing Types A and B programs was $300,000. 9. The City of Paducah, Kentucky did qualify to be audited as a low-risk auditee. Section II – Findings – Financial Statements Audit There are no findings related to the financial statements which are required to be reported in accordance with Government Auditing Standards. Section III – Findings and Questioned Costs – Major Federal Awards Programs There are no findings or questioned costs related to the major federal programs which are required to be reported in accordance with OMB Circular A-133, Section 510(a). -140- CITY OF PADUCAH, KENTUCKY SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS YEAR ENDED JUNE 30, 2013 Section II – Findings – Financial Statements Audit There were no findings related to the financial statements which are required to be reported in accordance with Government Auditing Standards. Section III – Findings and Questioned Costs – Major Federal Awards Programs There were no findings or questioned costs related to the major federal programs which are required to be reported in accordance with OMB Circular A-133, Section 510(a). -141-