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HomeMy WebLinkAboutCAFR-June-30-2016 CITY OF PADUCAH, KENTUCKY COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2016 FINANCE DEPARTMENT CITY OF PADUCAH, KENTUCKY City of Paducah Paducah, Kentucky Comprehensive Annual Financial Report Year Ended June 30, 2016 Issued by the Finance Department CITY OF PADUCAH, KENTUCKY COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2016 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 51-93 Required Supplementary Information: Schedule of Changes in the Police and Firefighters’ Pension Trust Fund’s Net Pension Liability and Related Ratios A-1 94 Schedule of Changes in the Appointive Employees’ Pension Trust Fund’s Net Pension Liability and Related Ratios A-2 95 Schedule of Police and Firefighters’ Pension Trust Fund Contributions and Investment Returns A-3 96 Schedule of Changes in the Appointive Employees’ Pension Trust Fund Contributions and Investment Returns A-4 97 Schedule of City’s Proportionate Share of the Net Pension Liability County Employees’ Retirement System A-5 98 Schedule of City’s Contributions County Employees’ Retirement System A-6 99 Exhibit No. Page No. Supplementary Information: General Capital Improvements Detail Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual B-1 100 Debt Service Fund Detail Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual B-2 101 Nonmajor Governmental Funds: Combining Balance Sheet B-3 102-103 Combining Statement of Revenues, Expenditures and Changes in Fund Balances B-4 104-105 Detail Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual: Municipal Aid Fund B-5 106 Emergency Communication Service Fund B-6 107 Court Awards Fund B-7 108 CDBG Grant Fund B-8 109 Special Revenue Bond Fund B-9 110 Nonmajor Proprietary Funds: Nonmajor Enterprise Funds: Combining Statement of Net Position C-1 111 Combining Statement of Revenues, Expenses and Changes in Fund Net Position C-2 112 Combining Statement of Cash Flows C-3 113 Internal Service Funds: Combining Statement of Net Position D-1 114 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position D-2 115 Combining Statement of Cash Flows D-3 116 Fiduciary Funds: Combining Statement of Net Position - Private-purpose Trust Funds E-1 117 Combining Statement of Changes in Net Position - Private-purpose Trust Funds E-2 118 Statement of Changes in Assets and Liabilities - Agency Funds E-3 119 Table No. Page No. Statistical Section: Net Position by Component 1 120 Changes in Net Position 2 121-122 Fund Balances, Governmental Funds 3 123 Changes in Fund Balances, Governmental Funds 4 124 Assessed and Estimated Actual Value of Taxable Property 5 125 Governments 6 126 Principal Taxpayers 7 127 Secured Tax Levies and Collections 8 128 Employee License Tax Collections 9 129 Principal Employee License Taxpayers 10 130 Ratio of Outstanding Debt by Type 11 131 Ratio of Net General Bonded Debt Outstanding 12 132 Table No. Page No. Statistical Section: Direct and Overlapping Governmental Activities Debt 13 133 Legal Debt Margin Information 14 134 Demographic and Economic Statistics 15 135 Principal Employers 16 136 City Full-Time Employees by Function 17 137 Operating Indicators by Function 18 138 Capital Asset Statistics by Function 19 139 Single Audit Section: Schedule of Expenditures of Federal Awards 140 Notes to the Schedule of Expenditures of Federal Awards 141 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 142-143 Independent Auditor’s Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by Uniform Guidance 144-145 Schedule of Findings and Questioned Costs 146 Schedule of Prior Audit Findings 147 CITY OF PADUCAH, KENTUCKY INTRODUCTORY SECTION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2016 December 6, 2016 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, 2016. 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, 2016, 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 650 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, footgolf, 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 180- year-old historic neighborhood. The LowerTown Art and Music Festival is an outdoor-juried show in its 14th 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. A second annual show is scheduled to begin in September 2017. One of Paducah’s oldest celebrations is the 8th of August Emancipation Celebration, which features African American family reunions, or a homecoming. It is a time for African Americans to pay tribute to their heritage and roots, and a time of reconciliation. The Barbecue on the River event was started in 1995, as a way for local charities to raise funds. It attracts in excess of 40,000 participants to Paducah’s riverfront during the last weekend in September. Over time, this annual event has grown to incorporate other events, including Marine Industry Day and Old Market Days. 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 $40,000 in cash and thousands of pounds of canned food annually. Paducah has an active symphony and several theater groups. The Paducah Symphony Orchestra stages concerts during the winter season, with the Market House Theater presenting several productions during the same time period. In addition, West Kentucky Community and Technical College’s Arts in Focus series sponsors a variety of professional productions. The 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. - 4 - 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 306 full-time employees as of June 30, 2016. 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; cultural events and recreation activities. Accounting System The City’s accounting system is organized on the basis of separate funds, each of which is considered to be a separate accounting entity. The financial activities of each fund generate a separate set of self- balancing accounts, which comprise its assets, liabilities, fund equity, revenues, and expenditures/expenses. Municipal resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The City’s accounting records for the governmental funds and agency funds are maintained on a modified accrual basis, with revenues being recorded when “measurable and available” and expenditures being recorded when the services or goods are received and the liabilities are incurred. Accounting records for the City’s proprietary funds and trust funds are maintained on the accrual basis, with revenues recognized when earned and expenses recorded when the liability is incurred or economic asset used. - 5 - 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 FY2016, one 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 FY2016 this contribution was $417 thousand. This amount was $391 thousand in FY2015. 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 FY2016 budget process, the Commission reviewed numerous decision packages proposed for the Investment Fund Budget; expenditures totaling approximately $5 million were appropriated. The City has numerous infrastructure/capital items that will affect the long-term financial planning process. The following projects are examples of future considerations facing the City: Floodwall Restoration. The 12.5-mile long floodwall and levee system protecting a large portion of the Paducah-McCracken area exceeds 70 years of age. Its age has marginalized its electrical and mechanical components well beyond their 50 year useful design life; therefore, it is in need of necessary repairs. In FY2011, the U.S. Army Corps of Engineers (USACE) issued a Feasibility Report, which recommended a comprehensive reconstruction, rehabilitation, and restoration project to improve the reliability and restore - 6 - the system performance of the original floodwall construction. 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. This project will have multiple phases and priorities of which cannot be complete within one project package. The City has targeted pump stations #2 and #9 to have active construction during calendar years 2017 and 2018. Based on USACE revised authorization, it is estimated that the City’s portion for the total overall project cost is approximately $10.9 million. The City has aligned itself with USACE to receive future in-kind credit approximating $2.1 million it expended in FY2009 for identified project components requiring reconstruction, i.e., slip lining 37 of its corrugated metal pipes. 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 340 foot transient boat dock, boat ramp, recreational trails, and shoreline enhancements. 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, 2015, Phase 1-A of the riverfront development project, which consists of installation of the pilings and the placement of stone for mass fill, was completed. The Phase 1-B project is currently under construction and will be completed in early 2017. This phase will include the gangway platforms, gangways, transient dock, wave attenuator, and the completion of the mass fill. This facility will allow for the mooring of several transient and local recreational boating with full City services, including power, water, and sewer pump out, with the capacity to supply gasoline and diesel for refueling vessels. 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 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. In October 2015 the Commission approved an ordinance to obtain design and architectural services to examine options of renovating or rebuilding City Hall. A decision has not yet been made as to which route will be pursued. 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 26,866 persons employed (McCracken County) as of June 30, 2016. The June 2016 unemployment rate was 6.2% (McCracken County), which is a increase from 5.6% in the prior year, and exceeds the June 2016 federal unemployment rate of 4.9%. 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 1,344 for fiscal year 2016 valued at $87 million, which is up approximately $37 million from fiscal year 2015. - 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, 2015. This was the twenty-fifth 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 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 Finance CITY OF PADUCAH, KENTUCKY PRINCIPAL OFFICIALS BOARD OF COMMISSIONERS Mayor Gayle Kaler Mayor Pro tem Allan Rhodes, Jr. Commissioner Richard Abraham Commissioner Sandra Wilson Commissioner Carol Gault CITY MANAGER Jeff Pederson Finance Jonathan Perkins, CPA 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 Sanderson Human Resources/Risk Manager Steve Doolittle Public Information Pam Spencer -9- Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Paducah Kentucky For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2015 Executive Director/CEO CITY OF PADUCAH, KENTUCKY FINANCIAL SECTION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2016 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 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, 2016, 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 is presented as a discretely presented component unit in the statement of net position and statement of activities. 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 discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Paducah, Kentucky, as of June 30, 2016, 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. 100 South 4th Street Suite 300 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 94-99 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 on pages 1-10; budgetary comparison schedules, combining and individual nonmajor fund financial statements, budgetary comparison schedules for the nonmajor funds, nonmajor enterprise financial statements, internal service and fiduciary financial statements on pages 100-119; and statistical section on pages 120-139, 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 on pages 140-141 is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the basic financial statements. The budgetary comparison schedules, combining and individual nonmajor fund financial statements, budgetary comparison schedules for the nonmajor funds, nonmajor enterprise financial statements, 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 6, 2016, 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 6, 2016 -12- CITY OF PADUCAH, KENTUCKY REQUIRED SUPPLEMENTARY INFORMATION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2016 - 13 - CITY OF PADUCAH, KENTUCKY MANAGEMENT’S DISCUSSION AND ANALYSIS JUNE 30, 2016 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, 2016. 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 29-93) 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 $29 million at the close of the 2015-2016 fiscal year. Total net position increased $5,270,431. At fiscal year end, City governmental funds reported a combined ending fund balance of $23.4 million. Approximately 14% of this total amount, $3.2 million, is restricted or committed for highways/streets and capital improvements. Assigned fund balance comprises 27% of combined fund balance; the majority of which is set aside for capital improvements. At the end of the current fiscal year, unassigned General Fund fund balance was $13.2 million and is available for spending at the City’s discretion. Cash makes up approximately $7.5 million. When compared to final total appropriations, the General Fund cash balance is 23%. 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. Both of the government-wide financial statements distinguish City functions that are primarily supported by taxes and intergovernmental revenues (governmental activities) from other City functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). City governmental activities include general government, public safety, public service, park and recreation, planning and development, and interest on long-term debt. Business-type activities of the City include Solid Waste, Section Eight Housing, and the Civic Center. - 14 - 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 nine (9) 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 five (5) 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 102-110. 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 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. - 15 - 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 111-113 of this report. Individual data for the internal service funds is likewise presented in the form of combining statements on pages 114- 116 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 89-90 and 117-119 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 51-93 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 102-119 of this report. 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 $29 million as of June 30, 2016. For FY2016, the largest portion of the City’s net position ($48.1 million) 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 ($1.3 million) represents resources that are subject to external restrictions on how they may be used. - 16 - In FY2015 the City implemented Government Accounting Standards Board (GASB) Statement No. 68, which requires that the City report and fully disclose its share of net pension liability, which is $43.1 million as of June 30, 2016. Disclosing the City’s participation in the County Employee Retirement System (CERS) has been the primary factor in driving the City’s unrestricted net position to a negative $20.1 million in FY2016. As of June 30, 2016, the City reports positive balances of total 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 2016 2015* 2016 2015* 2016 2015* Current Assets $ 40,457,159 $ 37,866,007 $ 7,328,926 $ 7,177,768 $ 47,786,085 $ 45,043,775 Capital Assets 55,617,018 49,322,057 1,678,728 1,133,226 57,295,746 50,455,283 Other noncurrent assets 3,573,410 3,954,388 - - 3,573,410 3,954,388 Total Assets 99,647,587 91,142,452 9,007,654 8,310,994 108,655,241 99,453,446 Deferred Outflows of Resources 9,697,728 4,615,407 440,338 198,406 10,138,066 4,813,813 Current Liabilities 10,283,408 11,698,595 390,146 403,880 10,673,554 12,102,475 Noncurrent liabilities 67,008,754 61,082,324 4,014,302 3,642,371 71,023,056 64,724,695 Total liabilities 77,292,162 72,780,919 4,404,448 4,046,251 81,696,610 76,827,170 Deferred Inflows of Resources 7,690,538 3,264,613 132,341 172,089 7,822,879 3,436,702 Net position: Net Invested in Capital Assets 46,389,685 39,349,789 1,678,728 1,133,226 48,068,413 40,483,015 Restricted 1,296,007 2,572,075 38,247 124,012 1,334,254 2,696,087 Unrestricted (23,323,077) (22,209,537) 3,194,228 3,033,822 (20,128,849) (19,175,715) TOTAL NET POSITION $ 24,362,615 $ 19,712,327 $ 4,911,203 $ 4,291,060 $ 29,273,818 $ 24,003,387 *Beginning net position as of July 1, 2014, was restated for implementation of GASB 68. - 17 - The exhibit below charts the City’s total net position from the implementation of GASB 34 through the present (as previously mentioned, prior years have not been restated for implementation of GASB 68). 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 $5 million in revenue each year, which is used mostly for capital investment and economic development related activities. After leveling off for several years, the City experienced a significant increase in net position in FY2013 and FY2014. This was due to two consecutive years of heavy capital development that was funded primarily with grant funding. The City’s net position decreased significantly in FY2015 due to the implementation of GASB 68. As discussed earlier in this report, the City’s participation in the County Employee Retirement System (CERS) has led to the addition of a noncurrent liability in excess of $30 million. The upswing in the current year is continuation of grant-fund capital development that began in FY2013. A. Analysis of the City’s Operations The following table provides a summary of the City’s operations for the years ended June 30, 2016 and 2015. Governmental activities increased the City’s net position by $4,650,288. Business-type activities increased the City’s net position by $620,143. - 18 - City of Paducah, Kentucky Changes in Net Position June 30 Governmental Activities Business-Type Activities Total Primary Government Revenues: 2016 2015* 2016 2015* 2016 2015* Program revenues: Charges for services $ 2,564,345 $ 2,222,494 $ 4,560,232 $ 4,497,350 $ 7,124,577 $ 6,719,844 Operating grants/contributions 6,179,709 3,360,731 1,845,549 1,744,364 8,025,258 5,105,095 Capital grants/contributions 4,139,036 899,522 - - 4,139,036 899,522 General Revenues: Property taxes 4,943,962 4,726,244 - - 4,943,962 4,726,244 Franchise taxes 162,593 207,742 - - 162,593 207,742 Telecommunications tax 656,214 689,843 - - 656,214 689,843 Insurance premium tax 4,170,381 3,786,514 - - 4,170,381 3,786,514 Vehicle tax 673,786 800,603 - - 673,786 800,603 Bank tax 242,344 229,722 - - 242,344 229,722 Gross receipts license tax 4,711,708 4,397,888 - - 4,711,708 4,397,888 Employee license tax 20,130,249 19,092,912 - - 20,130,249 19,092,912 Other taxes 656,647 665,057 - - 656,647 665,057 Intergovernmental revenue 368,318 371,718 - - 368,318 371,718 Unrestricted investment earnings 137,224 176,229 30,302 39,565 167,526 215,794 Gain on sale of capital assets - - - - - - Miscellaneous 189,489 16,870 85,649 8,338 275,138 25,208 Total revenues 49,926,005 41,644,089 6,521,732 6,289,617 56,447,737 47,933,706 Expenses: General Government 9,777,876 9,801,490 - - 9,777,876 9,801,490 Public safety 20,503,784 17,974,548 - - 20,503,784 17,974,548 Public service 10,266,856 7,600,982 - - 10,266,856 7,600,982 Park & recreation 3,052,360 2,811,533 - - 3,052,360 2,811,533 Planning & development 911,830 1,000,020 - - 911,830 1,000,020 Interest on long-term debt 900,593 850,827 - - 900,593 850,827 Solid Waste - - 3,815,476 3,843,081 3,815,476 3,843,081 Section Eight Housing - - 1,874,074 1,819,328 1,874,074 1,819,328 Civic Center - - 74,457 98,318 74,457 98,318 Total expenses 45,413,299 40,039,400 5,764,007 5,760,727 51,177,306 45,800,127 Increase (decrease) in Net position before transfers 4,512,706 1,604,689 757,725 528,890 5,270,431 2,133,579 Transfers 137,582 194,014 (137,582) (194,014) - - Change in net position 4,650,288 1,798,703 620,143 334,876 5,270,431 2,133,579 Net position, July 1, restated 19,712,327 17,913,624 4,291,060 3,956,184 24,003,387 21,869,808 NET POSITION, JUNE 30 $ 24,362,615 $ 19,712,327 $ 4,911,203 $ 4,291,060 $ 29,273,818 $ 24,003,387 *Beginning net position as of July 1, 2014 was restated for implementation of GASB 68. - 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 2016. In fiscal year 2016, the City derived approximately 84% of its revenue from taxes/licenses. Occupational licenses, which include payroll withholding tax, business licenses, and insurance - 20 - premium tax is the largest source of income to the City, totaling $29 million. This category of revenue increased 6.4% from fiscal year 2015. All of the taxes within this category had increases in excess of 5%. 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 nearly 10% of total revenue in FY2016. 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 2016, business-type activities as a whole had an increase in net position of $620,143. 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 $240,000 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 $23.4 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: Nonspendable fund balance includes amounts that are not in a spendable form or are required to be maintained intact indefinitely. For example, at the end of the fiscal year, the City had $623,735 of real property held in inventory for urban development. 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 $1,148,789 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 $2,018,581 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 27% 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 56% of total fund balance, $13.2 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 $7.5 million available as cash; the balance is tied up in other assets - 22 - including accounts receivable and property taxes collectible. City fiscal policy (Ordinance 2015-6- 8254) requires that an amount not less than 10% of the General Fund’s budgeted expenditures remain undesignated in the fund balance, or $3.4 million, which leaves $9.8 million as unreserved for fiscal year 2016. 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 ($13.2 million) represents 39% of expenditures and transfers out ($33.5 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 $2.0 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 slight increase in fund balance of approximately $200 thousand was primarily due to revenue being higher than anticipated. Fund balance in the General Capital Improvements fund increased by approximately $309 thousand from the prior year to $5.8 million. The increase is due to funds set aside to complete capital projects in FY2017. 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. Net position of the respective proprietary funds are: Solid Waste $4,151,057 Section Eight Housing 38,813 Civic Center 201,445 - 23 - Combined total net asset change for the three funds was an increase of $617,260, broken down as follows: Solid Waste ($636 thousand increase), Section Eight Housing ($87 thousand decrease), and Civic Center ($68 thousand increase). 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 $1.1 million increase in appropriations and can be briefly summarized as follows: Appropriations Department Increase Decrease (In Thousands) General Administration $ - $ 88 Finance - 2 Planning - - Radio and Rental Property - 41 Human Rights - 8 Information Systems - 77 Human Resources/Risk Management - 89 Police - 481 Fire - 120 Public Works - 390 Engineering Services 44 - Recreation - 226 PRDA - 1 Other 2,616 - General Administration had a decrease in appropriations of $88 thousand. The majority of this decrease was due to unutilized contingency funds. Human Resources/Risk Management decreased by $89 thousand. This department was without a director for the entire fiscal year. Several departments experienced decreases in excess of $100 thousand. These decreases were generally a result of salary slippage and equipment replacement that was budgeted but not purchased. Engineering Services had an increase in appropriations of $44 thousand. This was due to flood control equipment repairs. The primary components of the “Other” department category are operating transfers out, which are typically made to the capital project fund. Following the adoption of the original FY2016 budget, the Commission made the decision to appropriate General Fund funds in excess of the 10% reserve requirement. A total of $2 million was appropriated and appears on the financial statements as interfund transfers (to the Capital Projects fund). Design of City Hall Renovations $761,400 Study Stormwater/Sewer System Replacement Needs 986,600 Consultant for 911 Communication Services Equipment Replacement 252,000 $2,000,000 An unanticipated interfund transfer was also made in the amount of $230 thousand to fund the rehabilitation of the recently expanded Police operating headquarters, as well as a transfer to increase the cash reserve in the debt service fund in the amount of $100,000. - 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, 2016, is $57 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 2016, project and equipment additions totaled over $12 million, with $9.3 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 2016, are shown in the following table: Olivet Church Road Construction (Construction in Progress) $3,916,986 Riverfront Phase 1B (Construction in Progress) 3,736,954 Dome Relocation 1,285,671 Hotel Site Development 904,498 432 Broadway Demolition 704,537 City Hall Design 404,602 The City’s Construction in Progress balance at year end was in excess of $13 million. Two very large projects that have composed Construction in Progress for multiple years are anticipated to be placed into service in FY2017. At fiscal year end the Olivet Church Road project had total expenditures of nearly $7.4 million, and the Riverfront Phase 1B project totaled $3.8 million. In the upcoming years, several street, economic development, riverfront development, 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 2016 2015 2016 2015 2016 2015 Land $ 10,393,332 $ 10,383,332 $ 62,152 $ 62,152 $ 10,455,484 $ 10,445,484 Land improvements 9,749,732 10,486,724 - - 9,749,732 10,486,724 Construction in progress 13,293,457 4,025,248 - - 13,293,457 4,025,248 Buildings and improvements 5,830,257 7,709,771 271,324 269,025 6,101,581 7,978,796 Infrastructure 10,876,077 12,062,994 - - 10,876,077 12,062,994 Equipment 1,675,520 1,488,273 360,648 397,284 2,036,168 1,885,557 Furnishings and fixtures 12,542 14,353 - - 12,542 14,353 Vehicles 3,786,101 3,151,362 984,604 404,765 4,770,705 3,556,127 TOTALS $ 55,617,018 $ 49,322,057 $ 1,678,728 $ 1,133,226 $ 57,295,746 $50,455,283 - 25 - Additional information on City capital assets can be found in Note 3 in the notes to financial statements on pages 67-70. B. Long-Term Debt At year-end, the City had $27,281,531 in outstanding bonds and notes payable, compared to $29,421,411 at June 30, 2015 with maturities extending through 2032. Governmental Activities 2016 2015 Kentucky League of Cities – 2003 $1,500,126 $1,669,821 Police/Firefighter Pension Fund Liability – 2006 - 285,000 Floodwall Rehabilitation – 2008 1,990,271 2,104,212 Convention Center Renovation – 2008 1,866,666 1,976,250 Refinanced Convention Center – 2010 4,955,000 5,385,000 Margaret Hank Agreement – 2011 94,851 116,078 Refinanced Rental Building – 2011 2,530,000 2,820,000 Murray State University Agreement – 2011 2,224,792 2,338,915 Public Pool Renovations – 2013 990,000 1,055,000 Economic Development – 2013 2,185,000 2,330,000 Refinanced Public Projects – 2014 4,805,000 5,100,000 Refinanced Police/Firefighter Pension Fund Liability - 2014 4,055,000 4,150,000 Net Premiums/Discounts 84,825 91,135 TOTALS $27,281,531 $29,421,411 During the year, the City had no new debt issues. Debt issues prior to July 1, 2015 are described below: Police/Firefighter Pension Fund Liability – Refinance. In November 2014, a $4.225 million general obligation was issued to advance refund $3.845 of outstanding 2005 series bonds. The 2005 bonds were issued to finance the police and firefighters’ pension fund estimated pension liability. 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 a speculative building and 2) an approximately 30,000 square foot building (TeleTech). 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. 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. Rental 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 - 26 - finance the construction of a rental 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. 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. 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 $239,483,487. 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 2016, less than 2% of the General Fund budget was expended for debt service, and thus has minimal impact on current and future operations. Additional information on the City’s long-term debt can be found in Note 3 in the notes to financial statements on pages 71-76. VII. Other Potentially Significant Matters. A. 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 1996, 2006, and 2016. - 27 - CERS Employer Contributions Non-Hazardous Hazardous FY Rate Amount % Chg Rate Amount % Chg 1996 8.94% $428,100 18.21% $923,059 2006 10.98% $780,337 82% 25.01% $1,680,348 82% 2016 17.06% $1,312,181 68% 32.95% $2,920,343 74% In early spring 2013, the State of Kentucky 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. B. Police & Fire Pension Fund (PFPF) Unfunded Liability. In fiscal year 2006, the City issued $6.1 million in general obligation bonds to eliminate the unfunded pension liability. With the sharp decline in value of the national stock market in 2009, the PFPF’s equity investment dropped accordingly. PFPF net assets dropped in 2009 by nearly $3.5 million, or 28.5% of the beginning net assets (July 1, 2008). The Fund still remains in an unfunded position due to these events. The July 2016 actuary study shows that the PFPF unfunded pension liability is approximately $4.2 million as the following chart displays. - 28 - 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, 2016, indicates the minimum actuarially sound contribution for FY2016 will be $434,758. VIII. Requests for Information This financial report is designed to provide a general financial overview for those interested in the City of Paducah government finances. Questions or requests for additional financial information may be addressed to Jonathan Perkins, Finance Director, City of Paducah, 300 South 5th Street, Paducah, KY 42003. CITY OF PADUCAH, KENTUCKY BASIC FINANCIAL STATEMENTS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2016 Exhibit 1 Component Unit Paducah Governmental Business-type Water Works Current Assets: Activities Activities Total Authority Cash and cash equivalents 22,631,278$ 6,252,069$ 28,883,347$ 963,676$ Receivables, net: Notes 1,281,375 - 1,281,375 - Accounts 8,282,988 556,969 8,839,957 669,769 Grants 2,822,150 - 2,822,150 - Interest 9,909 - 9,909 - Property tax 5,237,767 - 5,237,767 - Accrued unbilled revenues - - - 1,170,165 Internal balances (519,888) 519,888 - - Inventory 679,851 - 679,851 719,415 Other current assets 31,729 - 31,729 922,544 Total current assets 40,457,159 7,328,926 47,786,085 4,445,569 Noncurrent Assets: Notes receivable 3,573,410 - 3,573,410 - Capital assets: Land and construction in progress 23,686,789 62,152 23,748,941 1,626,870 Depreciable capital assets 31,930,229 1,616,576 33,546,805 49,954,022 Other assets - - - 6,024,445 Total noncurrent assets 59,190,428 1,678,728 60,869,156 57,605,337 Total assets 99,647,587 9,007,654 108,655,241 62,050,906 Deferred Outflows of Resources: Deferred pension related outflows 9,377,005 440,338 9,817,343 915,349 Deferred charges on refunding 320,723 - 320,723 - Total deferred outflows of resources 9,697,728 440,338 10,138,066 915,349 See accompanying notes to the basic financial statements. CITY OF PADUCAH, KENTUCKY STATEMENT OF NET POSITION JUNE 30, 2016 ASSETS -29- Primary Government Component Unit Paducah Governmental Business-type Water Works Current Liabilities: Activities Activities Total Authority Voucher and accounts payable 4,976,806 195,087 5,171,893 736,316 Accrued payables 1,298,819 63,024 1,361,843 749,390 Unearned revenue 339,431 25,500 364,931 - Accrued compensated absences 1,336,751 106,535 1,443,286 236,631 Accrued interest 90,739 - 90,739 - Notes payable due within one year 467,714 - 467,714 348,054 Bonds payable due within one year 1,773,148 - 1,773,148 - Other current liabilities - - - 232,153 Total current liabilities 10,283,408 390,146 10,673,554 2,302,544 Noncurrent Liabilities: Accrued compensated absences 746,510 67,384 813,894 - Landfill post-closure costs - 2,062,500 2,062,500 - Pensions obligation 41,221,575 1,884,418 43,105,993 4,863,028 Notes payable 5,218,721 - 5,218,721 5,255,533 Bonds payable 19,821,948 - 19,821,948 - Total noncurrent liabilities 67,008,754 4,014,302 71,023,056 10,118,561 Total liabilities 77,292,162 4,404,448 81,696,610 12,421,105 Deferred Inflows of Resources Unavailable revenues - property taxes 5,023,063 - 5,023,063 - Deferred pension related inflows 2,667,475 132,341 2,799,816 98,592 Total deferred inflows of resources 7,690,538 132,341 7,822,879 98,592 Net invested in capital assets 46,389,685 1,678,728 48,068,413 45,977,305 Restricted for: Housing and development projects - 38,247 38,247 - Capital projects & infrastructure 1,148,789 - 1,148,789 - Public safety 147,218 - 147,218 - Unrestricted (deficit) (23,323,077) 3,194,228 (20,128,849) 4,469,253 TOTAL NET POSITION 24,362,615$ 4,911,203$ 29,273,818$ 50,446,558$ -30- LIABILITIES NET POSITION Primary Government Exhibit 2 FUNCTIONS/PROGRAMS Operating Charges for Grants and Primary Government: Expenses Services Contributions Governmental activities: General government 9,777,876 1,128,785 548,732$ 11,569$ Public safety 20,503,784 237,641 619,437 608,707 Public service 10,266,856 1,065,010 4,130,035 - Parks and recreation 3,052,360 132,909 - - Planning and development 911,830 - 737,500 3,518,760 Interest on long-term debt 900,593 - 144,005 - Total governmental activities (See Note 1) 45,413,299 2,564,345 6,179,709 4,139,036 Business-type activities: Solid Waste 3,815,476 4,520,084 60,070 - Section Eight Housing 1,874,074 - 1,785,479 - Civic Center 74,457 40,148 - - Total business-type activities 5,764,007 4,560,232 1,845,549 - TOTAL PRIMARY GOVERNMENT 51,177,306$ 7,124,577$ 8,025,258$ 4,139,036$ Component Unit: Paducah Water Works Authority 9,743,527$ 10,862,483$ -$ 1,041,432$ TOTAL COMPONENT UNITS 9,743,527$ 10,862,483$ -$ 1,041,432$ 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 Miscellaneous Total general revenues Transfers Total general revenues and transfers Change in net position Net position - beginning Net position - ending See accompanying notes to the basic financial statements. FOR THE YEAR ENDED JUNE 30, 2016 STATEMENT OF ACTIVITIES Program Revenues Capital -31- CITY OF PADUCAH, KENTUCKY Grants and Contributions Component Unit Governmental Business-type Paducah Water Activities Activities Total Works Authority (8,088,790)$ -$ (8,088,790)$ -$ (19,037,999) - (19,037,999) - (5,071,811) - (5,071,811) - (2,919,451) - (2,919,451) - 3,344,430 - 3,344,430 - (756,588) - (756,588) - (32,530,209) - (32,530,209) - - 764,678 764,678 - - (88,595) (88,595) - - (34,309) (34,309) - - 641,774 641,774 - (32,530,209) 641,774 (31,888,435) - - - - 2,160,388 - - - 2,160,388 4,943,962 - 4,943,962 - 162,593 - 162,593 - 656,214 - 656,214 - 4,170,381 - 4,170,381 - 673,786 - 673,786 - 242,344 - 242,344 - 4,711,708 - 4,711,708 - 20,130,249 - 20,130,249 - 656,647 - 656,647 - 368,318 - 368,318 - 137,224 30,302 167,526 14,225 189,489 85,649 275,138 2,945 37,042,915 115,951 37,158,866 17,170 137,582 (137,582) - - 37,180,497 (21,631) 37,158,866 17,170 4,650,288 620,143 5,270,431 2,177,558 19,712,327 4,291,060 24,003,387 48,269,000 24,362,615$ 4,911,203$ 29,273,818$ 50,446,558$ Net (Expense) Revenue and Changes in Net Position Primary Government -32- CITY OF PADUCAH, KENTUCKY BASIC FINANCIAL STATEMENTS FUND FINANCIAL STATEMENTS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2016 Exhibit 3 Special General Fund Assets Cash and cash equivalents 7,540,290$ 971,404$ 5,995,364$ Receivables: Accounts 7,450,358 - 1,465,933 Grants 12,265 - 2,809,885 Property taxes (net of allowances for uncollectibles) 5,302,767 - - Inventory - - 623,735 Due from other funds 1,317,401 1,247,177 - Total Assets 21,623,081$ 2,218,581$ 10,894,917$ Liabilities Voucher and accounts payable 497,443$ -$ 3,514,694$ Accrued payroll and payroll taxes 1,214,332 - - Due to other funds 1,247,177 200,000 1,285,671 Unearned revenue - other - - 291,487 Accrued compensated absences 213,533 - - Total liabilities 3,172,485 200,000 5,091,852 Deferred Inflows of Resources Unavailable revenue-property taxes 5,252,470 - - Fund Balances: Nonspendable Inventory - - 623,735 Restricted for: Highways and streets - - - Public safety - - - Capital improvements - - - Committed for: Capital improvements - 2,018,581 - Assigned for: Capital improvements - - 5,179,330 Public safety - - - Debt service - - - Unassigned: General Fund 13,198,126 - - Total fund balances 13,198,126 2,018,581 5,803,065 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES 21,623,081$ 2,218,581$ 10,894,917$ See accompanying notes to the basic financial statements. -33- Fund Improvements CITY OF PADUCAH, KENTUCKY BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2016 Revenue Investment General Capital Debt Service Fund 791,761$ 1,683,568$ 16,982,387$ - 234,498 9,150,789 - - 2,822,150 - - 5,302,767 - - 623,735 - - 2,564,578 791,761$ 1,918,066$ 37,446,406$ 16,859$ 261,008$ 4,290,004$ - 62,073 1,276,405 - - 2,732,848 24,078 - 315,565 - - 213,533 40,937 323,081 8,828,355 - - 5,252,470 - - 623,735 - 1,148,789 1,148,789 - 147,218 147,218 - - - - - 2,018,581 - - 5,179,330 - 298,978 298,978 750,824 - 750,824 - - 13,198,126 750,824 1,594,985 23,365,581 791,761$ 1,918,066$ 37,446,406$ -34- Governmental Nonmajor Governmental Funds Total Funds Exhibit 4 Total fund balance - total governmental funds 23,365,581$ Amounts reported for governmental activities in the Statement of Net Position are different because: 164,407 3,742,500 9,905 (456,577) 55,617,018 (179,492) 94,667 320,723 (2,667,475) 9,377,005 6,945,428 See accompanying notes to the basic financial statements. (Continued) Deferred refunding costs Deferred pension related inflows Deferred pension related outflows Accrued retainage on construction projects do not require the use of current financial resources and, therefore, is not reported in the governmental funds balance sheet. -35- Premiums, discounts and deferred refunding costs and deferred pension activity in governmental activities are not current financial resources and, therefore, are not reported in the governmentalfunds 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. Bond Premiums Bond Discounts 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, 2016 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) (1,812,592) (90,739)$ $ 2,240,862 66,177,418 (68,418,280) 6,149,491$ (333,639) (519,888) 5,295,964 NET POSITION OF GOVERNMENTAL ACTIVITIES 24,362,615$ See accompanying notes to the basic financial statements The portion of accrued compensatedabsences not due and payable in the current period, and therefore, not reported in the governmental funds balance sheet. JUNE 30, 2016 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 ($62,119,098) are not due and payable in the current period and, therefore, they are not reported in the governmentalfunds balance sheet. See Note 3 for detail. The long- term liabilities are: CITY OF PADUCAH, KENTUCKY RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO STATEMENT OF NET POSITION -36- Due within one year Due after one year Current assets Net amount allocated to Internal service funds are used by managementto charge the costs of certain activities, such as insurance and fleet management, to individual funds. The assets and liabilities of the Internal Service Funds (net of amount allocated to business-type activities) not included in other reconciling items are: Current liabilities Exhibit 5 Special Revenue General General Investment Capital Revenues: Fund Fund Improvements Taxes 6,595,802$ -$ -$ Licenses 24,658,566 4,947,986 - Charges for services 646,623 - - Intergovernmental - - - Grants 616,178 - 7,509,619 Interest 101,542 - - Property upkeep, rentals, sales and other 1,005,483 - 416,799 Total revenues 33,624,194 4,947,986 7,926,418 Expenditures: Current operations: General government 4,526,828 - - Public safety 16,943,529 - - Public service 4,768,109 - - Parks and recreation 2,929,404 - - Planning and development - 672,879 - Intergovernmental and other 441,742 - - Capital outlay - - 13,305,919 Debt service: Principal requirement - - - Interest requirement - - - Total expenditures 29,609,612 672,879 13,305,919 Excess (deficiency) of revenues over expenditures 4,014,582 4,275,107 (5,379,501) Other Financing Sources (Uses): Transfers in 526,187 261,000 5,795,359 Transfers out (3,891,875) (4,332,360) (106,687) Total other financing sources (uses) (3,365,688) (4,071,360) 5,688,672 Net change in fund balances 648,894 203,747 309,171 Fund balances - beginning 12,549,232 1,814,834 5,493,894 Fund balances - ending 13,198,126$ 2,018,581$ 5,803,065$ 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, 2016 Debt Service Fund -$ 381,131$ 6,976,933$ - - 29,606,552 - 237,636 884,259 635,705 497,147 1,132,852 - 766,732 8,892,529 - 14,380 115,922 289,005 374,125 2,085,412 924,710 2,271,151 49,694,459 - - 4,526,828 - 1,491,836 18,435,365 - 1,338,664 6,106,773 - - 2,929,404 - 237,500 910,379 - - 441,742 - - 13,305,919 2,133,570 - 2,133,570 849,798 - 849,798 2,983,368 3,068,000 49,639,778 (2,058,658) (796,849) 54,681 2,157,163 1,295,142 10,034,851 - (1,774,360) (10,105,282) 2,157,163 (479,218) (70,431) 98,505 (1,276,067) (15,750) 652,319 2,871,052 23,381,331 750,824$ 1,594,985$ 23,365,581$ Funds Nonmajor Governmental -38- Governmental Total Funds Exhibit 6 Net change in fund balances - total governmental fund (15,750)$ Amounts reported for governmental activities in the Statement of Activities are different because: 11,181,296 (360,803) 31,738 (2,695,391) (456,577) (1,476,865) (3,388,650)$ See accompanying notes to the basic financial statements. (Continued) FOR THE YEAR ENDED JUNE 30, 2016 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 $1,462,735. Depreciation expense on capital assets is reported in the government-wide Statement of Activitiesand Changes in Net Position, but does not require the use of current financial resources. Therefore, depreciationexpenseis not reported as an expenditure in governmental funds. This amount includes Internal Service Funds' depreciation expense of $734,995. The payments of a pension contribution requires the use of current financial resources and, therefore, is reported as an expenditure in governmental funds. However, the current year payments are deferred outflows of resources in the government-widestatements. Deferred outflows of resources related to pension expense decreased by this amount this year. Accrued retainage on construction projects do not require the use of current financial resources. However, in the government-wide statements, accrued expense are recorded when incurred. Only the loss on the disposal of capital assets is reported in the Statement of Activities, whereas in the governmental funds, the proceeds from the sale increases financial resources. Thus, the change in net position differs by the net book value of capital assets disposed. CITY OF PADUCAH, KENTUCKY RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES -39- Payments on property taxes recognized as revenues when received in the governmental funds. Exhibit 6 (Continued) 2,133,570 4,617 70,235 (56,919) 410,410$ (2,883) Capital Outlays (1,462,735) 734,995 (320,213) CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES 4,650,288$ 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 position business-type activities Depreciation expense Net of amount allocated to Long-term accrued compensated absences do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. 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 position in the government-wide Statement of Activities. Accrued interest payments on debt do not require the use of current financial resources. Interest expense is reported net of the change in accrued interest payable in the government-wide Statement of Activities. CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2016 Governmentalfunds 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. TO THE STATEMENT OF ACTIVITIES CITY OF PADUCAH, KENTUCKY RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND Exhibit 7 Variance with Final Budget Positive Original Final (Negative) Revenues: Taxes: Real and personal, current year 5,276,500$ 5,421,765$ 5,421,774$ 9$ Real and personal, prior year 125,000 112,440 112,444 4 Franchise 170,000 162,585 162,593 8 Bank taxes 230,000 242,340 242,344 4 In lieu of tax payment 295,000 276,395 276,401 6 Penalty, interest and advertising 57,000 60,170 60,177 7 Paducah Junior College tax collections - 320,065 320,069 4 Total taxes 6,153,500 6,595,760 6,595,802 42 Licenses: Business licenses 4,450,000 4,711,705 4,711,708 3 Employee earnings 14,400,000 15,182,260 15,182,262 2 Comcast fees 300,000 299,880 299,886 6 Penalties 175,000 201,095 201,095 - Alcoholic beverages 121,000 131,150 131,150 - Insurance premium tax 3,900,000 4,170,380 4,170,381 1 Building permits 140,000 210,015 210,016 1 Electrical permits 32,000 49,575 49,576 1 Zoning change fees 6,500 5,975 5,975 - Miscellaneous building and electrical fees 5,000 4,500 4,500 - Payroll tax sharing with County (290,000) (307,985) (307,983) 2 Total licenses 23,239,500 24,658,550 24,658,566 16 Charges for services: Tax collection fee 180,000 176,180 176,182 2 Administrative charge 284,520 297,020 297,020 - Base court revenue 42,000 40,510 40,512 2 Recreation fees 113,300 132,900 132,909 9 Total charges for services 619,820 646,610 646,623 13 See accompanying notes to the basic financial statements. (Continued) ActualBudgeted Amounts -41- CITY OF PADUCAH, KENTUCKY GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2016 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 315,000$ 292,855$ 292,858$ 3$ Fire State Incentive 265,000 259,170 259,172 2 Police supplemental grants 32,000 64,215 64,148 (67) Total grants 612,000 616,240 616,178 (62) Interest 94,800 101,540 101,542 2 Other: Property rent and sales 694,880 679,320 679,331 11 Property upkeep and maintenance 106,930 129,255 129,218 (37) Contractual programs 5,400 2,025 2,029 4 E911 - GIS 28,515 30,890 30,891 1 Miscellaneous 153,000 163,945 164,014 69 Total other 988,725 1,005,435 1,005,483 48 Total revenues 31,708,345 33,624,135 33,624,194 59 Expenditures: General government: General administration: Mayor and Commissioners 180,395 177,900 177,887 13 City Manager 459,725 454,925 454,914 11 City Clerk 126,735 127,490 127,531 (41) Corporate Counsel 151,420 221,870 222,019 (149) Non-departmental 822,400 776,605 776,599 6 Memberships and contingency 126,000 22,310 22,283 27 Civic beautification 3,000 - - - Total general administration 1,869,675 1,781,100 1,781,233 (133) PRDA 134,165 133,230 133,370 (140) Finance: Finance administration 260,165 259,470 259,335 135 Accounting and payroll 340,335 341,720 341,729 (9) Revenue collection 398,290 395,325 395,244 81 Total finance 998,790 996,515 996,308 207 See accompanying notes to the basic financial statements. (Continued) -42- STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN Budgeted Amounts GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2016 FUND BALANCE - BUDGET AND ACTUAL CITY OF PADUCAH, KENTUCKY Exhibit 7 (Continued) Variance with Final Budget Actual Positive General government:Original Final Amounts (Negative) Planning: Administration 274,955$ 273,850$ 273,738$ 112$ Planning 92,315 94,835 94,746 89 Grants 153,170 152,365 152,269 96 Economic development 134,535 134,435 134,299 136 Total planning 654,975 655,485 655,052 433 Radio and rental property 157,345 116,510 116,357 153 Human rights 41,955 34,280 34,076 204 Information systems 667,530 590,645 590,508 137 Human resources/risk management 309,050 220,045 219,924 121 Total general government 4,833,485 4,527,810 4,526,828 982 Public safety: Police: Police administration 994,300 1,029,540 1,029,370 170 Patrol 6,487,155 6,122,220 6,122,001 219 Investigations 2,015,000 1,863,945 1,863,887 58 Total police 9,496,455 9,015,705 9,015,258 447 Fire: Fire administration 562,200 537,385 537,219 166 Suppression 6,367,305 6,276,120 6,275,965 155 Prevention and inspection 168,150 984,835 984,693 142 Training 149,250 130,440 130,394 46 Construction 409,700 - - - Code enforcement 392,670 - - - Total fire 8,049,275 7,928,780 7,928,271 509 Total public safety 17,545,730 16,944,485 16,943,529 956 Public service: Public works: Street maintenance 2,077,105 1,705,855 1,705,770 85 Street lighting 765,000 788,180 788,182 (2) Landscape maintenance 1,117,490 1,075,560 1,075,392 168 Total public works 3,959,595 3,569,595 3,569,344 251 See accompanying notes to the basic financial statements. (Continued) Budgeted Amounts GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2016 -43- STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL CITY OF PADUCAH, KENTUCKY Exhibit 7 (Continued) Variance with Final Budget Actual Positive Public service:Original Final Amounts (Negative) Engineering services: Engineering services 580,115$ 495,585$ 495,269$ 316$ Flood control 574,990 703,615 703,496 119 Total engineering services 1,155,105 1,199,200 1,198,765 435 Total public service 5,114,700 4,768,795 4,768,109 686 Parks and recreation: Parks and recreation administration 832,650 768,610 768,330 280 Grounds maintenance 1,525,310 1,426,550 1,425,982 568 Pools and recreation programs 798,555 735,345 735,092 253 Total parks and recreation 3,156,515 2,930,505 2,929,404 1,101 Intergovernmental and other: Cable authorit y 83,610 93,930 93,912 18 Leave expense - 27,765 27,761 4 Intergovernmental expense - 320,070 320,069 1 Total intergovernmental and other 83,610 441,765 441,742 23 Total expenditures 30,734,040 29,613,360 29,609,612 3,748 Excess (deficiency) of revenues over expenditures 974,305 4,010,775 4,014,582 3,807 Other financing sources (uses): Operating transfers in 419,500 526,175 526,187 12 Operating transfers out (1,633,720) (3,891,885) (3,891,875) 10 Total other financing sources (uses) (1,214,220) (3,365,710) (3,365,688) 22 Net change in fund balance (239,915) 645,065 648,894 3,829 Fund balance - beginning 12,549,232 12,549,232 12,549,232 - Fund balance - ending 12,309,317$ 13,194,297$ 13,198,126$ 3,829$ See accompanying notes to the basic financial statements. -44- CITY OF PADUCAH, KENTUCKY Budgeted Amounts GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2016 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL Exhibit 8 Variance with Final Budget Positive Original Final (Negative) Revenues: Licenses: Employee earnings 4,800,000$ 4,947,985$ 4,947,986$ 1$ Total licenses 4,800,000 4,947,985 4,947,986 1 Other: Miscellaneous - - - - Total other - - - - Total revenues 4,800,000 4,947,985 4,947,986 1 Expenditures: General government: Planning and development: Economic development 690,500 672,880 672,879 1 Total expenditures 690,500 672,880 672,879 1 Excess (deficiency) of revenues over expenditures 4,109,500 4,275,105 4,275,107 2 Other financing sources (uses): Operating transfers in 261,000 261,000 261,000 - Operating transfers out (4,369,670) (4,332,365) (4,332,360) 5 Total other financing sources (uses) (4,108,670) (4,071,365) (4,071,360) 5 Net change in fund balance 830 203,740 203,747 7 Fund balance - beginning 1,758,934 1,814,835 1,814,834 (1) Fund balance - ending 1,759,764$ 2,018,575$ 2,018,581$ 6$ 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, 2016 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL Exhibit 8 Variance with Final Budget Positive Original Final (Negative) Revenues: Licenses: Employee earnings 4,800,000$ 4,947,985$ 4,947,986$ 1$ Total licenses 4,800,000 4,947,985 4,947,986 1 Other: Miscellaneous - - - - Total other - - - - Total revenues 4,800,000 4,947,985 4,947,986 1 Expenditures: General government: Planning and development: Economic development 690,500 672,880 672,879 1 Total expenditures 690,500 672,880 672,879 1 Excess (deficiency) of revenues over expenditures 4,109,500 4,275,105 4,275,107 2 Other financing sources (uses): Operating transfers in 261,000 261,000 261,000 - Operating transfers out (4,369,670) (4,332,365) (4,332,360) 5 Total other financing sources (uses) (4,108,670) (4,071,365) (4,071,360) 5 Net change in fund balance 830 203,740 203,747 7 Fund balance - beginning 1,758,934 1,814,835 1,814,834 (1) Fund balance - ending 1,759,764$ 2,018,575$ 2,018,581$ 6$ 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, 2016 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 5,837,161$ 414,908$ 6,252,069$ 5,648,890$ Accounts receivable 556,969 - 556,969 244,485 Due from other funds - - - 200,000 Inventory - - - 56,116 Total current assets 6,394,130 414,908 6,809,038 6,149,491 Noncurrent Assets: Net capital assets: Land 62,152 - 62,152 - Depreciable capital assets 1,486,478 130,098 1,616,576 3,884,310 Total noncurrent assets 1,548,630 130,098 1,678,728 3,884,310 Total assets 7,942,760 545,006 8,487,766 10,033,801 Deferred Outflows of Resources: Deferred pension contributions 377,374 62,964 440,338 125,310 Current Liabilities: Voucher and accounts payable 129,337 34,020 163,357 230,226 Accrued payroll and payroll taxes 63,024 - 63,024 22,414 Accrued compensated absences 104,574 1,962 106,536 35,704 Unearned revenue 25,500 - 25,500 23,865 Due to other funds - 31,729 31,729 - Total current liabilities 322,435 67,711 390,146 312,209 Noncurrent Liabilities: Pensions obligation 1,619,918 264,500 1,884,418 479,013 Landfill post-closure costs 2,062,500 - 2,062,500 - Accrued compensated absences 49,730 17,654 67,384 21,430 Total noncurrent liabilities 3,732,148 282,154 4,014,302 500,443 Total liabilities 4,054,583 349,865 4,404,448 812,652 Deferred Inflows of Resources Difference between projected and actuarial earnings on pension plan investments 114,494 17,847 132,341 44,484 Net invested in capital assets 1,548,630 130,098 1,678,728 3,884,310 Restricted - Housing - 38,247 38,247 - Unrestricted 2,602,427 71,913 2,674,340 5,417,665 TOTAL NET POSITION 4,151,057$ 240,258$ 4,391,315 9,301,975$ Reconciliation to government-wide statements of net position: Adjustment to reflect the consolidation of Internal Service Funds' activities related to Enterprise Funds 519,888 NET POSITION OF BUSINESS-TYPE ACTIVITIES 4,911,203$ 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, 2016 Exhibit 10 Nonmajor Solid Enterprise Operating Revenues: Waste Funds Totals Charges for services - internal -$ 40,148$ 40,148$ 5,906,661$ Charges for services - external 4,520,084 - 4,520,084 280,639 Miscellaneous 2,466 1,500 3,966 - Total operating revenues 4,522,550 41,648 4,564,198 6,187,300 Operating Expenses: Cost of sales and service 3,434,867 1,937,227 5,372,094 5,505,396 Depreciation and amortization 334,743 11,306 346,049 734,995 Total operating expenses 3,769,610 1,948,533 5,718,143 6,240,391 Operating income (loss) 752,940 (1,906,885) (1,153,945) (53,091) Nonoperating Revenues (Expenses): Grants - program purpose 60,070 1,785,479 1,845,549 - Interest and investment income 30,255 47 30,302 21,300 Gain (loss) on disposal of property and equipment 78,802 - 78,802 188,322 Total nonoperating revenues (expenses)169,127 1,785,526 1,954,653 209,622 Income (loss) before contributions and transfers 922,067 (121,359) 800,708 156,531 Contributions and Transfers: Transfers in - 102,418 102,418 253,879 Transfers out (285,866) - (285,866) - Total contributions and transfers (285,866) 102,418 (183,448) 253,879 Change in net position 636,201 (18,941) 617,260 410,410 Net position - beginning 3,514,856 259,199 8,891,565 Net position - ending 4,151,057$ 240,258$ 9,301,975$ Reconciliation to government-wide statements of net position: Adjustment to reflect the consolidation of Internal Service Funds' activities related to Enterprise Funds 2,883 CHANGE IN NET POSITION OF BUSINESS-TYPE ACTIVITIES 620,143$ See accompanying notes to the basic financial statements. Internal Service Funds -47- ActivitiesBusiness-type Activities CITY OF PADUCAH, KENTUCKY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2016 Governmental Exhibit 11 Nonmajor Solid Enterprise Cash Flows from Operating Activities: Waste Funds Totals Cash received from customers 4,508,714$ 40,148$ 4,548,862$ -$ Cash received from interfund services provided - - - 6,295,564 Payments to suppliers (2,023,181) - (2,023,181) (190,725) Payments to employees (830,275) (181,319) (1,011,594) (311,735) Claims paid - - - (3,338,437) Payments to internal service funds (487,278) (2,301) (489,579) - Other receipts 2,466 1,500 3,966 - Other payments - (1,769,922) (1,769,922) (1,712,959) Net cash provided (used) by operating activities 1,170,446 (1,911,894) (741,448) 741,708 Cash Flows from Noncapital Financing Activities: Grants - program purpose 60,070 1,785,479 1,845,549 - Transfers from other funds - 102,418 102,418 253,879 Transfers to other funds (285,866) - (285,866) - Net cash provided (used) by noncapital financing activities (225,796) 1,887,897 1,662,101 253,879 Cash Flows from Capital and Related Financing Activities: Purchase of capital assets (891,552) - (891,552) (1,462,735) Proceeds from sale of capital assets 78,802 - 78,802 209,141 Net cash provided (used) by capital and related financing activities (812,750) - (812,750) (1,253,594) Cash Flows from Investing Activities: Interest on cash and investments 30,255 47 30,302 21,300 Net cash provided (used) by investing activities 30,255 47 30,302 21,300 Net increase (decrease) in cash and cash equivalents 162,155 (23,950) 138,205 (236,707) Cash and cash equivalents, July 1, 2015 5,675,006 438,858 6,113,864 5,885,597 CASH AND CASH EQUIVALENTS, JUNE 30, 2016 5,837,161$ 414,908$ 6,252,069$ 5,648,890$ Reconciliation of Operating Income (Loss) to Net Cash Provided by Operating Activities: Operating income (loss) 752,940$ (1,906,885)$ (1,153,945)$ (53,091)$ Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization 334,743 11,306 346,049 734,995 Change in assets and liabilities: Receivables (10,070) - (10,070) 8,871 Prepaid expenses - - - - Inventories - - - 7,999 Due to other funds - - - 100,000 Pension obligation and related deferrals 42,438 18,619 61,057 (5,327) Account and accrued payables 51,695 (34,934) 16,761 (51,739) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 1,171,746$ (1,911,894)$ (740,148)$ 741,708$ See accompanying notes to the basic financial statements. Business-type Activities Funds CITY OF PADUCAH, KENTUCKY STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2016 -48- Governmental Activities Internal Service Exhibit 12 Private- Pension purpose Agency Funds Trusts Funds Cash and cash equivalents 20,819$ 108,472$ 519,942$ Receivables: Interest 6,292 - - Investments at fair value Money market funds 358,229 - - Common stock 2,317,643 - - Corporate bonds - - - Mutual funds 2,941,319 998,298 - Total assets 5,644,302 1,106,770 519,942$ Voucher and accounts payable 42 - - Payroll taxes and withholdings payable - - 519,942$ Total liabilities 42 - 519,942$ Net position restricted for pensions 5,644,260$ Held in trust for other purposes 1,106,770$ 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, 2016 Exhibit 13 Private- Pension purpose Additions: Funds Trusts Contributions: Employer 426,951$ -$ Plan members 4,494 - Private donations - 2,540 Total contributions 431,445 2,540 Investment income: Net increase (decrease) in fair value of investments 29,617 (89,646) Interest and dividends 135,916 92,271 Net investment income 165,533 2,625 Total additions 596,978 5,165 Deductions: Benefits 1,328,146 - Capital outlay - 54,685 Administrative expenses 53,962 12,968 Total deductions 1,382,108 67,653 Change in net position (785,130) (62,488) Net position - beginning 6,429,390 1,169,258 Net position - ending 5,644,260$ 1,106,770$ 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, 2016 CITY OF PADUCAH, KENTUCKY NOTES TO THE FINANCIAL STATEMENTS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2016 - 51 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 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, 2016 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, 2016 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, 2016 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, property and casualty insurance, and self-funded health 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. 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, 2016 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, 2016 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 departments and their line items; however, any revisions that alter the total expenditures 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 the modified accrued basis of accounting. Encumbrance accounting, under which purchase orders, contracts, and other commitments for expenditures 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, 2016. Cash and Investments The City Commission 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, 2016 Note 1 - Summary of Significant Accounting Policies: Receivables 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 on demand. 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 $56,116 held for consumption and real property of $623,735 held for urban development. The cost is recorded as an expenditure at the time individual items are consumed or sold for urban development rather than when purchased. 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, 2016 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 Government-wide Statement In addition to assets, the statement of net 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 two items that qualifies for reporting in the category. These are the deferred charge on refunding and deferred pension related outflows reported in the statements 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. The deferred related pension outflows results from pension contributions subsequent to the measurement date of the pension plan and various changes resulting from actuarial pension measurement. The pension contribution amount is deferred and recognized as a component of the change in pension plan liability in the next measurement period. The various changes resulting from actuarial pension measurement are deferred and amortized in future periods as a component of the pension expense. (Continued) - 59 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 1 - Summary of Significant Accounting Policies: Deferred Outflows/Inflows of Resources In addition to liabilities, the statement of net 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. The City has two type of items reported in this category. These are property taxes levied during the fiscal year for the next fiscal year and inflows related to the City’s pension plans that qualifies for reporting in this category – deferred pension related inflows. The various changes resulting from actuarial pension measurement are deferred and amortized in future periods as a component of the pension expense. A summary of change in deferred outflows/inflows of resources is as follows: Balance July 1, 2015 Additions Reductions Balance June 30, 2016 Governmental Activities Deferred outflows of resources Deferred charge on refunding $ 383,952 $ - $ (63,229) $ 320,723 Deferred pension contributions $ 4,079,846 $ 2,479,961 $ (4,079,846) $ 2,479,961 Changes in proportion and differences between employer contributions and proportionate share of contributions - 137,958 (28,270) 109,688 Differences between expected and actual experience - 824,383 (179,768) 644,615 Change of assumptions - 4,385,003 (1,030,063) 3,354,940 Difference between projected and actuarial earnings 151,609 3,342,828 (706,636) 2,787,801 Pension related deferred outflows $ 4,231,455 $ 11,170,133 $ (6,024,583) $ 9,377,005 Deferred inflows of resources Changes in proportion and differences between employer contributions and proportionate share of contributions $ - $ 344,313 $ (98,095) $ 246,218 Difference between projected and actuarial earnings 3,264,613 - (843,356) 2,421,257 Pension related deferred inflows $ 3,264,613 $ 344,313 $ (941,451) $ 2,667,475 Business-Type Activities Deferred outflows of resources Deferred pension contributions $ 198,406 $ 125,218 $ (198,406) $ 125,218 Differences between expected and actual experience - 21,899 (6,239) 15,660 Change of assumptions - 265,729 (75,706) 190,023 Difference between projected and actuarial earnings - 136,796 (27,359) 109,437 Pension related deferred outflows $ 198,406 $ 549,642 $ (307,710) $ 440,338 Deferred inflows of resources Unavailable revenues – property taxes $ 4,985,182 $ 5,023,063 $ (4,985,182) $ 5,023,063 Changes in proportion and differences between employer contributions and proportionate share of contributions $ - $ 55,651 $ (15,855) $ 39,796 Difference between projected and actuarial earnings 123,394 (30,849) 92,545 Pension related deferred inflows $ 123,394 $ 55,651 $ (46,704) $ 132,341 (Continued) - 60 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 1 - Summary of Significant Accounting Policies: Deferred Outflows/Inflows of Resources Fund Financial Statements The government has only one type of item, which arises only under a modified accrual basis of account, which qualifies for reporting as deferred inflows of resources. 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. (Continued) - 61 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 1 - Summary of Significant Accounting Policies: Equity Classifications Government-wide Statements Equity is classified as net position and displayed in three components: a. Net Invested in capital assets – Consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. b. Restricted net 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 “net invested in capital assets.” 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. The General Fund is the only governmental fund which reports an unassigned 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. (Continued) - 62 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 1 - Summary of Significant Accounting Policies: Interfund Transactions Interfund services provided and used are accounted for as revenues, expenditures, or expenses. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from it that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as reductions of expenditures/expenses in the fund that is reimbursed. All other interfund transactions are reported as transfers. Program Revenues Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Operating and Non-Operating Revenues and Expenses – Proprietary Funds Operating revenues and expenses for proprietary funds are those that result from providing services and producing and delivering goods and/or services. It also includes all revenue and expenses not related to capital and related financing, noncapital financing, or investing activities. Operating expenses for the enterprise and internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses Expenditures/Expenses In the government-wide financial statements, expenses are classified by function for both governmental and business-type activities. In the fund financial statements, expenditures are classified as follows: Governmental Funds – by 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. (Continued) - 63 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 1 - Summary of Significant Accounting Policies: Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make assumptions that affect reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Stewardship, Compliance, and Accountability By its nature as a local government unit, the City and its component units are subject to various federal, state, and local laws and contractual regulations. An analysis of the City’s compliance with significant laws and regulations and demonstration of its stewardship over City resources follows. Fund Accounting Requirements The City complies with all state and local laws and regulations requiring the use of separate funds. Revenue Restrictions The City has various restrictions placed over certain revenue sources from state or local requirements 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 Transient Room 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 For the year ended June 30, 2016, the City complied in all material respects with these revenue restrictions. Debt Restrictions and Covenants The City may not incur any indebtedness that would require payment from resources beyond the current fiscal year revenue without first obtaining voter approval. Subsequent Events In preparing these financial statements, management has evaluated events and transactions for potential recognition or disclosure through December 6, 2016, the date financial statements were available to be issued. (Continued) - 64 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 2 - Property Taxes: The City bills and collects its own property taxes. The City elects to use the annual property assessment prepared by McCracken County as its base to apply the property tax rate. According to Kentucky Revised Statutes, the assessment date for the City must conform to the assessment date of McCracken County and the annual increase in the property tax levy cannot exceed 4%. City property tax revenues are recorded as a receivable when assessed because the City has an enforceable legal claim to the resources. At this time, the receivable is offset by unearned revenue. Property tax revenues are recognized during the period for which they are levied. The due dates and collection period for all property taxes, exclusive of vehicle taxes, for the fiscal year ended June 30, 2016, are as follows: Description Date Assessment and enforceable lien January 1, 2015 Levy October 6, 2015 Face value amount payment dates 1st half by November 1, 2015 2nd half by February 1, 2016 Delinquent date - 10% penalty plus 1/2% per month 1st half - November 30, 2015 2nd half - February 28, 2016 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, 2016, 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 $29,532,580 and $30,469,258, respectively. (Continued) - 65 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 3 - Detail Notes on Transaction Classes/Accounts: Investments As of June 30, 2016, 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 $ 358,229 NA NA NA NA NA Common stock 2,317,643 NA NA NA NA NA Corporate bonds - NA $ - $ - $ - $ - U.S. agencies - - - - - Mutual funds Equity 3,939,617 NA NA NA NA NA TOTAL FIDUCIARY AND PRIVATE PURPOSE TRUST FUNDS $6,615,489 (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; 4. Bonds or certificates of indebtedness of the Commonwealth of Kentucky and of its agencies and instrumentalities; (Continued) - 66 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 3 - Detail Notes on Transaction Classes/Accounts: Investment Policies City Policy 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. 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. (Continued) - 67 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 3 - Detail Notes on Transaction Classes/Accounts: Investment Policies 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, 2016, was as follows: Balance Balance Primary Government: July 1, 2015 Additions Deductions June 30, 2016 Capital assets, not being depreciated: Land $10,383,332 $ 10,000 $ - $10,393,332 Construction-in-progress 4,025,248 9,300,717 32,508 13,293,457 Total capital assets, not being depreciated 14,408,580 9,310,717 32,508 23,686,789 Capital assets, being depreciated: Land improvements 12,898,307 3,355 - 12,901,662 Buildings and improvements 20,814,867 32,508 1,812,656 19,034,719 Infrastructure 41,625,986 - - 41,625,986 Equipment 8,102,749 482,226 173,436 8,411,539 Furnishings and fixtures 217,436 - 1,500 215,936 Vehicles 8,931,234 1,384,998 1,155,824 9,160,408 Totals at historical cost 92,590,579 1,903,087 3,143,416 91,350,250 Less accumulated depreciation: Land improvements 2,411,583 740,347 - 3,151,930 Buildings and improvements 13,105,096 436,722 337,356 13,204,462 Infrastructure 29,562,992 1,186,917 - 30,749,909 Equipment 6,614,476 293,414 171,871 6,736,019 Furnishings and fixtures 203,083 1,811 1,500 203,394 Vehicles 5,779,872 729,439 1,135,004 5,374,307 Total accumulated depreciation 57,677,102 3,388,650 1,645,731 59,420,021 Total capital assets, being depreciated, net 34,913,477 (1,485,563) 1,497,685 31,930,229 PRIMARY GOVERNMENT ACTIVITIES CAPITAL ASSETS, NET $49,322,057 $ 7,825,154 $1,530,193 $55,617,018 During the year ended June 30, 2016, the City donated a portable dome building to the Paducah-McCracken County Convention Center resulting in a net decrease in net position of $1,475,301. (Continued) - 68 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 3 - Detail Notes on Transaction Classes/Accounts: Capital Assets Depreciation expense was charged to governmental activities as follows: General government: General administration $ 300,540 Finance - Planning 19,922 Inspections - Human resources/risk management 909 Information systems 7,708 Fleet maintenance 4,861 Total general government 333,940 Public safety: Police 197,498 Fire 54,823 Grants - Emergency 911 25,553 Court awards 687 Fleet Lease Trust 730,133 Total public safety 1,008,694 Public service: Public works 38,850 Engineering 22,311 Total public service 61,161 Parks and recreation 795,223 Planning and development: Infrastructure 1,187,761 Grants 1,871 Total planning and development 1,189,632 TOTAL DEPRECIATION EXPENSE – GOVERNMENTAL ACTIVITIES $3,388,650 (Continued) - 69 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 3 - Detail Notes on Transaction Classes/Accounts: Capital Assets Balance Balance Business-type Activities: July 1, 2015 Increases Decreases June 30, 2016 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 16,932 - 571,759 Equipment 1,429,568 86,484 - 1,516,052 Vehicles 2,461,145 788,136 328,026 2,921,255 Totals at historical cost 4,445,540 891,552 328,026 5,009,066 Less accumulated depreciation: Buildings and improvements 285,802 14,633 - 300,435 Equipment 1,032,285 123,119 - 1,155,404 Vehicles 2,056,380 208,297 328,026 1,936,651 Total accumulated depreciation 3,374,467 346,049 328,026 3,392,490 Total capital assets, being depreciated, net 1,071,073 545,503 - 1,616,576 BUSINESS-TYPE ACTIVITIES CAPITAL ASSETS, NET $ 1,133,225 $ 545,503 $ - $ 1,678,728 Depreciation expense was charged to business-type activities as follows: Solid Waste Fund $ 334,743 Section Eight Housing 1,285 Civic Center 10,021 TOTAL DEPRECIATION EXPENSE – BUSINESS-TYPE ACTIVITIES $ 346,049 (Continued) - 70 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 3 - Detail Notes on Transaction Classes/Accounts: Capital Assets Balance Balance Discretely Presented July 1, 2015 Increases Decreases June 30, 2016 Component Units: Capital assets, not being depreciated: Land & construction in progress $ 531,621 $ 1,095,249 $ - $ 1,626,870 Total capital assets, not being depreciated 531,621 1,095,249 - 1,626,870 Capital assets, being depreciated: Utility plant 86,180,280 2,392,566 655,805 87,917,041 Total capital assets, being depreciated 86,180,280 2,392,566 655,805 87,917,041 Less accumulated depreciation: Utility plant 36,235,553 2,115,895 388,429 37,963,019 Total accumulated depreciation 36,235,553 2,115,895 388,429 37,963,019 Total capital assets, being depreciated, net 49,944,727 276,671 267,376 49,954,022 COMPONENT UNIT CAPITAL ASSETS, NET $ 50,476,348 $ 1,371,920 $ 267,376 $ 51,580,892 Depreciation expense, charged to functions/programs of discretely presented major component units as follows: Paducah Water Works $ 2,115,895 TOTAL DEPRECIATION EXPENSE BY ACTIVITY $ 2,115,895 Accounts Payable Payables in the governmental and proprietary funds are composed of payables to vendors and accrued expenditures. (Continued) - 71 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 3 - Detail Notes on Transaction Classes/Accounts: Long-Term Liabilities The City’s long-term liabilities are segregated between the amounts to be repaid from governmental activities and amounts to be repaid from business-type activities. Governmental Activities As of June 30, 2016, the governmental long-term liabilities consisted of the following: General obligation bonds: Current portion $ 1,773,148 Noncurrent portion 19,821,948 TOTAL GENERAL OBLIGATION BOND COSTS, NET OF PREMIUMS AND DISCOUNTS $ 21,595,096 Note payable: Current portion $ 467,714 Noncurrent portion 5,218,721 TOTAL NOTE PAYABLE PAYMENTS $ 5,686,435 Accrued compensated absences: Current portion $ 1,336,751 Noncurrent portion 746,510 TOTAL ACCRUED COMPENSATED ABSENCES $ 2,083,261 Pension obligations: County Employee Retirement System $ 36,877,136 Appointive Employee’s Pension Fund 95,226 Police and Firefighters Pension Plan 4,249,213 TOTAL PENSION OBLIGATIONS $ 41,221,575 (Continued) - 72 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 3 - Detail Notes on Transaction Classes/Accounts: Long-Term Liabilities Business-type Activities As of June 30, 2016, the long-term liabilities payable from proprietary fund resources consisted of the following: Accrued compensated absences: Current portion $ 106,535 Noncurrent portion 67,384 TOTAL ACCRUED COMPENSATED ABSENCES $ 173,919 Pension obligations: County Employee Retirement System $ 1,884,418 TOTAL PENSION OBLIGATIONS $ 1,884,418 General Obligation Bonds 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 ranging between 2% and 3.7%. 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. (Continued) - 73 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 3 - Detail Notes on Transaction Classes/Accounts: Long-Term Liabilities General Obligation Bonds 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 $289,000 of the bond and interest payments due with the remaining amount of $108,080 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. 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. Series 2014B Bond Issue – The City of Paducah issued general obligation refunding bonds of $4,225,000 in November 2014 with interest rate of 2.55%, to advance refund $3,845,000 of outstanding 2005 series bonds issued to finance the police and firefighter's pension fund estimated actuary liability. These bonds are required to be fully paid within 10 years from the date of issue and are backed by the full faith and credit of the City. (Continued) - 74 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 3 - Detail Notes on Transaction Classes/Accounts: Long-Term Liabilities Advance Refunding On November 1, 2014, the City issued general obligation refunding bonds of $4,225,000 with interest rate of 2.55% to advance refund 2005 series bonds with interest rate of 5.35%. The net proceeds of the new issue were deposited into an irrevocable trust with an escrow agent to redeem outstanding 2005 series bonds maturing on or after November 1, 2016 in the principle amount of $3,845,000 on November 1, 2015 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 $298,964. This amount was deferred and amortized over the remaining life of the refunded debt. This advance refunding was undertaken to reduce future total debt service payments over the next 10 years by $490,923 with a resulting net economic gain of $365,026. As of June 30, 2010, $0 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. 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%. (Continued) - 75 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 3 - Detail Notes on Transaction Classes/Accounts: Long-Term Liabilities Changes in Long-Term Liabilities The following is a summary of changes in long-term debt for the year ended June 30, 2016: Beginning Ending Due within Type of Liability: Balance Additions Reductions Balance One Year Governmental activities: General obligation bonds: Pension $ 285,000 $ - $ (285,000) $ - $ - Floodwall Rehabilitation 2,104,212 - (113,941) 1,990,271 128,148 Refinanced Pension 4,150,000 - (95,000) 4,055,000 395,000 Refinanced Convention Center 5,385,000 - (430,000) 4,955,000 440,000 Refinanced Rental Building 2,820,000 - (290,000) 2,530,000 300,000 Public Pool Renovations 1,055,000 - (65,000) 990,000 65,000 Economic Development 2,330,000 - (145,000) 2,185,000 145,000 Refinancing Public Projects 5,100,000 - (295,000) 4,805,000 300,000 Premiums 203,549 - (24,057) 179,492 - Discounts (112,414) - 17,747 (94,667) - Total bonds payable 23,320,347 - (1,725,251) 21,595,096 1,773,148 Notes payable: Kentucky League of Cities 1,669,821 - (169,695) 1,500,126 190,510 Kentucky Association of Counties 1,976,250 - (109,584) 1,866,666 114,583 Margaret Hank Agreement 116,078 - (21,227) 94,851 46,917 Murray State University Agreement 2,338,915 - (114,123) 2,224,792 115,704 Total notes payable 6,101,064 - (414,629) 5,686,435 467,714 Pension Obligations 32,788,823 11,017,715 (2,584,963) 41,221,575 - Accrued Compensated Absences 2,130,965 1,173,985 (1,221,689) 2,083,261 1,336,751 TOTAL GENERAL LONG- TERM LIABILITIES $64,341,199 $12,191,700 $ (5,946,532) $ 70,586,367 $ 3,577,613 Business-type activities: Pension Obligations $ 1,541,681 $ 473,594 $ (130,857) $ 1,884,418 - Accrued compensated Absences 125,323 130,534 (81,938) 173,919 106,535 TOTAL BUSINESS LONG- TERM LIABILITIES $ 1,667,004 $ 604,128 $ (212,795) $ 2,058,337 $ 106,535 (Continued) - 76 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 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 $55,617,018 Less: 19.75% of the outstanding 2010B general obligation bonds $ (986,513) 100% of the outstanding 2011 General obligation bonds (2,530,000) Net of the County's portion 1,758,256 (1,758,256) 78% of the outstanding 2014A general obligation bonds (3,747,900) 100% of the outstanding 2013A general obligation bonds (990,000) 52% of the outstanding 2013B general obligation bonds (1,136,200) 100% of the Margaret Hank Agreement (94,851) 100% of the outstanding Kentucky League of Cities' note payable (1,500,126) Net position invested in capital assets, net of related debt $46,389,685 Annual Debt Service Requirements The annual debt service requirements to maturity for bonds and notes as of June 30, 2016, are as follows: Year Ending June 30 Principal Interest 2017 $ 2,240,862 $ 844,232 2018 2,298,545 787,311 2019 2,308,002 719,446 2020 2,360,816 650,195 2021 2,430,402 576,613 2022-2026 11,248,112 1,729,940 2027-2031 4,137,976 343,731 2032 171,990 3,010 TOTALS $27,196,705 $ 5,654,478 (Continued) - 77 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 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, 2016, are as follows: Accrued Compensated Absences Governmental Business-type Activities Activities Accrued sick leave $ 755,527 $ 83,064 Accrued vacation leave 1,327,734 90,855 Totals 2,083,261 173,919 Less current portion 1,336,751 106,535 LONG-TERM PORTION $ 746,510 $ 67,384 Termination Benefits Nine employees, through employment contracts, are entitled to certain termination benefits upon involuntary termination of employment by the City Commission. These benefits include provision for salary payments for three to six months, as well as, certain health, life, dental, and disability insurance coverage for same period of time. As these benefits are only provided for involuntary termination of employment, no provision has been made for these benefits. The City funds these benefits on a pay-as- you-go basis in the period incurred. No termination benefits were paid for the year ended June 30, 2016. 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, 2016, $115,544 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, 2016, 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) - 78 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 3 - Detail Notes on Transaction Classes/Accounts: Interfund Transactions and Balances Interfund transfers during the year ended June 30, 2016, were as follows: Interfund Interfund Governmental Funds: Transfers In Transfers Out General Fund $ 526,187 $3,891,875 Special Revenue Investment Fund 261,000 4,332,360 Capital Project Fund 5,795,359 106,687 Debt Service Fund 2,157,163 - Nonmajor Governmental Funds 1,295,142 1,774,360 Internal Service Funds 253,879 - Proprietary Funds: Solid Waste - 285,866 Nonmajor Proprietary Funds 102,418 - TOTALS $10,391,148 $10,391,148 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. Significant transfers from the general fund transfers includes $470,142 for E911 support; $589,733 for debt service; and $2,338,569 for capital projects. Significant transfers from the special revenue investment fund includes $825,000 for municipal aid street resurfacing program; $1,567,430 for debt service; and $1,682,430 for capital projects. Due To/From Balances Due to/from balances used to cover current operating expenses were as follows as of June 30, 2016: Due From Due To General Fund $1,317,401 $1,247,177 Special Revenue Investment Fund 1,247,177 200,000 General Capital Improvements Fund - 1,285,671 Nonmajor Proprietary Funds - 31,730 Internal Service Funds 200,000 - TOTALS $2,764,578 $2,764,578 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) - 79 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 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 multiple-employer defined benefit pension plan administered by the Kentucky Retirement System, an agency of the Commonwealth of Kentucky. Under the provisions of the Kentucky Revised Statute (“KRS”) Section 61.645, the Board of Trustees of the Kentucky Retirement System administers CERS and has the authority to establish and amend benefit provisions. The Kentucky Retirement System issues a publicly available financial report that includes financial statements and required supplementary information for CERS. That report may be obtained from http://kyret.ky.gov/. Benefits provided - CERS provides retirement, health insurance, death and disability benefits to Plan employees and beneficiaries. Employees are vested in the plan after five years’ service. For retirement purposes, non-hazardous and hazardous employees are grouped into three tiers, based on hire date: Non-hazardous members: Tier 1 Participation date Prior to September 1, 2008 Unreduced retirement 27 years of service or 65 years old Reduced retirement Minimum 5 years of service and 55 years old Minimum 25 years of service and any age Tier 2 Participation date September 1, 2008 to December 31, 2013 Unreduced retirement Minimum 5 years of service and 65 years old Age of 57 or older and sum of service years plus age equal 87 Reduced retirement Minimum 10 years of service and 60 years old Tier 3 Participation date After December 31, 2013 Unreduced retirement Minimum 5 years of service and 65 years old Age of 57 or older and sum of service years plus age equal 87 Reduced retirement Not available Hazardous members: Tier 1 Participation date Prior to September 1, 2008 Unreduced retirement 20 years of service and any age Minimum 5 years of service and 55 years old Reduced retirement Minimum 15 years of service and 50 years old Tier 2 Participation date September 1, 2008 to December 31, 2013 Unreduced retirement Minimum 5 years of service and 60 years old 25 years of service and any age Reduced retirement Minimum 15 years of service and 50 years old Tier 3 Participation date After December 31, 2013 Unreduced retirement Minimum 5 years of service and 60 years old 25 years of service and any age Reduced retirement Not available (Continued) - 80 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 4 - Pension Plans - City of Paducah: Cost-Sharing Multiple-Employer Defined Benefit Plan County Employees’ Retirement System Cost of living adjustments are provided at the discretion of the General Assembly. Retirements is based on a factor of the number of years’ service and hire date multiplied by the average of the highest five years’ earnings. Reduced benefits are based on factors of both of these components. Participating employees become eligible to receive the health insurance benefit after at least 180 months of service. Death benefits are provided for both death after retirement and death prior to retirement. Death benefits after retirement are $5,000 in lump sum. Five years’ service is required for death benefits prior to retirement and the employee must have suffered a duty-related death. The decedent’s beneficiary will receive the higher of the normal death benefit and $10,000 plus 25% of the decedent’s monthly final rate of pay and any dependent child will receive 10% of the decedent’s monthly final rate of pay up to 40% for all dependent children. Five years’ service is required for non-service related disability benefits. Plan Funding – State statute requires active members to contribute % of creditable compensation based on the tier: Non-hazardous Hazardous Required Contribution Required Contribution Tier 1 5% Tier 1 8% Tier 2 5% plus 1% for insurance Tier 2 8% plus 1% for insurance Tier 3 5% plus 1% for insurance Tier 3 8% plus 1% for insurance Employers contribute at the rate determined by the CERS Board to be necessary for the actuarial soundness of the system, as required by KRS 61.565 and 61.752. The City’s required contribution rate was 17.06% for non-hazardous employees and 32.95% for hazardous employees for the year ended June 30, 2016. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2016, the City reported a liability for its proportionate share of the net pension liability for CERS. The amount recognized by the City as its proportionate share of the net pension liability that was associated with the City was as follows: City’s non-hazardous proportionate share of the CERS net pension liability $ 13,543,354 City’s hazardous proportionate share of the CERS net pension liability 25,218,200 Total CERS net pension liability associated with the City $ 38,761,554 (Continued) - 81 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 4 - Pension Plans - City of Paducah: Cost-Sharing Multiple-Employer Defined Benefit Plan County Employees’ Retirement System The net pension liability for each plan was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City’s proportion of the net pension liability for CERS was based on the actual liability of the employees and former employees relative to the total liability of the System as determined by the actuary. At June 30, 2015, the City’s non-hazardous proportion was 0.314997% percent and hazardous proportion was 1.642766% percent. For the year ended June 30, 2016, the City recognized pension expense of $3,923,034 related to CERS pension plans. At June 30, 2016, the City reported deferred outflows of resources and deferred inflows of resources related to the CERS pension plans from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Difference between expected and actual experience $ 660,275 $ - Changes in assumptions 3,544,963 - Net difference between projected and actual earnings on pension plan investments 2,566,191 2,286,458 Changes in proportion and differences between City contributions and proportionate share of contributions 109,688 286,014 City contributions subsequent to the Measurement date 2,605,179 - Total $ 9,486,296 $ 2,572,471 The City reported $2,605,179 as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows related to pensions will be recognized in pension expense as follows: Fiscal Year Ending June 30 Hazardous Non- Hazardous 2017 $ 650,100 $ 435,391 2018 650,100 435,391 2019 650,100 202,644 2020 1,044,706 240,214 - - (Continued) - 82 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 4 - Pension Plans - City of Paducah: Cost-Sharing Multiple-Employer Defined Benefit Plan County Employees’ Retirement System Actuarial assumptions - The total pension liability in the June 30, 2015 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 3.25% Projected salary increases 4.00% Investment rate of return, net of investment expense & inflation 7.50% For CERS, Mortality rates for the period after service retirement are according to the RP-2000 Combined Mortality Table projected with Scale BB to 2013 for all active and retired employees and beneficiaries. The RP-2000 Combined Mortality Table projected with Scale BB to 2013 set back four years for males is used for the period after disability retirement. The actuarial assumptions used were based on the results of an actuarial experience study for the period July 1, 2008 – June 30, 2013. For CERS, the long-term expected return on plan assets is reviewed as part of the regular experience studies prepared every five years. The most recent analysis, performed for the period covering fiscal years 2008 through 2013, is outlined in a report dated April 30, 2014. Several factors are considered in evaluating the long-term rate of return assumption including long-term historical data, estimates inherent in current market data, and a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected return, net of investment expense and inflation) were developed by the investment consultant for each major asset class. These ranges were combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and then adding expected inflation. The capital market assumptions developed by the investment consultant are intended for use over a 10-year horizon and may not be useful in setting the long-term rate of return for funding pension plans which covers a longer timeframe. The assumption is intended to be a long-term assumption and is not expected to change absent a significant change in the asset allocation, a change in the inflation assumption, or a fundamental change in the market that alters expected returns in future years. (Continued) - 83 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 4 - Pension Plans - City of Paducah: Cost-Sharing Multiple-Employer Defined Benefit Plan County Employees’ Retirement System The target allocation and best estimates of arithmetic real rates of return for each major asset class, as provided by CERS’s investment consultant, are summarized in the following table: Asset Class Target Allocation Long-Term Expected Real Rate of Return Combined Equity 44.0% 5.40% Combined Fixed Income 19.0% 1.50% Real Estate 5.0% 4.50% Private Equity 10.0% 8.50% Real Return (Diversified Inflation Strategies) 10.0% 3.50% Absolute Return (Diversified Hedge Funds) 10.0% 5.50% Cash 2.0% (0.25%) Total 100.0% Discount rate - The discount rate used to measure the total pension liability was 7.50%. The projection of cash flows used to determine the discount rate assumed that contributions from plan employees and employers will be made at statutory contribution rates. Projected inflows from investment earnings were calculated using the long-term assumed investment return of 7.50%. The long-term investment rate of return was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of CERS proportionate share of net pension liability to changes in the discount rate - The following table presents the net pension liability of the City, calculated using the discount rates selected by the pension system, as well as what the City’s net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower or 1-percentage-point higher than the current rate: 1% Decrease Current Discount Rate 1% Increase CERS 6.50% 7.50% 8.50% Non-hazardous’ proportionate share of net pension liability $17,289,774 $13,543,354 $10,334,878 Hazardous’ proportionate share of net pension liability $32,280,158 $25,218,200 $19,367,241 (Continued) - 84 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 4 - Pension Plans - City of Paducah: Cost-Sharing Multiple-Employer Defined Benefit Plan County Employees’ Retirement System Pension plan fiduciary net position - Detailed information about the pension plan’s fiduciary net position is available in the separately issued financial report of the CERS. 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. 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, 2016. AEPF does not issue a separate, stand-alone report. Accordingly, the plan financial statements are included in this audit report. (Continued) - 85 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 4 - Pension Plans - City of Paducah: Single Employer Defined Benefit Funds - Police and Firefighters' Pension Fund (PFPF) and Appointive Employees’ Pension Fund (AEPF) Membership Information: Membership of each plan consisted of the following at June 30, 2016: PFPF AEPF Active participants 1 0 Beneficiaries 29 2 Retired participants 25 1 TOTAL PARTICIPANTS 55 3 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%. 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. (Continued) - 86 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 4 - Pension Plans - City of Paducah: Single Employer Defined Benefit Funds - Police and Firefighters' Pension Fund (PFPF) and Appointive Employees’ Pension Fund (AEPF) Changes in PFPF and AEPF’s Net Pension Liability is as follows: PFPF Total Pension Liability Plan Net Position Net Pension Liability (a) (b) (a) – (b) Balance – June 30, 2015 $10,462,911 $ 6,408,638 $ 4,054,273 Service cost 7,183 - 7,183 Interest expense 686,614 - 686,614 Experience losses (gains) (111,824) - (111,824) Change in assumptions 156,880 - 156,880 Contributions – City - 420,352 (420,352) Contributions – Members - 4,494 (4,494) Investment income - 165,489 (165,489) Benefits paid (1,308,290) (1,308,290) - Plan administrative expenses - (46,422) 46,422 Net change (569,437) (764,377) 194,940 Balance – June 30, 2016 $ 9,893,474 $ 5,644,261 $ 4,249,213 AEPF Total Pension Liability Plan Net Position Net Pension Liability (a) (b) (a) – (b) Balance – June 30, 2015 $ 99,931 $ 20,743 $ 79,188 Service cost - - - Interest expense 5,400 - 5,400 Experience losses (gains) 9,751 - 9,751 Change in assumptions - - - Contributions – City - 6,599 (6,599) Contributions – Members - - - Investment income - 53 (53) Benefits paid (19,856) (19,856) - Plan administrative expenses - (7,539) 7,539 Net change (4,705) (20,743) 16,038 Balance – June 30, 2016 $ 95,226 $ - $ 95,226 For the year ended June 30, 2016, the City recognized pension expense of $336,043 and $23,363 related to PFPF and AEPF pension plans, respectively. (Continued) - 87 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 4 - Pension Plans - City of Paducah: Single Employer Defined Benefit Funds - Police and Firefighters' Pension Fund (PFPF) and Appointive Employees’ Pension Fund (AEPF) At June 30, 2016, the City reported deferred outflows of resources and deferred inflows of resources related to the PFPF and AEPF pension plans from the following sources: PFPF AEPF Deferred Outflows of Resources Deferred Inflows of Resources Deferred Outflows of Resources Deferred Inflows of Resources Difference between expected and actual experience $ - $ - $ - $ - Changes in assumptions - - - - Net difference between projected and actual earnings on pension plan investments 318,626 217,620 2,969 - Total $ 318,626 $ 217,620 $ 2,969 $ - Amounts reported as deferred outflows of resources and deferred inflows related to pensions will be recognized in pension expense as follows: Fiscal Year Ending June 30 PFPF AEPF 2016 $ (19,892) $ 1,096 2017 (19,892) 1,096 2018 51,892 431 2019 51,892 74 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 7/1/16 7/1/16 Actuarial cost method Entry age normal Aggregate (1) Amortization method Level dollar closed Level dollar closed Remaining amortization period 17 Years 10 Years Asset valuation method Market value Market value (Continued) - 88 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 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 assumptions: Investment rate of return 6.75% (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) 6.75% Effective July 1, 2016 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, 2015 PFPF plan year, the assumed rate of return was 7.00%. Beginning with the July 1, 2016 plan year, the assumed rate of return was changed to 6.75%. For the AEPF July 1, 2015 and 2016 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, 2016 was as follows: PFPF 6.75% - changed from 7.00% for the prior plan year. AEPF 6.00% (Continued) - 89 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 4 - Pension Plans - City of Paducah: Single Employer Defined Benefit Funds - Police and Firefighters' Pension Fund (PFPF) and Appointive Employees’ Pension Fund (AEPF) 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 $ 4,929,754 $ 4,249,213 $ 3,649,973 AEPF Net Pension Liability $ 99,993 $ 95,226 $ 90,920 Financial Reports The Police and Firefighters' Pension Fund (PFPF) and Appointive Employees’ Pension Fund (AEPF) plans do not issue stand-alone financial reports. The Plans financial statements are as follows: COMBINING STATEMENT OF FIDUCIARY NET POSITION PENSION TRUST FUNDS JUNE 30, 2016 PFPF AEPF Total Assets Cash and cash equivalents $ 20,819 $ - $ 20,819 Receivables: Interest 6,292 - 6,292 Investments at fair value Money market accounts 358,229 - 358,229 Common stock 2,317,643 - 2,317,643 Corporate bonds - - - Mutual funds 2,941,319 - 2,941,319 Total assets 5,644,302 - 5,644,302 Liabilities Vouchers and accounts payable 42 - 42 Net Position Held in trust for pension benefits $ 5,644,260 $ - $ 5,644,260 (Continued) - 90 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 4 - Pension Plans - City of Paducah: Single Employer Defined Benefit Funds - Police and Firefighters' Pension Fund (PFPF) and Appointive Employees’ Pension Fund (AEPF) COMBINING STATEMENT OF CHANGES IN NET POSITION PENSION TRUST FUNDS JUNE 30, 2016 PFPF AEPF Total Additions: Contributions Employer $ 420,352 $ 6,599 $ 426,951 Plan members 4,494 - 4,494 Total contributions 424,846 6,599 431,445 Investments earnings: Net change in fair value of investments 29,617 - 29,617 Interest and dividends 135,872 44 135,916 Net investment earnings 165,489 44 165,533 Total additions 590,335 6,643 596,978 Deductions: Benefits 1,308,290 19,856 1,328,146 Administrative expenses 46,423 7,539 53,962 Total deductions 1,354,713 27,395 1,382,108 Change in net position (764,378) (20,752) (785,130) Net position - beginning 6,408,638 20,752 6,429,390 Net position - ending $ 5,644,260 $ - $ 5,644,260 Note 5 - Component Unit Long-Term Liabilities: Long-term liabilities of the discretely presented component units consist of the following at June 30, 2016: 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, 2016, are as follows: .25% Year Ending Service R & M June 30 Principal Interest Fee Reserve Total 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 358,627 44,595 11,149 18,750 433,121 2021 342,222 41,000 10,250 18,750 412,222 2022-2026 1,886,314 149,795 37,449 - 2,073,558 2027-2031 1,961,759 54,352 13,587 - 2,029,698 TOTALS $5,603,587 $444,744 $111,186 $ 93,750 $6,253,267 (Continued) - 91 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 6 - Appropriations Deficit: No departments that adopted budgets annually had excess expenditures over appropriations for the fiscal year ended June 30, 2016. 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, 2016, the most significant construction commitment was as follows: Cumulative Estimated Costs Incurred Total Costs Riverfront Development – Phase 1b $ 3,833,074 $ 8,113,110 Olivet Church Road Improvement Project 4,183,308 6,380,137 $ 8,016,382 $14,493,247 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 $301,438 of which the City and County have equally guaranteed. The GPEDC is current on required payments and is expected to make full repayment 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 2013 - 2014 $ - $ 35,888 $ 35,888 $ - 2014 - 2015 - 32,834 32,834 - 2015 - 2016 - 95,720 95,720 - (Continued) - 92 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 8 - Risk Management and Litigation: 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, 2016, that amount was $2,601,438. 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 $202,365 at June 30, 2016. 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 2013 - 2014 $ 84,602 $ 1,662,555 $1,589,216 $ 157,941 2014 - 2015 157,941 2,833,917 2,728,374 263,484 2015 - 2016 263,484 2,596,080 2,657,199 202,365 Several lawsuits are pending involving citizens’ complaints and the City of Paducah. Various allegations have been made seeking damages which the legal counsel of the City, along with its management, has determined to be immaterial to the City’s financial position. Note 9 - Lease Agreements: Operating Leases The City is leasing land and building to the Luther F. Carson Four Rivers Center for the Performing Arts (Center) for a primary term of 99 years. No rental revenue is being collected from this lease. The rental for the primary term of the lease is the construction of the performing arts center. The building is deemed the property of the City; however, for financial reporting, the building is reported with the Luther F. Carson Four Rivers Center financial records. In December 2003, with the authorization of the City, the Center secured financing of $6.5 million subject to a mortgage against the leasehold and real property on which the performing arts center is located. The City also consented to an assignment of the lease as security for the loan. The City also leases certain other property to various lessees under non-cancelable agreements that have various expiration dates through June 30, 2024. Rental revenue received from leased property during 2016 totaled $746,754. The following is an analysis of property leased under these leases at June 30, 2016: Land $ 480,000 Buildings 3,422,261 Equipment 110,126 Total 4,012,387 Less: accumulated depreciation (1,163,928) NET BOOK VALUE $2,848,459 (Continued) - 93 - CITY OF PADUCAH, KENTUCKY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Note 9 - Lease Agreements: Operating Leases Depreciation expense for the year ended June 30, 2016, on leased property was $81,466. The following is a schedule of future minimum rental income from operating leases at June 30, 2016: Lease Income 2017 $ 746,749 2018 746,749 2019 746,749 2020 738,415 2021 490,343 2022-2024 867,000 TOTAL MINIMUM LEASE RECEIPTS $4,336,005 Note 11 – Subsequent Events: Loan to Genova Products, Inc. The Board of Commissioners approved a term loan with a multiple advance draw feature from the City of Paducah to Genova Products, Inc. of up to $1,100,000 to be financed jointly with McCracken County. There were no draws on this loan during the year ended June 30, 2016. The first draw was made in July, 2016. CITY OF PADUCAH, KENTUCKY REQUIRED SUPPLEMENTARY INFORMATION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2016 2016 2015 2014 Total pension liability Service cost 7,183$ 5,576$ 4,871$ Interest 686,614 744,910 792,267 Changes in benefit terms - - - Differences between expected and actual experience (111,824) (43,965) 150,977 Changes in assumptions 156,880 166,753 175,893 Benefit payments/refunds (1,308,290) (1,386,273) (1,445,080) Net change in total pension liability (569,437) (512,999) (321,072) Total pension liability - beginning 10,462,911 10,975,910 11,296,982 Total pension liability - ending (a)9,893,474$ 10,462,911$ 10,975,910$ Plan fiduciary net position Contributions - employer 420,352$ 391,468$ 420,834$ Contributions - member 4,494 6,088 5,354 Net investment income 165,489 310,681 1,057,726 Benefit payments/refunds (1,308,290) (1,386,273) (1,445,080) Administrative expenses (46,422) (49,115) (48,406) Other - - - Net change in plan fiduciary net position (764,377) (727,151) (9,572) Plan fiduciary net position - beginning 6,408,638 7,135,789 7,145,361 Plan fiduciary net position - ending (b)5,644,261$ 6,408,638$ 7,135,789$ Net pension liability ending (a) - (b)4,249,213$ 4,054,273$ 3,840,121$ Plan fiduciary net position as a percentage of total pension liability 57% 61% 65% Covered-employee payroll 56,175$ 76,102$ 66,928$ Net pension liability as a percentage of covered-employee payroll 7564% 5327% 5738% (1) -94- Exhibit A-1 CITY OF PADUCAH, KENTUCKY REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN THE POLICE AND FIREFIGHTERS' PENSION Last Three Fiscal Years Ending June 30 (1) TRUST FUND'S NET PENSION LIABILITY AND RELATED RATIOS Schedule is intended to show information for 10 years. Additional years of supplementary information will be provided as this information becomes available. 2016 2015 2014 Total pension liability Service cost -$ -$ -$ Interest 5,400 5,687 8,258 Changes in benefit terms - - - Differences between expected and actual experience 9,751 9,391 (30,605) Changes in assumptions - - - Benefit payments/refunds (19,856) (19,856) (21,152) Net change in total pension liability (4,705) (4,778) (43,499) Total pension liability - beginning 99,931 104,709 148,208 Total pension liability - ending (a)95,226$ 99,931$ 104,709$ Plan fiduciary net position Contributions - employer 6,599$ -$ -$ Contributions - member - - - Net investment income 53 264 598 Benefit payments/refunds (19,856) (19,856) (21,152) Administrative expenses (7,539) (7,533) (7,483) Other - - - Net change in plan fiduciary net position (20,743) (27,125) (28,037) Plan fiduciary net position - beginning 20,743 47,868 75,905 Plan fiduciary net position - ending (b)-$ 20,743$ 47,868$ Net pension liability ending (a) - (b)95,226$ 79,188$ 56,841$ Plan fiduciary net position as a percentage of total pension liability 0.0% 20.8% 45.7% Covered-employee payroll n/a n/a n/a Net pension liability as a percentage of covered-employee payroll n/a n/a n/a (1) -95- 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 Three Fiscal Years Ending June 30 (1) Schedule is intended to show information for 10 years. Additional years of supplementary information will be provided as this information becomes available. 2016 2015 2014 Actuarially determined contribution 416,844$ 391,468$ 421,933$ Contributions in relation to the actuarially determined contribution 420,352 391,468 420,834 Contribution deficiency (excess) (3,508)$ -$ 1,099$ Covered-employee payroll 56,175$ 76,102$ 66,928$ Contributions as a percentage of covered-employee payroll 748% 514% 629% 2016 2015 2014 Annual money-weighted rate of return, net of investment expense 2.78% 4.69% 15.95% (1) Exhibit A-3 CITY OF PADUCAH, KENTUCKY REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF POLICE AND FIREFIGHTERS' PENSION TRUST FUND CONTRIBUTIONS AND INVESTMENT RETURNS Last Three Fiscal Years Ending June 30 (1) Schedule of Contributions Schedule of Investment Returns -96- Schedule is intended to show information for 10 years. Additional years of supplementary information will be provided as this information becomes available. 2016 2015 2014 Actuarially determined contribution 19,856$ 15,734$ 10,779$ Contributions in relation to the actuarially determined contribution - - - Contribution deficiency (excess) 19,856$ 15,734$ 10,779$ Covered-employee payroll n/a n/a n/a Contributions as a percentage of covered-employee payroll n/a n/a n/a 2016 2015 2014 Annual money-weighted rate of return, net of investment expense 0.47% 0.75% 0.97% (1) Last Three Fiscal Years 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 -97- Schedule of Contributions Schedule of Investment Returns Schedule is intended to show information for 10 years. Additional years of supplementary information will be provided as this information becomes available. Year Ended June 30 City's proportion of the net pension liability City's proportionate share of the net pension liability (asset) City's covered employee payroll City's share of the net pension liability (asset) as a percentage of its covered employee payroll Plan fiduciary net position as a percentage of the total pension liability CERS Nonhazardous 2016 0.3150% 13,543,354 7,349,249 184.2821% 59.9684% 2015 0.3261% 10,579,475$ 7,477,608$ 141.4821% 66.8010% 2014 0.3261% 11,970,884$ 7,466,979$ 160.3176% 61.2209% CERS Hazardous 2016 1.6428% 25,218,200$ 8,402,943$ 300.1115% 57.5152% 2015 1.6323% 19,617,569$ 8,267,598$ 237.2826% 63.4574% 2014 1.6323% 21,907,757$ 8,016,505$ 273.2831% 65.7178% *The amounts presented were determined as of the measurement date June 30 of the prior year. * Exhibit A-5 -98- CITY OF PADUCAH, KENTUCKY SCHEDULE OF CITY'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY COUNTY EMPLOYEES' RETIREMENT SYSTEM LAST THREE FISCAL YEARS* Schedule is intended to show information for 10 years. Additional years of supplementary information will be provided as this information becomes available. REQUIRED SUPPLEMENTARY INFORMATION Year Ended June 30 Contractually required contribution Contributions relative to contractually required contribution Contribution deficiency (excess) City's covered employee payroll Contributions as a percentage of covered employee payroll CERS Nonhazardous 2016 940,471$ 940,471$ -$ 7,349,249$ 12.7968% 2015 1,095,109$ 1,095,109$ -$ 7,477,608$ 14.6452% 2014 977,540$ 977,540$ -$ 7,466,979$ 13.0915% CERS Hazardous 2016 1,775,349$ 1,775,349$ -$ 8,402,943$ 21.1277% 2015 1,727,101$ 1,727,101$ -$ 8,267,598$ 20.8900% 2014 1,661,821$ 1,661,821$ -$ 8,016,505$ 20.7300% *The amounts presented for each fiscal year were determined as of the measurement date June 30 of the prior year. * Changes of Benefit Terms: A cash balance plan was introduced for member whose participation date is on or after January 1, 2014. Changes of assumptions: The assumptions were updated as of result of an experience study for the three year period ending June 30, 2008. The discount rate changed from 7.75% to 7.50% from the prior measurement date. The inflation rate changed from 3.50% to 3.25% from the prior measurment date. Exhibit A-6 -99- Notes to Required Supplementary Information For the Year Ended June 30, 2016 The amortization period of the unfunded accrued liability was reset to a closed 30 year period for the year ended June 30, 2013. Schedule is intended to show information for 10 years. Additional years of supplementary information will be provided as this information becomes available. CITY OF PADUCAH, KENTUCKY SCHEDULE OF CITY'S CONTRIBUTIONS COUNTY EMPLOYEES' RETIREMENT SYSTEM LAST THREE FISCAL YEARS* REQUIRED SUPPLEMENTARY INFORMATION CITY OF PADUCAH, KENTUCKY SUPPLEMENTARY INFORMATION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2016 Exhibit B-1 Variance with Final Budget Final Positive Budget (Negative) Revenues: Grants 7,509,610$ 7,509,619$ 9$ Miscellaneous 416,795 416,799 4 Total revenues 7,926,405 7,926,418 13 Expenditures: Capital outlay 13,305,945 13,305,920 25 Excess (deficiency) of revenues over expenditures (5,379,540) (5,379,502) 38 Other Financing Sources (Uses): Operating transfers in 5,795,310 5,795,359 49 Operating transfers out (106,690) (106,687) (3) Total other financing sources 5,688,620 5,688,672 46 Net change in fund balance 309,080$ 309,170 84$ Fund balance, July 1, 2015 5,493,894 FUND BALANCE, JUNE 30, 2016 5,803,064$ See auditors report on pages 11-12. -100- Actual CITY OF PADUCAH, KENTUCKY DETAIL SCHEDULE OF REVENUES, EXPENDITURES, AND GENERAL CAPITAL IMPROVEMENTS FUND FOR THE YEAR ENDED JUNE 30, 2016 CHANGES IN FUND BALANCE - BUDGET AND ACTUAL Exhibit B-2 Variance with Final Budget Final Positive Budget Actual (Negative) Revenues: Intergovernmental 635,705$ 635,705$ -$ Property upkeep, rentals, sales and other 289,000 289,005 5 Total revenues 924,705 924,710 5 Expenditures: Debt service: Principal requirement 2,137,770 2,133,570 4,200 Interest and fiscal requirement 845,630 849,798 (4,168) Total expenditures 2,983,400 2,983,368 32 Excess (deficiency) of revenues over expenditures (2,058,695) (2,058,658) 37 Other Financing Sources (Uses): Operating transfers in 2,157,160 2,157,163 3 Total other financing sources 2,157,160 2,157,163 3 Net change in fund balance 98,465$ 98,505 40$ Fund balance, July 1, 2015 652,319 FUND BALANCE, JUNE 30, 2016 750,824$ See auditors report on pages 11-12. -101- FOR THE YEAR ENDED JUNE 30, 2016 CITY OF PADUCAH, KENTUCKY DEBT SERVICE FUND DETAIL SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL CITY OF PADUCAH, KENTUCKY SUPPLEMENTARY INFORMATION NONMAJOR GOVERNMENTAL FUNDS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2016 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 Awards Fund Cash and cash equivalents 1,307,207$ 175,938$ 200,423$ Receivables, net: Accounts 45,781 188,717 - TOTAL ASSETS 1,352,988$ 364,655$ 200,423$ Liabilities: Voucher and accounts payable 204,199$ 3,604$ 53,205$ Accrued payroll and payroll taxes - 62,073 - Total liabilities 204,199 65,677 53,205 Fund Balances: Restricted for: Highway and streets 1,148,789 - - Public safety - - 147,218 Capital Improvements - - - Assigned for: Public safety - 298,978 - Total fund balances 1,148,789 298,978 147,218 TOTAL LIABILITIES AND FUND BALANCES 1,352,988$ 364,655$ 200,423$ See auditors report on pages 11-12. LIABILITIES Service Fund Communication CITY OF PADUCAH, KENTUCKY COMBINING BALANCE SHEET ASSETS -102- Emergency AND NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2016 FUND BALANCES Municipal Aid Program Special Revenue Funds CDBG Grant Bond Fund Fund -$ -$ 1,683,568$ - - 234,498 -$ -$ 1,918,066$ -$ -$ 261,008$ - - 62,073 - - 323,081 - - 1,148,789 - - 147,218 - - - - - 298,978 - - 1,594,985 -$ -$ 1,918,066$ -103- Governmental Funds Total Nonmajor Special Revenue Funds Exhibit B-4 Court Awards Revenues: Fund Taxes -$ 381,131$ -$ Charges for services - 237,636 - Intergovernmental 497,147 - - Grants - - 29,232 Interest 7,133 785 1,147 Miscellaneous - 374,125 - Total revenues 504,280 993,677 30,379 Expenditures: Current operations: Public safety - 1,463,818 28,018 Public service 1,338,664 - - Planning and development - - - Total expenditures 1,338,664 1,463,818 28,018 Excess (deficiency) of revenues over expenditures (834,384) (470,141) 2,361 Other Financing Sources (Uses): Transfers in 825,000 470,142 - Transfers out - - - Total other financing sources (uses) 825,000 470,142 - Net change in fund balances (9,384) 1 2,361 Fund balances, July 1, 2015 1,158,173 298,977 144,857 FUND BALANCES, JUNE 30, 2016 1,148,789$ 298,978$ 147,218$ See auditors report on pages 11-12. CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES Special Revenue Funds Communication -104- Aid Program Municipal NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2016 Emergency Service Fund CDBG Grant Bond Fund Fund -$ -$ 381,131$ - - 237,636 - - 497,147 737,500 - 766,732 - 5,315 14,380 - - 374,125 737,500 5,315 2,271,151 - - 1,491,836 - - 1,338,664 237,500 - 237,500 237,500 - 3,068,000 500,000 5,315 (796,849) - - 1,295,142 (500,000) (1,274,360) (1,774,360) (500,000) (1,274,360) (479,218) - (1,269,045) (1,276,067) - 1,269,045 2,871,052 -$ -$ 1,594,985$ Special Revenue Funds Governmental -105- Funds Total Nonmajor Exhibit B-5 Variance with Final Budget Final Positive Budget Actual (Negative) Revenues: Intergovernmental 497,145$ 497,147$ 2$ Interest 7,130 7,133 3 Total revenues 504,275 504,280 5 Expenditures: Public service 1,338,670 1,338,664 6 Excess (deficiency) of revenues over expenditures (834,395) (834,384) 11 Other Financing Sources (Uses): Operating transfers in 825,000 825,000 - Operating transfers out - - - Total other financing sources (uses) 825,000 825,000 - Net change in fund balance (9,395) (9,384) 11 Fund balance, July 1, 2015 1,158,173 1,158,173 - FUND BALANCE, JUNE 30, 2016 1,148,778$ 1,148,789$ 11$ See auditors report on pages 11-12. -106- FOR THE YEAR ENDED JUNE 30, 2016 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 381,130$ 381,131$ 1$ Telephone surcharges 237,635 237,636 1 Interest 785 785 - Miscellaneous 374,120 374,125 5 Total revenues 993,670 993,677 7 Expenditures: Public safety 1,464,120 1,463,818 302 Excess (deficiency) of revenues over expenditures (470,450) (470,141) 309 Other Financing Sources (Uses): Operating transfers in 470,140 470,142 2 Operating transfers out - - - Total other financing sources (uses) 470,140 470,142 2 Net change in fund balance (310)$ 1 311$ Fund balance, July 1, 2015 298,977 FUND BALANCE, JUNE 30, 2016 298,978$ See auditors report on pages 11-12. -107- FOR THE YEAR ENDED JUNE 30, 2016 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 29,230$ 29,232$ 2$ Interest 1,145 1,147 2 Total revenues 30,375 30,379 4 Expenditures: Public safety 28,020 28,018 2 Excess (deficiency) of revenues over expenditures 2,355 2,361 6 Net change in fund balance 2,355$ 2,361 6$ Fund balance, July 1, 2015 144,857 FUND BALANCE, JUNE 30, 2016 147,218$ See auditors report on pages 11-12. -108- 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, 2016 Exhibit B-8 Variance with Final Budget Final Positive Budget Actual (Negative) Revenues: Grants 737,500$ 737,500$ -$ Total revenues 737,500 737,500 - Expenditures: Planning and development 237,500 237,500 - Excess (deficiency) of revenues over expenditures 500,000 500,000 - Other Financing Sources (Uses): Operating transfers in - - - Operating transfers out (500,000) (500,000) - Total other financing sources (uses) (500,000) (500,000) - Net change in fund balance -$ - -$ Fund balance, July 1, 2015 - FUND BALANCE, JUNE 30, 2016 -$ See auditors report on pages 11-12. -109- FOR THE YEAR ENDED JUNE 30, 2016 CITY OF PADUCAH, KENTUCKY CDBG 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 -$ -$ -$ Interest 5,315 5,315 - Total revenues 5,315 5,315 - Expenditures: Debt issuance costs - - - Total expenditures - - - Excess (deficiency) of revenues over expenditures 5,315 5,315 - Other Financing Sources (Uses): Proceeds of debt - - - Payment to refunded bond escrow agent - - - Discount on debt issued - - - Total other financing sources (uses) (1,274,360) (1,274,360) - Net change in fund balance (1,269,045)$ (1,269,045) -$ Fund balance, July 1, 2015 1,269,045 FUND BALANCE, JUNE 30, 2016 -$ See auditors report on pages 11-12. -110- FOR THE YEAR ENDED JUNE 30, 2016 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, 2016 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 336,908$ 78,000$ 414,908$ Total current assets 336,908 78,000 414,908 Noncurrent Assets: Net depreciable capital assets 566 129,532 130,098 Total assets 337,474 207,532 545,006 Deferred Outflows of Resources: Deferred pension related outflows 62,964 - 62,964 Current Liabilities: Voucher and accounts payable 27,933 6,087 34,020 Accrued compensated absences 1,962 - 1,962 Due to other funds 31,729 - 31,729 Total current liabilities 61,624 6,087 67,711 Noncurrent Liabilities: Pensions obligation 264,500 - 264,500 Accrued compensated absences 17,654 - 17,654 Total noncurrent liabilities 282,154 - 282,154 Total liabilities 343,778 6,087 349,865 Deferred Inflows of Resources Deferred pension related inflows 17,847 - 17,847 Net invested in capital assets 566 129,532 130,098 Restricted - Housing 38,247 - 38,247 Unrestricted - 71,913 71,913 TOTAL NET POSITION 38,813$ 201,445$ 240,258$ See auditors report on pages 11-12. CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF NET POSITION NONMAJOR PROPRIETARY FUNDS JUNE 30, 2016 ASSETS LIABILITIES NET POSITION -111- Total Nonmajor Enterprise Funds Section Eight Housing Exhibit C-2 Civic Center Operating Revenues: Fund Charges for services -$ 40,148$ 40,148$ Miscellaneous 1,500 - 1,500 Total operating income 1,500 40,148 41,648 Operating Expenses: Cost of sales and service 1,872,791 64,436 1,937,227 Depreciation and amortization 1,285 10,021 11,306 Total operating expenses 1,874,076 74,457 1,948,533 Operating income (loss) (1,872,576) (34,309) (1,906,885) Non-Operating Revenues (Expenses): Grants - program purpose 1,785,479 - 1,785,479 Interest and investment income 47 - 47 Total nonoperating revenues (expenses) 1,785,526 - 1,785,526 Income (loss) before contributions and transfers (87,050) (34,309) (121,359) Contributions and Operating Transfers: Transfers in - 102,418 102,418 Transfers out - - - Total contributions and operating transfers - 102,418 102,418 Change in net position (87,050) 68,109 (18,941) Net position - beginning 125,863 133,336 259,199 Net position - ending 38,813$ 201,445$ 240,258$ See auditors report on pages 11-12. COMBINING STATEMENT OF REVENUES, EXPENSES CITY OF PADUCAH, KENTUCKY Total Nonmajor Enterprise -112- FOR THE YEAR ENDED JUNE 30, 2016 NONMAJOR PROPRIETARY FUNDS AND CHANGES IN NET POSITION Funds Section Eight Housing Exhibit C-3 Civic Center Cash Flows from Operating Activities: Fund Cash received from customers -$ 40,148$ 40,148$ Payments to employees (181,319) - (181,319) Payments to internal service funds - (2,301) (2,301) Other receipts 1,500 - 1,500 Housing assistance and other payments (1,707,657) (62,265) (1,769,922) Net cash provided (used) by operating activities (1,887,476) (24,418) (1,911,894) Cash Flows from Noncapital Financing Activities: Grants - program purpose 1,785,479 - 1,785,479 Transfers from other funds - 102,418 102,418 Transfers to other funds - - - Net cash provided (used) by noncapital financing activities 1,785,479 102,418 1,887,897 Cash Flows from Investing Activities: Interest on cash and investments 47 - 47 Net increase (decrease) in cash and cash equivalents (101,950) 78,000 (23,950) Cash and cash equivalents, July 1, 2015 438,858 - 438,858 CASH AND CASH EQUIVALENTS, JUNE 30, 2016 336,908$ 78,000$ 414,908$ Reconciliation of Operating Income (Loss) to Net Cash Provided by Operating Activities: Operating income (loss) (1,872,576)$ (34,309)$ (1,906,885)$ Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation and amortization 1,285 10,021 11,306 Change in assets and liabilities: Unearned revenues - - - Pension obligation and related deferrals 18,619 - 18,619 Accounts payable and accrued expenses (34,804) (130) (34,934) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (1,887,476)$ (24,418)$ (1,911,894)$ 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, 2016 -113- Section Eight Housing Total Nonmajor Enterprise CITY OF PADUCAH, KENTUCKY SUPPLEMENTARY INFORMATION INTERNAL SERVICE FUNDS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2016 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 303$ 3,239,796$ 406,270$ 2,002,521$ 5,648,890$ Investments - - - - - Receivables, net - 200,075 641 43,769 244,485 Due from other funds - 200,000 - - 200,000 Inventories 56,116 - - - 56,116 Total current assets 56,419 3,639,871 406,911 2,046,290 6,149,491 Noncurrent Assets: Net depreciable capital assets 30,412 3,853,898 - - 3,884,310 Total assets 86,831 7,493,769 406,911 2,046,290 10,033,801 Deferred Outflows of Resources: Deferred pension related outflows 125,310 - - - 125,310 Current Liabilities: Voucher and accounts payable 15,860 829 11,172 202,365 230,226 Accrued payroll and payroll taxes 22,414 - - - 22,414 Accrued compensated absences 35,704 - - - 35,704 Deferred revenue - - - 23,865 23,865 Total current liabilities 73,978 829 11,172 226,230 312,209 Noncurrent Liabilities: Pensions obligation 479,013 - - - 479,013 Accrued compensated absences 21,430 - - - 21,430 Total noncurrent liabilities 500,443 - - - 500,443 Total liabilities 574,421 829 11,172 226,230 812,652 Deferred Inflows of Resources Deferred pension related inflows 44,484 - - - 44,484 Net invested in capital assets 30,412 3,853,898 - - 3,884,310 Unrestricted (437,176) 3,639,042 395,739 1,820,060 5,417,665 TOTAL NET POSITION (406,764)$ 7,492,940$ 395,739$ 1,820,060$ 9,301,975$ See auditors report on pages 11-12. -114- CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF NET POSITION INTERNAL SERVICE FUNDS JUNE 30, 2016 LIABILITIES ASSETS NET POSITION Fleet Maintenance Exhibit D-2 Health Fleet Lease Insurance Insurance Combined Trust Fund Fund Total Operating Revenues: Charges for services - internal 346,739$ 803,797$ 1,098,638$ 3,657,487$ 5,906,661$ Charges for services - external - - - 280,639 280,639 Total operating revenues 346,739 803,797 1,098,638 3,938,126 6,187,300 Operating Expenses: Vehicle maintenance 506,743 1,393 - - 508,136 Administrative - 39,180 - 539,772 578,952 Insurance - - 1,140,990 3,277,318 4,418,308 Depreciation 4,861 730,134 - - 734,995 Total operating expenses 511,604 770,707 1,140,990 3,817,090 6,240,391 Operating income (loss) (164,865) 33,090 (42,352) 121,036 (53,091) Nonoperating Revenues and (Expenses): Interest and investment income 15 21,285 - - 21,300 Gain (loss) on disposal of property and equipment 3,440 184,882 - - 188,322 Total nonoperating revenues (expenses) 3,455 206,167 - - 209,622 Income (loss) before transfers (161,410) 239,257 (42,352) 121,036 156,531 Contributions and Transfers: Transfers in 158,159 - 95,720 - 253,879 Transfers out - - - - - Total contributions and operating transfers 158,159 - 95,720 - 253,879 Change in net position (3,251) 239,257 53,368 121,036 410,410 Net position - beginning (403,513) 7,253,683 342,371 1,699,024 8,891,565 Net position - ending (406,764)$ 7,492,940$ 395,739$ 1,820,060$ 9,301,975$ See auditors report on pages 11-12. -115- 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, 2016 Exhibit D-3 Health Fleet Lease Insurance Insurance Combined Cash Flows from Operating Activities: Trust Fund Fund Total Receipts from other funds for services 346,923$ 906,972$ 1,097,997$ 3,943,672$ 6,295,564$ Payments to suppliers (190,725) - - - (190,725) Payments to employees (311,735) - - - (311,735) Claims paid - - - (3,338,437) (3,338,437) Other payments - (39,744) (1,133,443) (539,772) (1,712,959) Net cash provided (used) by operating activities (155,537) 867,228 (35,446) 65,463 741,708 Cash Flows from Noncapital Financing Activities: Transfers from other funds 158,159 - 95,720 - 253,879 Transfers to other funds - - - - - Net cash provided (used) by noncapital financing activities 158,159 - 95,720 - 253,879 Cash Flows from Capital and Related Financing Activities: Proceeds from sale of capital assets 3,440 205,701 - - 209,141 Purchase of capital assets (25,650) (1,437,085) - - (1,462,735) Net cash used by capital and related financing (22,210) (1,231,384) - - (1,253,594) Cash Flows from Investing Activities: Interest and dividends 15 21,285 - - 21,300 Net cash used by investing activities 15 21,285 - - 21,300 Net increase (decrease) in cash and cash equivalents (19,573) (342,871) 60,274 65,463 (236,707) Cash and cash equivalents, July 1, 2015 19,876 3,582,667 345,996 1,937,058 5,885,597 CASH AND CASH EQUIVALENTS, JUNE 30, 2016 303$ 3,239,796$ 406,270$ 2,002,521$ 5,648,890$ Reconciliation of Operating Income (Loss) to Net Cash Provided by Operating Activities: Operating income (loss) (164,865)$ 33,090$ (42,352)$ 121,036$ (53,091)$ Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization 4,861 730,134 - - 734,995 Change in assets and liabilities: Receivables 184 3,175 (641) 6,153 8,871 Inventories 7,999 - - - 7,999 Due form other funds - 100,000 - - 100,000 Pension obligation and related deferrals (5,327) - - - (5,327) Accounts payable and accrued expenses 1,611 829 7,547 (61,726) (51,739) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (155,537)$ 867,228$ (35,446)$ 65,463$ 741,708$ See auditors report on pages 11-12. -116- Fleet Maintenance CITY OF PADUCAH, KENTUCKY COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2016 CITY OF PADUCAH, KENTUCKY SUPPLEMENTARY INFORMATION FIDUCIARY FUNDS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2016 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-1 Cemetery and Park Trusts Cash and cash equivalents 108,472$ Investments at fair value Money market funds - Mutual funds 998,298 Total assets 1,106,770 Accounts payable - Held in trust for other purposes 1,106,770$ See auditors report on pages 11-12. STATEMENT OF NET POSITION CITY OF PADUCAH, KENTUCKY -117- ASSETS LIABILITIES NET POSITION JUNE 30, 2016 FIDUCIARY FUNDS - PRIVATE-PURPOSE TRUST FUNDS Exhibit E-2 Cemetery and Park Additions:Trusts Contributions: Intergovernmental revenues -$ Private donations 2,540 Total contributions 2,540 Investment earnings: Change in fair value of investments (89,646) Interest and dividends 92,271 Net investment earnings 2,625 Interfund transfers - Total additions 5,165 Deductions: Capital outlay 54,685 Administrative expenses 12,968 Total deductions 67,653 Change in net position (62,488) Net position - beginning 1,169,258 Net position - ending 1,106,770$ See auditors report on pages 11-12. STATEMENT OF CHANGES IN NET POSITION CITY OF PADUCAH, KENTUCKY -118- FOR THE YEAR ENDED JUNE 30, 2016 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-3 Payroll Fund: Additions Deductions Assets: Cash and cash equivalents 531,828$ 12,914,403$ 12,926,289$ 519,942$ Liabilities: Payroll taxes and withholdings payable 531,828$ 12,914,403$ 12,926,289$ 519,942$ See auditors report on pages 11-12. CITY OF PADUCAH, KENTUCKY AGENCY FUND IN ASSETS AND LIABILITIES STATEMENT OF CHANGES -119- FOR THE YEAR ENDED JUNE 30, 2016 Balance Balance July 1, 2015 June 30, 2016 CITY OF PADUCAH, KENTUCKY STATISTICAL SECTION COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2016 STATISTICAL SECTION Contents Page Financial Trends 120-124 Revenue Capacity 125-130 Debt Capacity 131-134 Economic and Demographic Information 135-136 Operating Information 137-139 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. 20162015 (1) 2014201320122011 2010 (2)200920082007Governmental activities:Net Invested in Capital Assets46,389,685$ 39,349,789$ 39,844,772$ 33,365,112$ 31,957,381$ 32,905,977$ 31,136,514$ 31,215,252$ 31,766,783$ 32,557,572$ Restricted for:Program purposes147,218 144,857 205,979 284,760 897,942 1,264,986 1,100,696 2,183,559 1,782,251 1,904,321 Capital projects1,148,789 2,427,218 2,168,201 1,301,421 4,105,639 5,987,399 5,077,026 4,363,913 5,028,420 4,618,923 Unrestricted(23,323,077) (22,209,537) 13,382,066 13,539,204 5,913,997 4,229,501 8,165,101 8,621,077 9,432,763 9,057,641 Total governmental activities net position24,362,615$ 19,712,327$ 55,601,018$ 48,490,497$ 42,874,959$ 44,387,863$ 45,479,337$ 46,383,801$ 48,010,217$ 48,138,457$ Business-type activities:Net Invested in Capital Assets1,678,728 1,133,226 1,210,415 1,232,735 1,308,574 1,334,230 1,652,961 1,721,419 1,863,975 1,491,523 Restricted for:Program purposes38,247 124,012 437,483 385,885 732,817 999,885 620,800 369,368 579,460 - Unrestricted3,194,228 3,033,822 3,837,034 3,428,267 3,246,320 3,004,783 1,816,705 1,036,093 (19,965) (147,286) Total business-type activities net postion4,911,203$ 4,291,060$ 5,484,932$ 5,046,887$ 5,287,711$ 5,338,898$ 4,090,466$ 3,126,880$ 2,423,470$ 1,344,237$ Primary government:Net Invested in Capital Assets48,068,413 40,483,015 41,055,187 34,597,847 33,265,955 34,240,207 32,789,475 32,936,671 33,630,758 34,049,095 Restricted for:Program purposes185,465 268,869 643,462 670,645 1,630,759 2,264,871 1,721,496 2,552,927 2,361,711 1,904,321 Capital projects1,148,789 2,427,218 2,168,201 1,301,421 4,105,639 5,987,399 5,077,026 4,363,913 5,028,420 4,618,923 Unrestricted(20,128,849) (19,175,715) 17,219,100 16,967,471 9,160,317 7,234,284 9,981,806 9,657,170 9,412,798 8,910,355 Total primary government net position29,273,818$ 24,003,387$ 61,085,950$ 53,537,384$ 48,162,670$ 49,726,761$ 49,569,803$ 49,510,681$ 50,433,687$ 49,482,694$ (1) Significant change in governmental and business-type net position due to implementation of GASB No. 68 - Accounting and Financial Reporting for Pensions. (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)-120- Pages 1 of 22016 2015 (1) 2014 2013 2012 2011 2010 (3) 2009 2008 (2) 2007ExpensesGovernmental activities:General government 9,777,876$ 9,801,489$ 8,005,619$ 7,843,140$ 12,937,997$ 9,786,052$ 9,763,178$ 12,148,118$ 10,709,641$ 9,462,543$ Public safety 20,503,784 17,974,548 18,439,670 18,204,945 17,045,731 16,993,228 16,239,042 15,734,557 15,938,831 15,182,704 Public service 10,266,856 6,855,234 6,982,536 6,167,510 6,163,602 7,328,806 7,669,729 12,849,566 9,543,714 8,299,658 Parks and recreation 3,052,360 2,811,533 2,750,531 2,710,659 2,654,098 2,748,333 2,653,474 1,492,306 1,286,955 1,197,072 Planning and development 911,830 1,000,020 1,805,379 1,463,659 1,192,952 1,212,103 970,022 708,827 282,042 1,891,725 Interest on long-term debt 900,593 850,827 1,084,016 1,066,876 1,059,537 1,363,580 1,099,450 1,029,888 1,066,067 1,134,898 Total governmental activities expenses 45,413,299 39,293,651 39,067,751 37,456,789 41,053,917 39,432,102 38,394,895 43,963,262 38,827,250 37,168,600 Business-type activities:Solid Waste 3,815,476 3,843,081 3,985,233 3,967,490 3,900,264 3,832,130 3,797,097 4,037,845 4,086,747 4,079,684 Section Eight Housing 1,874,074 1,819,328 1,855,869 2,032,843 1,921,004 1,956,728 2,061,370 2,154,360 1,949,899 - Civic Center 74,457 98,318 81,982 78,000 71,069 76,546 69,537 75,692 84,908 54,562 TISA - - - - 173,708 183,546 206,798 162,848 156,388 267,192 Total business-type activities expenses 5,764,007 5,760,727 5,923,084 6,078,333 6,066,045 6,048,950 6,134,802 6,430,745 6,277,942 4,401,438 Total primary government expenses 51,177,306$ 45,054,378$ 44,990,835$ 43,535,122$ 47,119,962$ 45,481,052$ 44,529,697$ 50,394,007$ 45,105,192$ 41,570,038$ Program RevenuesGovernmental activities:Charges for services:General government 1,128,785$ 185,745$ 1,672,552$ 1,525,212$ 1,488,845$ 1,051,509$ 993,371$ 1,303,667$ 1,415,943$ 1,730,046$ Public safety 237,641 237,222 264,143 354,829 509,297 790,650 484,754 602,262 268,839 1,024,610 Public service 1,065,010 945,471 960,271 963,893 1,032,953 1,205,666 1,197,194 1,220,999 1,111,188 1,150,507 Parks and recreation 132,909 108,307 105,248 106,183 97,896 129,790 152,890 180,420 124,606 122,929 Planning and development - - - - - - - 1,600 30,627 10,810 Operating grants and contributions 6,179,709 3,360,731 5,419,715 3,067,581 2,215,247 2,086,625 1,813,019 2,119,845 1,340,261 2,797,216 Capital grants and contributions 4,139,036 899,522 4,136,749 2,165,548 533,169 1,767,093 1,390,848 4,889,520 1,297,900 3,681,490 Total governmental activities program revenues 12,883,090 5,736,998 12,558,678 8,183,246 5,877,407 7,031,333 6,032,076 10,318,313 5,589,364 10,517,608 Business-type activities:Solid Waste 4,520,084$ 4,453,865$ 4,410,059$ 4,372,060$ 4,437,341$ 4,476,139$ 4,436,540$ 4,547,959$ 4,165,094$ 3,928,140$ Section Eight Housing - - - - - - - - - - Civic Center 40,148 43,486 41,266 38,265 34,038 33,766 32,455 38,577 32,932 31,372 TISA99,603 138,797 148,158 148,291 143,833 193,713 Operating grants and contributions 1,845,549 1,744,364 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 Total business-type activities program revenues 6,405,781 6,241,715 6,408,320 6,137,563 6,234,229 7,057,901 6,984,659 6,829,795 6,137,148 4,177,194 Total primary government program revenues 19,288,871$ 11,978,713$ 18,966,998$ 14,320,809$ 12,111,636$ 14,089,234$ 13,016,735$ 17,148,108$ 11,726,512$ 14,694,802$ Fiscal Year-121-TABLE 2CITY OF PADUCAH, KENTUCKYCHANGES IN NET POSITIONLast Ten Fiscal Years (accrual basis of accounting) Pages 2 of 22016 2015 (1) 2014 2013 2012 2011 2010 (3) 2009 2008 (2) 2007Net (Expense)/RevenueGovernmental activities(32,530,209)$ (33,556,653)$ (26,509,073)$ (29,273,543)$ (35,176,510)$ (32,400,769)$ (32,362,819)$ (33,644,949)$ (33,237,886)$ (26,650,992)$ Business-type activities641,774 480,988 485,236 59,230 168,184 1,008,951 849,857 399,050 (140,794) (224,244) Total primary government net (expense) (31,888,435)$ (33,075,665)$ (26,023,837)$ (29,214,313)$ (35,008,326)$ (31,391,818)$ (31,512,962)$ (33,245,899)$ (33,378,680)$ (26,875,236)$ General Revenues and Other Changesin Net PositionGovernmental activities:Taxes and licenses:Property taxes, levied for general purpose4,943,962 4,726,244 4,622,292 4,502,276 4,267,812 4,402,226 4,207,736 3,986,760$ 4,221,957 4,122,538$ Insurance premium tax 4,170,381 3,786,514 3,831,792 3,863,464 3,690,806 3,476,309 3,797,347 4,055,228 4,699,458 4,414,672 Gross receipts license tax 4,711,708 4,397,888 4,444,440 4,391,352 4,359,835 4,243,511 4,229,102 4,320,850 4,061,587 4,050,057 Employee license tax 20,130,249 19,092,912 18,114,396 18,336,124 18,095,182 17,345,033 16,384,509 16,584,636 16,520,523 16,273,966 Other taxes 2,759,902 2,964,685 2,785,333 2,799,043 2,711,924 2,712,817 2,844,154 2,776,407 2,259,956 1,964,101 Intergovernmental revenue - - - - - - - - 1,401,400 1,243,028 Unrestricted investment earnings 137,224 176,229 232,204 211,306 203,261 264,913 172,213 336,960 540,620 639,702 Miscellaneous 189,489 16,870 (482,137) 300,378 36,718 62,539 64,620 68,530 119,200 48,656 Insurance recoveries - - - - 27,448 410,462 - - - - Litigation settlement - - - - - (1,482,743) - - - - Transfers in/out 137,582 194,014 212,128 485,138 270,620 (125,772) (78,893) (110,838) (96,609) (58,175) Total governmental activities 37,180,497 35,355,356 33,760,448 34,889,081 33,663,606 31,309,295 31,620,788 32,018,533 33,728,092 32,698,545 Business-type activities:Unrestricted investment earnings 30,302 39,565 48,255 49,382 48,806 46,052 33,724 52,961 73,985 83,854 Miscellaneous 85,649 8,339 116,682 135,702 2,443 67,657 1,112 98,369 127,131 16,641 Transfers (137,582) (194,014) (212,128) (485,138) (270,620) 125,772 78,893 110,838 96,609 58,176 Total business-type activities (21,631) (146,110) (47,191) (300,054) (219,371) 239,481 113,729 262,168 297,725 158,671 Change in Net PositionGovernmental activities:4,650,288 1,798,703 7,251,375 5,615,538 (1,512,904) (1,091,474) (742,031) (1,626,416) 490,206 6,047,553 Business-type activities:620,143 334,878 438,045 (240,824) (51,187) 1,248,432 963,586 661,218 156,931 (65,573) Total primary government 5,270,431$ 2,133,581$ 7,689,420$ 5,374,714$ (1,564,091)$ 156,958$ 221,555$ (965,198)$ 647,137$ 5,981,980$ (1) Significant change in governmental and business-type net position due to implementation of GASB No. 68 - Accounting and Financial Reporting for Pensions. (2) The City began reporting Section Eight Housing fund as a business-type activity previously reported as a governmental fund. Prior years have not been restated.(3) Significant change in governmental net position due to restatement of prior year grant receivables.(accrual basis of accounting)CHANGES IN NET POSITION-122-Fiscal YearCITY OF PADUCAH, KENTUCKYLast Ten Fiscal Years TABLE 2 2016 2015 2014 2013 2012 2011 2010 (2) 2009 2008 (1) 2007General FundUnassigned 13,198,126$ 12,549,232$ 12,694,610$ 12,311,565$ 11,321,438$ 10,940,121$ 10,208,678$ 10,311,490$ 9,416,427$ 9,976,079$ Total general fund 13,198,126$ 12,549,232$ 12,694,610$ 12,311,565$ 11,321,438$ 10,940,121$ 10,208,678$ 10,311,490$ 9,416,427$ 9,976,079$ All Other Governmental FundsNonspendable:Inventory 623,735$ 828,419$ 1,497,659$ 1,336,234$ 1,098,304$ 1,253,953$ 1,416,130$ 2,019,630$ 1,208,749$ 808,216$ Restricted for:Program purposes 1,296,007 1,303,030 205,979 284,760 1,236,780 - - - - - Capital improvements - 1,269,045 2,168,201 1,301,421 286,276 - - - - - Committed for:Capital improvements 2,018,581 1,814,834 1,758,934 2,589,099 2,631,233 2,587,012 2,844,706 2,618,147 2,081,280 1,692,872 Assigned for:Program purposes 1,049,802 951,296 802,692 752,691 472,235 683,578 1,402,731 1,634,547 1,193,968 1,543,547 Capital improvements 5,179,330 4,665,475 3,206,412 3,055,250 1,487,938 2,133,786 5,151,791 1,745,766 2,947,140 2,926,051 Total all other governmental funds 10,167,455$ 10,832,099$ 9,639,877$ 9,319,455$ 7,212,766$ 6,658,329$ 10,815,358$ 8,018,090$ 7,431,137$ 6,970,686$ (1) Significant decrease in reserve for program purpose due to converting governmental fund to proprietary fund.(2) Significant decrease in general fund balance due to restatement of prior year grant receivables-123-Fiscal YearTABLE 3CITY OF PADUCAH, KENTUCKYFund Balances, Governmental FundsLast Ten Fiscal Years (modified accrual basis of accounting) 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007Revenues:Taxes 6,976,933$ 6,987,173$ 6,713,889$ 6,583,690$ 6,343,608$ 6,223,511$ 6,326,740$ 5,867,782$ 6,139,164$ 6,044,069$ Licenses 29,606,552 27,804,759 26,987,110 27,197,290 26,753,432 25,704,849 24,979,768 25,411,112 25,924,562 25,140,615 Charges for services 884,259 848,971 851,080 815,791 817,607 811,590 846,087 866,688 835,105 783,018 Intergovernmental 1,132,852 1,244,417 2,624,363 1,240,312 1,191,835 1,148,362 1,091,324 1,086,377 1,565,348 1,676,783 Grants 8,892,529 2,496,329 5,923,651 3,737,402 1,699,399 2,992,519 2,062,554 5,405,810 1,673,936 6,089,711 Interest 115,922 148,411 199,583 175,371 162,580 205,837 121,246 225,251 419,103 540,204 Other 2,085,412 2,408,193 3,271,860 2,743,698 1,902,075 1,790,890 2,653,382 2,250,344 1,944,310 1,832,161 Total revenues 49,694,459 41,938,253 46,571,536 42,493,554 38,870,536 38,877,558 38,081,101 41,113,364 38,501,528 42,106,561 Expenditures:General government 4,526,828 4,484,105 4,311,103 4,481,485 5,117,194 5,151,370 5,277,916 4,726,435 5,051,374 4,763,839 Public safety 18,435,365 18,524,763 18,475,471 18,174,349 18,479,428 16,854,136 15,999,437 15,599,613 15,696,728 14,759,735 Public service 6,106,773 6,165,664 6,323,481 5,710,018 5,596,702 6,446,503 5,984,115 7,855,846 7,935,188 7,226,542 Parks and recreation 2,929,404 2,842,460 2,602,348 2,426,234 2,677,781 2,781,663 2,582,382 1,490,732 1,298,329 1,192,727 Planning and development 910,379 950,297 2,086,527 1,776,897 2,372,314 1,842,474 2,471,869 1,000,202 481,523 1,784,685 Other 441,742 247,878 640,452 766,847 516,534 486,239 847,188 514,488 520,611 526,238 Capital outlay 13,305,919 4,708,663 11,926,435 4,324,821 2,104,993 5,121,682 8,324,312 8,580,910 4,826,983 6,504,491 Debt service:Principal requirement 2,137,759 2,158,385 1,748,233 1,698,468 1,434,246 2,233,588 1,020,585 830,682 880,887 782,870 Debt issuance costs - 51,461 109,292 - - - - - - - Interest and fiscal requirement 845,609 817,191 1,086,866 1,089,447 1,114,852 1,519,329 1,077,128 1,003,439 1,051,008 1,108,385 Total expenditures 49,639,778 40,950,867 49,310,208 40,448,566 39,414,044 42,436,984 43,584,932 41,602,347 37,742,631 38,649,512 Other Financing Sources (Uses):Bonds issued - 4,225,000 9,055,000 - - - 6,645,000 1,718,605 - - Payment to bond escrow agent - (4,143,964) (5,627,447) - - - - - - - Premium on debt issued - - 220,683 - - - - - - - Discount on debt issued - (29,576) (53,529) - - - - - - - Long-term debt draws/issued - - - 308,112 101,983 366,039 1,480,781 69,032 - 246,667 Capital lease - - - 405,796 405,796 405,796 405,796 405,796 371,979 - Transfers in 10,034,851 7,785,410 9,148,761 7,462,944 5,888,847 8,455,433 9,722,852 5,928,413 6,241,886 5,209,977 Transfers out (10,105,282) (7,780,785) (9,199,119) (7,125,024) (5,809,539) (8,201,253) (9,893,709) (6,150,847) (7,086,517) (5,556,722) Total other financing sources (uses) (70,431) 56,085 3,544,349 1,051,828 587,087 1,026,015 8,360,720 1,970,999 (472,652) (100,078) Net change in fund balances (15,750)$ 1,043,471$ 805,677$ 3,096,816$ 43,579$ (2,533,411)$ 2,856,889$ 1,482,016$ 286,245$ 3,356,971$ Capital outlay (1) 9,718,561$ 1,481,948$ 10,843,726$ 4,034,424$ 2,156,290$ 4,833,547$ 8,763,073$ 2,850,717$ 2,857,189$ 4,638,045$ Debt service as a percentageof noncapital expenditures 7.47% 7.54% 7.37% 7.66% 6.84% 9.98% 6.02% 4.73% 5.54% 5.56%(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.-124-Fiscal Year(modified accrual basis of accounting)TABLE 4CITY OF PADUCAH, KENTUCKYChanges in Fund Balances, Governmental FundsLast Ten Fiscal Years TotalEstimated DirectFiscal Personal Actual Tax Year Commercial Residential Property Franchise Total Value Rate Exemptions2007 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 2015 851,731,625 751,761,832 582,368,709 73,944,847 2,259,807,013 2,333,746,718 0.291 96.8% 73,939,705 2016 902,687,182 783,886,570 573,896,954 57,561,993 2,318,032,699 2,394,834,871 0.289 96.8% 76,802,172 Source: McCracken County Property Valuation AdministratorNotes: Property in McCracken county is reassessed once every four years on average.-125-TABLE 5CITY OF PADUCAH, KENTUCKYASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTYLAST TEN FISCAL YEARSEstimatedValuePercentAssessedToAssessed ValueReal Estate TotalFiscal Real Direct Real Real Real RealYear Estate Personal Rate Estate Personal Estate Personal Estate Personal Estate Personal2007 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 2015 0.255 0.390 0.291 0.495 0.495 0.771 0.771 0.017 0.017 0.094 0.095 2016 0.255 0.390 0.289 0.524 0.524 0.800 0.800 0.017 0.017 0.098 0.102 Source: McCracken County Property Valuation Administrator and City Tax Levy Ordinance.General FundCity Direct RatesMcCracken Co. City of Paducah-126-McCracken PaducahSchool Districts School Districts Junior College CountyTABLE 6CITY OF PADUCAH, KENTUCKYPROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS(PER $100 OF ASSESSED VALUE)LAST TEN FISCAL YEARS (1) (2) (1) (2) Assessed Assessed Taxpayer Valuation Valuation Kentucky Oaks Mall 50,900,262$ 2.20% 50,900,262$ 2.88% Superior Care Homes Properties 14,791,539 0.64% Paducah Medical Investors 13,440,090 0.58% 13,440,090 0.76% Ducmall LLC 13,119,800 0.57% 14,374,800 0.81% Woodstone Enterprises LP 12,429,000 0.54% Wal Mart Real Estate Business 10,646,400 0.46% Paducah Hospitality Partners 9,600,000 0.41% Sams Real Estate Business Trust 9,222,955 0.40% Computer Service Inc 9,083,185 0.39% 15,362,263 0.87% Wal Mart Store 9,000,000 0.39% 34,849,607 1.97% Lowe's 14,201,793 0.80% Olivet Church 1031 LLC 23,261,290 1.32% Lourdes Medical Pavilion 15,982,400 0.90% TOTALS 152,233,231$ 6.58%182,372,505$ 10.31% (1) Source - Property Valuation Administration; Assessed value as of January 1, 2015. (2) Source - Property Valuation Administration; Assessed value as of January 1, 2006. -127- Percentage of Percentage of Total Assessed Total Assessed Valuation Valuation TABLE 7 CITY OF PADUCAH, KENTUCKY PRINCIPAL TAXPAYERS - PROPERTY TAX CURRENT YEAR AND NINE YEARS PRIOR 2016 2007 Total Collections to Date (1) (1) Percent of Percent of Amount of Levy Total Levy Collections Collected Collections Collected 3,995,992 3,855,679 96.5% 134,677 3,990,356 99.9% 3,970,104 3,814,940 96.1% 149,758 3,964,698 99.9% 4,195,755 4,017,032 95.7% 167,918 4,184,950 99.7% 4,252,290 4,131,454 97.2% 107,607 4,239,061 99.7% 4,191,047 4,110,973 98.1% 65,783 4,176,756 99.7% 4,220,129 4,119,689 97.6% 84,620 4,204,309 99.6% 4,433,546 4,334,698 97.8% 80,773 4,415,471 99.6% 4,600,347 4,509,874 98.0% 64,156 4,574,030 99.4% 4,725,239 4,644,522 98.3% 44,866 4,689,388 99.2% 4,886,268 4,802,067 98.3% - 4,802,067 98.3% (1) Includes current year real and personal property tax. * Source - City of Paducah Finance Department. 2012 -128- 2007 Collected within the Fiscal Year of the Levy Taxes Levied Fiscal for the 2008 2009 2015 2016 2013 2014 2010 2011 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 (1) Direct Fiscal Taxes Tax Year Collected Rate 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% 2015 19,092,911 2.00% 2016 20,130,158 2.00% 176,877,420 (1) Source - City of Paducah Finance Department - Actual collections during the fiscal year. -129- 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 2,444 97.80% 9,458,851 46.99% $50,001 - $100,000 28 1.12% 2,061,308 10.24% $100,001 - $500,000 25 1.00% 5,304,313 26.35% Greater than $500,000 2 0.08% 3,305,686 16.42% TOTALS 2,499 100.00% 20,130,158$ 100.00% (1) Percentage of Number of Percentage Taxes Total Employee Filers of Total Collected License Tax $0 - $50,000 2,264 98.18% 8,747,840 53.80% $50,001 - $100,000 22 0.95% 1,602,865 9.86% $100,001 - $500,000 18 0.78% 3,681,440 22.64% Greater than $500,000 2 0.09% 2,226,801 13.70% TOTALS 2,306 100.00% 16,258,946$ 100.00% (1) Source - City of Paducah Finance Department - Actual collections during the fiscal year. -130- Taxpayers By Range Taxpayers By Range 2016 2007 TABLE 10 CITY OF PADUCAH, KENTUCKY PRINCIPAL EMPLOYEE LICENSE TAXPAYERS CURRENT YEAR AND NINE YEARS PRIOR (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 Capita2007 18,310,000 3,320,522 - - - 21,630,522 1.17 4.46% 821 2008 17,680,000 2,946,303 - - - 20,626,303 1.05 4.26% 784 2009 19,799,638 5,187,262 - - - 24,986,900 1.21 5.16% 950 2010 25,661,440 5,808,267 - - - 31,469,707 1.52 6.50% 1,196 2011 24,879,948 4,910,742 - - - 29,790,690 1.42 5.92% 1,190 2012 23,651,493 7,320,328 - - - 30,971,821 1.47 6.16% 1,238 2013 22,361,906 6,920,838 - - - 29,282,744 1.32 5.82% 1,170 2014 24,706,291 6,519,356 - - - 31,225,647 1.38 6.21% 1,248 2015 23,320,347 6,101,064 - - - 29,421,411 1.26 5.85% 1,176 2016 21,595,096 5,686,435 - - - 27,281,531 1.14 5.42% 1,090 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 dataTABLE 11CITY OF PADUCAH, KENTUCKYRATIO OF OUTSTANDING DEBT BY TYPELAST TEN FISCAL YEARSPublic-131-ImprovementDebtNetPublicDebtImprovement (1)Ratio ofInfinitiPublicNetConvention & Media Floodwall ImprovementPublic PoolEconomic Bonds toFiscal Art Center BuildingRehabilitation ProjectRenovation DevelopmentActualYear Bonds Bonds Bonds Bonds Bonds Bonds Total Value2007 7,870,000 5,925,000 4,515,000 - - - - 18,310,000 0.99 695 2008 7,600,000 5,740,000 4,340,000 - - - - 17,680,000 0.90 672 2009 7,320,000 5,545,000 4,160,000 2,774,638 - - - 19,799,638 0.96 753 2010 7,030,000 5,340,000 3,975,000 2,671,440 6,645,000 - - 25,661,440 1.24 975 2011 7,040,000 5,125,000 3,780,000 2,564,948 6,370,000 - - 24,879,948 1.18 994 2012 6,630,000 4,895,000 3,630,000 2,455,210 6,100,000 - - (58,717) 23,651,493 1.12 945 2013 6,220,000 4,655,000 3,370,000 2,341,790 5,825,000 - - (49,884) 22,361,906 1.01 894 2014 5,805,000 4,400,000 3,100,000 2,224,863 5,460,000 1,120,000 2,475,000 121,428 24,706,291 1.09 987 2015 5,385,000 4,435,000 2,820,000 2,104,212 5,100,000 1,055,000 2,330,000 91,135 23,320,347 1.00 932 2016 4,955,000 4,055,000 2,530,000 1,990,271 4,805,000 990,000 2,185,000 84,825 21,595,096 0.90 863 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.TABLE 12CITY OF PADUCAH, KENTUCKYRATIO OF NET GENERAL BONDED DEBT OUTSTANDINGLAST TEN FISCAL YEARSPolice andFire PensionFundBonds-132-CapitaAmortizationof Discountsand Premiums(2)NetBonds Per Estimated (1) Share of Reported Percentage Direct and Debt Applicable Overlapping Outstanding to the City Debt City of Paducah 27,281,531$ 100.00% 27,281,531$ Paducah Independent School District 47,420,445 * 100.00% 47,420,445 McCracken County 19,271,760 * 46.60% 8,980,640 McCracken County Board of Education 63,896,975 * 32.90% 21,022,105 Overlapping debt 130,589,180 77,423,190 TOTAL DIRECT AND OVERLAPPING DEBT 157,870,711$ 104,704,721$ (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. -133- TABLE 13 CITY OF PADUCAH, KENTUCKY DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT AS OF JUNE 30, 2016 Net assessed value2,318,032,699$ Add exemption76,802,172 Total assessed value2,394,834,871$ Debt limit - 10% of total assessed (1)239,483,487$ Debt outstanding:General obligation bonds outstanding21,595,096$ Note payable5,686,435 Less debt not subject to limit- Gross bonded debt27,281,531 Less amount available in debt servicefunds791,761 Net bonded indebtedness subject tolimit26,489,770 LEGAL DEBT MARGIN212,993,717$ 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007Debt limit 239,483,487$ 233,374,672$ 227,059,775$ 221,497,836$ 212,207,634$ 210,312,025$ 207,696,169$ 206,945,061$ 197,015,689$ 182,759,543$ Total net debt applicable to limit 26,489,770 28,769,092 30,721,830 28,966,286 30,936,733 29,716,418 31,377,263 24,893,656 20,561,255 21,598,686 LEGAL DEBTMARGIN212,993,717$ 204,605,580$ 196,337,945$ 192,531,550$ 181,270,901$ 180,595,607$ 176,318,906$ 182,051,405$ 176,454,434$ 161,160,857$ Total net debtapplicable to thelimited as a percentage ofdebt limit 11.06% 12.33% 13.08% 14.58% 14.13% 15.11% 12.03% 10.44% 11.82% 12.68%(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."-134-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 2,804 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% 25,024 503,179,300 20,430 41.4 2,843 5.6% 25,024 503,179,300 20,430 41.4 3,139 6.2% 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. -135- TABLE 15 CITY OF PADUCAH, KENTUCKY DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS (1) (1) (2) (3) Per Capita Median School Unemployment Enrollment RateAgeIncome 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 Fiscal Year Population 2013-2014 2014-2015 2015-2016 Percentage of Percentage ofTotal TotalEmployees (1) Employment (2) Employees (1) Employment (2)Western Baptist Hospital 820 3.05% 1,660 5.55%Lourdes Hospital 1,445 5.38% 1,500 5.01%Wal Mart 1,022 3.80% 570 1.91%Paducah Public Schools 774 2.88% 600 2.01%West Kentucky Community and Technical College 451 1.68% 270City of Paducah 486 1.81% 380 1.27%State of Kentucky 346 1.29% 390 1.30%Parkview Convalescent Center278 1.03%Paxton Media Group 209 0.78% 285 0.95%Computer Services, Inc. 270 1.00%LYNX Services390 1.30%NRE Acquisitions270 0.90%TOTALS6,10122.71%6,31520.20%(1) Source - City of Paducah Finance Department(2) State of Kentucky - Office of Employment and Training. Ratio based on employment within County of McCracken.-136-EmployerTABLE 16CITY OF PADUCAH, KENTUCKYPRINCIPAL EMPLOYERSCURRENT YEAR AND NINE YEARS PRIOR20072016 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007Governmental ActivitiesGeneral governmentGeneral administration 11 11 11 12 12 12 12 12 12 12Finance 11 11 11 11 11 14 14 17 14 14Inspection0000111110131313Information systems5556666444Risk/Human resources3333311144Public safetyPolice 87 87 87 88 90 90 90 93 93 93Fire 75 76 76 74 64.5 64 65 69 69 71Public serviceStreets 21 21 20 20 23 23 23 29 29 30Facilities 12.5 12.5 13.5 13.5 11.5 14 34 36 35 34Engineering 6.6 6.6 6.6 7.6 7.675899Other5555564666Parks and recreation2525242424247777Planning and development101099999101111OtherPaducah Riverfront Dev. Authority1111100000Renaissance033453500Fleet maintenance 6.5 6.5 6.5 6.5 6.5 6.58677Business-type ActivitiesSolid waste 25.4 25.4 25.4 25.4 25.4 26 27 27 27 27TOTAL PRIMARY GOVERNMENT306306307309314.5318318343340342* Employee budget census.-137-Fiscal YearTABLE 17CITY OF PADUCAH, KENTUCKYCITY FULL-TIME EMPLOYEES BY FUNCTION*Last Ten Fiscal Years 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007General governmentBuilding and electrical permits issued1,344 1,175 1,251 1,202 1,232 1,239 1,263 1,179 1,203 1,411 Business licenses issued 3,826 3,729 3,717 3,966 3,956 3,254 3,397 3,691 3,507 3,500 Public safetyPoliceAdult arrests 2,174 2,293 2,546 2,508 2,753 3,564 3,859 4,454 4,170 5,012 Murder2 2 3 - 3 3 1 5 - - Rape11 10 17 16 14 22 12 20 15 18 Robberies42 41 36 38 14 31 56 41 49 42 Burglary185 138 127 142 123 155 245 169 203 208 Auto theft59 49 60 41 47 54 62 57 60 117 Larceny1,173 1,138 1,090 1,110 1,005 1,013 1,092 1,106 * *Arson7 2 3 5 7 6 7 7 8 16 Traffic accidents1,936 1,722 1,664 1,573 1,666 1,762 1,774 1,368 1,519 1,949 Traffic violations4,231 5,501 6,821 10,168 8,573 7,701 7,240 9,143 7,109 7,323 FireEmergency responses3,201 2,956 2,935 3,054 3,164 3,181 2,603 3,305 2,603 2,456 Fires extinguished124 118 115 105 138 122 133 136 102 163 Structure fires42 42 35 33 53 37 49 57 49 40 Incidents with reportedlosses72 73 56 55 89 73 89 85 70 80 Medical/rescue2,259 2,150 2,080 2,151 2,270 2,133 1,690 1,616 1,506 1,369 Tours/in-services/carseats305 400 378 570 524 671 676 907 699 485 Training man hours10,589 10,860 8,959 9,155 7,232 7,033 8,493 7,716 4,344 1,183 Inspections2,060 1,324 1,710 1,157 1,417 1,063 985 1,183 1,449 *Refuse collectionResidentialRefuse collected (tons 41 34 36 36 34 34 38 32 25 28 per day)Customers served9,801 9,639 9,600 9,478 9,488 9,568 9,445 9,435 9,446 9,388 CommercialRefuse collected (tons61 64 61 65 71 71 70 75 83 85 per day)Customers served854 861 927 805 803 806 810 810 821 832 Public service911 dispatches85,380 83,465 83,614 92,786 79,333 82,268 79,768 81,525 83,871 76,815 Police46,660 44,337 43,877 51,131 43,686 44,794 42,496 40,921 43,420 41,887 Fire32,320 3,152 3,517 4,747 3,189 3,226 2,702 2,490 2,720 2,399 Other35,490 35,976 36,220 36,908 32,458 34,248 34,570 38,114 37,731 32,529 * Information not available.** Information from city departments.-138-Fiscal YearTABLE 18CITY OF PADUCAH, KENTUCKYOPERATING INDICATORS BY FUNCTION**Last Ten Fiscal Years 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007Public safetyPoliceStations1111111111FireStations5555555555Refuse collectionCollection trucksResidential 10 10 10 10 10997109Commercial4444445455Other public worksStreets (miles paved) 218 218 218 218 218 218 218 216 216 216Sidewalks (miles) 47 47 47 47 47 47 47 45 45 45Traffic signals 13 13 13 13 13 13 13 12 11 11Parks and recreationParks 28 28 28 27 27 27 27 27 27 27Acreage 960 960 960 960 1125 1125 1125 960 960 960Community centers2222221111Swimming pools1111111111Public tennis courts6666666666Public golf courses2222222222* Information from city departments.-139-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, 2016 Federal CFDA Pass-Through Pass-Through Program Title: Number Grantor Number To Subrecipients Expenditures Department of Housing and Urban Development: Direct Programs: Section 8 Housing Choice Vouchers 14.871 N/A -$ 1,872,789$ Pass-through Kentucky Governors Office for Local Development: Community Development Block Grants 14.228 N/A 250,000 750,000 Total Department of Housing and Urban Development 250,000 2,622,789 Department of the Interior: Pass-through Kentucky Department of Fish and Wildlife Resources Sportfishing and Boating Safety Act 15.622 PON2-094-1500003154-1 - 437,895 Passed-through Kentucky Heritage Council: Historic Preservation Fund Grants in Aid 15.904 KY-15-111 - 3,795 Total Department of the Interior - 441,690 Department of Justice: Direct Programs: Bulletproof Vest Partnership Program 16.607 N/A - 12,645 Edward Byrne Memorial Justice Assistance Grant Program 16.738 N/A - 10,912 Total Department of Justice - 23,557 Department of Homeland Security: Direct Programs: Port Security Program 97.056 N/A - 34,233 Passed-through Kentucky Division of Emergency Management: Disaster Grants - Public Assistance 97.036 FEMA-4216-DR-KY - 26,683 Passed-through Kentucky Office of Homeland Security Homeland Security Grant Program 97.067 PO2-094-1500003154-1 - 75,000 Total Department of Homeland Security - 135,916 Department of Transportation: Passed-through Kentucky Transportation Cabinet State and Community Highway Safety 20.600 PT-15-36 - 8,867 State and Community Highway Safety 20.600 PT-16-43 - 15,074 National Highway Traffic Safety Administration (NHTSA) Discretionary Safety Grants 20.614 DD-15-01 - 1,178 Highway Planning and Construction 20.205 P02-625-1500004634 - 3,035,720 Total Department of Transportation - 3,060,839 TOTAL EXPENDITURES OF FEDERAL AWARDS 250,000$ 6,284,791$ See accompanying notes to schedule of expenditures of federal awards. -140- CITY OF PADUCAH, KENTUCKY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2016 Federal Grantor/Pass-Through Grantor/ CITY OF PADUCAH, KENTUCKY NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2016 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 Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Award (Uniform Guidance). 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 $250,000 Note 3 – Indirect Cost Rate: The City of Paducah has not elected to use the 10% de minimis indirect cost rate as allowed under the Uniform Guidance. Note 4 – Reconciliation of Federal Awards to the Financial Statements: Total Federal Awards $ 6,284,791 Federal Awards by Fund General Fund $ 41,414 Capital Improvement Fund 4,133,088 Special Revenue Fund 237,500 Proprietary Fund 1,872,789 Total Federal Awards $ 6,284,791 -141- 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, 2016, 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 6, 2016. 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. 100 South 4th Street Suite 300 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 6, 2016 -143- OMB Compliance Supplement Management’s Responsibility Auditor’s Responsibility Government Auditing Standards Code of Federal Regulations Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Opinion on Each Major Federal Program deficiency in internal control over compliance material weakness in internal control over compliance significant deficiency in internal control over compliance Government Auditing Standards Code of Federal Regulations Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Award . Government Auditing Standards Code of Federal Regulations Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Award .