THE CITY OF IRONDALE, ALABAMA GENERAL PURPOSE FINANCIAL STATEMENTS SEPTEMBER 30, 2016 THE CITY OF IRONDALE, ALABAMA TABLE OF CONTENTS SEPTEMBER 30, 2016 Page 1-2 3-12 13 14 15 16 independent Auditors' Report Management's Discussion and Analysis Government-Wide Financial Statements: Statement of] Net Position Statement of Activities Fund Financial Statements: Balance Sheet Governmental Funds and Discretely Presented Component Unit Reconciliation of the Governmental Funds Balance Sheet to the Statement ofNet Position Statement of Revenues, Expenditures and Changes in Fund Balances- Governmental Funds and Discretely Presented Component Unit Reconciliation ofthe Statement ofRevenues, Expenditures and Changes in Fund Balances Governmental Funds to the Statement of Activities Statement of Net Position - Proprietary Fund Water Enterprise Fund and Statement of Revenues, Expenses and Changes in Net Position - Proprietary Fund Water Enterprise Fund and Discretely Presented Component Unit Statement of Cash Flows - Proprietary Fund Water Enterprise Fund and 17 18 19 Discretely Presented Component Unit 20 21 22-47 Discretely Presented Component Unit Notes to the Fimancial Statements Required Supplementary Information: and Actual - General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance Budget 48-49 50 51 Schedule of Changes in' The Net Pension Liability Schedule of] Employer Contributions CH &C Cork, Hill & Company, L.L.C. INDEPENDENT AUDITORS' REPORT To the Honorable Mayor and Members of the City Council of The City ofl Irondale, Alabama Wel have audited the accompanying general purpose financial statements oft the City ofIrondale, Alabama (the City), as ofand fort the year ended September 30, 2016, and thei related: notes to the financial statements ofthe governmental activities, the discretely presented component units, eachi major fund andi the remaining funds information which collectively comprise the City's s basic financial statements as listed: int thei 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 generallyaccepted ini the United States of America; this includes the design, implementation, andi maintenanccofintema control: relevant tot the preparationandi fairp presentation offinancial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United Stats of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the. financial statements. Thej procedures selected depend ont the auditor'sj judgement, including the assessment ofthe risks ofr 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 City'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 City's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and thei reasonableness ofs significant accounting estimates made by management, financial statements are free from material misstatement. as well as evaluating the overall presentation oft the financial statements. Certified Public. Accountants 2100 Southbridge Parkway Suite 530 Birmingham, AL 35209 P.205.879.3292 K.205.879.3295 -1- Wel believe that the audit evidence we. have obtained is sufficient and appropriate to provide al basis for our audit opinion. Opinion Inc our opinion, thei financial statements: referred to above present fairly, in all material respects, the financial positionofthes govemmentactivities, businessactivities, the: aggregate discretely presented component units, each major fund and the remaining fund information oft the City ofIrondale, Alabama as of September 30, 2016 and the changes in its net position and cash flow where applicable for the year then ended in accordance with accounting principles generally accepted ini the United States of America. Report on Required Supplemental Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis (pages 3-12), budgetary comparison schedules (pages 48-49), schedule of changes int the net pension liability (page 50), and the schedule ofe employee contributions (page 51) 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 them to be an essential part offinancial 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 acceptedint the United State ofA America, which consisted of inquiries of management about the method 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 orp provide any assurance on thei information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Cok,Ydee Cempa L.L.C. Birmingham, Alabama May 16,2017 -2- THE CITY OF IRONDALE, ALABAMA MANAGEMENTS DISCUSSION and ANALYSIS SEPTEMBER 30, 2016 MANAGEMENT'S DISCUSSION AND ANALYSIS Our discussion and analysis ofthe City of] Irondale's financial performance provides an overview of the City's financial activities for the fiscal year ended September 30, 2016 Please read it in conjunction with the City's financial statements, which begin on page 13. USING THIS ANNUAL REPORT This report consists of a series of financial statements. The Statements of Net Position and the Statement of Activities (onj pages 13 and 14) provide information about the activities oft the City as awhole and present a longer-term view of the City's finances. Fund financial statements start on page 15. These statements tell how City services were finançed in the short term as well as what remains for future spending. Fund financial statements also report the City's operations in more detail than the government-wide statements by providing information about the City's most significant funds. REPORTING THE CITY AS. A WHOLE One ofthei mosti important questions asked about the City's s finances is, "Is the City as a whole better off or worse off as a result of this year's activities?" The Statement of Net Position and the Statement ofActivities report information about the city as a whole and about its activities in a way that helps answert this question. These statements include all assets and liabilities using the accrual basis ofaccounting, which is similar tot the accounting used by most private-sector companies. All of the current year's revenues and expenses are taken into account regardless of when cash is These two statements report the City's net position and change ini net position. You can think ofthe City's net position as one way to measure the City's financial health, or financial position. Over time, increases or decreases in the City's net position are one indicator of whether its financial health isi improving or deteriorating. You will also need to consider non-financial factors in order received or paid. to assess the overall health ofthe City. -3- THE CITY OF IRONDALE, ALABAMA MANAGEMENTS DISCUSSION and ANALYSIS SEPTEMBER 30, 2016 The Statement of Net Position and the Statement of Activities separate the City's governmental activities and its business type activities. Governmental activities - The City's basic services are reported here, including the police, fire, public works, and parks departments, and general administration. Sales taxes, business Business-type activities - The City of Irondale operates a water system which is reported underthis caption. Business: activities provide a service and are compensated fort the services licenses, and franchise fees finance most of these activities. provided. REPORTING THE CITY'S MOST SIGNIFICANT FUNDS The fund financial statements begin on page 15 and provide detailed information about the most significant funds, not the City as a whole. Some funds are required to be established by State law. However, the City Council establishes many other funds to help it control and manage money for particular purposes or to show that it isi meeting legal responsibilities foru using certain taxes, grants, and other money. The City'sg governmental funds use the following accounting approach. The City's basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted tocash. The governmental fund statements provide a detailed short-term viewofthe City's general governmental operations and the basic services it provides. Governmental fund Mlmuwlipyaudetmin whetherthere. arei more or fewer financial resources that can be: spent in the near future to finance the City's programs. We describe the relationship (or differences) between governmental activities (reported int the Statement ofNet Positiona and the Statement of Activities) and governmental funds (reported in the Balance Sheet and the Statement of] Revenues, Expenditures and Changes in Fund Balance) in reconciliations on pages 16 and 18. -4- THE CITY OF IRONDALE, ALABAMA MANAGEMENT'SDISCUSSION and ANALYSIS SEPTEMBER 30, 2016 THE CITY AS A WHOLE The following schedules present a comparison of current and prior year statements of net position for government and business-type activities. Increase (Decrease) Variance 472,042 326,212 (3,567,275) 917,699 (1,851,322) 702,025 (1,149,297) 1,067,173 709,808 1,031,258 (130,958) 1,610,108 965,644 2,575,752 (432,898) (2,446,767) (389,026) 61,815 (2,224,978) 350,774 2016 2,806,205 5,403,900 1,059,651 15,522,814 43,265,831 58,788,645 5,737,319 2015 2,479,993 8,971,175 141,952 17,374,136 42,563,806 59,937,942 4,670,146 GOVERNMENT ACTIVITIES Cash Receivables Restricted cash Other assets Total current assets Capital and other assets Total assets $ 6,253,058 $ 5,781,016 $ Deferred outflows of resources Total Assets and Deferred Outflows Accounts payable Current maturities oflong-term debt Interest payable Total current liabilities Non-current liabilities Total liabilities $64,525,964 $6 64,608,088 $ (82,124) 2,501,092 $ 1,791,284 $ 3,202,015 683,406 6,386,513 54,031,682 60,418,195 134,851 683,256 887,034 (2,402,628) 3,972,918 2,170,757 814,364 4,776,405 53,066,038 57,842,443 567,749 3,130,023 1,276,060 1,791,813 6,197,896 Deferred inflows of resources Net Position Invested in capital assets Restricted Unrestricted Total net position 64,525,964 $ 64,608,088 $ Current assets decreased $1,851,322 and current liabilities increased $1,610,108, respectively, resulting in a $3,461,430 decrease in working capital. This decrease resulted principally from funds being spent on capital projects THE CITY OF IRONDALE, ALABAMA MANAGEMENT'SDISCUSSION and ANALYSIS SEPTEMBER30, 2016 Business activities working capital decreased $16,752 which was thei result ofal loss from operations during the year and investment inj property and equipment. Increase (Decrease) Variance 723,230 562,263 17,567 (1,198,241) 104,819 31,729 136,548 (8,819) 127,729 2016 $ 780,722 $ 1,401,737 128,554 205,227 2,516,240 6,872,259 9,388,499 535,234 2015 57,492 $ 839,474 110,987 1,403,468 2,411,421 6,840,530 9,251,951 544,053 BUSINESS ACTIVITIES Cash Receivables Other current assets Restricted cash Total current assets Capital and other assets Total Assets Deferred outflows Total Assets and Deferred Outflows $ 9,923,733 $ 9,796,004 $ Accounts payable Current maturities of long-term debt Other current liabilities Total current liabilities Non-current liabilities Total liabilities Deferred inflow ofresources Net Position Invested in capital assets Restricted Unrestricted Total net position $ 222,953 $ 545,829 332,237 1,101,019 9,033,509 10,134,528 8,350 163,121 $ 417,591 398,736 979,448 8,510,128 9,489,576 35,673 59,832 128,238 (66,499) 121,571 523,381 644,952 (27,323) (219,145) (219,145) 270,755 270,755 (489,900) (489,900) 127,729 9,923,733 $ 9,796,004 $ -6- THE CITY OF IRONDALE, ALABAMA MANAGEMENTS DISCUSSION and ANALYSIS SEPTEMBER 30, 2016 STATEMENT OF ACTIVITIES To aid in the understanding oft the Statement of Activities (page 14) some additional explanation is given. Of particular interest is the format that is significantly different than a typical Statement of Revenues, Expenses, and Changes in] Fund Balance. Your willnoticet that governmental expenses are listed ini the first column with revenues from that particular program reported to the right. Thei result isal Net( (Expense)Revenue. The: reason for this format is tol highlight the relative financial burden each government function has on the City'st taxpayers. It also identifies how much each function draws from the general revenues orifitisself-financing through fees and grants. Business activities are adjusted on one line as income or (loss). Details ofbusiness type revenues and expenses can be found on page 20. For comparative purposes, revenues and expenditures are listed in a columnar format. Variance Favorable (Unfavorable) 2016 2015 GOVERNMENTALACTIVITIES Revenues Program revenue Taxes and licenses Investment Earnings Other Expenditures Administrative Police Fire Public works Other Interest Transfers-net Change in net position $ 1,721,228 $ 3,518,944 $ (1,797,716) 13,895,458 3,595 1,299,331 16,919,612 5,272,805 4,032,020 3,430,019 3,038,019 1,113,508 2,351,104 (92,885) 19,144,590 14,008,006 686 1,459,283 19,986,919 3,432,860 3,577,720 3,538,684 3,241,931 1,169,307 2,062,874 117,330 17,140,706 (112,548) 2,909 (159,952) (2,067,307) 1,839,945 454,300 (108,665) (203,912) (55,799) 288,230 (210,215) 2,003,884 (2,224,978) $ 1,846,213 $ (4,071,191) In year 2016 governmental expenditures exceeded governmental revenues, resulting in a decrease in net position of $2,224,978. -7- THE CITY OF IRONDALE, ALABAMA MANAGEMENT'S DISCUSSION and ANALYSIS SEPTEMBER 30, 2016 Variance Favorable (Unfavorable) 2016 2015 BUSINESS ACTIVITIES Revenues Charges for services Other operating revenues Operating Expenses Salaries Depreciation Insurance Utilities Repairs 1 1,935,391 $ 1,734,026 $ 201,365 (11,628) 189,737 19,312 20,297 (1,670) 7,763 89,759 115,307 250,768 (61,031) (421,347) 1,421 1,936,812 482,754 389,417 164,108 192,697 102,754 338,941 1,670,671 266,141 (754,041) 13,049 1,747,075 463,442 369,120 165,778 184,934 12,995 223,634 1,419,903 327,172 (334,694) Other operating expenses Operating income (loss) Non-operating income (expenses) Change in net position $ (489,900) $ (7,522) $ (482,378) The business-type activities (Water Department) operated at a loss for 2016 and 2015. -8- THE CITY OF RONDALE, ALABAMA MANAGEMENT'S DISCUSSION and ANALYSIS SEPTEMBER 30, 2016 THE CITY'S REVENUES The following schedule presents as summary ofg governmental fund revenues and expenditures forthe year ended September 30, 2016, and the increase and decrease in relation to the prior year. Increase (Decrease) From 2015 2016 Amount 1,941,342 1,916,133 912,063 435,680 1,007,838 17,410,006 2015 Amount 1,983,269 876,159 1,218,063 601,897 3,563,247 19,536,410 Revenues Governmental Revenues Taxes Licenses and permits Intergovernmental Charges for services Fines and forfeitures Proceeds from debt and other Total governmental revenues $ - 11,196,950 $ 11,293,775 $ (96,825) (41,927) 1,039,974 (306,000) (166,217) (2,555,409) (2,126,404) (Increase) Decrease From 2015 5,658,452 181,388 (760,985) 40,621 (4,996) 12,716,770 (117,330) 17,713,920 2016 Amount 7,107,157 3,112,074 461,387 236,995 18,944,001 38,407,443 2015 Amount 6,925,769 3,873,059 420,766 241,991 6,227,231 117,330 20,648,827 Expenditures Governmental Expenditures General government Public safety Streets, sanitation and parks Library Senior citizens Debt service and capital outlays Transfers Total governmental expenditures Excess revenues (expenditures) $ 8,545,829 $ 2,842,681 $(20,997,437) $ (1,112,417) $(19,840,324) Large debt service expenditures in the current year and payments to encourage business relocations to the City are the principal reasons for the excess ofe expenditures over revenue. -9- THE CITY OF IRONDALE, ALABAMA MANAGEMENTS DISCUSSION and ANALYSIS SEPTEMBER 30, 2016 GENERAL FUND BUDGETARY HIGHLIGHTS The City Council did not amend the City's general fund budget this year. See page 48 of this report General fundrevenues exceeded hapadmensy31972 Thel largest revenuesoverunder) for the details of budget verses actual revenues and expenditures budgeted amounts were as follows: Taxes Intergovernmental Charges for services Licenses and permits $ (245,678) 1,472,233 (88,937) (101,558) Actual total general fund expenditures and operating transfers were: more than budgeted amounts by $5,909,395 due principally to economic stimulus payments during the year. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets As of September 30,2016, the City had $49,138,090 invested in a broad range of governmental and business type capital assets, including police and fire equipment, buildings, park facilities, roads, drainage systems, water system, and land. (See Table Below). Government Activities 2016 832,950 4,686,867 2,846,181 2,601,451 349,966 21,158,500 Business Activities 2016 465,031 592 133,364 104,963 6,129,529 2015 1,860,144 4,864,935 3,013,842 2,812,083 1,101,486 19,121,399 2015 345,023 1,076 62,895 122,287 6,270,470 Land Construction in progress Parks and land improvements Buildings Automotive Equipment and furniture Roads and drainage system Water plant 9,789,917 $ 9,789,917 $ 38,779 $ 38,779 $42,265,832 $ 42,563,806 $ 6,872,258 $ 6,840,530 Total investment for 2016 $ 49,138,090 -10- THE CITY OF IRONDALE, ALABAMA MANAGEMENT'S DISCUSSION and ANALYSIS SEPTEMBER 30, 2016 Debt As of September 30, 2016 the City had $56,478,463 in outstanding bonds and capitalized leases versus $54,776,883 in 2015. This increase of 1,701,630 was the result of normal repayment of $2,321,395 by the City and $432,401 by the water department. The City issued new debt in the amounto of $25,065,426 in the form of bonded indebtedness which was used to defease existing debit of20,610,000. These transactions resulted in the $1,701,630 increase in long-term debt. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES The City's elected and appointed officials decided to conservatively estimate the revenues ($18,464,530): and expenditures ($18,464,530) for the 2016/2017general fund budget. The economy isstill expected to slowly recover during the year: however, tax revenues havel been unadventurously projected to be $12,013,280 which is approximately 4j percent higher than the 2015/2016 fiscal year amount of$11,442,628. The aggregate amount oftaxes estimated tol be collected throughout they year isl larger than last year; the City expects its sales and use taxes, which represents approximately fifty percent of the general fund budget, to dramatically increase by 6 percent from $8,000,000 to $8,500,000duet to ani increase in car sales. The City also projects that itsl business license: revenue will increaset to $1,90,000because ofseveral opportunities to attract newi retail andi industrial businesses. Furthermore, with the addition of two new subdivisions and the construction of the Maserati and Mercedes dealerships, permitting fees and ad valorem taxes should substantially increase during the fiscal year. Ini the final analysis, although the salaries and healthcare rates for employees are steadily increasing, the City has been able to weather the storm by decreasing expenditures and refunding several bond issues. -11- THE CITY OF IRONDALE, ALABAMA MANAGEMENT'SDISCUSSION and ANALYSIS SEPTEMBER 30, 2016 CONTACTING THE CITY'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview ofthe City'sf finances and to show the City'saccountability fortl the moneyitreceives. Ifyouhaveany questions about this reporto corneeda dlioalmtomutm,cmst Charles Moore, Mayor City ofl Irondale 101 South 20th Street Irondale, AL: 35210 (205)956-9200 -12- THE CITY OF IRONDALE, ALABAMA STATEMENT OF NET POSITION SEPTEMBER 30, 2016 Primary Government Activities Governmental Business Type Activities 2,806,205 (1,128,089) 8,822 178,918 5,403,900 10,622,867 32,642,964 2,000,000 58,788,645 5,737,319 Component Unit 448,333 Total 3,079,853 109,867 206,427 5,609,127 11,126,677 39,011,413 2,000,000 68,177,144 6,272,553 ASSETS Cash and cash equivalents Receivables (net) Internal balances Inventories Prepaids Restricted assets Cash and cash equivalents Capital assets: Non-depreciable Depreciable (net) Receivables non-current Total Assets $ 6,253,058 $ 780,722 $ 7,033,780 $ 282,641 273,648 1,128,089 101,045 27,509 205,227 503,810 6,368,449 9,388,499 535,234 142,100 4,903,079 5,776,153 DEFERRED OUTFLOWS OFI RESOURCES TOTAL. ASSETS. ANDI DEFERRED OUTFLOWS OF RESOURCES LIABILITIES Accounts payable and accrued expenses Liabilities payable fromi restricted assets Customer deposits Current maturities of long-term debt Interest payable Internal balances Total current liabilities Non-current liabilities Capitalized leases payable Net Pension Liability Bonds payable Net OPEB obligation Compensated absences payable Less current maturities Total non-current liabilities Total liabilities DEFERRED INFLOWS OFI RESOURCES NETI POSITION Invested in capital assets Restricted net position Unrestricted net position Total net position POSITION 64,525,964 $ 9,923,733 $ 74,449,697 $ 5,776,153 $ 2,501,092 $ 222,953 $ 2,724,045 $ 197,378 545,829 134,859 1,101,019 39,146 477,309 8,993,150 11,793 57,940 (545,829) 9,033.509 10,134,528 8,350 197,378 3,747,844 818,265 7,487,532 2,493,037 8,185,857 53,985,426 192,993 1,955,722 (3,747,844) 63,065,191 70,552,723 143,201 683,256 887,034 2,183,483 3,753,773 3,202,015 683,406 6,386,513 2,453,891 7,708,548 44,992,276 181,200 1,897,782 (3,202,015) 54,031,682 60,418,195 134,851 683,256 887,034 2,402,628 3,972,918 448,333 448,333 5,045,179 282,641 5,327,820 (219,145) (219,145) TOTALLIABILITIES, DEFERRED INFLOWS OF RESOURCESANDNET 64,525,964 $ 9,923,733 $ 74,449,697 $ 5,776,153 See Independent Auditors' Report and Notes to Financial Statements. -13- THE CITY OF IRONDALE, ALABAMA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2016 Net (Expense). Revenue and Changes in Net Position Primary Government Business- Program Revenues Charges Operating for Capital Grants and Grants and Governmental Type Component Unit Expenses Services Contributions Contributions Activities Activities Total Function/Program. Activities Primary Government: Governmental. Activities: General government Police Fire Parks and recreation Public works Library Senior Citizens' Center Interest onl long-term debt Total governmental activities Business-type Activities: Water Department Interest and finance charges Total business-type activities Total primary government Component units: Industrial Development Board Commercial Development. Authority Total component units General Revenues: Taxes: Ad valorem taxes Sales tax Gas tax Franchise taxes Othert taxes License and permits Investment earnings Miscellaneous Transfers (net) Total general revenues and transfers Change in' Net Position from activities Net position, beginning of year Prior period adjustments Net position, beginning ofy year as adjusted Netp position, end ofy year 5,272,805 $ 20,784 $ 4,032,020 3,430,019 394,289 3,038,019 468,644 250,575 2.351,104 19,237,475 1,661,750 9,143 $ 27,784 16,614 241 1,696 4,000 59,478 (5,242,878) $ (3,339,995) (3,413,405) (393,557) (2,125,935) (438,852) (210,521) (2,351.104) (17,516,247) (5,242,878) (3,339,995) (3,413,405) (393,557) (2,125,935) (438,852) (210,521) (2.351,104) (17,516,247) 267,187 267,187 (664,202) (664.202) (397.015). (397.015) 664,241 732 911,843 28,096 36,054 19,237,475 $ 1,661,750 $ 59,478 $ (17,370,392) (397,015) (17,913,262) 22 (300.360) 1,034,990 8,523,912 374,638 994,222 1,001,903 1,965,793 3,595 1,299,331 92,885 15,291,269 6,197,896 1,034,990 8,523,912 374,638 994,222 1,001,903 1,965,793 3,595 1,299,331 (92,885) (92,885) 15,198,384 (2,224,978) (489,900) (2,714,878) (300,338) 270,755 6,468,651 9,217,680 (3.589,522) 6.197,896 270.755 6,468.651 5.628.158 3,972,918 $ (219,145) $ 3,753,773 $5,327,820 See Independent Auditors' Report and Notes to Financial Statements. -14- THE CITY OFI IRONDALE, ALABAMA BALANCE SHEET - GOVERNMENTAL FUNDS AND DISCRETELY PRESENTED COMPONENT UNIT SEPTEMBER 30, 2016 Total Governmental Component Funds 6,253,058 $ 35,959 890,279 1,224,926 727,804 8,822 5,403,900 178.918 Capital Projects Special General 6,253,058 $ 845,203 1,224,926 77,804 8,822 44,558 178,918 8,633,289 $ 4,498,592 Debt Service Revenue Unit Assets and other debits Assets: Cash and cash equivalents Receivables Taxes Accounts Due from other funds Inventories Restricted assets: Cash and cash equivalents Capital assets Land Buildings andi improvements Deferred charges Total assets and other debits Liabilities, equity and other credits Liabilities: Accounts payable and accrued liabilities Duet to other funds Bonds payable Total liabilities Equity and other credits: Fund balances: Reserved for: Non-spendable Reserved Committed Assigned Unassigned Total equity and other credits Total liabilities, equity and other credits 45,076 300,000 1,210,750 350,000 4,148,592 $ 1,555,826 $ 14,687,707 $ 35,959 $ 59,653 $ 2,501,092 $ 2,092,742 $ 348,697 $ 1,778,447 3,871,189 187,740 122,362 1,001,071 3,450,927 4.762,100 8,633,289 $ 4,498,592 77,446 426,143 1,855,893 4,356,985 187,740 5,690,984 1,001,071 3,450,927 10.330,772 14,687,707 $ 59,653 4,072,449 4,072.449 1,496,173 1,496.173 1,555,826 35,959 35.959 35,959 See Independent Auditors' Report and Notes to Financial Statements. -15- THE CITY OF IRONDALE, ALABAMA THE STATEMENT OF NET POSITION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO SEPTEMBER 30, 2016 Fund Balance- Total Government Funds Netl Position is different because: $ 10,330,722 Amounts reported for Governmental Activities int the Statement of Capital Assets used in Governmental Activities are not current financial resources and therefore, are not reported in the Governmental Funds Balance Sheet. Receivables related to the: sale of City property are not current financial resources until collected andt therefore not recognized as assets int the Governmental Funds Balance Interest payable on long-term debt does not require current financial resources. Therefore, interest payable is not reported as a liability int the Governmental Funds Compensated: absences payable do not require current financial resources. Therefore, compensated absences payable isi not reported as a liability in the Governmental Long-Term Liabilities are not due andj payable in the current period andt therefore, they are not reported in the Governmental Funds Balance Sheet. Net pension plan liability which does not require current financial resources and therefore is not reported as a liability int the governmental funds balance sheet Charge to net position to record beginning of year net Charge inj pension liability in current year Charge in deferred inflows and outflows of resources Cost ofrefundingi is deferred and amortized over the bond life in the statement of net assets but charged to current operations in the Governmental Funds. Portion of other post retirement benefit liability which does not require current financial resources and therefore is not reported as a liability in the Governmental Funds Balance Allowance for doubtful accounts does not require current financial resources and therefore are not reported in the Governmental Funds Balance Sheet. Net Position of Governmental Activities 43,265,831 Sheet. 2,710,000 Balance Sheet. (683,406) Funds Balance Sheet. (1,897,782) (47,446,167) pension liability (7,708,548) 1.370,514 (6,338,034) 4,231,954 Sheet. (181,200) (19,000) (3,972,918) See Independent Auditors' Report and Notes to Financial Statements. -16- THE CITY OF IRONDALE, ALABAMA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS AND DISCRETELY PRESENTED COMPONENT UNIT FOR THE YEAR ENDED SEPTEMBER 30, 2016 Total Governmental Component Funds 11,196,950 $ 1,941,342 2,269,006 1,218,874 687,026 4,264 1,005,093 18,322,555 8,584,295 7,553,498 3,135,306 461,387 236,995 64,363 20,035,844 2,056,760 17,407,548 1,523,203 41,023,355 (22,700,820) 6,732,963 (6,640,080) 18,718,954 18.811,837 General Fund 11,196,950 $ 1,941,342 1,916,133 912,063 435,680 2,745 1,005,093 17,410,006 8,545,829 7,107,157 3,047,711 461,387 236,995 64,363 19,463,442 13,250 17,407,548 1,523,203 38,407,443 (20,997,437) 1,058,730 (4,449,648) 18,593,528 15,202,610 Capital Projects 109,890 669 110,559 Debt Service Fund Special Revenue $ 242,983 306,811 251,346 850 801,990 38,466 446,341 87,595 Unit Revenues: Taxes Licenses and permits Intergovernmental Charges for services Fines and forfeitures Interest Other Totali revenues Expenditures: Current operations: General government Public safety Streets, sanitation and parks Library Senior citizens Public relations and beautification Total current operations Capital outlays Debt service: Principal Interest andi fiscal charges Total expenditures Excess (deficiency) ofr revenues over (under) expenditures Other financing sources (uses): Operating transfers in Operating transfers out Proceeds from long-term financing Total other financing sources (uses) Excess (deficiency) of revenues and other financing sources over (under) expenditures and other financing uses Fund balances, beginning Fund balances, ending 22 22 572,402 10,485 582,887 219,103 5,000 (14,632) (9,632) 2,033,025 2,033,025 (1,922,466) 5,669,233 (1,514,214) 125,426 4,280.445 22 (661,586) (661,586) (5,794,827) 10,556,927 2,357,979 1,714,470 (661,586) 661,586 209,471 1,286,702 (3,888,963) 14,219,685 22 35,937 4 4,762,100 $ 4,072,449 $ $1 1,496,173 $ 10,330,722 $ 35,959 See Independent Auditors' Report and Notes to Financial Statements. -17- THE CITY OF IRONDALE, ALABAMA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - GOVERNMENTAL FUNDS TOTHE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2016 Neto change ini fund balances total governmental funds Amounts reported for governmental activities int the statement of activities are different because: (3,888,963) Governmental funds report capital outlay as expenditures. However, int the government-wide: statement ofa activities and changes in net assets, the cost of those assets are allocated over their estimated useful lives as depreciation expense. This is the amount of capital assets recorded int the Cost of capital assets acquired during the year Book value of assets disposed of current period: 2,219,475 (35,664) 2,183,811 The issuance of long-term debt provides current financial resources to governmental funds, whilet the repayment of the principal of long-term debt consumes the current financial resources ofg governmental funds. Cost ofi issuing debt is reported as an expenditure in the government funds whilet these costs are amortized int the government" wide statements. The effect oft these differences in treatment ofl long-term debt and related items is as follows: Repayment of long-term debt Long-term borrowing Amortization of bond issue costs 17,701,444 (18,785,076) 295,480 (788,152) Accrued compensated absences is recorded int the government-wide: statement of activities and changes in net assets, but they do not require the use of current financial resources. Therefore, accrued compensated absences isi not recorded Depreciation expense on capital assets isi recorded: in the government-wide statement of activities and changes inr net assets, but it does not require the use of current financial sources. Therefore, depreciation expense is not recorded Accrued interest expense on long-term debt is recorded in the government-wide statement of activities and changes ini net assets but does not require the use of current financial resources. Therefore, accrued interest expense is not recorded as expenditures in governmental funds. Revenues related tot the sale of city property are not recognized as earned until collected and therefore are not included in the Governmental Funds Statement ofRevenue, Expenditures and Change in Fund Balance. Current year pension and other employment benefit costs recognized in the government wide statement of activities and changes in net assets but do not require the use of current financial resources. Therefore the cost ist not recorded as an expenditure on as an expenditure in governmental funds. (100,217) as an expenditure in governmental funds. (1,481,784) 130,958 1,342,948 the governmental funds. Change in net position of governmental activities 376,421 (2,224,978) See Independent Auditors' Report and Notes to Financial Statements. -18- THE CITY OF IRONDALE, ALABAMA STATEMENT OF NET POSITION PRESENTED COMPONENT UNIT SEPTEMBER 30, 2016 PROPRIETARY FUND WATER ENTERPRISE FUND AND DISCRETELY ASSETS Water Enterprise Fund $ 780,722 Component Unit $ 246,682 Current Assets Cash and cash equivalents Receivables accounts of $25,000) Other Inventories Prepaid expenses Total current assets Property, Plant and Equipment Land and improvements Construction in progress Water plant and equipment Capital assets net of depreciation Customer accounts (less allowance for doubtful 273,648 1,128,089 1,401,737 101,045 27,509 2,311,013 38,779 465,031 6,368,440 6,872,259 448,333 695,015 695,015 5,037,578 7,601 5,045,179 Restricted Assets Customer deposits Total Assets Deferred outflows 205,227 205,227 9 9,388,499 535,234 $ 5 5,740,194 Total Assets and Deferred Outflows $9,923,733 $ 5,740,194 LIABILITIES AND NET POSITION Proprietary Fund $ 222,953 $ 222,953 197,378 545,829 134,859 878,066 9,032,296 477,309 11,793 57,940 (545,829) 9,033,509 10,134,528 8,350 Component Unit Current Liabilities Accounts payable Total current liabilities (payable from current assets) Current Liabilities (payable from restricted assets) Meter deposits Current portion of long-term debt Accrued interest assets) Non-current Liabilities Bonds and Capitalized leases Net pension liability Net OPEB obligations Compensated absences Less current maturities Total non-current liabilities Total liabilities Deferred inflows of resources Net Position (Deficiency in Assets) Invested in capital assets Restricted Unrestricted Total net position 37,797 37,797 448,333 Total current liabilities (payable from restricted (37,797) 410,536 448,333 (219,145) (219,145) 5,291,861 5,291,861 Total Liabilities And Net Position $ S 9,923,733 $ 5,740,194 See Independent Auditors' Report and Notes to Financial Statements. -19- THE CITY OF IRONDALE, ALABAMA STATEMENT OF REVENUES, EXPENSES AND CHANGES INI NET POSITION PROPRIETARY FUND WATER ENTERPRISE FUND AND DISCRETELY PRESENTED COMPONENT UNIT FOR THE YEAR ENDED SEPTEMBER 30, 2016 Component Unit Amount $ 196,512 142,100 14,955 353,567 549,177 1,060 20,685 Water) Enterprise Amount 1,935,391 1,421 1,936,812 100.0 482,754 389,417 192,697 164,108 102,754 84,045 57,559 56,549 39,015 25,795 12,334 12,270 11,985 10,080 8,014 7,650 6,900 6,745 1,670,671 86.0 266,141 1,046 (92,885) (664,202) (34.3) (756,041) (39.0) (489,900) (25.3) 270,755 (219,145) %of Revenue 99.9 0.0 0.0 0.1 24.9 20.1 9.9 8.5 5.3 4.3 3.0 2.9 2.0 1.3 0.6 0.6 0.6 0.5 0.4 0.4 0.4 0.3 13.7 0.1 (4.8) Operating revenues Charges for services Rental income Donations received Miscellaneous Total operating revenues Operating expenses Salaries and wages Depreciation Utilities Insurance Repairs and maintenance Retirement Materials and supplies Payroll taxes Office expense Professional fees Water analysis Fuel Data processing Bad debt Communications: Chemicals Training Miscellaneous Total operating expenses Operating income Non-operating income (expenses) Interest income Operating transfers Interest expense Total non-operating income Change ini net assets Net position, beginning ofy year Net position, end of year 68,062 638,984 (285,417) 12 (14,955) (14,943) (300,360) 5,592,221 $ 5,291,861 See Independent Auditors' Report and Notes to Financial Statements. -20- THE CITY OF IRONDALE, ALABAMA STATEMENT OF CASH FLOWS PRESENTED COMPONENT UNIT FORTHE YEAR ENDED SEPTEMBER 30, 2016 PROPRIETARY FUND WATER ENTERPRISE FUND AND DISCRETELY Water Enterprise Component Fund 1,920,174 $ 229,020 (798,878) (478,251) 643,045 (92,885) (552,481) (645,366) (421,148) 449,138 (380,201) (121,526) (473,737) 1,046 1,046 (475,012) (1,460,961) 985,949 $ 246,683 $ 780,722 $ 246,683 205,227 $ 985,949 $ 246,683 $ 266,141 $ (285,417) Unit (89,807) 139,213 Cash flows from operating activities: Cashi received from customers Cash paidt to suppliers Cash paid to employees Operating transfers Advances from other funds Net cashj provided by operating activities Cash flows from non-capital financing activities: Net cash used by non-capital financing activities Cash flows from capital and related financing activities: Acquisition and construction of capital assets Proceeds from bonded debti issue Repayment ofindebtedness Interest paid on capital and related financing activities Net cash used by capital andi related financing activities Cash flows from investing activities: Interest received on investments (21,509) (21,509) 12 12 117,716 128,967 Net cash provided by investing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning ofy year Cash and cash equivalents at end ofy year Unrestricted cash Restricted cash Reconciliation of operating income (loss) to net cash provided by operating activities: Operating income (loss) Adjustments to reconcile operating income to net Cash provided by operating activities: Depreciation and amortization Non-cash items in income Changes in operating assets and liabilities: (Increase) decrease in accounts receivable (Increase) in inventories and prepayments Increase in accounts payable and accrued expenses Decrease in pension liability Increase in customer deposits Net cash provided by operating activities 389,417 (9,783) (17,567) 37,889 (16,197) (6,855) 643,045 $ 139,213 549,177 (157,055) 32,508 See Independent Auditors' Report and Notes to Financial Statements. -21- THE CITY OF IRONDALE, ALABAMA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 NOTEI-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Introduction The financial statements ofthe Cityoflrondale, Alabama (the City) are prepared ina accordance with generally accepted accounting principles (GAAP). The City'sreporting entity applies all relevant Governmental Accounting Standards Board (GASB) pronouncements. Reporting Entity The City of Irondale, Alabama (the City) is a municipal corporation governed by an elected Mayor and a five member City Council. As required by generally accepted accounting principles, these financial statements present the Cltyanditscomponent units, entities forwhich the City is considered to bei financially accountable. The discretely presented component units are reported in a separate column in the combined financial statements to emphasize that they are legally separate from the City. The discretely presented component units have a September Component Units. The Cityoflrondale, Alabama Industrial Development Board (thel IDB)and the Commercial Development Authority (CDA)are governed by boards which are appointed by the City Council, and there is a potential for these Boards to provide specific financial benefits to, or impose specific financial burdens on the City. The IDB is presented as a governmental fund type. Andi the CDAisaproprictary fund. Complete financial statements for Other Boards. The City Council also appoints the members of several other local boards (e.g., zoning board, park board, etc.) These other boards do not possess corporate powers that distinguish them as being legally separate from the City, and are, for financial reporting 30 year end. these Boards are not prepared. purposes, considered to be part oft the City's primary government. Basis of Presentation - Fund Accounting The accounting system is organized and operated on a fund basis. Ai fund is defined as a fiscal andaccountinge entiywihasifPhalmaings setofaccounts, whichare: segregated forthe purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions or limitations. The City's funds are grouped into two broad fund categories and five generic fund types for financial statement presentation purposes. Governmental funds include the general, special revenue, debt service and capital projects funds. Proprietary funds only have an enterprise fund. -22- THE CITY OF IRONDALE, ALABAMA NOTESTO' THE FINANCIAL STATEMENTS FOR' THE YEAR ENDED SEPTEMBER 30, 2016 NOTEI-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES- Continued Basis of Accounting COVERNMENI-WIDE FINANCIAL STATEMENTS The statement ofnet position and the: statement ofactivities display information about the City as a whole. These statements distinguish between activities that are governmental and those that are considered business-type activities. Internal activity between funds is considered The government-wide: S statements are] prepared using the economici resources measurement focus andt the accrual basisofaccounting. Governmental fund financial statements arej prepared using the modified accrual basis. Therefore, governmental fund financial statements include a reconciliation with brief explanations to better identify the relationship between the The government-wide statement of activities presents a comparison between expenses and program revenues for each segment of the business-type activities of the City and for each governmental program. Directe texpenses aret those that ares aalyasdlaawlaenes program or department and are therefore clearly identifiablei to aj particular function. Program revenuesinclude chargesp paid by ther recipients ofthe goods ors services offered by the programs and grants and contributions that are restricted to meeting the operational or capital requirements ofaj particular program. Revenues which are not classified as program revenues The comparison ofprogrami revenues and expenses identifies the extent to which each program or business segment is self-financing or draws from the general revenues of the City. Net position is reported as restricted for the amount invested in capital assets net ofi related debt. Other restrictions result when constraints placed on net position use are either externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or imposed by law through constitutional. provisions or enabling legislation. The net position restricted for other purposes result from special revenue immaterial and is not eliminated. government-wide statements and the statements for governmental funds. are presented as general revenues. funds and the restrictions on their use. -23- THE CITY OF IRONDALE, ALABAMA NOTESTOTHE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 NOTE1-S SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued FUND FINANCIAL STATEMENTS Fundi financial statementsi reponrtdehaiedinfommation about the City. Thei focusofgovernmental fund financial statements is on major funds rather than reporting funds by type. Each major fund is presented in a separate column. Non-major funds are aggregated and presented in a single column. GOVERNMENTAL FUNDS During the year ended September 30, 2014, the City adopted GASB 62, Codifications of Accounting Reporting Guidance Contoured in Pre-November 1989 GASB and AICPA Pronouncements. GASB 62 incorporates into the GASB authoritative literature contain accounting and reporting guidance in FASB pronouncements when they do not conflict or All governmental funds are accounted for using the modified accrual basis ofaccounting and the current financial resources measurement focus. Under this approach, revenues are recognized in the accounting period in which they become measurable and available. Expenditures are recognized in the accounting period in which the fund liability is incurred, if contradict GASB pronouncements. measurable. Revenue Recognition In applying the susceptible to accrual concept under the modified accrual basis, taxes, investment earnings and other receivables are deemed both measurable and available if collected within the current year or within 60 days of year-end. Reimbursements due for federally funded projects are accrued as revenue at the time the expenditures are made. When received in advance, these revenues are deferred until expenditures are made. Otherrevenues, including licenses and permits, certain charges for services, and miscellaneous revenues are recorded as revenue when received in cash because they are generally not measurable until actually received. Expenditure Recognition The measurement focus of governmental fund accounting is on decreases in net financial resources (expenditures) rather than expenses. Most expenditures are measurable and are recorded when the related fund liability is incurred. However, principal and interest on general long-term debt, which has not matured, are recognized when paid. Allocations of costs, such as depreciation and amortization, are not recognized in the governmental funds because purchases of capital assets are treated as expenditures. -24- THE CITY OF IRONDALE, ALABAMA NOTESTOTHE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 NOTE: 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued A. Annual budgets are adopted on a basis consistent with generally accepted accounting principles for the general fund andj proprietary fund. All annual appropriations lapse at fiscal year end. On or around the first of August of each year, each department head submits requests fora appropriations tot thel Mayor. The Mayor and the City Clerk review these requests and prepare a proposed budget. The proposed budget is sent to the finance committee ofthe City Council normally by the first of September. The finance committee meets with the department heads, reviews the proposed budget and returns thej proposed budget tot the Mayor with recommended changes. Normally by September 15, the Mayor submits the final budget to the City Council for approval. The approved budget is prepared by fund, department and line item. The City Clerk may make transfers of appropriations within a department. Transfers of appropriations between departments requires the approval of the City Council. The legal level of budgetary Budget Requirements, Accounting, and Reporting control is the department level. B. Encumbrance accounting is not employed by the City. C. Fort they year ended September:s0,2016.expemitunseseddhusgetedappropiations Enterprise funds business-type: activities) are accounted for on the flowofeconomic resources measurement focus and the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are reçorded at the time the liabilities are incurred. With this measurement focus, all assets and alll liabilities associated with the operation ofthese funds Enterprise funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with an enterprise funds' principal ongoing operations. The principal operating revenues of the City's enterprise fund are water and garbage pick-up services. Operating expenses for enterprise fundsincluder the administrative costs ofp providing the services and maintenance of the system. All revenues and expenses not meeting this Enterprise Funds are included in the statement ofnet position. definition are reported as nonoperating revenues and expenses. Cash and Cash Equivalents The City's cash and cash equivalents are considered tol be cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. -25- THE CITY OF IRONDALE, ALABAMA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 NOTE1 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued All receivables, are shown net of an allowance for uncollectible accounts. The allowance for uncollectible accounts: is based on the City's historical bad debt experience and management's judgement. Property values are assessed andare collected by. Jefferson County. Property values are assessed annually and taxes are due and payable on October 1 ofthe subsequent fiscal year. Property taxes are an enforceable lien on property and are considered delinquent if paid after Receivables January 1. Inventories Inventories are valued at cost using the first-in/first out (FIFO) method. Restricted Assets Certain proceeds ofthe City's general obligation warrants, as well as certain resources set aside for general obligation warrant repayment, are classified asi restricted assets on thel balance: sheet because their use is limited by applicable debt covenants. In addition, the City maintains a "water warrants" account to segregate resources accumulated for debt service payments over the next twelve months. Also, special revenue funds are restricted in their use. Capital Assets and Depreciation The accounting and reporting treatment applied to the capital assets associated with ai fund are determined by its measurement focus. Fundaccountingi reports capital outlays as expenditures and does not recognize capital assets and depreciation. Under the government-wide accrual basis of reporting, general capital assets are long-lived assets of the City as a whole. When purchased, such assets are capitalized. Infrastructure such as streets, traffic signals and signs are capitalized. The valuation basis for general capital assets is historical cost, or where historical cost is not available, estimated historical cost based on replacement cost. The City capitalizes all capital assets with a value of$5,000 or greater when acquired. Donated capital assets are capitalized at estimated fair market value on the date donated. Depreciation ofcapital assetsi is computed and recorded byt thes straight-line method. Estimated useful lives ofthe various classes of depreciable capital assets are as follows: Buildings Equipment 40 years 5-15 years Improvements and infrastructure 5-100 years -26- THE CITY OF IRONDALE, ALABAMA NOTES TOTHE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES- - Continued Bond issue costs related to the defeasance of debt are being amortized using the straight-line method over the repayment period oft the related bonds. Bond issue costs except for any portion that relates to the refunding of existing debt is recognized as an expense in the period incurred and amortization costs of defeased bonds is also expensed in the year of defeasement. Amortization expense for 2016 was $295,480 on the government wide financials and $383,218 on the proprietary fund. All amortization was charged to interest Bond Issue Costs expense. Compensated Absences In the government-wide and proprietary fund financial statements, the City accrues liabilities for compensated absences as required by GASB. As of September 30, 2016, the accrued vacation and sick pay attributable to the general fund was $1,897,782 and the water was $57,940. No other government fund has compensated absences. Pension Plan The CityofIrondale participates: int the! Retirement System ofAlabama (RSA)and substantially all of the City's full time employees are covered. Funding rates are determined each year actuarially in accordance with an act oft the State Legislature and vary according to funding requirements. Rates fore employees! shiredp priortoJanuary 1,2013 required aj payment of11.01% of covered compensation by the employer and 5% from all employees except for full-time certified police officers and firemen who contribute 6%. For employees hired after. January 1, 2013, the City contributed 8.71% of covered compensation and employees contributed 6% except for police officers and firemen where the contribution rate is 7%. Deferred Outflows/Inflows of Resources In addition to assets, the statement of net position reports a separate section for deferred outflows of resources which represents a consumption ofr net position that applies to a future period and SO will not be recognized as an outflow ofr resources (expense) until then. The City has deferred earnings resulting from expectations oft the rate of return ofinvestment earnings notl beingi met and paymentsmades aftermeasurement. date. Theamountisrecognizedoyerafive year amortization period. -27- THE CITY OF IRONDALE, ALABAMA NOTES TO' THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 NOTEI-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Deferred Outflows/Inflows of Resources Continued In addition to liabilities, the statement ofnet position reports a separate section for deferred inflows of resources which represent an acquisition ofnet position that applies to a future period and as such will not be recognized as an inflow ofr resources until that time. The City has one item reporting in that category, deferred inflows from actual to expected experience. This difference is recognized over a seven year amortization period. Restricted Funds Iti is the City'sp policy to first use: restricted resources when an expense is incurred for purposes for which both restricted and non-restricted assets are available. Use of Estimates those estimates. Inj preparing these financial statements, management is required to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from NOTE 2-1 DEPOSITS AND INVESTMENTS The State of Alabama requires all financial institutions accepting deposits of public funds to be a member ofThe Security for Alabama Funds Enhancement (SAFE) program. This is a state-wide collateral pool for all public funds and is administered through the Alabama Treasurers Office. All ofthe City' s deposits are collateralized by FDICinsurance: and this collateral pool. Allinvestments The carrying amount and bank balance of deposits for the component units was $282,641. All of the bank balance was covered by the SAFE program and Federal depository insurance. Debt service trust funds arei invested by! bank trust departments in U.S. Government securities and are not subject of the City are in certificates of deposit. to collateralization requirements. -28- THE CITY OF IRONDALE, ALABAMA NOTESTOTHE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 NOTE3-RECEIVABLES Receivables as ofyear end, including the applicable allowances for uncollectible accounts, are as follows: Entity Wide Funds $ Governmental Funds 732,097 18,790 29,747 45,076 64,569 148,515 76,411 1,000,000 2,115,205 2,115,205 $ Enterprise Taxes: Sales and use tax Lease tax Lodging tax Intergovernmental State gasoline taxes Other Accounts Water and garbage service Economic incentives receivable Lease payments due Reimbursements due on road work Total receivables Less: allowance for uncollectible Net total reçeivables 732,097 $ 18,790 29,747 45,076 64,569 148,515 2,710,000 76,411 1,000,000 4,825,205 19,000 4,806,205 298,648 298,648 25,000 273,648 $ Included in total receivables are gasoline tax receivables of $45,076 which are restricted to road In 2015 the City made road improvements for which reimbursements of $2,000,000 were to be received from Jefferson County, Alabama. The balance of$1,000,000 at September 30, 2016 was collected in October 2016. The advances of $710,000 to Phoenix Water made under an economic incentive agreement are to be repaid in August 2017. Additional advances of $2,000,000 to Benchmark Imports, LLC are to be repaid through sales tax collections applied to the loan. This advance is treated as a non-current receivable and is reflected in the Statement of Net Position as maintenance and construction. non-current receivable. -29- THE CITY OF IRONDALE, ALABAMA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 NOTE 4- CAPITAL ASSETS Capital asset activity for the City during the year ended September 30, 2016 was as follows: Beginning Balance Oct.1,2015 $ 9,789,917 $ 1,860,144 11,650,061 26,878,133 3,914,212 8,300,953 8,515,661 47,608,959 16,695,214 30,913,745 Ending Balance $ 9,789,917 832,950 10,622,867 29,281,186 3,922,312 8,336,041 9,119,209 50,658,748 18,015,784 32,642,964 Additions Retirements Sept. 30,2016 Governmental activities Capital assets, not being depreciated: Land Construction in progress Depreciated capital assets Infrastructure Buildings Improvements other than buildings Equipment and furniture Total capital assets being depreciated Less accumulated depreciation Net capital assets $ 1,860,144 1,860,144 832,950 832,950 2,403,053 8,100 35,088 800,428 3,246,669 1,481,784 1,764,885 196,880 161,214 35,666 Governmental activities, net capital assets $ 42,563,806 $ 2,597,835 $ 1,895,810 $ 43,265,831 Deprecation was charged to functions as follows: General government Public works Fire Police Parks and recreation Senior citizens' center Library 565,913 254,944 232,829 306,880 82,246 23,133 15,839 $1,481,784 Total governmental activities depreciation expense -30- THE CITY OF IRONDALE, ALABAMA NOTES TOTHE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 NOTE 4- CAPITAL ASSETS- - Continued Beginning Balance Oct. 1,2015 Additions $ 38,779 $ 220,000 258,779 38,332 11,781,197 571,835 12,391,364 5,934,638 6,456,726 Ending Balance $ Retirements Sept. 30,2016 Business-type activities Capital assets, not being depreciated: Land Construction inj progress Total capital assets, not being depreciated Depreciated capital assets Buildings and improvements Water system Equipment and furniture Total capital assets being depreciated Less accumulated depreciation Net capital assets $ 38,779 465,031 503,810 38,332 11,971,482 682,690 12,692,504 6,324,055 6,368,449 $ 6,872,259 120,008 120,008 190,285 110,855 301,140 389,417 (88,277) Business-type activities, net capital assets $6,840,528 $ 31,731 * Retirement from construction inj progress represent completed projects transferred to the water system Depreciation was charged to functions as follows: Water Department $ 389,417 NOTES-INTERFUND RECEIVABLES AND PAYABLES At September 30, 2016, inter-fund receivables and payables consist of the following items: General Fund Due from Water Due to Capital Projects Fund Due to Corrections Fund Capital Projects Fund Due from General Fund Corrections Fund Due from General Fund Forfeiture Drug Fund Water Fund Due from Forfeiture Drug Funds Due to General Fund Receivable 1,128,089 357 272,553 Payable 272,553 357 1,128,089 -31- THE CITY OF IRONDALE, ALABAMA NOTESTOTHE FINANCIALSTATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 NOTE 6-1 LONG-TERM DEBT General Obligation Warrants. The City issues general obligation warrants to provide funds for the acquisition and construction of major facilities. General obligation warrants have been issued for both general government and proprietary activities. These warrants are: reported in the proprietary fund ifthe proceeds were used by the proprietary fund and thel bonds are expected to be repaid from The City has, in past years, in-substance retired certain general obligation bonds by placing the proceeds of new bond issues in an irrevocable trust to provide for all future debt service payments ont thel bonds to be defeased. The bond proceeds deposited in the trust account are accounted for as an in-substance retirement of debt and the bond liability removed from the statement ofr net assets. General obligation warrants are direct obligations and pledge the full faith and credit of the City. These warrants generally are issued as 20-year serial warrants withi increasing amounts of principal There are a number of limitations and restrictions contained in the bond indentures. Management Thel leases reported in the schedulec oflong-term debt are financing leases and have no provision for proprietary fund revenues. maturing each year. believes the City is in compliance with all limitations and restrictions. contingent rental payments. -32- THE CITY OF IRONDALE, ALABAMA NOTESTO' THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 NOTE6-LONG-TERMI DEBT- Continued Changes in Long-Term Debt The following is a summary of changes in long-term debt for the year ended September 30, 2016: Balance 9-30-15 2,595,050 $ 8,365,000 1,985,000 4,720,000 9,995,000 550,000 1,270,000 5,405,000 8,725,000 Balance 9-30-16 Description Issued Retired 2,595,050 $ 8,365,000 140,000 4,720,000 125,000 415,000 650,000 127,800 265,000 Governmental. Activities General obligation warrants: General government (series 2006)-3 3.25%- 4.375% General government (series 2007A)5.796-5.99 General government (series 2010) 2.0%-4.2% General government (series 2010A) 1.0%-6.125% General government (series 2011-A)2.5%- 4.15% General government (series 2011-B)1.1%-2.09 General government (series 2014-A)0.5%-1.25 General government (series 2013-B) 0.5%- 2.9% General government (series 2014-C)3.0%-- 4.0% General government - (series 2015-A) 0.8% to 4.3% General government - (series 2015-C)2.0%1 to 4.0% General government - (series 2015-D) 2.0%t04.0% General government - (series 2015-E),2.0%1 to 4.0% General government - (series 2016-A),2.03% Other long-term debt: Oshkosh Capital- Payable annually at $122,430 including interest at 2.53%. Lease matures in 2022 and iss secured by fire equipment with ab book value of $1,002,408. BB&T Government Finance- Payable monthly at $5,320 including interest at 2.29%. Lease matures inz 2023 and iss secured by garbage pickup vehicles and equipment with al book value of $479,887. Oshkosh Capital- Payable annually at $96,076, including interest at 3.02%. Lease matures in 2030 andi is secured by fire equipment with al book value of$1,113,473. Renasant Bank Payable monthly at $7,354, including interest at 2.22%. Lease are for five years maturing in 2020 and ares secured by nine vehicles with al book value $410,240. Governmental funds total Business-type. Activities General Obligation- (series 2006)- Variable General Obligation- (series 2007C0-529-6329 General Obligation- - (series 2010)-2.0096-4209 General Obligation (series 2015-B) 0.8%t04 4.375% General Obligation- (series 2015-C)2.09104 4.0% Capitalized lease 2012. John Deere Backhoe Loader payable monthly at $1,243 including interest at 4%.. Lease Capitalized lease 2012. John Deere Excavator Loader payable monthly at $938 including interest at 4%.1 Lease 1,845,000 9,995,000 425,000 855,000 4,755,000 8,725,000 9,600,000 2,651,850 5,305,000 710,000 125,426 9,600,000 2,779,650 5,570,000 710,000 125,426 774,998 421,587 1,145,287 410,614 46,362,536 1,059,950 4,290,000 3,005,000 102,435 54,759 61,488 79,913 17,701,445 1,059,950 4,290,000 240,000 52,200 11,498 8.703 5,662,351 23,363,796 $ 56,478,463 672,563 366,828 1,083,799 330,701 47,446,167 2,765,000 5,145,000 1,083,150 22,815 16,331 9,032,296 18,785,076 5,145,000 1,135,350 Other long-term debt: matures in2 2018. matures in 2018. Business-type. Activities total Total all long-term debt 34,313 25.034 8,414,297 54,776,833 S 25,065,426 6,280,350 -33- THE CITY OF IRONDALE, ALABAMA NOTES TO' THE FINANCIALSTATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 NOTE 6-1 LONG-TERM DEBT- CONTINUED Long-Term Debt Maturities Long-term bonded debt maturities, including principal and interest, are as follows: Year ending Sept. 30, 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Total General Government Principal 3,202,015 2,555,068 2,548,185 2,449,314 2,495,619 2,588,258 2,176,565 1,960,912 2,019,209 2,241,695 2,321,706 2,391,792 2,554,488 2,647,342 2,634,100 2,746,200 2,858,300 2,496,850 2,373,950 184,599 Business-Type Activities Principal 545,829 530,167 533,500 543,500 563,500 571,400 507,850 519,300 544,300 557,200 578,650 345,100 351,550 374,450 380,900 403,800 416,700 438,150 251,050 75,400 Interest 1,472,061 1,428,182 1,379,809 1,320,805 1,259,611 1,193,596 1,124,624 1,062,750 999,270 929,577 853,565 775,873 688,954 592,291 494,069 390,362 275,528 165,300 64,927 3,692 Interest 297,926 286,571 274,418 260,275 244,546 227,549 214,693 202,110 184,245 165,116 144,247 121,546 103,296 89,676 75,352 59,341 41,637 23,190 8,375 1,508 Total 5,517,831 4,799,988 4,735,912 4,573,894 4,563,276 4,580,803 4,023,732 3,745,072 3,747,024 3,893,588 3,898,168 3,634,311 3,698,288 3,703,759 3,584,421 3,599,703 3,592,165 3,123,490 2,698,302 265,199 $47,446,167 $16,474,846 $ 9,032,296 $3,025,617 $ 75,978,926 -34- THE CITY OF IRONDALE, ALABAMA NOTES TOT THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 NOTE 7- RESERVED AND RESTRICTED NET ASSETS AND FUND BALANCE The City's general obligation water warrant covenants do not require reservations of the water system's retained earnings. Net Assets are restricted as follows: Governmental Net Position $ 4,148,592 $ 1,210,750 44,558 43,265,831 45,076 48,714,807 46,736,167 408,350 47,144,517 1,570,290 $ Governmental Funds Balance 1,210,750 44,558 187,740 77,804 45,076 5,638,377 Cash restricted for construction from bonded debt Special Revenue Funds Other restricted and committed cash Investment in capital assets Non-spendable assets Internal receivables Special revenue fund receivables Total restricted assets Less: Bonded debt related to capital assets Special revenue fund accounts payable Restricted net assets and fund balance NOTE8-C CONTINGENTI LIABILITIES 5,638,377 Amounts received or receivable from grant 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, ifany, of expenditures which may be disallowed' by the grantor cannot be determined at this time although the City expects In2011, the City entered into an agreement to guarantee the repayment ofa $575,000 loan made by Jefferson County, Alabama to Commercial Development Authority ofI Irondale (The Authority), a component unit of the City. Repayment of this indebtedness began in 2014 by The Authority and The Cityisad defendant in several lawsuits. The City'sposition ist to defend itselfvigorouslyagainst such amounts, ifany, to be immaterial. the debt matures in 2026. The current balance on this loan is $448,333. all claims. -35- THE CITY OF IRONDALE, ALABAMA NOTESTOTHE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 NOTE 9- RISK MANAGEMENT The City is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; employee medical benefits; workers' compensation; and natural disasters for which the City carries commercial insurance. Management believes the amount of insurance maintained is adequate to protect the City from significant loss. The City maintains a limited risk management program for an employee dental plan. Premiums are paid into the general fund by all employees, and are available toj pay claims, claim reserves and administrative costs of the program. These premiums are used to reduce the amount of claims expenditure reported in the general fund. There were no significant reductions in insurance coverage during the year ended September 30,2016, and no settlement amounts exceeded insurance coverage in any ofthe previous three years. Dental plan liabilities are reported when it is probable that a loss has occurred and the amount ofthe loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported (IBNRs). Claim liabilities are calculated considering the effects of inflation, recent claim trends including frequency and amount of pay-outs and other economic and social factors. The liability for claims is reported in the general fund because it is expected to be liquidated with expendable: available financial resources. Changesint thel balancesofclaimi liabilities during the past two years are as follows: Funds available for claims, October 1, Premiums received Claim payments 2016 47,665 $ 48,132 69,800 (41,355) (45,847) 76,110 $ 47,665 2015 45,380 Funds available for claims, September 30, NOTE 10- -) ECONOMIC DEPENDENCY The City is economically dependent on sales tax collected from a small number oftaxpayers. Sales and use tax revenue accounted for 48.6% percent oftotal governmental fund type revenues for the fiscal year ended September 30,2016. Sales and uset tax revenues: received: from ten majort taxpayers accounted for $4,756,212 or 56.2%] percent of the total $8,463,272 sales and uset tax collected City- wide. NOTE 11-1 PENSION PLAN The City contributes to the Employees' Retirement System of Alabama (RSA), an agent multiple- employer public retirement system, that acts as a common investment and administrative agent for the various state agencies and departments. -36- THE CITY OF IRONDALE, ALABAMA NOTESTOTHE FINANCIALSTATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 NOTE 11 - PENSION PLAN- CONTINUED Plan Description Thel Employec'sRetrement System ofA Alabama, an agencyn multipleemployerplan, wasestablished October 1, 1945 under the provisions of Act 515 of the Legislature of 1945 for the purpose of providing retirement allowances and other specified benefits for state employees, State Police, and on an electivel basis, to all cities, counties, towns and quasi-public organizations. The responsibility for the general administration and operation of ERS is vested in its Board of Control. The ERS Board of Control consists of 13 trustees. The Plan is administered by the Retirement Systems of Alabama (RSA). Title 36-Chapter 27 oft the Code of Alabama grants the authority to establish and amend the benefit terms to the ERS Board ofControl. The Plan suesapublidlyavalabe financial report that can be obtained at www.rsa-al.gov. The ERS Board of Control consists of 13 trustees as follows: 1) The Governor, ex officio. 2) The State Treasurer, ex officio. 3) The State Personnel Director, ex officio. 4) The State Director of Finance, ex officio. 5) Three vested members of ERS appointed by the Governor for a term of four years, no two of whom are from the same department ofs state government nor from Six members ofERS who are elected by members from the same category of ERS Two retired members with one from the ranks ofretired state employees and one: from the rants ofretired employees ofac city, county, or aj public agency Two vested active employees of an employer participating in ERS pursuant any department of which an ex officio trustee is the head. 6) forat term of four years as follows: a. b. C. each of whom is an active beneficiary of] ERS. Two vested active state employees. to 36-27-6. Benefits Provided State law establishes retirement benefits as well as death and disbility benefits and any ad hoc increase in postretirement benefits for the ERS. Benefits for ERS members vest after 10 years of creditable service. Employees who retire after age 60 with 10 years or more ofcreditable service or with 25 years of service (regardless of age), are entitled to an annual retirement benefit, payable monthly for life. Service and disability retirement benefits are based on a guaranteed minimum or af formula method, with the member receiving payment under the method that yields the highest monthly benefit. Under the formula method, members ofthe ERS are allowed 2.0125% of their average final compensation (highest 3 oft the last 10 years) for each year of service. -37- THE CITY OF IRONDALE, ALABAMA NOTES" TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 NOTE 11 - PENSION PLAN- - Continued Act377ofthel Legistlature of2012 established a new tier ofbenefits (Tier 2) for members hired on or afterJanuary 1,2013.Tier2ERS: members are eligiblet forretirement afterage 62 with 10s years or more ofcreditable service and are entitled to an annual retirement benefit, payable monthly for life. Service and disability retirement benefits are based on a guaranteed minimum or a formula method, with the memberreccivingi payment underthei method that yieldst thel highest monthly benefit. Undert the formula method, Tier 2 members oft the ERS are allowed 1.65% of their average final compensation (highest Members are elegible for disability retirement ift they have 10 years of credible service, are currently in-service, and determined by the RSA Medical Board to be permanently incapacitated from further performance ofduty. Pre-retirement death benefits are calculated and paid to the beneficiary based on The ERSservicesa appoximately 8461 local participating employers. Thej nepitingempyeinolae 287 cities, 65 counties, and 494 other public entities. The ERS membership includes approximately 83,874 participants. As of September 30, 2015, the City's membership consisted of: 5ofthe last 10 years) for each year of service. the member's age, service credit, employment status and eligibility for retirement. Retirees and beneficiaries currently receiving benefits 59 1 6 152 218 Vested inactive members Non-Vested inactive members Active Members Total Contributions. Members of the ERS who were covered prior to January 1, 2013 contribute 5% of camabiecompemsuiontole ERS asi required bys statute except certified] lawe enforcement, officers, and Tier 2 members oft the ERS are those employees who become covered subsequent to January 1,2 2013. Tier21 members contribute 6% earnablec compensation tot thel ERS except certified law enforcement and firefighters who contribute 6%. fire fighters who contribute 7% ofe earnable compensation. -38- THE CITY OF IRONDALE, ALABAMA NOTES TO THE FINANCIALSTATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 NOTE1 11-1 PENSION PLAN - Continued The ERS establishes rates based upon an actuarially determined rate recommended by an independent actuary. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, withadditional amounts toi finance any unfunded accrued liability, the pre-retirement death benefit and administrative expenses oft the Plan. For the year ended September 30, 2016 the average active employee contribution rate was 5.65% of covered employee payroll, and the City's average contribution rate to fund the normal and accrued liability costs was The City'scontractually required contribution rate for the year ended September 30, 2016 was 11.21% of pensionable pay for Tier 1 employees, and 8.72% of pensionable pay for Tier 2 employees. These required contribution rates are based upon the actuarial valuation dated September 30, 2014, aj percent of annual pensionable payroll, and actuarially determined as an amount that, when combined with member contributions, is expected to finance the costs of benefits earned by members during the year, with an additional amount toi finance any unfundedaccrued liability. Total emplbgyercoumtrhuiosione 11.45% of covered employee payroll. pension plan were $891,563 for the year ended September 30, 2016. Net Pension Liability The City's net pension liability was measured as of September 30, 2015, and the total pension liability used to caculate the net pension liability was deteremined by an actuarial valuation as ofSeptember30, 2013 rolled forward to September 30, 2015 using standard roll-forward techniques as shown in the following table: Expected 2015 28,104,818 653,499 Actual 2015 27,948,116 653,499 (1,723,725) 29.044,790 Total pension liability, September 30, 2014 for October 1, 2014-September 30, 2015 Actual Benefit Payments and Refunds for October 1, 2014 - September 30, 2015 Total Pension Liability, as of September 30, 2015 0-XCAP-B-NCAD (a) (b) Entry Age Normal Cost (c)_ (1,723,725) (d). 29.214,028 Difference between expected and actual experience (gain)/loss (169,238) -39- THE CITY OF IRONDALE, ALABAMA NOTES TO THE FINANCIALSTATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 NOTE 11- PENSION PLAN - Continued Actuarial Assumptions The total pension liability in the September 30, 2013 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation Salary Increases 3.00% 3.75%-7.25% Investment rate of return* 8.00% *Net of pension plan investment expense Mortality rates forl ERS werel based on the RP-2000Combined Mortality Table Projected with Scale. AA to 2015 set forward three years fori males and two years for females. The rates ofr mortality for the period after disability retirement are according to the sex distinct RP-2000 Disability Mortality Table. The actuarial assumptions used in the September 30, 2013 valuation were based on the results of an investigation oft the economic and demographic experience for the ERS based upon participant data as ofSeptember 30,2010. The BoardofControl accepted and approved these changes on. January 27,2012, The long-term expected rate of return on pension plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected returns net of! pension plan investment expense and inflation). are developed for each major asset class. These ranges are combined to produce the long-term expected rate ofreturn by weighing the expected future real rates ofreturn by the target asset allocation percentage. and by adding expected inflation. The target asset allocation and best estimates of geometric real rates of return for each major asset class are which became effective at the beginning of fiscal year 2012. as follows: Long-Term Expected Rate ofReturn* 5.00% 9.00% 12.00% 15.00% 11.00% 16.00% 7.50% 1.50% Target Allocation 25.00% 34.00% 8.00% 3.00% 15.00% 3.00% 10.00% 2.00% 100.00% -40- Fixed Income U.S. Large Stocks U.S. Mid Stocks U.S. Small Stocks Real Estate Cash International Developed Market Stocks International Emerging Market Stocks Total *Includes assumed rate ofinflation of2.50% THE CITY OF IRONDALE, ALABAMA NOTEST TO' THE FINANCIALSTATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 NOTE: 11-PENSION PLAN - Continued Discount Rate The discount rate used to measure the total pension liability was the long-term rate ofreturn, 8%. The projection ofcash flows used to determinei the discount rate assumed that planmemlercomtributions will be made at the current contribution rate and the employer contributions will be made in accordance with the funding policy adopted by the ERS Board of Control. Based on those asusmptions, components of the pension plan's fiduciary net position were projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate ofreturn on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Changes in Net Pension Liability Increase (Decrease) Position 20,970,827 $ Total Pension Liability Plan Fiduciary Net Net Pension Liability (Asset) 7,133,991 653,498 2,179,436 (169,238) (764,327) (451,105) (246,666) (149,732) 1,051,866 8,185.857 Balance as September 30, 2014 Changes for the year: Service Cost Interest Changes of assumptions Difference between expected and actual experience Contributions employer Contributions employee Net investment income Benefit payments, including refunds ofemployee contributions Transfers Among Employers Net Change Balance at September 30, 2015 $ 28,104,818 $ 653,498 2,179,436 (169,238) 764,327 451,105 246,666 (1,723,725) 149,732 (111,895) 20.858.932 (1,723,725) 939,971 29.044,789 Sensitivity of the net pension liability to changes in the discount rate The following table presents the Board's net pension liability calculated using the discount rate of8%, as well as what the City's proportionate share of the net pension liability would bei ifit were calculated using a discout rate that is 1-percentage point lower (7%) or I-percentage-point higher (9%) than the current rate: 1% Decrease (7%) $ 11,435,935 $ Current Rate (8%) 8,185,857 1% Increases (9%) $ 5,420,378 Board's net pension liability -41- THE CITY OF IRONDALE, ALABAMA NOTES TOTHE! FINANCIALSTATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 NOTE11-1 PENSION PLAN- Continued Pension Plan Fiduciary Net Position Detailed information about the pension plan' s fiduciary net position is available ini the separately issued RSA Comprehensive Annual Report for the fiscal year ended September 30, 2015. The supporting actuarial information is included in the GASB Statement No. 68 Report for the ERS prepared as of September 30, 2014. The auditor's report on the Schedule of changes in Fiduciary Net Position by Employer and accompanying notes is also available. The additional financial and actuarial information is available at www.rsa-al.goy Pension Expense and Deferred Outflows and Inflows of Resources For the year ended September 30, 20151 the City recognized pension expense of$675,213. At September 30, 2015, the City reported deferred outflows of resources and deferred inflows of resources related to pensions oft the following sources: Deferred Outflows ofResources Deferred Inflows of Resources Net difference between projected and actual experience Changes of assumptions Net difference between projected and actual earnings on plan investments Employer contributions subsequent to measurement date Total deferred inflows and outflows related to pension liabilities Payments made to pension plan subsequent to measurement date Cost to issue bonds for purposes of defeasance of existing bonds Total deferred outflows and inflows of resources $ $ 143,201 680,760 $ 680,760 $ 915,655 4,676,138 6,272,553 p 143,201 143,201 Deferred outflows and inflows of resources are allocated as follows: Governmental entity wide Water proprietary fund Total $ 5,737,319 $ 535,234 6,272,553 $ 134,851 8,350 143,201 -42- THE CITY OF IRONDALE, ALABAMA NOTES TOTHE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 NOTE: 11-1 PENSION PLAN- Continued Amounts reported as deferred outflows of resources and deferred inflows ofi resources related to pensions will be recognized inj pension expense as follows: Year ended September 30: 2017 2018 2019 2020 2021 Thereafter 106,439 106,439 106,441 257,293 (26,037) (13,016) NOTE 12-DEFERRED COMPENSATION PLAN The Cityoffers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all full-time classified employees at their option, permits participants to defer a portion of their salary until future years. The deferred compensation is not available to participants until termination, retirement, death, or unforeseeable emergency. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and alli income attributable tot those amounts, property ori rights are (until paid or made available Iti ist the opinion ofthe City'smanagement that the City has no liability for losses under the plan but does tot the participant or beneficiary) solely the property oft the City. have the duty of due care that would be required of an ordinary prudent investor. NOTE 13- WATER CUSTOMER INFORMATION (UNAUDITED) Water customers are classified as either residential or commercial depending on the meter size. There are no unmetered customers. Customer revenue and rates by class of customers are as follows: Customer Class Residential Number of Customers 2,896 Gross Revenue $1 1,137,817 Rate Schedule First 2,000 gallons rate determined by the size ofr meter (5/8"- $14.10, 1"- $24.00); all over 2,000 gallon at $3.85 First 2,000 gallons rate determined by size ofi meter; all over 2,000 gallons at $3.85 per 1,000 gallons per 1,000 gallons Commercial 348 3,244 797,574 - 1,935,391 -43- THE CITY OF IRONDALE, ALABAMA NOTES TOTHE FINANCIALSTATEMENTS FOR THE YEAR ENDED SEPTEMBER3, 2016 NOTE 14- WATER DEPARTMENT INSURANCE COVERAGE Property Coverage Accounts receivable Blanket limit on buildings and contents, all losses including theft Deductibles $1,000 each loss occurrence, $100,000 earthquake and flood $ 4,896,932 100,000 Inland Marine Equipment Coverage Special perils including theft, scheduled equipment values Unscheduled Miscellaneous Tools and Equipment 96,873 125,000 125,000 50,000 2,000,000 100,000 1,000 1,000 2,000,000 2,000,000 2,000,000 2,000,000 1,000 3,000,000 1,000,000 1,000 Employee tools Rental equipment Unscheduled tools Automobile Bodily injury/Property damage Combined limit Uninsured motorists - Each occurrence Comprehensive deductible Collision deductible General Liability General total limit Products/Completed work total limit Personal injury each person limit Each event limit Deductible and sewer deductible per claim Employee benefits liability Each event Each employee Deductible -44- THE CITY OF IRONDALE, ALABAMA NOTES TOTHE FINANCIALSTATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 NOTE 15- OTHER POST EMPLOYMENT BENEFITS (OPEB) Plan Description The City contributes to the Alabama Local Government Health Insurance Program, an agent multiple- employer public health insurance system, that acts as a common: insurer and administrative agent for the various state agencies and departments. Medical, drug and dental benefits are offered for pre-Medicare retirees. Eligibility. for Allowance: The City shall pay for continuing health benefits for eligible retired City employees undert thel Health Care Plan of the City of Irondale subject to the following requirements: Class Ie employees: All full-time City employees at the time of their retirement: A. Who have been enrolled in the City's health plan at the time ofhis/her retirement B. Who have 25 or more employment years of service with the City, or C.Whose combined years of service with the City plus age equal 75 or more years Class II employees: All full-time employees at the time oftheir retirement who are age 60 or greater and have been enrolled in the City's health plan at the time ofl his/her retirement and have 10 or more years Currently, the health care plan has 120 active members, and 3 retired members, with 123 of those Dental coverage isa availableati full costi toi thei retiree. The. AlabamaLocal Government Health Insurance Program issues a publicly available financial report that includes financial statements and required supplemental information for the Employees' Retirement System of Alabama. That report may be obtained by writing to The Retirement Systems of Alabama, 135 South Union Street, Montgomery, The City ofIrondale has established a trust to receive and hold payments set aside toi fund eligible retired employees health insurance costs. The trust does not issue annual financial statements. ofservice and who do not qualify as a ClassIretiree. participating in the health plan. Alabama 36130-2150. Amount ofAllowance: amount of coverage is as follows: amount paid at the time ofi retirement. coverage elected by said retiree. Retirees are offered coverage through the Alabama Local Government Health Insurance Program. The Classlemployees: The city shall payt the premium amount being paid: fort thei individual active employees toward the retiree's premium. Retiree's s spouse and/or dependents shall be covered to the extent oft the Class II employees: The Class II retiree shall pay the full cost ofi individual, dependent and/or family -45- THE CITY OF IRONDALE, ALABAMA NOTES TOTHE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 NOTE 15- OTHER POST EMPLOYMENT BENEFITS (OPEB)-Continued Contribution Requirements An actuarial study was performed for the plan as of September 30, 2015 and the actuarially determined contribution for the year beginning October 1,2 2015 was calculated to be $74,524. Insurance premiums paid for retired workers of $21,276 are considered to offset this required contribution making the net contribution $53,248. Annual required contribution (ARC) Amounts applied toward ARC $ 74,524 (21,276) 53,248 (278,054) 417,799 192,993 Contributions made (premiums paid during year for retired plan members) Increase (decrease) in net OPEB obligation Adjustment for prior year over accrued Beginning net OPEB obligation (NOO) Ending net OPEB obligation (NOO) $ Actuarial Valuation asof September 30, 2015. The actuarial valuation is made triennially one year in arrears. The most recent valuation was made Actuarial Accrued Liability (AAL) Entry Age (b)* $755,708 Actuarial Value of Assets (a) Unfunded AAL (UAAL) (b-a) $457,330 UAALasa Percentage of Covered Payroll ((b-a)/c) 6.3 2.5 Actuarial Valuation Date Funded Ratio (a/b) 39.5 73.4 Covered Payroll @ $7,277,912 $7,789,467 9/30/13 $298,378 9/30/15 $533,282 $726,275 $192,933 -46- THE CITY OF IRONDALE, ALABAMA NOTES TOTHE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 NOTE 15- OTHER POST EMPLOYMENT BENEFITS (OPEB) - Continued Last Valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Actuarial assumptions: Investment rate ofreturn* Medical cost trend rate YearofUltimate trend rate *Includes inflation at NOTE 16-COMMITMENTS 09/30/15 Projected unit credit Level dollar, open 30 years Market Value of Assets 7.00% 8.00-5.00% 2016 2.50% The City has entered into inducements with businesses to locate within the City of Irondale. These agreements run through the year 2026 and require sales tax reductions of amounts up to $2,186,729 per year with the total not to exceed $13,228,396 over the remaining life of the agreements. In 2016, $128,196 was paid under these agreements. NOTE 17-N MAYOR AND COUNCIL MEMBERS Mayor and council members of the City of Irondale at September 30, 2016 were as follows: Mr. Tommy Joe Alexander, Mayor Mr. Terry Bearden, President Mr. Donna Pike, Council Pro Tempore Mr. Craig Sanderson, Council Member Mr. Bobby Joe Wilson, Council Member Mr. John London, Council Member NOTE 18-SUBSEQUENT EVENTS Subsequent events were evaluated through May 16, 2017, whichi is the date thei financial statements were available to be issued. Management has concluded there were no events or transactions during this subsequent reporting period that requires recognition or disclosure in the financial statements. -47- REQUIRED SUPPLEMENTARY INFORMATION THE CITY OF IRONDALE, ALABAMA BUDGET AND ACTUAL - GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30, 2016 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE Variance Favorable (Unfavorable) (101,558) 1,473,233 (88,937) 132,680 2,245 185,293 1,357,278 (5,600,704) (518,022) 68,201 (53,137) 68,701 87,916 (5,947,045) 37,650 (5,909,395) (4,552,117) 1,058,730 (4,449,648) (14,852,548) (1,523,203) 18,593,528 (1,173,141) Original Budget 2,042,900 442,900 1,001,000 303,000 500 819,800 16,052,728 2,945,125 6,589,135 3,115,912 408,250 305,696 152,279 13,516,397 50,900 13,567,297 2,485,431 Amended Budget 2,042,900 442,900 1,001,000 303,000 500 819,800 16,052,728 2,945,125 6,589,135 3,115,912 408,250 305,696 152,279 13,516,397 50,900 13,567,297 2,485,431 Actual 1,941,342 1,916,133 912,063 435,680 2,745 1,005,093 17,410,006 8,545,829 7,107,157 3,047,711 461,387 236,995 64,363 19,463,442 13,250 19,476,692 (2,066,686) 1,058,730 (4,449,648) (1,523,203) 18,593,528 Revenues: Taxes Licenses and permits Intergovernmental Charges for services Fines and forfeitures Interest Other Total revenues Expenditures: Government administration Public safety Streets, sanitation and parks Library Senior citizens Public relations and beautification Total operations Capital outlays Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Operating transfers in Operating transfers out Debt service principal Debt service interest Proceeds of bonds issued Total other financing sources (uses) Excess (deficiency) of revenues and other financing sources over (under) expenditures and other financing uses Fund balances, beginning Fund balances, ending $1,442,628 $11,442,628 $11,196,950 $ (245,678) (2,555,000) (2,555,000) (2,555,000) (17,407,548) (2,555,000) (3,728,141) $(69,569) $ (69,569) (5,794,827) $ (5,725,258) 10,556,927 4,762.100 48- THE CITY OF IRONDALE, ALABAMA FOR THE YEAR ENDED SEPTEMBER 30, 2016 NOTES TO THE REQUIRED: SUPPLEMENTAL - INFORMATION NOTEI-COMIPLIANCE AND ACCOUNTABILITY Budget Requirements, Accounting, and Reporting Requirements for all funds: Annual budgets are adopted for the City's general fund. The budget is based on expected expenditures Appropriation control (City Council appropriated budget) is by department and line item within a department. The budget may be amended to transfer amounts among line items or departments. The budget was not amended during the year. Budgetary comparison schedules are presented in the Supplemental Section as Required Supplemental information. The budgetary basis is the modified by program within a fund and estimated resources by source for all funds. accrual basis of accounting. Excess of Expenditures Over. Appropriations For the year ended September 30, 2016, expenditures exceeded appropriations by $2,066,686 before otherf financing sources (uses) comparing budget to actual by department, the government administration exceeded budget by $5,600,704, public safety by $518,022 and library by $53,137. Other departments expenditures were within budget. The excess ofexpenditures in the administration department was due principally to economic stimulus payments for businesses to locate in Irondale. The public safety department budgets were exceeded duei tol higher payroll costsand employeebenefitcosis; and the library spent more on programs. -49- THE CITY OF IRONDALE, ALABAMA SCHEDULE OF CHANGES IN' THE NET PENSIONLIABILITY FOR THE YEAR ENDED SEPTEMBER 30, 2016 Schedule of Changes in the Net Pension Liability Total Pension Liability Service Cost Interest 2015 $ 653,499 2,179,436 (1,723,725) 939,972 28,104,818 2014 $628,940 2,090,325 (1,487,028) 1,232,237 26,872,581 Difference between expected benefit payments including refunds ofe employee Net Change In' Total Pension Liability Total Pension Liability, Beginning of Year Total Pension Liability, End of Year Plan Fiduciary Net Position Contributions Employer Contributions- Employee Net Investment Income Benefit payments including refunds of employee contributions Transfers among employers Net Change in Plan Fiduciary Net Position Plan Net Position, Beginning of Year Plan Net Position, End of Year Net Pension Liability, End of Year Plan Fiduciary Net Position as a Percentage of the Total Pension Liability Covered Employee Payroll Net Pension Liability as a Percentage of Covered Employee Payroll contributions 29,044,790 $28.104.818 $ 764,327 451,105 246,666 (1,723,725) 149,732 (111,895) 20,970,827 $729,456 389,541 2,263,366 (1,487,028) 55,760 1,951,095 19,019,732 2 20,858,932 $20,970,827 8,185,858 $7,133,991 71.82% 7,270,204 112.59% 74.62% 6,384,074 111.75% -50- THE CITY OF IRONDALE, ALABAMA SCHEDULE OF EMPLOYER CONTRIBUTIONS FOR THE YEAR ENDED SEPTEMBER 30, 2016 2016 $ 2015 Actuarially Determined Contribution Contributions in relation to the actuarially determined contribution* Contribution deficiency (excess) Covered employee payrol!** Contributions as aj percentage of covered employee payroll 898,985 $ 786,685 898,985 786,685 8,268,573 10.87% 7,270,204 10.82% *Amounto ofemployer contributionsi relatedton normal and accrued. liability componemtsofemployer rate net of any refunds or error service payments. The contribution period runs from Octoberlto ** Employer's covered payroll during fiscal year ist thet total payroll paid to covered employees. The September 30 oft the year presented. fiscal year runs from October 1 to September 30 ofthe year presented. Notes to Schedule Actuarially determined contribution rates are calculated as of September 30 two years prior to the end oft the fiscal year in which contributions are reported. Contributions for fiscal year 2015 were based on the September 30, 2012 actuarial valuation. Methods and assumptions used to determine contribution rates: Actuarial cost method Amortization method Remaining amortization period Asset valuation method Inflation Salary increases Investment rate ofreturn Entry. Age Level percent closed 29 years Five year smoothed market 3.00% 3.75% to 7.25%, including inflation 8.00%, net of pension plan investment expense, including inflation -51-