FY19 CAFR FINALCITY OF KALISPELL
ANNUAL FINANCIAL REPORT
TABLE OF CONTENTS
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STATISTICAL SECTION
Financial Trends
Net Position by Component..................................................................................................................... 138
Changes in Net Position........................................................................................................................... 139
Fund Balances of Governmental Funds................................................................................................. 140
Changes in Fund Balances, Governmental Funds................................................................................. 141
Revenue Capacity
Market Value of Taxable Property ........................................................................................................ 142
Direct and Overlapping Property Tax Rates......................................................................................... 143
Principal Property Tax Payers ............................................................................................................... 144
Property Tax Levies and Collections...................................................................................................... 145
Debt Capacity
Ratios of Outstanding Debt by Type...................................................................................................... 146
Ratios of General Bonded Debt Outstanding ........................................................................................ 147
Legal Debt Margin Information............................................................................................................. 148
Direct and Overlapping Governmental Activities Debt........................................................................ 149
Pledged Revenue Coverage..................................................................................................................... 150
Demographics and Economics
Demographic and Economic Statistics ................................................................................................... 151
Principal Employers................................................................................................................................. 152
Operating Statistics
Full-time Equivalent City Government Employees by Function/Program......................................... 153
Operating Indicators by Function.......................................................................................................... 154
Capital Assets Statistics by Function/Program ..................................................................................... 155
Additional Information
The Water System.................................................................................................................................... 156
The Sewer System .................................................................................................................................... 157
Tax Increment District Information.......................................................................................................158-162
Special Improvement District Information............................................................................................ 163
General Obligation Debt Ratios.............................................................................................................. 164
REPORTS OF INDEPENDENT PUBLIC ACCOUNTANTS
Independent Auditor’s Report on Compliance and on Internal Control over Financial Reporting
based on an Audit of Financial Statements Performed in Accordance with Government
Auditing Standards................................................................................................................................. 165-166
Schedule of Findings and Questioned Costs..................................................................................................... 167
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City of Kalispell
Post Office Box 1997 - Kalispell, Montana 59903-1997
Telephone (406) 758-7701 Fax - (406) 758-7758
December 30, 2019
To the Honorable Mayor, members of the City Council, and Citizens of the City of Kalispell,
Montana:
CAFR TRANSMITTAL
State law requires that all general-purpose local governments publish within six months of the
close of each fiscal year (by December 31) a complete set of financial statements presented in
conformity with generally accepted accounting principles (GAAP). State law also requires a
biannual audit of these statements in accordance with generally accepted auditing standards by a
firm of licensed certified public accountants to be completed within 9 months of the close of
every other fiscal year (by March 31). It is the belief of the City Council and the Executive staff
that an annual audit assures a higher level of financial management and fiscal responsibility.
Pursuant to this policy and these requirements, the audited annual financial report for the City of
Kalispell, Montana for the fiscal year ended June 30, 2019, is submitted for your review.
Management Representation
The Finance Office prepared this report. Responsibility for the accuracy and completeness of
the presented data, including all disclosures, rests with the City. We believe the data, as
presented, is accurate in all material aspects. The material is presented in a manner designed to
state fairly the financial position and results of operations of the City as measured by the
financial activity of its various funds. All disclosures necessary to enable the reader to gain an
understanding of the City's financial affairs have been included.
To provide a reasonable basis for making these representations, management of the City has
established and maintains an internal control system designed to ensure that the assets of the
City are protected from loss, theft or abuse. The internal control system has been designed to
also ensure that adequate accounting data are compiled to allow for the preparation of financial
statements in conformity with accounting principles generally accepted in the United States (US
GAAP) and to comply with laws and regulations. The system of internal control is designed to
provide reasonable, but not absolute, assurance that these objectives are met. The concept of
reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits
likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments
by management.
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INDEPENDENT AUDITOR’S REPORT
City Council Members
City of Kalispell
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business-type
activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining
fund information of the City of Kalispell, Montana (the City), as of and for the year ended June 30, 2019 and
the related notes to the financial statements, which collectively comprise the City’s basic financial statements
as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States; this includes the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of
financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our
audit in accordance with auditing standards generally accepted in the United States and the standards
applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General
of the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of
the risks of material misstatement of the financial statements, whether due to fraud or error. In making those
risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation
of the financial statements in order to design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly,
we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of significant accounting estimates made by management, as well as evaluating the
overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinions.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective
financial position of the governmental activities, the business-type activities, the aggregate discretely
presented component units, each major fund, and the aggregate remaining fund information of the City of
Kalispell, as of June 30, 2019, and the respective changes in financial position and, where applicable, cash
flows thereof for the year then ended in accordance with accounting principles generally accepted in the United
States.
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Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States require that the management’s discussion and
analysis, schedule of total liability and related ratios – other postemployment benefits, schedules of total pension
liability, schedules of contributions, and budgetary comparison information on pages 85-99 be presented to
supplement the basic financial statements. Such information, although not a part of the basic financial
statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential
part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or
historical context. We have applied certain limited procedures to the required supplementary information in
accordance with auditing standards generally accepted in the United States, which consisted of inquiries of
management about the methods of preparing the information and comparing the information for consistency with
management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained
during our audit of the basic financial statements. We do not express an opinion or provide any assurance on
the information because the limited procedures do not provide us with sufficient evidence to express an opinion
or provide any assurance.
Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the City’s basic financial statements. The introductory section, combining and individual non-major
fund financial statements, budgetary comparisons, and statistical section are presented for purposes of
additional analysis and are not a required part of the financial statements. The combining and individual non-
major fund financial statements and budgetary comparisons are the responsibility of management and were
derived from and relate directly to the underlying accounting and other records used to prepare the financial
statements. Such information has been subjected to the auditing procedures applied in the audit of the basic
financial statements and certain additional procedures, including comparing and reconciling such information
directly to the underlying accounting and other records used to prepare the financial statements or to the financial
statements themselves, and other additional procedures in accordance with auditing standards generally
accepted in the United States. In our opinion, the combining and individual non-major fund financial statements
and budgetary comparisons are fairly stated in all material respects in relation to the financial statements as a
whole.
The introductory section and statistical tables have not been subjected to the auditing procedures applied in the
audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance
on them.
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Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated December 18, 2019
on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with
certain provisions of laws, regulations, contracts and grant agreements, and other matters. The purpose of that
report is to describe the scope of our testing of internal control over financial reporting and compliance and the
results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control over
financial reporting or on compliance. That report is an integral part of an audit performed in accordance with
Government Auditing Standards in considering the City’s internal control over financial reporting and
compliance.
Wipfli LLP
Helena, Montana
December 30, 2019
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Debt
At the end of fiscal year 2019, the City of Kalispell had total long-term debt outstanding of
$32,568,773. Of this amount, $940,000 comprises debt backed by the full faith and credit of the
government and $5,370,000 represents bonds secured solely by specific revenue sources (i.e.,
revenue bonds). The remainder consists of $23,139,971 (increase from fiscal year 2018,
(westside interceptor borrowing) outstanding on State Revolving Fund loans for
construction/expansion of the wastewater treatment plant, the extension of sewer lines south on
Highway 93, the construction of a water storage facility and the related distribution/supply
system, the removal and replacement of the water main on 4th Avenue East. There is also
$1,793,229 of special assessment debt for which the City of Kalispell is liable in the event of
default by the property owners subject to the assessment, and $1,325,573 of loans for the
purchase of other property and equipment.
Governmental Business-type Total
activities activities
2019 2018 2019 2018 2019 2018
General obligation bonds 940,000$ 1,415,000$ -$ -$ 940,000$ 1,415,000
Revenue/Urban Renewal bonds 4,965,000 5,300,000 405,000$ 475,000$ 5,370,000$ 5,775,000
SRF loans 567,498 591,760 22,572,473 12,968,771 23,139,971 13,560,531
Assessments 1,793,229 2,045,507 1,793,229 2,045,507
Contract debt/loans 1,325,573 1,458,992 - 39,121 1,325,573 1,498,113
Total 9,591,300$ 10,811,259$ 22,977,473$ 13,482,892$ 32,568,773$ 24,294,151$
CITY OF KALISPELL'S OUTSTANDING DEBT
Other obligations of the City of Kalispell include accrued vacation pay and sick leave
(compensated absences, $1,796,209), OPEB liability ($2,859,205), and pension liability
($11,350,153). More detailed information about the City’s long-term liabilities is presented in
the notes to the financial statements (Note E. Long-Term Debt pages 53-58).
ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES
The City’s elected and appointed officials considered many factors when adopting the fiscal year
2020 budget for tax rates and fees that will be charged by the business-type activities. Some of
these factors include: capital improvements identified in the City’s Capital Improvement
Program, inflation rates, the City’s collective bargaining units, the local economy, and the
citizen’s ability to pay. For the year, inflation rates continued to increase. The Bureau of Labor
Statistics of the U.S. Department of Labor reported the Consumer Price Index-Unadjusted for All
Items at 1.6 percent for the calendar year ending June of 2019. The index for all items less food
and energy rose 2.1 percent for the 12 months ending June of 2019. The food index increased
0.0 percent over the span, and the energy index retreated 2.3 percent. Inflation rates have a
significant impact on the cost of City projects.
Request for Information
This financial report is designed to provide a general overview of the City of Kalispell’s finances
for all those with an interest in the government’s finances. Questions concerning any of the
information provided in this report or requests for additional financial information should be
addressed to the City of Kalispell, Finance Director, P.O. Box 1997, Kalispell, MT 59903-1997.
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INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON
COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
City Council Members
City of Kalispell
We have audited, in accordance with auditing standards generally accepted in the United States and the
standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller
General of the United States, the financial statements of the governmental activities, the business-type
activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining
fund information of the City of Kalispell, Montana (the City) as of and for the year ended June 30, 2019, and
the related notes to the financial statements, which collectively comprise the City’s basic financial statements,
and have issued our report thereon dated December 18, 2019.
Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City’s internal control over
financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances
for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing
an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the
effectiveness of the City’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or
employees in the normal course of performing their assigned functions, to prevent, or detect and correct
misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in
internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial
statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a
deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness,
yet important enough to merit attention by those charged with governance.
Our consideration of internal control over financial reporting was for the limited purpose described in the first
paragraph of this section and was not designed to identify all deficiencies in internal control over financial
reporting that might be material weaknesses or significant deficiencies. Given these limitations, during our
audit we did not identify any deficiencies in internal control over financial reporting that we consider to be
material weaknesses. However, material weaknesses may exist that have not been identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City’s financial statements are free of material
misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and
grant agreements, noncompliance with which could have a direct and material effect on the determination of
financial statement amounts. However, providing an opinion on compliance with those provisions was not an
objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed
no instances of noncompliance or other matters that are required to be reported under Government Auditing
Standards.
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Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and
the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control or on
compliance. This report is an integral part of an audit performed in accordance with Government Auditing
Standards in considering the City’s internal control and compliance. Accordingly, this communication is not
suitable for any other purpose.
Wipfli LLP
Helena, Montana
December 30, 2019
167
Schedule of Findings and Responses
For the year ended June 30, 2019
Section I: Summary of Auditor’s Results
Type of Auditor’s Report Issued: Unmodified
Internal Control Over Financial Reporting
Are any material weaknesses identified?
___Yes _X_ No
Are any significant deficiencies identified not considered to be material weaknesses?
___Yes _X_ No
Is any noncompliance material to the financial statements noted?
___Yes _X_ No
Section II: Financial Statement Findings
There were no findings related to the financial statements that are required to be reported in accordance
with Government Auditing Standards.
Section III: Current Status of Prior Year Findings
There were no prior year findings required to be reported in accordance with Government Auditing
Standards.