5. Notes to Financial StatementsCITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The City complies with generally accepted accounting principles (GAAP). GAAP includes all relevant Governmental
Accounting Standards Board (GASB) pronouncements. In the government -wide financial statements and the fund financial
statements for the proprietary funds, Financial Accounting Standards Board (FASB) pronouncements and Accounting
Principles Board (APB) opinions issued on or before November 30, 1989, have been applied unless those pronouncements
conflict with or contradict GASB pronouncements, in which case GASB prevails. For enterprise funds GASB statement Nos.
20 and 34 provide the City the option of electing to apply FASB pronouncements issued after November 30, 1989. The City
has elected not to apply those pronouncements.
In June 2004, the Governmental Accounting Standards Board (GASB) issued Statement No. 45, Accounting and Financial
Reporting By Employers for Postretirement Benefits Other Than Pensions. The City is required to implement this new
statement during the year ended June 30, 2009. Certain significant changes in the Statement include the following:
1. Recognition of cost of postemployment benefits on the government -wide financial statements on the accrual basis of
accounting instead of the cash basis.
2. Provide information on current values of future benefits, associated liabilities, and summarize major plan provisions
and demographics.
Financial Reporting Entity
In determining the financial reporting entity, the city complies with the provisions for GASB statement No. 14, The Financial
Reporting Entity, and includes all component units of which the City appointed a voting majority of the units' board; the City
is either able to impose it's will on the unit or a financial benefit or burden relationship exists.
Primary Government
The City of Kalispell is a political subdivision of the State of Montana governed by an elected Mayor and Council duly
elected by the registered voters of the City. The City utilizes the City Manager form of government. The City is considered a
primary government because it is a general purpose local government. Further, it meets the following criteria: (a) It has a
separately elected governing body (b) It is legally separate and (c) It is fiscally independent from the State and other local
governments.
The accompanying financial statements present the primary government and its component units, entities for which the
government is considered to be financially accountable. These financial statements include all funds, agencies, boards,
commissions and authorities which meet the criteria for inclusion in the City's financial report. These criteria include
financial accountability, appointment of a majority of the secondary government and the financial benefit or burden derived
by the primary government from a secondary government.
Discretely Presented Component Units
Discretely presented component units are separate legal entities that meet the component unit criteria described above but do
not meet the criteria for blending. The Cities' two discretely presented component units, the Kalispell Parking Commission,
and the Downtown Business Improvement District are legally separate organizations of the City, but the City is financially
accountable. The component units are reported in a separate column to emphasize that they are legally separate from the City.
32
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
Kalispell Parking Commission
The Kalispell City Council passed Resolution 4103, a Resolution of intention to create Special Parking District #2 on June
21, 1993. Also passed was Resolution 4104, a resolution of intention to provide for funding the cost of maintaining,
operating, repairing, and improving Special Parking Maintenance District #2 and Resolution 4105, a Resolution declaring the
need for a Parking Commission to function in the City of Kalispell and declaring a jurisdictional area wherein said Parking
Commission is authorized to function. The Mayor and City Council appointed the Board of Directors composed of City
residents who operate businesses within the district. The Parking Commission opened their doors on February 1st 1994. The
City transferred $53,000 in Fiscal 1994 to the district as start up money; no further City funds have been given to the district.
It is intended that the Parking Commission be operated as a Proprietary type fund and has been classified as such in the City's
financial statements.
Downtown Business Improvement District
On May 17, 2004, by resolution 4891A, the City created the Downtown Business Improvement District. The purpose of
which appears to promote the health, safety, prosperity, security and general welfare of the inhabitants of the City of Kalispell
and the proposed district, and appears to be of special benefit to the property within the District. The District boundaries are
roughly 2nd Avenue East to 2nd Avenue West between Center Street and 4`h Street South. Publicly owned property and owner
occupied single family dwellings are exempt from the assessments related to the District.
Basis of Presentation, Measurement Focus, and Basis of Accounting
Government -wide Financial Statements
The government -wide financial statements (i.e., the Statement of Net Assets and the Statement of Activities) report
information on all of the nonfiduciary activities of the primary government and its component units. For the most part, the
effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported
by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely to a significant
extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate
component units for which the primary government is financially accountable.
Eliminations have been made to minimize the double -counting of business -type activities.
The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by
program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. The general
government function of the City includes expenses which are, in essence, indirect expenses of other functions. These
expenses are allocated to each related function. Program revenues include 1) charges to customers or applicants who
purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants
and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment.
Taxes and other items not properly included among program revenues are reported instead as general revenues.
Indirect expenses reported in the statement of activities must be allocated to the different functions of the City. These
expenses include administration, data processing, and central garage. The administrative cost allocation is based on each
functions percentage of total City expenses. Data processing is allocated based approximately on that functions usage of the
City's computer servers. Central garage expenses are allocated to the other functions of the City based on actual invoicing.
Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the
latter are excluded from the government -wide financial statements. Major individual governmental funds and major
individual enterprise funds are reported as separate columns in the fund financial statements.
33
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
Certain eliminations have been made as prescribed by GASB 34 in regards to inter -fund activities, payables and receivables.
All internal balances in the Statement of Net Assets have been eliminated except those representing balances between the
governmental activities and business -type activities, which are presented as internal balances and eliminated in the total
primary government column. In the Statement of Activities, internal service fund transactions have been eliminated; however,
those transactions between governmental and business -type activities have not been eliminated.
Measurement Focus and Basis of Accounting
On the government -wide Statement of Net Assets and the Statement of Activities, both governmental and business -type
activities are presented using the economic resources measurement focus and the accrual basis of accounting. Under the
accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred,
regardless of the timing of the cash flows. Property taxes are recognized as revenues in the year for which they are levied.
Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been
met. The City generally applies restricted resources to expenses incurred before using unrestricted resources when both
restricted and unrestricted net assets are available.
Fund Financial Statements
Basis of Presentation
Fund financial statements of the City are organized into funds. A fund is an independent fiscal and accounting entity with a
self -balancing set of accounts. Fund accounting segregates funds according to their intended purpose and is used to aid
management in demonstrating compliance with finance -related legal and contractual provisions. The minimum number of
funds is maintained consistent with legal and managerial requirements. Funds are organized into three categories:
governmental, proprietary, and fiduciary. An emphasis is placed on major funds within the governmental and proprietary
categories. Each major fund is displayed in a separate column in the governmental funds statements. All of the remaining
funds are aggregated and reported in a single column as non -major funds. A fund is considered major if it is the primary
operating fund of the City or meets the following criteria:
a. Total assets, liabilities, revenues, or expenditures/expenses of that individual governmental or enterprise fund
are at least 10 percent of the corresponding total for all funds of that category or type; and
b. Total assets, liabilities, revenues, or expenditures/expenses of that individual governmental or enterprise funds
are at least 5 percent of the corresponding total for all governmental and enterprise funds combined.
Measurement focus and Basis of Accounting
Governmental funds are used to account for the City's general government activities. Governmental fund types use the flow
of current financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual
basis of accounting, revenues are recognized when susceptible to accrual. (i.e., when they are "measurable and available")
"Measurable" means the amount of the transaction can be determined and "available" means collectible within the current
period or soon enough thereafter to pay liabilities of the current period. The City considers all revenues available if they are
collected within 60 days after year-end. Expenditures are recorded when the related fund liability is incurred, except for
unmatured interest on general long-term debt which is recognized when due, and certain compensated absences and claims
and judgements which are recognized when the obligations are expected to be liquidated with expendable available financial
resources.
Real and personal property taxes, special assessments, charges for current services, and interest earnings are susceptible to
accrual. Other receipts and taxes become measurable and available when cash is received by the City and are recognized as
34
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
revenue at that time. The City recorded real and personal property taxes and assessments levied for the current year as
revenue. Taxes and assessments receivable remaining unpaid at year-end and not expected to be collected soon enough
thereafter to be available to pay obligations of the current year were recorded as deferred revenue, with a corresponding
reduction in revenues, as required by generally accepted accounting principles. In addition, prior period delinquent taxes and
assessments collected in the current period were recorded as revenue in the current period as required by generally accepted
accounting principles. Entitlements and shared revenues are recorded at the time of receipt or earlier if the susceptible to
accrual criteria are met. Expenditure driven grants are recognized as revenue when the qualifying expenditures have been
incurred and all other grant requirements have been met.
Major Funds
The City reports the following major governmental funds:
The General Fund is always a major fund. This is the City's primary operating fund and it accounts for all financial
resources of the City except those required to be accounted for in other funds.
The Community Development Loan Revolving Fund was established to account for the lending and repayment of monies
loaned to businesses and individuals for projects approved by the City's Community Development department.
SID 344 is a debt service fund established to account for the resources accumulated and payments made for principal and interest
on the 20 year bonds sold to finance the construction of the Old School Station Industrial and Technology Park.
Proprietary funds are accounted for using the accrual basis of accounting. These funds account for operations that are primarily
financed by user charges. The flow of economic resources focus concerns determining costs as a means of maintaining the capital
investment and management control. Revenues are recognized when earned and expenses are recognized when incurred.
Allocations of costs, such as depreciation, are recorded in proprietary funds.
Proprietary funds distinguish operating revenues and expenses from non -operating items. Operating revenues and expenses
generally result from providing services and producing and delivering goods in connections with a proprietary fund's
principal ongoing operations. The principal operating revenues for enterprise funds are charges to customers for sales and
services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and
depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non -operating revenues
and expenses. When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted
resources first, then unrestricted resources as they are needed.
The City reports the following major proprietary funds:
The Water Fund accounts for the activities of the City's water distribution operations.
The Sewer Fund accounts for the activities of the City's sewer collection and treatment operations and includes the storm
sewer system.
Fiduciary funds account for assets held by the government in a trustee capacity or as an agent on behalf of others.
The agency fund is custodial in nature and does not present results of operations or have a measurement focus. Agency funds
are accounted for using the modified accrual basis of accounting. This fund is used to account for assets that the City holds
for others in an agency capacity.
35
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
As a general rule the effect of interfund activity has been eliminated from the government -wide financial statements, and the
internal service funds have been absorbed pro -ratably into governmental -type and business -type activities on the government -
wide financial statements. Exceptions to this general rule are charges for services between various functions of the
government. Elimination of these charges would distort the direct costs and program revenues reported for the various
functions concerned.
Budget Process
An annual appropriated operating budget is adopted each fiscal year for the general fund, special revenue funds, debt service
funds and capital projects funds on the modified accrual basis. In addition, a budget is adopted for the enterprise and internal
service funds on a full accrual basis. The appropriated budget is prepared by fund, function, and for the general fund and
certain other funds, by department.
The final budget is legally enacted by the City Council, after holding public hearings as required by State statutes, and within
forty-five days of the State providing final shared revenue figures. Budget appropriation transfers may be made between
general classifications of salaries and wages, maintenance and operation and capital outlay. Reported budget amounts
represent the originally adopted budget as amended by resolution of the City Council. It is management's responsibility to see
that the budget is followed to the budgetary line item.
The City Council may amend a final budget when shortfalls in budgeted revenues require reductions in approved
appropriations to avert deficit spending; when savings result from unanticipated adjustments in projected expenditures; when
unanticipated state or federal monies are received; or when a public emergency occurs which could not have been foreseen at
the time of adoption. The procedure to amend the budget in total can be made only after the City prepares a resolution, notice
is published of a public hearing, and a public hearing is held in accordance with state law.
All material budget amendments and transfers during FY 2010 are described below:
Governmental Funds
Accepted an Urban Forestry Grant (fund 2602) and approved appropriation of the $93,500 to address Dutch Elm Disease in
the City of Kalispell.
Approved an increase in the MACI Grant (fund 2825) of $20,480, to cover the actual cost of a Large Vacuum Sweeper.
Accepted a Department of Homeland Security grant (fund 2615) and approved appropriation of the $97,548 to enhance
Flathead County Border Corridor security.
Accepted a U.S. Department of Justice Drug Court grant (fund 2921) and approved appropriation of the $348,473 to
implement an adult misdemeanor drug court in the City of Kalispell.
Amended the Cultural Arts Grants (fund 2927) by $28,120 to appropriate pass-thru grant funds for the Northwest Montana
Historical Society, the Hockaday, and the Central School Museum.
Accepted a Montana Board of Crime Control grant (fund 2950) and approved appropriation of the $12,953.46 for the
continued funding of the Kalispell Municipal Domestic Violence Court Compliance Officer.
Increased the DUI Court grant (fund 2951) appropriation budget by $106,260, for grant increases and continued funding of
the Kalispell Municipal DUI Court.
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CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
Accepted a U.S. Department of Housing and Urban Development grant (fund 2991) and approved appropriation of the
$4,000,000 to fund a Neighborhood Stabilization Program.
Accepted a Department of Homeland Security grant (fund 4150) and approved appropriation of the $1,348,039 to renovate
Fire Station #61.
Proprietary Funds
Increased sewer fund appropriations by $289,908 to provide the needed budget authority for the relocation of sewer service
lines in advance of the U.S. 93 bypass construction.
Increased water fund appropriations by $306,872 to provide the needed budget authority for the relocation of water service
lines in advance of the U.S. 93 bypass construction.
Assets, Liabilities, and Net Assets or Equity
1. Cash, Cash Equivalents, and Investments
The City's cash and cash equivalents are considered to be cash on hand, demand and time deposits, government backed
securities, bonds and warrants, and investments with the State of Montana's short-term investment pool (STIP). The cash
resources of the individual funds are combined to form a pool of cash and investments which is managed by the City
Treasurer.
Investments are carried at cost, which does approximate fair value as described in Note III, A, except for investments in STIP
and particular bonds, which are reported at fair value.
For purposes of the statement of cash flows, the enterprise and internal services funds consider all funds (including restricted
assets) held in the City's cash management pool to be cash equivalents.
2. Receivables and Payables
Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year
are referred to as either interfund receivables/payables (i.e., the current portion of interfund loans) or advances to/from other
funds (i.e., the non -current portion of interfund loans). All other outstanding balances between funds are reported as due
to/from other funds.
Advances between funds are offset by a fund balance reserve account in applicable governmental funds to indicate they are
not available for appropriation and are not expendable available financial resources.
Property tax levies are set within forty-five days of the State providing shared revenue figures, in connection with the budget
process. Real property (and certain attached personal property) taxes are billed within ten days after the third Monday in
October and are due in equal installments on November 30 and the following May 31. After those dates, they become
delinquent, and a lien is filed upon the property. After three years, the City may exercise the lien and take title to the
property. Special assessments are billed in two equal installments due November 30 and the following May 31. Personal
property taxes (other than those billed with real estate) are generally billed no later than the second Monday in July (normally
in May or June), based on the prior November's levies. Personal property taxes, other than mobile homes, are due thirty days
after billing. Mobile home taxes are billed in two halves, the first due thirty days after billing; the second due September 30.
The tax billings are considered past due after the respective due dates and are subject to penalty and interest charges.
37
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
An allowance for uncollectible accounts was not maintained for real and personal property taxes and special assessments
receivable. The direct write-off method is used for these accounts.
A reserve for estimated uncollectible accounts receivable is maintained for the Water Fund and Sewer Fund. The reserve
balances are as follows for June 30, 2010:
Water $ 12,306
Sewer $ 16,570
3. Inventories and Prepaid Items
Inventories for materials and supplies for governmental fund types are expended at the time of purchase. Enterprise Fund
inventory of materials and supplies are valued at cost and the First -In First -Out (FIFO) method is utilized. Certain payments
to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items.
4. Restricted Assets
Certain proceeds of the City's enterprise fund revenue bonds, as well as certain resources set aside for their repayment, are
classified as restricted assets on the balance sheet because their use is limited by applicable bond covenants. When an
expense is incurred for which both restricted and unrestricted net assets are available, it is the City's policy to first apply the
restricted resources.
5. Capital Assets
Capital assets, which include property, plant, and equipment, are reported in the applicable governmental or business -type
activities columns in the government -wide financial statements. Capital assets are defined by the government as assets with
an initial, individual cost of more than $5,000 and an estimated useful life in excess of five years. Such assets are recorded at
historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair
market value at the date of donation. As required by GASB, the City of Kalispell has retroactively reported its streets as part
of capital assets in the financial reports for fiscal year 2009. More detailed information on the City's streets and all capital
assets can be found in Note D. Capital Assets.
The costs of normal maintenance and repairs that do not add to the value of the assets or extend asset lives are not capitalized.
Improvements are capitalized and depreciated over the remaining useful lives of the related assets. Major outlays for capital
assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of fixed
assets is reflected in the capitalized value of the asset constructed, net of interest earned on the invested proceeds over the
same period.
Depreciation has been provided for the property, plant and equipment of the City of Kalispell using the straight line method.
The useful lives of these assets have been estimated as follows:
Buildings
20-50 years
Improvements Other than buildings
10-50 years
Streets
40 years
Machinery, vehicles and equipment
5-20 years
Water and Sewer lines, pump stations
10-50 years
38
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
6. Compensated Absences
It is the City's policy and state law to permit employees to accumulate a limited amount of earned but unused vacation
benefits, which will be paid to employees upon separation from City service. Employees are allowed to accumulate and carry
over a maximum of two times their annual accumulation of vacation. Any vacation leave time accumulated over this
maximum carryover must be used within 90 days of the new calendar year. There is no restriction on the amount of sick leave
that may be accumulated. Upon separation, employees are paid 100 percent of accumulated vacation and 25 percent of
accumulated sick leave.
The liability associated with governmental fund -type employees is reported in Governmental Activities column of the
Statement of Net Assets, while the liability associated with proprietary fund -type employees is recorded in the respective fund
and the Business -type Activities column of the Statement of Net Assets. For the purpose of reporting these compensated
absences payable as current or noncurrent, the City uses a last in first out assumption. Under this assumption, the only
compensated absences the City reports as current are the liabilities associated with employees who will retire within the 12
months following the fiscal year being reported.
7. Long - Term Obligations
In the government -wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and
other long-term obligations are reported as liabilities in the applicable governmental activities, or proprietary fund type
statement of net assets. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are
expensed when incurred.
In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance
costs, during the current period. The face amount of the debt issued is reported as other financing sources. Premiums
received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other
financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service
expenditures.
NOTE 2. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
A. Excess of expenditures over appropriations
For the year ended June 30, 2010, all City funds expenditures were less than or equal to budgeted appropriations.
B. Deficit Fund Balances
The following Funds had deficit fund balances at June 30, 2010:
Debt Service Funds:
Sidewalk & Curbs (1) $ 469
(1) This deficit will be eliminated as delinquent assessments are collected.
39
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
NOTE 3. DETAILED NOTES ON ALL FUNDS AND ACCOUNT GROUPS
A. Cash and Cash Equivalents
Investment Income
Income from pooled investments is allocated to the individual funds based on the fund's month end cash balance in relation to
total pooled investments.
Cash Composition
Cash and investments may include cash and cash items; demand, time, savings, and fiscal agent deposits; investments in the
State Short -Term Investment Pool (STIP); repurchase agreements; U.S. government treasury bills, notes bonds, and other
treasury obligations such as state and local government series; general obligations of certain agencies of the United States
such as Federal Home Loan Bank; and U.S. government security money market funds if the fund meets certain conditions.
Total City's (primary governmental and component units) composition of cash, deposits and investments at fair value as of
June 30, 2010, are as follows:
Cash on hand
$ 2,730
Cash in banks:
Demand Deposits
9,690,004
Savings Deposits
2,260
Bonds/Warrants
55,463
STIP
1,503
Government Backed Securities
9,725,000
Total
119.476.960
Credit Risk
Section 7-6-202, MCA, limits investments of public money of a local government in the following eligible securities:
(a) United States government treasury bills, notes and bonds and in the United States treasury obligations, such as state
and local government series (SLGLS), separate trading of registered interest and principal of securities (STRIPS), or
similar United States treasury obligations;
(b) United States treasury receipts in a form evidencing the holder's ownership of future interest or principal payments
on specific United States treasury obligations that, in the absence of payment default by the United States, are held in
a special custody account by an independent trust company in a certificate or book entry form with the federal
reserve bank of New York; or
(c) Obligations of the following agencies of the United States, subject to the limitations in subsection 2 (not included):
(i) federal home loan bank;
(ii) federal national mortgage association;
(iii) federal home mortgage corporation; and
(iv) federal farm credit bank.
With the exception of the assets of a local government group self-insurance program, investments may not have a maturity date
exceeding 5 years except when the investment is used in an escrow account to refund an outstanding bond issue in advance.
40
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
Section 7-6-205 and Section 7-6-206, MCA, state that demand deposits may be placed only in banks and Public money not
necessary for immediate use by a county, city, or town that is not invested as authorize in Section 7-6-202 may be placed in time
or savings deposits with a bank, savings and loan association, or credit union in the state or placed in repurchase agreements as
authorized in Section 7-6-213.
The City of Kalispell has no investment policy that would further limit its investment choices.
The City of Kalispell has the following investments and their related credit risk as reported by Standard and Poor's or Moody's
investment service:
Short Term Investment Pool (STIP) Credit Quality ratings by the NRSRO as of June 30, 2010:
Security Investment Type
Credit Quality Rating
Asset Backed Commercial Paper
$
368,299,047
Al
Corporate Commercial Paper
$
196,596,245
Al+
Corporate Variable -Rate
$
206,328,268
A2
Certificates of Deposit Fixed
$
105,006,272
A3
Certificates of Deposit Variable -Rate
$
235,000,000
A2
U.S. Government Agency Fixed
$
100,306,188
Al+
U.S. Government Agency Variable -Rate
$
760,102,766
Al+
Money Market Funds (Unrated)
$
181,695,137
NR
Money Market Funds (Rated)
$
10,000,000
Al+
Structured Investment Vehicles
$
85,617,544
D
Total Investments
$2,248,951,467
Al
Securities Lending Collateral Investment Pool
$ 86 635,467
NR
Unaudited financial statements for the State of Montana's Board of Investments are available at 555 Fuller Avenue in Helena,
Montana.
Custodial Credit Risk
Custodial Credit risk is the risk that, in the event of a bank failure, the government's deposits may not be returned to it. The City
of Kalispell does not have a deposit policy for custodial credit risk. All deposits are carried at cost plus accrued interest. As of
June 30, 2010, the City of Kalispell's bank balance was exposed to custodial credit risk as follows:
Depository Account Balance
Insured $ 250,000
Collateralized
-Collateral held by the pledging bank's trust
department, but not in the City's name $ 9,529,070
-Uninsured and uncollateralized $ 0
Total Deposits $ 9.779. 770
41
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
Deposit Security
Section 7-6-207, MCA, states (1) The local governing body may require security only for that portion of the deposits which is not
guaranteed or insured according to law and, as to such unguaranteed or uninsured portion, to the extent of:
(a) 50% of such deposits if the institution in which the deposit is made has a net worth of total assets ratio of 6% or
more; or
(b) 100% if the institution in which the deposit is made has a net worth of total assets ratio of less than 6%.
The amount of collateral held for the City of Kalispell deposits at June 30, 2010, equaled or exceeded the amount required by
State statues.
Concentration of Credit Risk
The City of Kalispell places no limit on the amount the entity may invest in any one issuer. The City of Kalispell's concentration
of credit risk percentages follow for each investment issued that is not issued or explicitly guaranteed by the U.S. government,
invested in mutual funds, external investment pools or other pooled investments:
% of credit risk
Bonds/Warrants <1 %
Interest Rate Risk
The City of Kalispell does not have a formal investment policy that limits investment maturities as a means of managing its
exposure to fair value losses arising from increasing interest rates. The following is a list of individual investments as of June 30,
2010 along with their related interest rates and maturity dates.
Investment
STIP
Federal National Mtg Assn
Federal National Mtg Assn
Federal Home Loan Bank
Federal National Mtg Assn
Federal Home Loan Bank
Federal Home Loan Mortgage Corp
Federal Home Loan Bank
Federal National Mtg Assn
Federal Home Loan Bank
Federal National Mtg Assn
S&C Bonds
Interest Rate
0.316%
2.000%
2.000%
3.000%
2.500%
2.000%
2.000%
2.000%
2.000%
2.000%
1.500%
Maturity Date
varies
4/29/14
5/27/14
12/24/14
2/26/15
3/17/15
4/15/15
4/22/15
5/12/15
5/19/15
6/10/15
3.5%-9.5% varies
is
Amount
$ 1,503
$ 1,000,000
$ 725,000
$ 1,000,000
$ 1,000,000
$ 1,000,000
$ 1,000,000
$ 1,000,000
$ 1,000,000
$ 1,000,000
$ 1,000,000
$ 55,463
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
B. Interfund Receivables and Payables
The composition of interfund balances as of June 30, 2010, was as follows:
Due to/from other funds:
Receivable Fund Payable Fund Amount Purpose
CD Revolving - Major Governmental Street Maintenance $ 16,000 S/T Loan
SID - Revolving S & C's $ 4,995 SIT Loan
Advances to/from other funds:
Receivable Fund Payable Fund Amount Purpose
CD Revolving - Major Governmental Street Maintenance $ 16,000 UT Loan
C. Operating Transfers
The following is an analysis of transfers in and out during Fiscal Year 2010:
From
To
Amount
Purpose
Health
General - Major Governmental
$
516,615
Operating
Health
Parks
$
60,000
Operating
Old School Tech TIF
Old School TIF - Debt Service
$
46,600
Operating
Old School Industrial TIF
Old School TIF - Debt Service
$
10,832
Operating
Street Maintenance
MACI Grant
$
29,563
Match
Airport TIF - Debt Service
Airport TIF - Special Revenue
$
550,000
Operating
Westside TIF - Debt Service
Westside TIF - Special Revenue
$
487,172
Operating
General - Major Governmental
Drug Grant
$
26,730
Match
General - Major Governmental
COPS Grant
$
5,000
Match
General - Major Governmental
Law Enforcement Block Grant
$
8,000
Match
TOTAL
$
1,740,512
D. Capital Assets
Capital asset activity for the year ended June 30, 2010 was as follows:
Transfers between fund types
In fiscal year 2010, the Montana Department of Transportation began construction of a truck bypass around the City of
Kalispell. During construction, relocation and extension of some City owned infrastructure was necessary. The cost of this
relocation and extension was agreed to be split proportionally between the City and State. Some of the relocation and
extension was done in the Westside TIF District, and the City chose to pay its proportionate share using TIF dollars. The
Westside TIF District is a special revenue fund. Below is a breakdown of the infrastructure transferred between fund types as
a result.
From To Amount Purpose
Westside TIF (special revenue) Water Enterprise $ 72,695 Mains/Hydrants
Westside TIF (special revenue) Sewer Enterprise $ 121,864 Mains (storm/sanitary)
Capital assets transferred from governmental funds to enterprise funds are not reported in the Statement of Revenues,
Expenditures, and Changes in Fund Balances, because there has been no flow of current financial resources. The enterprise
43
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
funds report it as a capital contribution in the Statement of Revenues, Expenses and Changes in Net Assets. It is reported as a
transfer for both sides in the Statement of Activities.
City of Kalispell streets
In fiscal year 2007, as required by GAS13, the City of Kalispell retroactively reported its streets as part of capital assets. At
the time a 20 year service life was assumed for all streets. During fiscal year 2010, the City of Kalispell finance department
and public works department reassessed this assumption and determined that a service life of at least 40 years should be used.
This conclusion was reached after closely reviewing the City's past street maintenance records. This change in depreciable
life resulted in a $14,444,335 restatement on the statement of activities.
Balance
Additions /
Deductions /
Balance
Governmental Activities:
July 1, 2009
Contributions Restatements
Transfers
June 30, 2010
Capital assets not being depreciated:
Land
$ 2,552,209
$ 2,552,209
Construction in Progress
125,508
194,404
(10,398)
309,514
Total capital assets not being depreciated
2,677,717
194,404
(10,398)
2,861,723
Capital assets being depreciated:
Buildings
18,357,863
$ 6,161
18,364,024
Improvements other than buildings
14,006,291
285,908
14,292,199
Machinery and equipment
6,451,302
298,871
(70,586)
6,679,587
Infrastructure
79,280,573
79,280,573
Total capital assets being depreciated
118,096,029
590,940
(70,586)
118,616,383
Less accumulated depreciation for
Buildings
(5,945,824)
$ (603,765)
(6,549,589)
Improvements other than buildings
(3,844,838)
(606,251)
(4;451,089)
Machinery and equipment
(3,241,598)
(463,139)
70,194 (3,634,543)
Infrastructure
(28,891,291)
(1,982,014)
14,444,335 (16,428,970)
Total accumulated depreciation
(41,923,551)
(3,655,169)
14,444,335 70,194 (31,064,191)
Total capital assets being depreciated, net
76,172,478
(3,064,229)
14,444,335 (392) 87,552,192
City capital assets, net
$ 78,850,195 $ (2,869,825) $ 14,444,335 $ (10,790) $ 90,413,915
Balance
Internal service funds: July 1, 2009 Additions
Data Processing $ 149,736 $
Less accumulated depreciation (124,837) (5,898)
Internal service funds assets, net $ 24,899 $ (5,898)
ME
Balance
Deductions June 30, 2010
$ $ 149,736
(130,735)
$ $ 19,001
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
Balance
Additions /
Deductions /
Balance
Business -type activities:
July 1, 2009
Contributions
Transfers
June 30, 2010
Capital assets not being depreciated:
Land
$ 1,699,194
$
$ 1,699,194
Construction in progress
21,798,325
31,402
(21,706,517)
123,210
Total capital assets not being depreciated
23,497,519
31,402
(21,706,517)
1,822,404
Capital assets being depreciated:
Buildings
316,731
316,731
Machinery and equipment
1,906,707
(106,358)
1,800,349
Source of supply
4,524,313
4,524,313
Pumping plant
3,535,443
-
-
3,535,443
Treatment plant
15,679,204
416,088
21,706,517
37,801,809
Transmission and distribution
46,996,557
1,564,551
(11,382)
48,549,726
General plant
4,242,616
45,001
-
4,287,617
Storm sewer system
11,506,779
644,661
12,151,440
Total capital assets being depreciated
88,708,350
2,670,301
21,588,777
112,967,428
Less accumulated depreciation for:
Buildings
(191,222)
(15,681)
(206,903)
Machinery and equipment
(1,251,321)
(207,850)
106,358
(1,352,813)
Source of supply
(415,021)
(92,593)
(507,614)
Pumping plant
(1,088,764)
(111,469)
(1,200,233)
Treatment plant
(12,984,438)
(1,391,888)
(14,376,326)
Transmission and distribution
(10,807,331)
(1,325,703)
11,382
(12,121,652)
General plant
(2,072,742)
(208,612)
(2,281,354)
Storm sewer system
(2,583,031)
(259,528)
(2,842,559)
Total accumulated depreciation
(31,393,870)
(3,613,324)
117,740
(34,889,454)
Total capital assets being depreciated, net
$
57,314,480
$ (943,023)
$ 21,706,517
$ 78,077,974
Business -type activities capital assets, net
$
80,811,999
$ (911,621)
$ -
$ 79,900,378
Balance
Balance
Component Unit:
July
1, 2009
Additions
Deductions
June 30, 2010
Parking Commission assets
$
109,098
$ -
$
$ 109,098
Less accumulated depreciation
(76,140)
(6,214)
(82,354)
Component unit assets, net
$
32,958
$ (6,214)
$
$ 26,744
45
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
Depreciation was charged to functions/programs of the primary government as follows:
Governmental Activities:
General Government
$ 2,585,353
Public Safety
486,408
Public Works
159,509
Parks and Recreation
423,899
Total Governmental Activities
$ 3,655,169
Business-tvae Activities:
Airport $ 100,832
Water 824,121
Sewer 2,497,319
Solid Waste 191,052
Total Business -type Activities $ 3,613,324
E. Long -Term Debt
During the year ended June 30, 2010, the following changes occurred in liabilities reported in long-term debt:
Balance
Balance
Due within
July 1, 2009 Additions
Reductions
June 30, 2010
1 year
(1)G.O. Bonds
$ 5,145,000 $
$ (340,000)
$ 4,805,000
$ 355,000
(1,2)Revenue Bonds
3,800,876
(594,876)
$ 3,206,000
533,000
(2)SRF
18,471,000 -
(691,000)
$ 17,780,000
718,000
(1)Assessments
4,760,664 7,629
(357,831)
$ 4,410,462
334,210
(1)Contract Debt/Loans
2,302,010 -
(212,245)
$ 2,089,765
203,853
(1)lntermediary Program
760,552 -
(16,977)
$ 743,575
25,651
(1,2,3,4)Compensated Absences
1,405,437
(24,002)
$ 1,381,435
61,748
Total
$ 36,645,539 $ 7,629
$ (2,236,931)
$ 34,416,237
$ 2,231,462
(1)reported in long-term debt account group
(2)reported in enterprise funds
(3)reported in component units
(4)reported in internal service fund
In prior years, the general fund was used to liquidate compensated absences and claims and judgments.
General Obligation Bonds — The City issues general obligation bonds to provide funds for the acquisition and construction
of major capital facilities. General obligation bonds are direct obligations and pledge the full faith and credit of the City.
General obligation bonds outstanding as of June 30, 2010 were as follows:
Origination
Interest
Due
Principal
Annual
Balance
Purpose Date
Rate Term
Date
Amount
Payment
30-Jun-10
Aquatic Facility 4/15/2002
4.2%-4.9% 20 years
2022
$ 3,675,000
varies
$ 2,610,000
Fire Station #62 4/1/2005
3%-6.5% 15 years
2020
3,000,000
varies
2,195,000
Total G.O. Bonds
$ 6,675,000
$ 4,805,000
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
Special Assessment Debt — Special assessment bonds are secured by a lien on the assessed properties. The primary source of
repayment is the assessments levied against the benefiting properties. However, the City is liable, to an extent, for repayment
of these special assessment bonds. The City is authorized by State law to establish and has established a revolving fund to
ensure the payment of debt service on the bonds in the event that assessed property owners default.
Origination
Interest
Due
Principal
Annual
Balance
Purpose
Date
Rate
Term
Date
Amount
Payment
30-Jun-10
SID341
9/1/1995
6.06%
15 years
2011
$ 100,000
varies
$ 5,000
SID342
11/1/1995
6.34%
15 years
2011
209,000
varies
10,000
SID343
6/12/2001
3.6%-5.5%
20 years
2021
1,581,500
varies
720,000
SID344
6/15/2006
3.7%-5.1%
20years
2026
4,520,000
varies
3,620,000
2002 S&C
1/2/2003
4.25%
8 years
2011
13,364
varies
1,670
2003 S&C
1/1/2004
4.50%
8 years
2012
13,758
varies
3,440
2004 S&C
1 /3/2005
5.00%
8 years
2013
31,693
varies
11,885
2005 S&C
1/3/2006
7.25%
8 years
2014
22,850
varies
11,425
2007 S&C
1/3/2008
6.00%
8 years
2016
15,407
varies
11,555
2008 S&C
1/3/2009
3.50%
8 years
2017
8,981
varies
7,858
2009 S&C
1/4/2010
3.50%
8 years
2018
7,629
varies
7,629
Total Special
Assessment
Bonds
$ 6,524,182
$ 4,410,462
SID's 343 and 344 Assessments
In the event that all future and delinquent assessments are paid and that there are no future adjustments to assessments by the
City of Kalispell, there is a projected surplus of principal assessments in SID's 343 and 344 of $154,657 and $157,609,
respectively.
SID 344 Bonds
The City of Kalispell entered into a Continuing Disclosure Undertaking dated as of June 29, 2006 with respect to the SID 344
Bonds. As part of the Undertaking, the City covenanted and agreed to provide continuing disclosure of certain financial
information, operating data, and timely notices of the occurrence of certain events for the benefit of the Holders of the Bonds
in order to assist the Participating Underwriters in complying with Securities and Exchange Commission Rule 15c2-12(b)(5),
promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the
"Rule"). The Bonds were issued pursuant to Resolution No. 5123, adopted by the City Council of the City on June 19, 2006.
Pursuant to Resolution No. 5123, principal of and interest on the Bonds are secured by: (i) special assessments payable by
taxpayers in SID 344; (ii) certain tax increment revenues pledged to the Bonds; (iii) a bond reserve account ($226,000)
established in the SID 344 fund; (iv) the debt service revolving fund ($226,000). On the July 1, 2009 payment date for the
Bonds, the City used $169,652.02 of the $452,000 in the SID 344 bond reserve account to fully satisfy the regularly
scheduled debt service payment of $318,603.75.
The use of the bond reserve monies was necessary because the largest property owner in SID 344 (currently the owner of 12
of the 17 total parcels in SID 344) had not paid 2008/2009 Special Assessments when due on November 30, 2008 and May
31, 2009 and the available Special Assessments and Tax Increments were insufficient to fully satisfy the regularly scheduled
payment. The City has determined that the use of bond reserve monies constitutes a material event (as defined by the Rule
and the Undertaking) because it is an unscheduled draw on the reserves reflecting financial difficulties for the Bonds. In
October 2009, Lot 2 of Special Improvement District 344 was sold. The purchaser of Lot 2 made a $250,000 prepaid tax
47
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
payment. The seller used the proceeds to bring the taxes current on 6 of the remaining unsold lots. The City used a portion of
these payments to replenish the bond reserve account to its required amount of $226,000. These prepaid taxes also allowed
the City to make the fiscal year 2010 debt payments without the use of reserve money. At June 30, 2010, $226,000 is in the
SID 344 bond reserve account, and $245,041 is in the debt service revolving fund available to pay future debt service on the
bonds.
Revenue Bonds — Revenue bonds are directly related to and expected to be paid from the proprietary fund. The 2005 Airport
Tax Increment bonds are accounted for in the Government -wide financial statements.
Purpose
2001 Water
2004 Water Refunding
2002 Sewer/WWTP
2005A - Airport TIF
Issue Interest
Date Rate
Jun-01 4.00%
May-04 2.5%-4.85%
Apr-02 1.8%-4.1 %
Sep-05 3.8%-4.40%
Total Revenue Bonds
Final
Term Maturity
20 years 2021
20 years 2024
9 years 2011
10 years 2020
Significant Provisions of the Series 2005 Airport Urban Renewal Tax Increment Bond
Bonds
Issued
Balance
30-Jun-10
$ 761,000
$ 481,000
1,840,000
1,050,000
2,355,000
230,000
1,445,000
1,445,000
$ 6,401,000
$3,206,000
Reserve Account — The City shall maintain a debt service reserve account with a balance equal to the lesser of: (i) ten percent
of the sum of the original principal amounts of each series of Bonds of which any Bond is Outstanding or (ii) the maximum
amount of principal and interest due on the Outstanding Bonds (giving effect to any mandatory sinking fund redemption) in
the then current or any future calendar year.
Maximum amount of principal and interest due in any future fiscal year $184,875
City's Reserve $184,875
Significant Provisions of the Water System Revenue Bonds
Debt Service Account - Monthly an amount equal to not less than 1/6 of the interest due within the next six months and 1/12
of the principal to become due within the next twelve months shall be credited to the debt service account. The debt service
account was zero as of June 30, 2010, as all debt service payments were made as of the end of the fiscal year, leaving no
accrued interest or principal balance.
Reserve Account - The City shall keep in the reserve account an amount equal to the lesser of 10% of the original principal or
the maximum amount of principal and interest required in the current or any subsequent fiscal year. For the Water fund the
City complies with the maximum amount of principal and interest required in the current or any subsequent fiscal year.
Maximum Principal and Interest $ 510,611
Total Reserve Requirement $ 510,611
Reserve balance 6/30/10 $ 5154-49
Property Insurance - The City will cause all buildings, properties, fixtures, and equipment to be kept insured in amounts that
are ordinarily carried.
Liability Insurance - The City will carry insurance against liability of the City and its employees.
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
Rates and Charges — Rates and charges will be made and kept sufficient to provide gross income and revenues adequate to
pay promptly the reasonable and current expenses of operating and maintaining the system and to produce in each fiscal year
net revenues in excess of such current expenses, equal to 125% of the maximum amount of principal and interest payable
from the Revenue Bond Account in any subsequent fiscal year.
Cash Flow Coverage
*Water Service Charges
$2,559,343
Misc. Revenue
143,879
Total Operating Revenue
$2,703,222
Less: Operating Expense (before depreciation)
1,651,775
Available for Debt Service
J1.051. 447
**Maximum Debt Service
$ 510,611
Coverage FYI
205%
*includes interest revenue
**includes all debt service needs of the water fund
Sewer Revenue Bonds Ordinances and Required Information
Operating Reserve — The city shall keep in the operating reserve account an amount equal to one month's operating expenses.
As of June 30, 2010, the operating reserve account contains $213,000.
Debt Service Account - Monthly an amount equal to not less than 1/6 of the interest due within the next six months and 1/12
of the principal to become due within the next twelve months shall be credited to the debt service account. The debt service
account was zero as of June 30, 2010, as all debt service payments were made as of the end of the fiscal year, leaving no
accrued interest or principal balance.
Reserve Account - The City shall keep in the reserve account an amount equal to the lesser of 10% of the original principal,
the maximum amount of principal and interest required in the current or any subsequent fiscal year, or 125% of the average
debt service payable in any fiscal year. The City is in compliance with the maximum amount of principal and interest
required in the current or any subsequent year. As of June 30, 2010, the debt service reserve account contains $1,371,162.
Rates and Charges — Rates and charges will be made and kept sufficient to provide gross income and revenues adequate to
pay promptly the reasonable and current expenses of operating and maintaining the system and to produce in each fiscal year
net revenues in excess of such current expenses, equal to 125% of the maximum amount of principal and interest payable
from the Revenue Bond Account in any subsequent fiscal year.
Cash Flow Covera.Qe
*Operating Revenue $4,259,802
Impact Fees pledged for debt service 250,000
Less: Operating Expense (before depreciation) 2,862,106
Available for Debt Service $1.647.696
**Maximum Debt Service $1,356,624
Coverage FY 10 121 %
*includes interest revenue
**includes all debt service needs of the sewer fund
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
State Revolving Fund — the City has five (5) loan agreements with the State Revolving Fund (SRF). These obligations are to
be repaid from the operating income of the fund.
SRF LOANS
Interest
Amount
Outstanding
Purpose
Origination
Rate
Term
Borrowed
30-Jun-10
Sewer - WWTP (construction)
FY92
4.00%
20 years
$ 3,913,425
$ 672,000
Sewer (Highway 93 S extension)
FY04
3.75%
20 years
1,475,860
1,138,000
Water 2007'A' (refinance)
FY07
3.75%
8 years
1,283,159
846,000
Water 2007'B' (well, storage, distribution)
FY08
3.75%
20 years
1,500,000
1,423,000
Sewer - WWTP (expansion)
FY08
3.75%
20 years
14,470,000
13,701,000
Total SRF Loans
$ 22,642,444
$ 17,780,000
Loans/Contracted Debt
Governmental Funds
Origination
Interest
Due
Principal
Balance
Purpose
Date
Rate** Term
Date
Amount
30-Jun-10
*Board of Housing
3/1/1995
6.00%
30 years
2/1/2025
$ 271,000
$ 189,874
BOI:City Hall HVAC
7/16/2004
varies
10 years
2/15/2014
151,836
73,004
BOI:Fire Truck
4/22/2005
varies
10 years
8/15/2015
279,900
166,905
Rocky Mtn Bank - Fire Truck
3/7/2008
3.95%
10 years
3/1/2018
575,000
478,000
Capital One Public Funding -
201 1st Ave E -City Hall
10/25/2007
4.85%
12 years
9/15/2019
1,420,165
1,181,983
Total BOI loans/contracted
debt
2,697,901
2,089,766
USDA: Intermediary
Relending Program
10/12/2004
1.00%
30 years
10/12/2034
520,000
486,074
Relending Program
11/27/2006
1.00%
30 years
11/27/2036
257,500
257,500
Total loans/contracted debt
$ 3,475,401
$ 2,833,340
BOI - Board of Investments Intercap Loan Program
*The board of housing loan is paid from the proceeds of the rents on the Courtyard Apartments per the
agreement with Northwest Human Resources.
Compensated Absences Payable — compensated absences payable, which represent vacation, sick leave and compensatory
time earned by employees, and is payable upon termination, were as follows:
Governmental Funds
$1,051,049
Enterprise Funds
320,249
Data Processing Fund
6,636
Parking Commission
3,501
Total
$ 1,381,435
50
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
Requirements to amortize debt
The annual requirements to amortize all long-term debt outstanding, excluding compensated absences payable, as of June 30,
2010, were as follows:
SPECIAL
G.O.
ASSESSMENT
CONTRACTED
REVENUE
FOR FISCAL
BONDS
BONDS
LOANS/DEBT
BONDS
YEAR ENDED
PRINCIPAL
INTEREST
PRINCIPAL
INTEREST
PRINCIPAL
INTEREST
PRINCIPAL
INTEREST
TOTAL
2011
355,000
203,645
334,210
205,554
947,504
759,095
533,000
125,628
3,463,636
2012
365,000
190,288
317,541
190,828
1,222,205
721,163
219,000
113,830
3,339,855
2013
385,000
176,573
315,820
176,918
1,159,234
672,841
226,000
105,215
3,217,601
2014
395,000
161,618
311,858
162,851
1,296,110
630,938
237.000
96,195
3,291,571
2015
415,000
145,783
309,002
148,772
1,382,197
580,340
244,000
85,508
3,310,602
2016-2020
2,350,000
450.670
1,452,030
543,348
6,130,687
2,175,535
1,390,000
268,798
14,761,068
2021-2025
540,000
39,935
1,140,000
233,385
5,876,726
1,044,010
357,000
41,765
9,272,821
2026-2030
230,000
11,730
2,419,911
128,414
2,790,055
2031-2035
159,588
5,359
164,947
2036-2040
19,177
150
19,327
TOTAL
4,805,000
1,368,512
4,410,462
1,673,387
. 20,613,339
6,717,845
3,206,000
836,939
43,631,483
F. State -Wide Retirement Plans
Substantially all full-time City employees are eligible for one of three retirement plans: Montana Public Employees'
Retirement System (PERS); Municipal Police Officer's Retirement System (MPORS): and the Firefighters' Unified
Retirement System (FURS). The plans are established by State law and administered by the State of Montana. The plans are
cost -sharing multiple -employer defined benefit and/or defined contribution plans that provide retirement, disability and death
benefits to plan members and beneficiaries. The City had a total payroll of $9,873,686 for FY10, of which $9,237,558 is
covered by PERS, MPORS, or FURS. Component Unit payroll covered by PERS was $52,746 for the Parking Commission.
Contribution rates for the plans are required and determined by State law. The contribution rates, expressed as a percentage
of covered payroll for the fiscal year ended June 30, 2010, were:
PERS
MPORS
FURS
Employee
6.90%
9.00%
10.70%
Employer
7.07%
14.41%
14.36%
State
0.10%
29.37%
32.61%
The State contribution qualifies as an on behalf payment. These amounts have been recorded in the City's financial
statements.
The Retirement System issues a publicly available financial report that includes financial statements and required
supplementary information for all three plans. That report may be obtained by writing to Public Employees Retirement
Division, P. O. Box 200131, Helena, MT 58620-0131 or by calling 1-406-444-3154.
The City's contributions for the years ending June 30, 2008, 2009 and 2010, as listed below, were equal to the required
contributions for each year.
PERS
2008 $ 383,694
2009 $ 397,550
2010 $ 402,258
MPORS
FURS
$ 253,371
$ 284,147
$ 266,802
$ 285,567
$ 263,223
$ 254,540
51
PARKING COMM
$ 3,817
$ 3,664
$ 3,729
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
G. Post Employment Health Insurance Benefits
Terminated employees may remain on the City's health insurance plan for up to 18 months if they pay the monthly premiums.
This benefit is required under federal C.O.B.R.A. law. In accordance with Montana State law (see below), retirees may
remain on the City's health plan as long as they wish, at a rate that does not cover all of the related costs. This results in the
reporting of an implied rate subsidy in the financial statements and footnotes. The City's contract with Allegiance Benefits
details the plan eligibility. MMIA is the administrator of the benefit plan which covers both active and retired members. The
City's retirees may continue coverage for themselves and their covered eligible dependents if they are eligible for public
employees' retirement by virtue of their employment with the City of Kalispell. The City's current labor contracts do not
include any obligations for payments to retirees.
Montana Codes Annotated (MCA) Section 2-18-704 states (1) An insurance contract or plan issued under this part must
contain provisions that permit:
(a) The member of a group who retires from active service under the appropriate retirement provisions of a defined
benefit plan provided by law or, in the case of the defined contribution plan provided in Title 19, chapter 3, part 21,
a member with at least 5 years of service and who is a least age 50 while in covered employment to remain a
member of the group until the member becomes eligible for medicare under the federal Health Insurance for the
Aged Act, 42 U.S. C. 1395, as amended, unless the member is a participant in another group plan with substantially
the same or greater benefits at an equivalent cost or group plan with substantially the same or greater benefits at an
equivalent cost;
(b) The surviving spouse of a member to remain a member of the group as long as the spouse is eligible for retirement
benefits accrued by the deceased member as provided by law unless the spouse is eligible for medicare under the
federal Health Insurance for the Aged Act or unless the spouse has or is eligible for equivalent insurance coverage
as provided in subsection (1)(a);
(c) The surviving children of a member to remain members of the group as long as they are eligible for retirement
benefits accrued by the deceased member as provide by law unless they have equivalent coverage in subsection
(1)(a) or are eligible for insurance coverage by virtue of the employment of a surviving parent or legal guardian.
The City of Kalispell does not consider its liability for other post employment benefits material and has elected not to report
OPEB in any funds.
Funding Policy. The plan is unfunded by the City and plan members receiving benefits contribute 100 percent of their cost of
the benefits on a pay-as-you-go basis. For fiscal year ended June 30, 2010, the City has 31 retired members receiving
benefits.
Annual OPEB Cost and Net OPEC Obligation. The City's annual other post -employment benefit (OPEB) cost (expense) is
calculated based on the annual required contribution of the employer (ARC). The ARC represents a level of funding that, if
paid on an ongoing basis, is projected to cover normal cost each year and to amortize any unfunded actuarial liabilities (or
funding excess) over a period not to exceed thirty years.
52
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
The following table shows the components of the City's annual OPEB cost for the year, the amount actually contributed to the
plan, and changes in the City's net OPEB obligation to the Retiree Health Plan:
Annual required contribution/Annual OPEB Cost (Expense) $282,232
Contributions made 0
Increase in net OPEB obligation 282,232
Net OPEB obligation - beginning of year 282,232
Net OPEB obligation - end of year $564,464
The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the Plan, and the net OPEB obligation for
fiscal year ended June 30, 2010, were as follows:
Percentage of
Fiscal Year
Annual
Annual OPEB Cost
Net OPEB
Ended
OPEB Cost
Contributed
Obligation
June 30, 2009
$282,232
0.00%
$282,232
June 30, 2010
$282,232
0.00%
$564,464
The June 30, 2010 year-end annual OPEB expense, if considered material, would be reported in the City's funds as follows:
Functions/Programs Expenses
Primary Government:
Governmental activities:
General government $237,300
Total governmental activities 237,300
Business -type activities:
Water
Sewer
Total primary government
23,195
21,737
Total business -type activities 44,932
$282,232
Actuarial Methods and Assumptions. As of July 1, 2008, the City's actuarially accrued liability (AAL) for benefits was
$3,008,915. The AAL by status breakdown is shown below:
Active participants:
Retirees, Dependents, and Surviving Spouses
Total AAL
Normal Cost
Participant Information
Active participants:
Retirees, Dependents, and Surviving Spouses:
Total
$ 1,450,472
$ 1,558,443
$ 3,008,915
$ 170,429
172
31
203
53
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
The following key assumptions were chosen by the City:
1. Discount Rate: 4.25%
2. Expected Long Term Rate of Return on Assets: N/A
3. Healthcare and Retiree Contribution Trend Rates: 7.6% as of July 1, 2008 reduced linearly to 5% by fiscal year
2014, and remaining at 5 % thereafter.
4. Participation Rate: 30% of future retirees are assumed to elect medical coverage. 70% of the future retirees
who elect medical coverage and are married are assumed to elect spousal coverage as well.
5. Marital Assumption: For future retirees, 60% are assumed to be married, and males are assumed to be 3 years
older than females.
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the
probability of events far into the future. Examples, as detailed above, include assumptions about future employment,
mortality, and the healthcare cost trend. Actuarially determined amounts are subject to continual revisions as actual results
are compared with past expectations, and new estimates are made about the future. Actuarial calculations reflect a long-term
perspective. The schedule of funding progress, presented as required supplementary information following the notes to the
financial statements, is designed to present multiyear trend information about whether the actuarial value of plan assets is
increasing or decreasing over time relative to the actuarial liabilities for benefits.
Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the
employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern
of sharing of benefit costs between the employer and plan members to that point. The methods and assumptions used include
techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value
of assets, consistent with the long-term perspective of the calculations.
H. Amounts Due From and Due To other Governments
On June 30, 2010, the amounts due from and due to other governments consisted of the following:
General Fund
Due from: Amount
State of Montana -License Fee $ 3,225
Flathead County -Taxes 73,168
Total $ 76,393
Special Revenue Funds
Due from:
Amount
MDOT-Bypass reimb.
$ 31,940
MDOT-Court Grant
$ 24,665
Flathead County -EMS Levy
$ 51,797
Flathead County -Taxes
$ 427,562
DNRC-Grants
$ 24,427
Montana Historical Society
$ 500
Dept. of Military Affairs
$ 7,856
Flathead County Sheriff Dept.
$ 43,095
Montana Board of Crime Control
$ 1,422
State of Montana-Hazmat Reimb
$ 1,269
U.S. Dept. of Justice -Grants
$ 50,645
Total
$ 665,178
Debt Service Funds
Due from: Amount
Flathead County -Taxes $ 72,297
Capital Project Funds
Due from: Amount
U.S. Dept. of Homeland Sec. $ 29,641
Enterprise Funds
Due from: Amount
Flathead County -Taxes 265,595
MDOT-Bypass reimb. $ 106,873
Total
54
$ 372,468
$ 1,215,977
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
TUNE 30, 2010
I. Restricted Cash/Investments
The following restricted cash/investments were held as of June 30, 2010. These amounts are reported within the
cash/investment account on the Combined Balance Sheet.
Business -type Activities
1-Jul-09 Additions
Subtractions
30-Jun-10
Water Bond Reserve (includes SRF & BOI)
$ 515,449
$ -
$ -
$ 515,449
Plant InvestmenUlmpact Fees
676,428
256,305
(154,728)
778,005
Sewer Operating Reserve
213,000
-
213,000
Bond Contingency
1,371,162
-
1,371,162
Plant Investment/impact Fees (sanitary)
2,061,325
128,492
(566,126)
1,623,691
Plant InvestmenUlmpact Fees (treatment plant)
692,727
167,505
(413,184)
447,048
Plant InvestmenUlmpact Fees (storm)
656,285
253,136
(454,753)
454,668
Treatment Plant Replacement
387,349
425,890
(484,269)
328,970
Total business -type activities restricted cash/investments
6,573,725
1,231,328
(2,073,060)
5,731,993
Governmental Activities
Impact Fees Capital
170,987
172,416
(48,798)
294,605
Urban Forestry Developers
127,823
4,254
(30,564)
101,513
Debt Service Bond Reserve
413,315
169,652
(82,567)
500,400
Total governmental activities restricted cash/investments
712,125
346,322
(161,929)
896,518
Total restricted cash/investments
$ 7,285,850
$ 1,577,650
$ (2,234,989)
$ 6,628,511
Plant investment/impact fee cash is from new services and is restricted to be used only for capital (state law).
Operating reserve cash is restricted according to bond agreement (third party).
Treatment plant replacement cash is restricted by an agreement with Flathead County Water District (third party).
Urban forestry receives cash from developers to be used to plant trees in new city developments (third party).
Plant investment/impact fees. Montana State legislation regulating impact fees to fund capital improvements, MCA 7-6-1601
through 7-6-1604 (see 7-6-1603 below related to expending impact fees), became effective April 19,2005 and sets forth the
procedures and requirements for the.imposition of impact fees by local governments. On October 16, 2006, by ordinance no.
1587, the Kalispell City Council authorized and established the procedure and imposition of impact fees to fund capital
improvements related to additional capacity (growth).
MCA 7-6-1603 states that "the collection and expenditure of impact fees must be reasonably related to the benefits accruing
to the development paying the impact fees..."
J. Restatements
During the current fiscal year, the following adjustments relating to prior years' transactions were made to fund balance and
retained earnings accounts.
Fund
Governmental Funds
Amount Reason
$ 14,444,335 Prior Fiscal Year Depreciation Correction
55
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
K. Joint Ventures
Joint ventures are independently constituted entities generally created by two or more governments for a specific purpose
which are subject to joint control, in which the participating governments retain 1) an ongoing financial interest or 2) an
ongoing financial responsibility.
1. City -County Health Department
The City -County Health Department is operated under an interlocal agreement between Flathead County and the City of
Kalispell. The Department operates under the supervision and control of the City -County Health Board. The Board consists
of seven members, six of whom are appointed by the Board of County Commissioners. The Department is financed, in
addition to revenue generated by providing health services, by the City and the County levying an identical mill levy, up to 5
mills, in order that all property within the City of Kalispell and all property in Flathead County outside the City limits are
taxed equally. The operation is accounted for in the City Health Fund and is included in the general purpose financial
statements of Flathead County within the Special Revenue Fund.
2. Courtyard Apartments/Northwest Montana Human Resources
The City entered into an agreement with Northwest Montana Human Resources for a joint venture construction project of the
Courtyard Apartments. The City owns 16 units of the apartment complex built with Home Grant and CDGB funds.
NWMHR has built 16 units also. The agreement provides for the management of the housing complex for low income
housing. All operations and maintenance of the housing complex are managed by Northwest Montana Human Resources.
NWMHR maintains a trust fund in the City's name to record the revenues and expenses of the housing complex. As of June
30, 2010 the equity in the fund was $2,261. The debt payments on the mortgage are paid from the proceeds of the rents by
NWMHR. The principal balance is recorded on the City's books in the Government -wide financial statements. The original
amount of the loan was $271,000. The balance as of June 30, 2010 is $189,874.
3. 911 Dispatch Center
The 911 Dispatch Center is operated under an interlocal agreement between Flathead County, the City of Columbia Falls, the
City of Whitefish, and the City of Kalispell. The Center operates under the supervision and control of the Flathead
Emergency Communications Center Board. The Board consists of six members, the Flathead County Sheriff, a County
Commissioner chosen by the Board of County Commissioners, the County Attorney or other elected County officer, and an
elected official or designee from each of the cities of Kalispell, Whitefish, and Columbia Falls. The Department is financed
by funds received by all members from the State (9-1-1 fees) pursuant to Section 10-4-302, M.C.A. Any additional operating
funds needed will be shared proportionally by all members. Under the supervision of the Board, the Director shall hire and
direct staff to carry out the responsibilities of the County's Office of Emergency Services and the Flathead County Fire
Service Area.
L. County Provided Services
The City of Kalispell is provided various financial services by Flathead County. The County serves as cashier and treasurer
for the City for tax assessment collections and other revenues received by the County which are subject to distribution to the
various taxing jurisdictions located in the County. The collections made by the County on behalf of the City are accounted
for in an agency fund in the City's name and are periodically remitted to the City by the County Treasurer. The County
charges the City for fees associated with City Special Assessments.
56
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
118 ►11=11w 1ID7
M. Risk Management
The City faces a considerable number of risks of loss, including a) damage to and loss of property and contents, b) employee
torts, c) professional liability, i.e., errors and omissions, d) environmental damage, e) workers' compensation, i.e. employee
injuries, and f) medical insurance costs of employees. A variety of methods are used to provide insurance for these risks.
Commercial policies, transferring all risks of loss, except for relatively small deductible amounts are purchased for property
and content damage and professional liabilities. The City participates in two statewide public risk pools operated by the
Montana Municipal Insurance Authority, for workers' compensation and for tort liability coverage. Employee medical
insurance is provided through a state-wide health insurance pool administered by MMIA. Given the lack of coverage
available, the City has no coverage for potential losses from environmental damages.
Effective July 1, 1987 The City of Kalispell joined with other Montana cities to form the Montana Municipal Insurance
Authority, a self-insurance pool offering Worker's Compensation and Liability Coverage. Both public entity risk pools
currently operate as common risk management and insurance programs for the member governments. The liability limits for
damages in tort action are $750,000 per claim and $1.5 million per occurrence with an $11,250 deductible per occurrence.
State tort law limits the City's liability to $1.5 million. The city pays an annual premium for its employee injury insurance
coverage, which is allocated to the employer funds based on total salaries and wages. The agreements for formation of the
pools provide that they will be self-sustaining through member premiums. The tort liability plan and workers' compensation
program issued bonds in the amount of $4.41 million and $7.610 million, respectively, to immediately finance the necessary
insurance reserves. All members signed a contingent note for a pro rata share of this liability in case operating revenue was
insufficient to cover the debt service. The City's share is $201,445 for liability and $281,715 for Workers' Compensation to
finance the necessary insurance reserves. Based on the plan's current financial position, the City doesn't expect to make any
payment on these notes. Separate financial statements are available from the Montana Municipal Insurance Authority.
On October 1, 2004, Kalispell signed a 5 year agreement with many other Montana Cities, and through the Montana
Municipal Insurance Authority, to create a state wide health insurance pool. The City pays the total monthly premium for
employees who only choose to cover themselves. For employees who choose to cover additional dependents, the City pays a
percentage of the extra costs.
N. Pending Litigation
The following is a list of litigation pending against the City and the amount of damages claimed by the Plaintiff. The City
Attorney has made no evaluation as to the outcome of each case. The City has liability insurance that may cover all or part of
the damages. Accordingly, no provision has been made in the financial statements for these contingent liabilities.
Damages Loss
Litigant
Requested
Potential*
Status
Sandry
>10,000
unknown
discovery phase
Wagner
>10,000
unknown
threatened
Talmadge
>10,000
unknown
District Court
OWL Corporation
>10,000
unknown
discovery completed
57
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
O. Loans Receivable
Community Development Loan Revolving
The City entered into a community development program, which includes funding from a community development block
grant, to make available to eligible applicants (low -to -moderate income residents), a loan for at least one-half of the required
rehabilitation cost. These funds from the City, together with loans from the First Federal Savings Bank (now Glacier Bank) of
Montana, the lender, must provide the total funds required for the purchase and rehabilitation of the housing unit. At the time
the bank loans are closed with the borrower, the proceeds of the City's loan will be deposited into the borrower's construction
account at First Federal. The City's loan is secured by the property, and filed in a third lien position. Repayment of the City
loan will not begin until 30 days after the Lender's loan (second lien) for construction of the unit has been paid off. The City's
loan is interest free until such time as repayment begins. The maximum amount of a private lender loan cannot exceed
$20,000 per property with a ten-year pay back.
In addition, when an owner -occupant is unable to afford a private lender loan at the pre -determined interest rate agreed to by
the City and lender, he or she may qualify for City financing. The City may provide a direct loan of up to $25,000 with a
varying interest rate (as low as zero percent) or with a longer amortization period (maximum of fifteen years) or a deferred
loan to be repaid simultaneously, at a later date, with a balloon payment, or to be released at the end of ten years.
The City has $54,590 recorded as housing rehab loans receivable as of June 30, 2010 in the Community Development Loan
Revolving Fund. The above mentioned loans are offset with deferred revenue accounts. Uncollected receivables in
governmental funds are offset with deferred revenue accounts as explained in the "basis of accounting".
Other loans receivable of the Community Development Loan Revolving Fund:
A 15 year loan at 5% to Flathead Health and Fitness in November 2004.
Original Loan amount $ 74,250
June 30, 2010 balance $ 54,006
Community Development Block Grant Economic Development Program
In fiscal year 2007, the City entered into a community development program with funding from a community development block
grant economic development program. Eligibility for these low interest loans is tied to the creation of jobs within Kalispell with a
percentage of the jobs created to be filled by low and moderate -income persons.
The following loan has been made by the City using the economic development program funds:
A 15 year loan at 6.5% to Distinctive Countertops in July 2006.
Original Loan amount $ 25,000
June 30, 2010 balance $ 23,285
A 15 year loan at 5% to Distinctive Countertops in October 2006.
Original Loan amount $ 288,619
June 30, 2010 balance $ 271,893
A 7 year loan at 7% to the Kalispell Hotel (Hilton) in July 2007.
Original Loan amount $ 150,000
June 30, 2010 balance $ 96,410
W
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
A15 year loan at 6% to AGAPE Home Care in May 2009.
Original Loan amount $ 42,500
June 30, 2010 balance $ 40,542
Rural Development Loan Revolving
On May 5, 2003, the City Council passed Resolution No. 4780 establishing an Economic Development Revolving Loan Fund
(ED RLF) for small business retention and expansion. The resolution also created an Economic Development Loan Review
Committee to process all applications for assistance. Additionally, on August 16, 2004 and again on November 6, 2006, the
City Council, by Resolution No. 4929 and 5158, respectively, authorized the City Manager to enter into loan agreements with
the United States Department of Agriculture, Rural Development office, in the amount of $520,000 and $750,000. These
monies will be used to assist in the retention and expansion of small business, which may stimulate economic development
activity by assisting the private sector where a funding gap exists and alternative sources of public and private financing are
not adequate.
The following loans have been made by the City using the Rural Development funds:
A 15 year loan at 5% to Flathead Health and Fitness in November 2004.
Original Loan amount $ 90,750
June 30, 2010 balance $ 64,340
A 7 year loan at 6.25% to Little Caesar's in March 2006.
Original Loan amount $ 37,500
June 30, 2010 balance $ 14,513
A 15 year loan at 6.5% to Distinctive Countertops in July 2006.
Original Loan amount $ 150,000
June 30, 2010 balance $ 139,462
A 10 year loan at 7% to Crossroads Realty in June 2007.
Original Loan amount $ 150,000
June 30, 2010 balance $ 133,257
A 7 year loan at 7% to the Kalispell Hotel (Hilton) in July 2007.
Original Loan amount $ 150,000
June 30, 2010 balance $ 96,409
A 7 year loan at 7% to Unfinished Furniture Creations in April 2006.
Original Loan amount $ 50,000
June 30, 2010 balance $ 8,200
*The balance of this loan $35,425 was forgiven. The defaulting parties (Bott/Thomas) agreed and signed
promissory notes for $5000 each.
UDAG
The following loan was made by the City using Urban Development Assistance Grant (UDAG) funds:
A 20 year redevelopment loan at 5% with Big Sky Manor in August 1999.
Original Loan amount $ 124,000
June 30, 2010 balance $ 72,677
59
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
P. City Court Contracts Receivable
Contracts receivable of the City Court, because of the uncertainty regarding when and if they will be collected, are no longer
booked as an asset on the balance sheet of the General Fund. These receivables, at June 30, 2010, amounted to $1,763,937.
Q. Wastewater Treatment Plant agreement with Evergreen
The City of Kalispell entered into an Interlocal Agreement with the Evergreen Sewer District #1 for treatment of sewage from
the district at the City's plant. The Evergreen district sewer went into operation in July 1994. The City bills Evergreen
monthly for debt service at 12% of the principle and interest due for the plant. The City also bills for maintenance and
operation and replacement costs per the agreement based on metered flows. Evergreen Sewer District has an equity interest in
the replacement account carried on the City's books. The balance of the account as of June 30, 2010 is $328,970 of which
Evergreen's interest is $139,707.
R. Gateway West Mall
Flathead County Economic Development Authority, Flathead County and the City of Kalispell entered into an inter -local
agreement to purchase 59,000 square feet of the Gateway West Mall for $2.5 million and sign a ten-year lease with Stream
International, Ltd. The City of Kalispell agreed to acquire the property by issuing a $2.5 million tax increment urban renewal
bond. The City then conveyed the property to the Authority as "tenants in common". The County through the Authority
became vested with an undivided 37% interest in the property with the City vested with the remaining 63% interest. As a
result of this conveyance, the Authority recognized its portion of the building and the related debt on their books.
The Authority is responsible for the operation maintenance of the property during the term of the initial ten-year lease. The
Authority is also responsible for the carrying of property insurance against the property. The City has agreed to reimburse the
Authority for its proportionate share of these costs.
The Authority has agreed to levy up to two mills or $156,000 for the term of the bond, and has pledged $30,567 of the
revenue generated each year to be remitted to the City of Kalispell in two equal installments of $15,284 that will be used
toward the retirement of the tax increment bond. The authority shall also set up and contribute $3,000 to a building reserve
fund each year of the lease. The reserve will be used for any repair or construction work deemed necessary in maintaining the
property.
The City issued the tax increment bonds in its name and agrees to be punctual in all debt payments, and will keep all proper
records and meet all necessary requirements of the bond resolution. The City shall also set up and contribute $5,000 to a
building reserve fund for each year of the lease. The reserve will be used for any repair or construction work deemed
necessary in maintaining the property. The Authority shall manage this building reserve.
The City has pledged the following revenues towards the repayment of the $2.5 million bond:
1. Tax increment money generated from the Westside Tax Increment District until the City reaches their share
of the debt payment or $52,000.
2. The Authority's annual contribution of $30,567.
The County has agreed that it will approve the Authority's levy for an ad valorem property tax of up to two mills on all
taxable property in the County, until the tax increment bond is paid.
Within 180 days of the payment in full of the Bond, either the authority or the City may give notice to each other of intent to
60
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
purchase the property. The purchase price to be paid will be equal to the total debt service paid by the other party. The
Authority has the first option of buying the property from the City. If neither the Authority nor the City wants to purchase the
property outright, then the City has granted American Capital a right of first refusal to purchase the property. The proceeds
from the sale of the property shall be distributed based on the equity interest each entity holds.
In August of 2003, Stream International closed their computer support call center in the Gateway West Mall building, and
subsequently bought out the remaining portion of their 10 year contract with the City.
In February of 2004 the City entered into an agreement with TeleTech Holdings, Inc. TeleTech, which will operate a call -in
center, similar to Stream's operation, entered into a lease structured similar to Stream's. Rent abatement is tied to jobs
created and maintained and pay. TeleTech will also pay the guaranteed minimum tax payment of $140,000/year. This
ensures that the City will be able to meet its portion of the debt obligation related to the Gateway West Mall building.
S. Long Term Loans Receivable
Community Develonment Loan Revolving
Hampstead Partners
In August of 2002, the City of Kalispell entered into two (2) notes receivable agreements with 2nd Avenue West Partners, L.P.
(Hampstead Partners) for property on 2nd Avenue West in Kalispell. The property consists of a 40-unit low-income apartment
complex known as 2nd Avenue West Independent Living Center. As stipulated in the agreement, this property is restricted as
low income housing, and shall remain as such for a period of thirty-five years.
One of these notes is for $480,000, and bears interest at 1% per annum. The second of these notes is for $400,000, and bears
interest at 4.81 % per annum. These loans mature on February 28, 2032. Payments of interest on the note are due on or
before the last day of the taxable year, to the extent there is surplus cash, as defined by the note. Unpaid interest shall accrue
until paid, but not compound on the first loan. Payments of principal are not required until the maturity date of the loans. The
notes are secured by a deed of trust on the property. Accrued interest as of June 30, 2010, is $38,055, and $142,688,
respectively.
T. Subsequent Events
Fire Station #61 Remodel
On February 2, 2010, the Department of Homeland Security announced a grant award of $1,348,039 to the Kalispell Fire
Department for the renovation of Fire Station #61 at 312 1" Avenue East.
The grant award was for additional space to be located over the current apparatus floor, to correct multiple code deficiencies
in the station, to create access to the fire department for the community, and to stimulate the local economy.
This grant is 100 percent federally funded.
61