5. Notes to Financial StatementsNOTES TO THE FINANCIAL
STATEMENTS
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
WC1110DRR.YIAAQA/11:WelW[0101W0W."WhIITKK11"ChY1001030toIDki
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 implemented this new statement during
the year ended June 30, 2011. 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 its 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' discretely presented component units, the Downtown Business Improvement
District and the Tourism Business Improvement District are legally separate organizations of the City, but the City is
financially accountable. The two component units are reported in a separate columns to emphasize that they are legally
separate from the City.
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CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
Downtown Business Improvement District
On September 2, 2003, by resolution 4828, the City created the Downtown Business Improvement District (BID). The Mayor
and City Council appointed the Board of Directors. The City is able to impose its will on the BID as it is authorized to levy
assessments to support the activities of the BID. The annual budget of the BID is subject to approval by the City Council.
The purpose of said Business Improvement District is 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 2"a Avenue East to 2"a Avenue West between Center Street and 4' Street South.
Publicly owned property and owner occupied single family dwellings are exempt from the assessments related to the District.
Tourism Business Improvement District
On May 3, 2010, by resolution 5425, the City created the Tourism Business Improvement District (TBID). The Mayor with
the approval of the City Council appointed seven owners of property within the district to act as the Board of Trustees of the
District. The City is able to impose its will on the TBID as it is authorized to levy assessments to support the activities of the
TBID. The annual budget of the TBID is subject to approval by the City Council. The purpose of said Tourism Business
Improvement District is 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 is
made up of those properties within the corporate limits of the City of Kalispell with five or more rooms providing overnight
stays for transient patrons at its business.
Basis of Presentation, Measurement Focus, and Basis of Accounting
Government -wide Financial Statements
The government -wide financial statements (i.e., the Statement of Net Position 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.
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CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
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 Position 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.
The City has chosen not to accrue the interest payable of general long-term debt at year end. This practice results in interest
expense reported for governmental activities on the statement of activities to equal the interest expenditure on the statement of
revenues, expenditures, and changes in fund balance. Although, this is contrary to full accrual accounting, the City feels that
it is immaterial in the presentation of its financial statements.
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 un-
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CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
matured interest on general long-term debt which is recognized when due, and certain compensated absences and claims and
judgments 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
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 Airport TIF Fund (special revenue fund) was established to account for the construction and other costs incurred in the
construction of projects deemed beneficial to the City's Airport Tax Increment Financing district. A transfer from the Airport
TIF debt service fund is the main source of revenue for this fund. The main revenue source for the related debt service fund is
tax increment (increased taxable value of the TIF district since base year)
The Community Development Loan Revolving Fund (special revenue fund) was originally established to account for a
federal Community Development Block Grant. These federal dollars were loaned to businesses and individuals for projects
approved by the City's Community Development department. The main revenue source for this fund currently is borrower's
principal and interest payments.
SID 344 is a debt service fund established to account for the resources accumulated and payments made for principal and interest
of 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.
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CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
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.
As a general rule the effect of inter -fund 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 City Manager is granted budget amendment authority for the expenditure of funds from debt service funds, enterprise
funds, internal service funds, trust funds, federal and state grants accepted and approved by the City Council, special
assessments, and donations.
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.
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CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
All material budget amendments and transfers during FY 2013 are described below:
Governmental Funds
The City Manager amended the 2004 Sidewalk & Curb debt service fund $2,286. This was the final year of this S & C and
the amendment was needed to close out the fund.
The City Manager amended the Westside TIF debt service fund as the fiscal year 2013 interest payment on the new revenue
bond issue exceeded budget by $41.
The City Manager amended the Cops Hiring Recovery Program (CHRP) Grant Special Revenue fund to account for swing
and graveyard pay for the officer paid thru the grant.
Accepted a U.S. Department of Transportation grant (fund 2951) and approved appropriation of the $130,462 to continue
funding the DUI Court Implementation Program in Kalispell Municipal Court (Resolution No. 5594).
Passed Resolution No. 5600 authorizing the Storm Sewer fund to expend $200,000. This is the City's portion of the
"Willows" storm water project.
Passed Resolution No. 5634 relating to the Airport TIF Special Revenue fund. This $2,166,366 amendment was needed to
accommodate the purchase of the permanent easement on the Kidsports property.
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CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
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
Between Funds
Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year
are referred to as either interfund receivable s/payable s (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.
Taxes
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.
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.
Ambulance
An allowance, based on history, for estimated uncollectible accounts receivable of 46% (.46) is maintained for the Ambulance
fund. This allowance account has been adjusted to $164,146 at June 30, 2013.
Ambulance accounts receivable $356,840
Times allowance percentage 46%
@ June 30, 2013 $164,146
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CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
Water/Sewer
A reserve for estimated uncollectible accounts receivable of 0.5% (005) of metered sales is maintained for the Water Fund
and Sewer Fund. The reserve balances are as follows for June 30, 2013:
Water $ 12,966
Sewer $ 20,716
Contracts
The following are contracts payable to the City of Kalispell on June 30, 2013.
FUND
Source
Amount
General - Major Governmental
Municipal Court
$ 41,445
General - Major Governmental
Buffalo Hills Golf Course
16,762
Total Governmental
58,207
Information Technology - Internal Service
Charter (formerly Bresnan)
43,980
Water - Major Proprietary
Impact Fees
16,931
Sewer - Major Proprietary
Impact Fees
48,407
Total Proprietary
65,338
Total City contracts receivable
$ 167,525
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.
The City pays in advance for Health Insurance and Workers' Compensation. This results in a City asset at June 30. On June
30, 2013, the City reported assets for prepaying expenses in the following funds.
FUND
General - Major Governmental
General - Major Governmental
Parks
Ambulance
Building Department
Street Maintenance
Purpose
Workers Compensation
Health Insurance
Health Insurance
Health Insurance
Health Insurance
Health Insurance
Total Governmental
Information Technology - Internal Service Health Insurance
Airport
Water - Major Proprietary
Sewer - Major Proprietary
Solid Waste
Health Insurance
Health Insurance
Health Insurance
Health Insurance
Total Proprietary
Total City prepaids
Amount
$ 90,655
68,930
11,938
6,107
3,324
11,556
192,510
L,L44
608
12,380
17,363
6,495
36,846
$ 231,600
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CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
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.
Police vehicles are an exception despite a useful life less than 5 years. The City has determined that it is important to
capitalize and depreciate these because the total cost, as a group, is substantial.
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
3-20 years
Water and Sewer lines, pump stations
10-50 years
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.
In fiscal year 2012, the City of Kalispell began offering a voluntary employees beneficiary association (VEBA) plan. A tax-
free post -retirement medical expense account used by retirees and their eligible dependents to pay for any eligible medical
expenses. The plan is funded by 50% of the employee's unused sick leave at the time of retirement, which is contributed by
the City into the plan. The benefit to the retiree of this plan is that they receive two times the amount of unused sick leave at
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CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
retirement, none of which is subject to tax
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 assumes all employees will use their vacation accumulated as of June 30'
in the succeeding fiscal year (current). The City also assumes sick leave accumulated as of June 30' will remain accumulated
in the succeeding fiscal year (noncurrent).
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.
8. Net Position/Fund Balance
Net position in the government wide and proprietary fund financial statements show the amount of the capital assets less any
outstanding debt issued to fund them as "net investment in capital assets." Restricted net position are those that have
constraints placed on them either by external parties or imposed by law or enabling legislation.
The City implemented GASB Statement 54 for fiscal year 2011. As a result, the classifications for fund balance now used for
governmental funds are reported in two general classifications, non -spendable and spendable:
Non -spendable represents the portion of fund balance that is not in spendable form such as inventories and prepaids, and, in
the general fund, long term notes and loans receivable.
Spendable fund balance is further categorized as restricted, committed, assigned, and unassigned.
Restricted fund balance contains balances that can be spent only for the specific purposes stipulated by external parties or
through enabling legislation. External parties include grantors, debt covenants, votes, and laws and regulations of other
governments.
Committed fund balance includes amounts that can be used only for the specific purposes determined by a formal action of
the government's highest level of decision -making authority, the City Council. The City Council needs to formally adopt
a Resolution in order to establish, modify, or rescind a fund balance commitment.
Assigned fund balances are intended to be used by the government for specific purposes but do not meet the criteria to be
classified as restricted or committed. Assignments of fund balance are created by an official who the governing body has
delegated the authority to assign amounts to be used for specific purposes. The City Council and City Manager
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CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
individually have the authority to express assignments. In governmental funds other than the general fund, assigned fund
balance also represents the remaining amount that is not restricted or committed. Also included in the assigned fund
balance for the general fund are assignments for the portion of the current general fund balance that is projected to be used
to fund expenditures and other cash outflows in excess of the expected revenues and other cash inflows in the next fiscal
year.
Unassigned fund balance is the residual classification for the government's general fund and includes all spendable
amounts not contained in the other classifications. In other funds, the unassigned classification should be used only to
report a deficit balance resulting from overspending for specific purposes for which amounts have been restricted,
committed, or assigned.
When both restricted and unrestricted resources are available, spending will occur in the following order, for the identified
fund types:
General Fund: restricted, committed, assigned, unassigned
Special Revenue Funds: restricted, committed, assigned
Debt Service Funds: assigned, committed, restricted
Capital Project Funds: restricted, committed, assigned
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CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
NOTE 2. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
A. Excess of expenditures over appropriations
For the year ended June 30, 2013, all City funds expenditures were less than or equal to budgeted appropriations.
B. Deficit Fund Balances
The City reports one (1) Fund with a deficit fund balance at June 30, 2013.
The "Willows" storm water capital project shows a negative fund balance at June 30'. This is due to the fund recognizing
capital expenditures in fiscal year 2013, but the closing on the bond sale being postponed. These are SID bonds to be repaid
by the property owners within the district where the construction is taking place. Closing is scheduled for fiscal year 2014.
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CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
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, 2013, are as follows:
Cash on hand $ 3,730
Cash in banks:
Demand Deposits 12,729,314
Bonds/Warrants 27,649
STIP 1,515
Government Backed Securities 10,298,000
Total S23,060, 008
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.
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
50
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
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, 2013:
Credit
WAM
Quality
in
Security Investment Type
Amortized Cost
Ratina
Days
Asset Backed Commercial Paper
$ 907,892,295
Al
44
Corporate Commercial Paper
150,768,775
Al
105
Corporate Variable Rate
663,143,336
A3
41
Certificates of Deposit Fixed Rate
50,000,000
Al
222
Certificates of Deposit Variable Rate
435,974,196
A2
35
Other Asset Backed
17,987,295
BBB-
NA
U.S. Government Agency Fixed
25,000,000
Al
3
U.S. Government Agency Variable
182,700,345
Al
17
Money Market Funds (Unrated)
168,232,935
NR
1
Money Market Funds (Rated)
15,000,000
At+
1
Structured Investment Vehicles
29,561,449
NR
4
Total Investments
$ 2,646,260,626
A2
43
Securities Lending Collateral Investment Pool
$ 7,182,928
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, 2013, the City of Kalispell's bank balance was exposed to custodial credit risk as follows:
Depository Account Balance
Insured $ 421,814
Collateralized
-Collateral held by the pledging bank's trust
department, but not in the City's name 12,307,500
Total Deposits $12.729. 114
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%.
51
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
The amount of collateral held for the City of Kalispell deposits at June 30, 2013, 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,
2013 along with their related interest rates and maturity dates.
Investment
Interest Rate
Maturity Date
Amount
STIP
0.3%(varies)
varies
$ 1,515
Federal Farm Banks
0.900%
12/26/17
2,000,000
Federal Farm Banks
1.030%
3/12/18
1,000,000
Federal National Mtg Assn
0.900%
10/25/17
1,595,000
Federal Home Loan Bank
1.100%
7/10/17
1,000,000
Federal Home Loan Bank
3.250%
3/28/16
300,000
Federal National Mtg Assn
0.900%
11/7/17
1,405,000
Federal National Mtg Assn
0.700%
11/15/17
1,000,000
Federal National Mtg Assn
1.000%
3/27/18
1,750,000
Wells Fargo Bank
0.950%
2/28/18
248,000
S&C Bonds - internal
3.25%-7.75%
varies
27,649
Total
$10,327,164
52
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
RUNE 30, 2013
B. Interfund Receivables and Payables (Due to/from Other Funds)
The composition of interfund balances and due to/from as of June 30, 2013, was as follows:
Receivable Fund
Payable Fund
Amount
Purpose
General Fund
Permissive Health - Spec Rev. Fund
$ 42,739
S/T
Loan
General Fund
Ambulance - Spec Rev. Fund
15,119
S/T
Loan
General Fund
COPS Grant - Spec Rev. Fund
404,130
S/T
Loan
General Fund
Law Enforcement Grants - Spec Rev. Fund
9,635
S/T
Loan
General Fund
Preserve America Grant - Spec Rev. Fund
6,306
S/T
Loan
General Fund
DUI Court Grant - Spec Rev. Fund
1,025
S/T
Loan
General Fund
Brownfields Grants - Spec Rev. Fund
4,807
S/T
Loan
General Fund
Fire Grants - Spec Rev. Fund
29,906
S/T
Loan
General Fund
Fema Grant - Spec Rev. Fund
190,082
S/T
Loan
General Fund
G.O. Bonds - Debt Serv. Fund
7,894
S/T
Loan
General Fund
Airport TIF - Debt Serv. Fund
64,014
S/T
Loan
General Fund
SID 343 - Debt Serv. Fund
23,022
S/T
Loan
General Fund
SID 344 - Debt Serv. Fund
244,882
S/T
Loan
Total - Due From Other Funds (Governmental Funds)
1,043,561
Sewer - Enterprise Fund
"Willows" Storm Sewer - Capital Proj. Fund
33,009
S/T
Loan
Total - Due From/Internal Balances (Proprietary Funds/Entity Wide)
33,009
Total - Due To Other Funds (Governmental Funds)
$ 1,076,570
C. Transfers
The following is an analysis of transfers between funds during Fiscal Year 2013:
From
Health
Health
Streets
Parks - in - Lieu
Old School Tech TIF
Old School Industrial TIF
West Side TIF - Special Revenue
West Side TIF - Capital Project
Airport TIF - Debt Service
S & C's - Debt Service
General - Major Governmental
General - Major Governmental
General - Major Governmental
General - Major Governmental
To
Amount
Purpose
General - Major Governmental
$ 660,239
Operations
Parks
68,000
Operations
MACI Grant
75,000
Match
CTEP
2,026
Match
Old School TIF - Debt Service
25,000
Operations
Old School TIF - Debt Service
12,661
Operations
West Side TIF - Debt Service
32,000
Operations
West Side TIF - Debt Service
889
Close-out
Airport TIF - Major Governmental
540,000
Operations
SID Revolving - Debt Service
2,285
Close-out
FEMA Grant
14,114
Match
Drug Grant
55,000
Match
CHIRP Grant
20,000
Match
Law Enforcement Block Grant
5,000
Match
TOTAL
$ 1,512,214
53
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
D. Capital Assets
Capital asset activity for the year ended June 30, 2013 was as follows
Asset Transfers between fund types
Capital assets transferred from governmental funds to business -type 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. It is reported as
a transfer for both sides in the Statement of Activities. It is reported as a capital contribution on the Proprietary Funds
Statement of Revenues, Expenses, and Changes in Fund Net Position. For fiscal year 2013 governmental funds contributed
capital valued at $358,169 to the Water Fund ($265,544) and Airport Fund ($92,625). Of this amount, $248,602 was
transferred out of governmental activities construction in progress, and $109,567 was an expenditure of the Westside TIF
Capital Project Fund in fiscal year 2013.
Asset Restatements /Assets Conveyed to Other Agencies
Capital assets restated in governmental 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. It is reported as a restatement on the Statement
of Activities. For fiscal year 2013, there was a capital asset restatement of $143,954 from construction in progress. A
$10,000 partial payment on a planned sculpture purchase from fiscal year 2008 was removed. Completing the purchase is no
longer in the City's plans. The balance from construction in progress, $133,954, is related to a redesign of Three Mile Drive
which was completed in fiscal year 2010. This plan has become obsolete because of the State of Montana building the
Kalispell Highway 93 Bypass.
In fiscal year 2013, the City of Kalispell, by Resolution No. 5616, approved the conveyance of City's ownership of a portion
of the Gateway West Mall and some adjacent property to the Flathead County Economic Development Authority. This
resulted in a loss on conveyance of capital asset of $1,139,077 (the depreciated value). Another $6,749 loss on disposal is the
result of obsolete/disposed assets not being fully depreciated. Gain / (loss) on the conveyance and/or disposed of capital
assets is not displayed prominently on the Statement of Activities so this amount is displayed cumulatively with all other
general government expenses.
Assets Contributed
In fiscal year 2013, Governmental Activities report contributed assets with a value of $19,126. These are sidewalk
improvements paid for by homeowner's.
In fiscal year 2013, Business -type Activities report contributed assets with a value of $69,330. This consists of two water
mains, a fire hydrant, and a sewer main installed and constructed by private developers.
Gain (Loss) on Sale/Disposal of Capital Assets
In fiscal year 2013, Business -type Activities report loss on disposal of assets of $43,324, the result of overestimating the life
of water meters. Residential and commercial meters were replaced with a depreciated value of $43,324.
54
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
Balance
Balance
Governmental Activities:
July 1, 2012 Additions Contributions
Restatements
Transfers
Deductions June 30, 2013
Capital assets not being depreciated:
Land
$ 2,552,209 $ - $ -
$ -
$ -
$ (156,910) $ 2,395,299
Construction in Progress
392,556 38,331
(143,954)
(248,602)
38,331
Total capital assets not being depreciated
$ 2,944,765 $ 38,331 $
$ (143,954)
$ (248,602)
$ (156,910) $ 2,433,630
Capital assets being depreciated:
Buildings
Improvements other than buildings
Machinery and equipment
General
Ambulance
Parking
Infrastructure
Total capital assets being depreciated
$ 19,361,951 $ 7,123 $ - $ - $ - $ (2,075,000) $ 17,294,074
15,278,302 133,239 19,126 - - - 15,430,667
6,452,964 1,413,468 - - - (112,214) 7,754,218
398,059 - - - - - 398,059
123,794 - - - - - 123,794
80,419,328 80,419,328
$ 122,034,398 $ 1,553,830 $ 19,126 $ $ $ (2,187,214) $ 121,420,140
Less accumulated depreciation for:
Buildings
$
(7,264,977)
$ (660,877)
$ -
$ -
$ -
$ 1,092,833
$
(6,833,021)
Improvements otherthan buildings
(5,746,769)
(654,116)
-
-
-
-
(6,400,885)
Machinery and equipment
General
(3,848,404)
(433,747)
-
-
-
105,464
(4,176,687)
Ambulance
(344,466)
(12,644)
-
-
-
-
(357,110)
Parking
(96,606)
(7,432)
-
-
-
-
(104,038)
Infrastructure
(20,688,756)
(2,010,483)
(22,699,239)
Total accumulated depreciation
$
(37,989,978)
$ (3,779,299)
$
$
$
$ 1,1 88,297
$
(40,570,980)
Total capital assets being depreciated, net
84,044,420
(2,225,469)
19,126
(988,917)
80,849,160
City capital assets, net
$
86,989,185
$ (2,187,138)
$ 19,126
$ (143,954)
$ (248,602)
$ (1,145,827)
$
83,282,790
Balance
Balance
Internal service funds:
July
1, 2012
Additions
Contributions
Restatements
Transfers
Deductions
June 30, 2013
Data Processing
$
172,580
$ 8,599
$ -
$ -
$ -
$ -
$
181,179
Less accumulated depreciation
(125,229)
(16,071)
(141,300)
Internal service funds assets, net
$
47,351
$ (7,472)
$
$
$
$
$
39,879
Governmental activities depreciation was charged to functions/programs of the primary government as follows:
Governmental Activities:
General Government
Public Safety
Public Works
Parks and Recreation
Total Governmental Activities
$ 2,664,407
472,412
170,068
472,412
$ 3,779,299
55
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
Balance
Balance
Business -type activities:
July 1, 2012
Additions
Contributions
Gain (Loss)
Transfers Deductions June 30, 2013
Capital assets not being depreciated:
Land
Airport
$
1,347,867
$ -
$ -
$ -
$ - $ - $
1,347,867
Water
105,958
-
-
-
- -
105,958
Sewer
221,513
-
-
-
- -
221,513
Sewer (Storm)
26,550
-
-
-
- -
26,550
Construction in progress
Airport
91,808
-
-
-
92,625 -
184,433
Water
33,495
163,221
-
-
- (6,473)
190,243
Sewer
50,067
340,960
-
-
- -
391,027
Sewer (Storm)
98,575
6,851
(98,575)
6,851
Total capital assets not being depreciated
$
1,975,833
$ 511,032
$
$
$ 92,625 $ (105,048) $
2,474,442
Capital assets being depreciated:
Airport
$
1,962,813
$ -
$ -
$ -
$ - $ - $
1,962,813
Water
General Plant
1,327,249
91,946
-
(82,196)
- -
1,336,999
Source of Supply
4,645,339
-
-
-
- -
4,645,339
Transmision and Distribution
25,101,537
391,456
52,608
(135,996)
265,544 -
25,675,149
Pumping Plant
3,535,443
62,321
-
- 6,473
3,604,237
Sewer
General Plant
1,162,083
8,389
-
(184,998)
- -
985,474
Transmision and Distribution
24,031,595
4,850
16,722
-
- -
24,053,167
Storm Sewer System
12,310,998
820,574
-
- 98,575
13,230,147
Treatment Plant Equipment
465,667
-
-
-
- -
465,667
Treatment Plant
37,869,516
65,786
-
- -
37,935,302
Solid Waste
Buildings
316,731
-
-
- -
316,731
Machinery and equipment
1,212,896
34,694
1,247,590
Total capital assets being depreciated
$
113,941,867
$ 1,4 00,016
$ 69,330
$ (403,190)
$ 265,544 $ 105,048 $
115,458,615
Less accumulated depreciation for:
Airport
$
(656,696)
$ (97,918)
$ -
$ -
$ - $ - $
(754,614)
Water
General Plant
(1,051,788)
(47,786)
-
82,196
- -
(1,017,378)
Source of Supply
(697,781)
(97,575)
-
-
- -
(795,356)
Transmision and Distribution
(6,713,267)
(601,675)
-
92,672
- -
(7,222,270)
Pumping Plant
(1,419,370)
(111,003)
-
-
- -
(1,530,373)
Sewer
General Plant
(964,513)
(38,939)
-
184,998
- -
(818,454)
Transmision and Distribution
(7,999,791)
(758,790)
-
-
- -
(8,758,581)
Storm Sewer System
(3,406,023)
(289,260)
-
-
- -
(3,695,283)
Treatment Plant Equipment
(428,298)
(13,545)
-
-
- -
(441,843)
Treatment Plant
(17,142,064)
(1,100,408)
-
-
- -
(18,242,472)
Solid Waste
Buildings
(238,266)
(15,681)
-
-
- -
(253,947)
Machinery and equipment
(874,155)
(90,974)
(965,129)
Total accumulated depreciation
$
(41,592,012)
$ (3,263,554)
$
$ 359,866
$ $ $
(44,495,700)
Total capital assets being depreciated, net
$
72,349,855
$ (1,783,538)
$ 69,330
$ (43,324)
$ 265,544 $ 105,048 $
70,962,915
Business -type activities capital assets, net
$
74,325,688
$ (1,272,506)
$ 69,330
$ (43,324)
$ 358,169 $ $
73,437,357
Business -type activities depreciation was charged to functions/programs of the primary government as follows:
Business -type Activities:
Airport $ 97,919
Water 858,041
Sewer 2,200,937
Solid Waste 106,657
Total Business -type Activities $ 3,263,554
56
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
RUNE 30, 2013
E. Long -Term Debt
During the year ended June 30, 2013, the following changes occurred in liabilities reported in long-term debt:
Balance
July 1, 2012 Additions
Reductions
Balance Due within
June 30, 2013 1 year
Governmental Activities:
G.O. Bonds
$ 4,145,000
$ -
$ (445,000)
$
3,700,000
$ 445,000
Revenue Bonds
1,700,000
(142,000)
$
1,558,000
148,000
Assessments
3,845,329
3,981
(391,663)
$
3,457,647
313,198
Contract Debt/Loans
1,750,206
239,697
(255,668)
$
1,734,235
210,454
Intermediary Program
671,985
-
(25,385)
$
646,600
25,621
Compensated Absences
1,217,495
106,636
(41,372)
$
1,282,759
971,988
Governmental Activities Sub Total
$ 13,330,015
$ 350,314
$ (1,301,088)
$
12,379,241
$ 2,114,261
Internal Service Funds:
Compensated Absences
5,298
7,092
$
12,390
10,518
Internal Service Funds Sub Total
$ 5,298
$ 7,092
$ -
$
12,390
$ 10,518
Business -type Activities
Revenue Bonds $ 1,254,000
$ (459,000)
$
795,000
$ 60,000
SRF 16,079,000 536,483
(1,472,000)
$
15,143,483
1,166,000
Compensated Absences 245,117 25,338
(7,223)
$
263,232
155,890
Business -type Activities Sub Total $ 17,578,117 $ 561,821
$ (1,938,223)
$
16,201,715
$ 1,381,890
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, 2013 were as follows:
Purpose
Pool/Fire Hall Refunding
Origination Interest
Date Rate Term
6/13/2012 1%-2% 10 years
Total G.O. Bonds
57
Due Principal
Annual Balance
Date Amount
Payment 30-Jun-13
2022 $4,145,000
varies $3,700,000
$ 4,145, 000
$ 3, 700, 000
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
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-13
SID343
6/12/2001
3.6%-5.5%
20 years
2021
1,581,500
varies
485,000
SID344
6/15/2006
3.7%-5.1%
20 years
2026
4,520,000
varies
2,945,000
2005 S&C
1/3/2006
7.25%
8 years
2014
22,850
varies
2,856
2007 S&C
1/3/2008
6.00%
8 years
2016
15,407
varies
5,778
2008 S&C
1/3/2009
3.50%
8 years
2017
8,981
varies
4,490
2009 S&C
1/4/2010
3.50%
8 years
2018
7,629
varies
4,768
2010 S&C
1/6/2011
3.00%
8 years
2019
942
varies
706
2011 S&C
1/6/2012
3.25%
8 years
2020
5,792
varies
5,068
2012 S&C
4/12/2013
3.25%
8 years
2021
3,981
varies
3,981
Total Special Assessment
Bonds
$ 6,167,082
$ 3,457,647
SID's 343 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 343 of $61,117.
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, 2013 payment date for the
Bonds, the City used $244,882 of the $452,000 in the SID 344 bond reserve accounts to fully satisfy the regularly scheduled
debt service payment of $376,733.
The use of the bond reserve monies was necessary because the largest property owner in SID 344 (currently the owner of 11
of the 17 total parcels in SID 344) had not paid 2008/2009/2010/2011/2012 Special Assessments when due, 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. At June 30, 2013, $0 is in the
SID 344 bond reserve account, and $207,118 is in the debt service revolving fund available to pay future debt service on the
bonds.
58
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
Revenue Bonds — Revenue bonds are directly related to and expected to be paid from the proprietary fund. The 2005 Airport
Tax Increment bonds and the 2012 West Side Tax Increment bonds are accounted for in the Government -wide financial
statements and are paid directly from tax increment in the district.
Purpose
Governmental Activities:
2005A - Airport T I F
2012 - West Side TIF
Governmental Activities Sub Total
Business -type Activities:
2004 Water Refunding
Business -type Activities Sub Total
Issue Interest
Date Rate Term
Sep-05 3.8%-4.40% 10 years
Mar-12 variable 25 years
May-04 2.5%-4.85% 20 years
Total Revenue Bonds
Final Bonds
Maturity Issued
Balance
30-Jun-13
2020 1,445,000 1,070,000
2037 500,000 488,000
1,945,000 1,558,000
2024 1,840,000 795,000
$ 1,840,000 $ 795,000
$ 3,785,000 $ 2,353,000
Significant Provisions of the Series 2005 Airport Urban Renewal Tax Increment Bond
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 $182,700
City's Reserve $184,875
Significant Provisions of the Series 2012 West Side Urban Renewal Tax Increment Note
The Note matures on January 1, 2037, and is subject to redemption, at the option of the City, in whole or in part, on July 1,
2014. Interest on the note is variable and adjusts at a rate equal to the Prime Rate as published in the Wall Street Journal plus
.75% on each interest payment date for the Note.
Reserve Account — The City is not required to maintain a debt service reserve account related to the Series 2012 West Side
Urban Renewal Tax Increment Note.
Water Debt Required Information
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, 2013, 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 10% of the original principle.
10% of Original Principal $ 411,000
Total Reserve Requirement $ 411,000
Reserve balance 6/30/13 $ 411258
59
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
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.
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 $2,593,314
*Misc. Revenue $ 181,829
Total Operating Revenue $2,775,143
Less: Operating Expense (excludes depreciation) $1,710,665
Available for Debt Service $1,064,478
—10%of original principal $ 411,000
Coverage FY13 259%
*includes interest revenue
**includes all water fund borrowings
State Revolving Fund — the City has six (6) loan agreements with the State Revolving Fund (SRF). These obligations are to
be repaid from the operating income of the fund.
Water and Sewer Debt Refinanced
On August 20, 2012, by Resolution No. 5576 and Resolution No. 5577, the City Council approved the refinancing of most of
the debt of the Water fund and all of the debt of the Sewer Funds.
Resolution No. 5576 related to first amended and restated water system revenue bonds (DNRC Drinking Water State
Revolving Loan Program); amending authorizing resolutions adopted March 5, 2001, June 4, 2007, and September 4, 2007,
and bonds. Refunded principal of the three bond issues was $404,000, $526,000 and $1,340,000, respectively. Total Water
fund debt service related to these issues, prior to refinancing was $2,857,582. After the refinancing was completed on August
30, 2012, total Water fund debt service related to these issues was 2,558,345. Net savings from refinancing the Water fund
debt will be $299,237.
Resolution No. 5577 related to first amended and restated sewer system revenue bonds (DNRC Water Pollution Control State
Revolving Loan Program); amending authorizing resolutions adopted July 6, 2004, and October 15, 2007, and bonds.
Refunded principal of the two bond issues was $1,009,000 and $13,026,000, respectively. Total Sewer fund debt service
related to these issues, prior to refinancing was $18,370,225. After the refinancing was completed on August 30, 2012, total
Sewer fund debt service related to these issues was 16,290,310. Net savings from refinancing the Sewer fund debt will be
$2,079,915.
SRF LOANS
Interest
Amount
Outstanding
Purpose
Origination
Rate
Term
Borrowed
30-Jun-13
*2013 Sewer- WWTP Digester Lid
FY13
3.00%
20 years
$ 1,271,000
$ 132,483
2012 Sewer Refunding
FY13
2.25%
12 years
1,009,000
935,000
2012 Water Refunding
FY13
1.25%
3 years
526,000
353,000
2012 Water Refunding
FY13
2.25%
15 years
1,340,000
1,264,000
2012 Water Refunding
FY13
2.00%
8 years
$ 404,000
$ 360,000
2012 Sewer Refunding
FY13
2.25%
15 years
12,827,000
12,099,000
Total SRF Loans
$ 17,377,000
$ 15,143,483
*the City of Kalispell entered into this loan agreement with the State Revolving Fund Program (DNRC) on June 10,
2013. As of June 30, 2013, the City had only drawn $132,483. The balance will be drawn in FY 2014.
60
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
Sewer Debt 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, 2013, the operating reserve account contains $190,000.
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, 2013, 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, 2013, the debt service reserve account contains $1,119,062.
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
*Operating Revenue $5,038,453
Impact Fees Pledged for Debt $ 250,000
Total $ 5,288,453
Less: Operating Expense (excludes depreciation) $ 2,699,909
Available for Debt Service $2,588,544
—Maximum Debt Service $1,119,062
Coverage FY13 231%
*includes interest revenue
—does not include the FY13 Digester Lid SRF Loan - at June 30, 2012,
City had only drawn a $132,483 advance toward the total borrowing of
$1,271,000. $9,749 of this draw was to fund the bond reserve account.
Debt service on the Digester Lid SRF Loan will be approx. $85,000/yr.
Loans/Contracted Debt
Governmental Funds
Origination
Interest
Due
Principal
Balance
Purpose
Date
Rate** Term
Date
Amount
30-Jun-13
BOI:City Hall HVAC
7/16/2004
varies
10 years
2/15/ 0014
1 11,836
25,040
BOI Fire Truck
4/22/2005
varies
10 years
8/15/2015
279,900
80,177
BOI :Bucket Truck
12/30/2010
varies
5years
2/15/2016
28,300
17,235
BOI Mover
3/4/2011
varies
5 years
2/15/2016
71,220
43,491
BOI:Dump Truck
6/15/2012
varies
5 years
2/15/2017
124,865
111,339
BOI:Compactor
12/30/2011
varies
5 years
2/15/2017
45,928
36,979
BOI: Stumper
2/1/2013
varies
5 years
2/15/2018
20,000
20,000
BOI: P/U &Tractor
2/1/2013
varies
5 years
2/15/2018
45,000
45,000
BOI: Dump Trucks (2)
5/24/2013
varies
5 years
2/15/2018
174,698
174,698
Rocky Mtn Bank - Fire Truck
3/7/2008
3.95%
10 years
3/1/2018
575,000
315,250
Capital One Public Funding -
2011stAve E- City Hall
10/25/2007
4.85%
12years
9/15/2019
1,420,165
865,026
Sub total BOI
loanstcontracted debt
2,936,912
1,734,235
USDA: Intermediary
Relending Program
10/12/2004
1.00%
30 years
10/12/2034
520,000
433,920
Relending Program
11/27/2006
1.00%
30 years
11/27/2036
257,500
212,680
Sub total USDA
Intermediary
777,500
646,600
Total loanstcontracted debt
$ 3,714,412
$ 2,380,835
BOI - Board of Investments Intercap Loan Program
61
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
Requirements to amortize debt
The annual requirements to amortize all long-term debt outstanding, excluding compensated absences payable, as of June 30,
2013, were as follows:
Governmental Activities:
SPECIAL
G.O.
ASSESSMENT
CONTRACTED
INTERMEDIARY
REVENUE
FOR FISCAL
BONDS
BONDS
LOANS/DEBT
LOAN PROGRAM
BONDS
YEAR ENDED
PRINCIPAL INTEREST
PRINCIPAL
INTEREST
PRINCIPAL
INTEREST
PRINCIPAL
INTEREST
PRINCIPAL
INTEREST
TOTAL
2014
445,000
56,913
313,198
171,362
326,645
58,159
25,621
6,467
148,000
64,890
1,616,255
2015
450,000
52,463
310,342
157,224
327,892
48,759
25,878
6,210
153,000
58,903
1,590,671
2016
455,000
47,963
310,342
143,068
313,454
38,842
26,960
6,044
159,000
52,563
1,553,236
2017
465,000
41,138
308,416
128,687
285,596
28,766
27,230
5,774
164,500
45,913
1,501,020
2018
470,000
34,163
307,293
114,196
256,480
18,617
27,502
5,502
175,000
45,913
1,454,666
2019-2023
1,415,000
59,613
1,218,056
354,881
224,168
10,959
141,690
23,329
425,000
99,738
3,972,434
2024-2028
690,000
70,380
148,917
16,101
104,000
58,680
1,088,078
2029-2033
156,514
8,505
125,500
36,300
326,819
2034-2038
66,288
1,297
104,000
9,600
181,185
TOTAL
3,700,000
292,253
3,457,647
1,139,798
1,734,235
204,102
646,600
79,229
1,558,000
472,500
13,284,364
Business -type Activities:
SRF REVENUE
FOR FISCAL LOANS BONDS
YEAR ENDED
2014
2015
2016
2017
2018
2019-2023
2024-2028
TOTAL
PRINCIPAL
INTEREST
PRINCIPAL
INTEREST
TOTAL
1,166,000
327,525
60,000
36,795
1,590,320
1,192,000
304,099
60,000
34,275
1,590,374
1,020,483
280,732
65,000
31,695
1,397,910
1,008,000
258,552
65,000
28,835
1,360,387
1,030,000
235,868
70,000
25,943
1,361,811
5,379,000
823,426
385,000
79,295
6,666,721
4,348,000
219,781
90,000
4,365
4,662,146
15,143,483
2,449,983
795,000
241,203
18,629,669
62
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
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 $9,940,007 for FY13, of which $9,444,893 is
covered by PERS, MPORS, or FURS.
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, 2013, were:
PERS
MPORS
FURS
Employee
6.90%-7.90%
9.00%
10.70%
Employer
7.07%
14.41%
14.36%
State
0.10%
29.37%
32.61%
The State contribution to firefighter and police retirement qualifies as an on behalf payment. In fiscal year 2013, the State of
Montana contributed $597,601 to firefighter retirement and $594,027 to police retirement. 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, 2011, 2012 and 2013, as listed below, were equal to the required
contributions for each year.
PERS
2011 $ 382,595
2012 $ 363,551
2013 $ 373,843
MPORS
FURS
$ 286,797
$ 256,369
$ 293,843
$ 247,995
$ 291,452
$ 263,157
63
PARKING COMM
$ 3,633
$ 4,103
N/A
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
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.
For FY2013, the City of Kalispell has recorded other post employment benefits in the governmental funds. This recording
resulted in an expense of $307,647 on the statement of activities, governmental activities, general government. OPEB is
recorded on an accrual basis in the governmental funds. Other post employment benefits expenses were also recorded in the
water fund ($36,918), and sewer fund ($21,682). In prior years, the City of Kalispell considered other post employment
benefits of the water fund and sewer fund immaterial. In fiscal year 2013, these unrecognized OPEB expenditures resulted in
prior period adjustments in the water fund ($90,627) and sewer fund ($53,226).
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. The City plan's administratively established retiree medical, dental and vision
premiums vary between $415 and $1,665 per month depending on the medical plan selected, family coverage, and Medicare
eligibility. The plan provides different coinsurance amounts depending on whether members use preferred, non -preferred, or
other hospitals. For fiscal year ended June 30, 2013, the City has 12 retired members receiving benefits.
Annual OPEB Cost and Net OPEB 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.
64
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
The following table shows the components of the City's annual OPEB cost for the year, the amount implicitly 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)
Interest on beginning of year net OPEB obligation
Adjustment to the Annual Required Contribution
Annual OPEB Cost
Contributions made (implicit)
Net OPEB obligation - beginning of year
Net OPEB obligation - end of year
Governmental Business -type
Total
Activities
Acitivities
$333,826
$280,414
$53,412
$39,919
$33,532
$6,387
-$53,629
-$45,048
-$8,581
$320,116
$268,897
$51,219
$46,131
$38,750
$7,381
$899,082
$755,229
$143,853
$1,265,329
$1,062,876
$202,453
The June 30, 2013 year-end OPEB obligation is reported in the City's funds as follows:
Functions/Programs Net OPEB Obligation
Primary Government:
Governmental activities:
General government $1,062,876
Total governmental activities 1,062,876
Business -type activities:
Water
Sewer
Total primary government
127,545
74,908
Total business -type activities 202,453
$1,265,329
Funded Status and Funding Progress. The projection of future benefit payments for an ongoing plan involves estimates of
the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples
include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the
funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual
results are compared with past expectations and new estimates are made about the future. The schedule of funding progress,
presented as required supplementary information following the notes to the financial statements, presents multiyear trend
information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial
accrued liabilities for benefits. The City has elected not to fund this liability.
Actuarial Methods and Assumptions. As of June 30, 2013 (most current information), the City's actuarially accrued liability
(AAL) for benefits was $2,311,036. The AAL by status breakdown is shown below:
SCHEDULE OF FUNDING PROGRESS
Actuarial
Actuarial
UAAL as a
Actuarial
Value of
Accrued
Unfunded
Percentage of
Valuation
Assets
Liability (AAL)
AAL (UAAL)
Covered
Covered Payroll
Retiree Medical Plan
Date
(b)
(a)
(a - b)
Funded Ratio(a / b )
Payroll ( c)
(( a - b ) / c )
6/30/2013
$ -
$ 2,311,036
$ 2,311,036
0.0%
Not Available
Not Available
65
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
Fiscal
Fiscal
Fiscal
Fiscal
Fiscal
2009
2010
2011
2012
2013
Active participants: $ 1,450,472
N/A
$ 1,284,463
N/A
$1,616,159
Retirees, Dependents, and Surviving Spouses: $ 1,558,443
N/A
$ 861,059
N/A
$ 694,877
Total AAL $ 3,008,915
N/A
$ 2,145,522
N/A
$ 2,311,036
Normal Cost
Impact on Statement of Activities
Annual OPEB Cost
Impact on Statement of Net Assets
Assumed Contributions
Net OPEB Obligation at June 30
Participant Information
Active participants:
Retirees, Dependents, and Surviving Spouses:
Total
$ 170,429 N/A $ 105,750 N/A $ 191,764
$ 282,232 $282,232 $ 247,511 $ 247,511 $ 333,826
$ - $ - $ 72,790 $ 73,206 $ (46,131)
$ 282,232 $566,853 $ 734,256 $ 899,082 $1,265,329
172 N/A 172 N/A 179
31 N/A 16 N/A 12
203 N/A 188 N/A 191
The following key assumptions were chosen by the City:
1. Discount Rate: 4.44%
2. Healthcare (inflation) Trend Rates: 7% as of July 1, 2013 reduced linearly to 5% by fiscal year 2018, and
remaining at 5% thereafter.
3. Retirees are required to pay 100% of the total premium developed for the active population.
4. Program valued as it stands today.
5. Expected Long Term Rate of Return on Assets: N/A
6. Participation Rate: 20% 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.
7. Marital Assumption: For future retirees, 60% are assumed to be married, and males are assumed to be 3 years
older than females.
8. Amortization method: 30 year open (level dollar).
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. The City of Kalispell has elected not to fund
this liability.
The benefits the plan is expected to provide are assigned to appropriate accounting periods using the Projected Unit Credit
cost method as described under Governmental Accounting Standards Board Statement No. 45. For each participant, an
actuarial present value of benefit total payments is determined as of the measurement date. 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.
66
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
H. Amounts Due From/To other Governments
On June 30, 2013, the amounts due from other governments consisted of the following:
General Fund
Due from: Amount
State of Montana -Video License Fee $ 125
Flathead County -Taxes 465,782
Sub Total $ 465.907
Special Revenue Funds
Due from:
Amount
State of Montana-SB372 Reimb.
$
54,986
State of Montana -Preserve America
Grant $
6,306
Flathead County -Taxes
$
396,026
Flathead County -EMS Levy
$
42,099
U.S. Dept. of H. U. D.
$
26,918
Flathead County Sheriff Dept.
$
4,303
State of Montana-MDOT
$
9,220
U.S Dept. of Homeland Sec.
$
276,179
EPA
$
55,659
U.S. Dept. of Justice -Grants
$
548,711
Sub Total $1,420,407
Debt Service Funds
Due from: Amount
Flathead County -Taxes $ 198,879
Total Governmental Funds $ 2,085,193
Enterprise Funds
Due from: Amount
Flathead County -Taxes 157,694
Total Business -type Funds $ 157,694
Total City of Kalispell $ 2,242,887
67
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
I. Restricted Cash/Investments
The following restricted cash/investments were held as of June 30, 2013. These amounts are reported within the
cash/investment account on the Combined Balance Sheet.
RESTRICTED CASH:
Business-tvoe Activities
Water Bond Reserve (includes SRF & BOI)
Plant Investment/Impact Fees (1)
Sewer Operating Reserve (2)
Bond Contingency
Plant Investment/Impact Fees (sanitary) (1)
Plant Investment/Impact Fees (treatment plant) (1)
Plant Investment/Impact Fees (storm) (1)
Treatment Plant Replacement (3)
Total business -type activities restricted cash/investments
Governmental Activities
Impact Fees Growth related Capital
Urban Forestry Developers (4)
Debt Service Airport TIF Bond Reserve
Debt Service SID 343 Bond Reserve
Debt Service SID 344 Bond Reserve
Debt Service Revolving Fund
Total governmental activities restricted cash/investments
Total restricted cash/investments
1-Jul-12 Additions Subtractions 30-Jun-13
$ 460,119 $ (48,861) $ 411,258
475,913 252,698 (144,010) 584,601
190,000 190,000
1,332,469 9,749 (223,156) 1,119,062
1,862,927 169,895 (34,682) 1,998,140
334,230 217,995 (238,059) 314,166
671,921 193,804 865,725
969,880 421,069 (138,867) 1,252,082
6,297,459 1,265,210 (827,635) 6,735,034
281,732 93,154 (35,411) 339,475
94,906 - (3,876) 91,030
184,875 184,875
79,075 79,075
109,217 493,516 (376,733) 226,000
226,000 - - 226,000
975,805 586,670 (416,020) 1,146,455
$ 7,273,264 $ 1,851,880 $ (1,243,655) $ 7,881,489
(1) Plant investment/impact fee cash. 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..."
(2) Sewer operating reserve cash is restricted by ordinance no. 859 (1 month operating expenses).
(3) Treatment plant replacement cash is restricted by an agreement with Flathead County Water District (third party).
(4) Urban forestry receives cash from developers to be used to plant trees in new city developments (third party).
J. Restatements
During the 2013 fiscal year, the following adjustments relating to prior years' transactions were made to fund balance or
retained earnings accounts.
Fund
Fema Grant - Golf Course
Subtotal - Governmental Fund Financials
Governmental Funds - Community Development
Governmental Funds
Total Statement of Activities - Gov'tal Funds
Water Fund
Sewer Fund
Solid Waste
Total Proprietary funds/Business-type activities
Amount
Reason
$ (14,114)
Prior period revenue overstated
$ (14,114)
$ 1,212,995
Prior period revenues understated
$ (143,954)
Construction in progress/Other assets - obsolete
$ 1,054,927
$ (90,627)
Expense of a prior period - OPEB
$ (53,226)
Expense of a prior period - OPEB
$ (654)
Revenue of a prior period refunded
$ (144,507)
68
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
FEMA Grant Restatement
On June 30, 2012, the City of Kalispell estimated receiving $204,197 from FEMA related to the erosion issue at Buffalo Hills
Golf Course. That amount was booked as a revenue and due from other government. On July 25, 2013, actual amount
received was $190,083.
Hampstead Partners Loan Restatement
In prior periods, the City of Kalispell considered the collection of these loans uncertain because of the length of time before
any principal payment is required, the maturity dates of the loans. Collection of the interest was also considered uncertain as
it is only payable to the extent there is surplus cash, and none has been collected to date.
For fiscal year 2013, the City of Kalispell, for purposes of reporting, will now consider these loans and the accrued interest
related to the loans, fully collectible. A prior period adjustment of $1,212,994 on the government -wide statement of activities
has been made to recognize all prior year's revenue associated with these loans.
More information related to the Hampstead Partners loans can be found in Note O. Deferred Revenue.
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 County Health Fund and is included in the general purpose financial
statements of Flathead County within the Special Revenue Fund.
2. 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.
69
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
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.
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
Famous Dave's $ 720,000 unknown
Brown $ unspecified unknown
Burke $ unspecified unknown
70
Status
Filed
Filed
Not Filed
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
O. Deferred Revenue
Taxes Receivable
The following governmental funds had taxes receivable at June 30, 2013.
FUND
Source
Amount
General - Major Governmental
Taxes
$ 575,727
Westside TIF
Taxes
7,321
Parks
Taxes
50,167
Old School'Tech" TIF
Taxes
57,777
Old School "Ind" TIF
Taxes
8,792
Health Levy
Taxes
72,873
Light District
Taxes
20,322
Street Maintenance
Taxes
90,099
Forestry
Taxes
12,364
G.O. Bonds
Taxes
53,676
Airport TIF
Taxes
59,740
S & C's
Taxes
866
SID 344 - Major Governmental
Taxes
770,752
Current Portion
1,780,476
S & C's
Taxes
27,529
SID 343
Taxes
575,624
SID 344 - Major Governmental
Taxes
2,711,418
Non current Portion
3,314,571
Total Governmental Funds
$ 5,095,047
Accounts Receivable
At June 30, 2013 the Ambulance fund had accounts receivable deferred net of $189,349. Total net accounts receivable of the
Ambulance fund is $192,694. The difference is the result of $3,345 being receivable prior to the Ambulance fund conversion
from a proprietary fund to a special revenue fund.
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 (Glacier). 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 $44,134 recorded as housing rehab loans receivable as of June 30, 2013 in the Community Development Loan
71
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
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, 2013 balance $ 39,770
Hampstead Partners
In August of 2002, the City of Kalispell entered into two (2) notes receivable agreements with 2" a Avenue West Partners, L.P.
(Hampstead Partners) for property on 2" a Avenue West in Kalispell. The property consists of a 40-unit low-income apartment
complex known as 2"a 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, 2013, is $52,455, and $252,673,
respectively.
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 loans have 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, 2013 balance
$ 22,785
A 15 year loan at 5% to Distinctive
Countertops in October 2006.
Original Loan amount
$ 288,619
June 30, 2013 balance
$ 271,893
A 7 year loan at 7% to the Kalispell Hotel (Hilton) in July 2007.
Original Loan amount
$ 150,000
June 30, 2013 balance
$ 30,402
A 15 year loan at 6% to AGAPE Home Care in May 2009.
Original Loan amount
$ 42,500
June 30, 2013 balance
$ 28,565
A 10 year loan at 3% to Norm's News in June 2013.
Original Loan amount
$ 50,000
June 30, 2013 balance
$ 48,202
72
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
A 10 year loan at 3% to Smith/Red & Black in June 2013.
Original Loan amount $ 50,000
June 30, 2013 balance $ 49,616
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, 2013 balance $ 46,899
A 7 year loan at 6.25% to Little Caesar's in March 2006.
Original Loan amount $ 37,500
June 30, 2013 balance $ 0
A 15 year loan at 6.5% to Distinctive Countertops in July 2006.
Original Loan amount $ 150,000
June 30, 2013 balance $ 139,962
A 10 year loan at 7% to Crossroads Realty in June 2007.
Original Loan amount $ 150,000
June 30, 2013 balance $ 120,231
A 7 year loan at 7% to the Kalispell Hotel (Hilton) in July 2007.
Original Loan amount $ 150,000
June 30, 2013 balance $ 30,403
A 7 year loan at 7% to Unfinished Furniture Creations in April 2006.
Original Loan amount $ 50,000
June 30, 2013 balance $ 6,900
*The balance of this loan $35,425 was forgiven. The defaulting parties (Bott/Thomas) agreed and signed
promissory notes for $5000 each.
A 6 month loan at 5.25% to Glacier Valley Endodontics, Inc. in January 2012.
Original Loan amount $ 35,000
June 30, 2013 balance $ 32,266
73
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
A 10 year loan at 5.29% to Parkman Properties, LLC (The Edge Salon), in February 2012.
Original Loan amount $ 77,000
June 30, 2013 balance $ 69,446
A 10 year loan at 3% to Whipps, LLC in December 2011.
Original Loan amount $ 50,000
June 30, 2013 balance $ 43,421
A 10 year loan at 3% to Bill and Jana Goodman in June 2013.
Original Loan amount $ 34,660
June 30, 2013 balance $ 31,897
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, 2013 balance $ 52,699
SUMMARY COMMUNITY DEVELOPMENT LOANS RECEIVABLE
From To
Amount Purpose
CD Loan Revolving - Major Governmental Various
$ 44,134 Housing Rehab
CD Loan Revolving - Major Governmental Flathead Health and Fitness
39,770 Small Business
CD Loan Revolving - Major Governmental Distinctive Countertops
22,785 Jobs
CD Loan Revolving - Major Governmental Distinctive Countertops
271,893 Jobs
CD Loan Revolving - Major Governmental Kalispell Hotel - Hilton
30,402 Jobs
CD Loan Revolving - Major Governmental AGAPE Home Care
28,565 Jobs
CD Loan Revolving - Major Governmental Norm's News
48,202 Jobs
CD Loan Revolving - Major Governmental Smith/Red & Black
49,616 Jobs
CD Loan Revolving - Major Governmental Hampstead Partners*
880,000 Low Income Housing
CD Loan Revolving - Major Governmental Hampstead Partners - Interest Portion*
305,128 Low Income Housing
Subtotal Major Fund
1,720,495
UDAG Big Sky Manor
52,699 Urban Dev. Assistance
Rural Development Loan Revolving Flathead Health and Fitness
46,899 Small Business
Rural Development Loan Revolving Distinctive Countertops
139,962 Small Business
Rural Development Loan Revolving Crossroads Realty
120,231 Small Business
Rural Development Loan Revolving Kalispell Hotel - Hilton
30,403 Small Business
Rural Development Loan Revolving Unfinished Furniture - Bott/Thomas
6,900 Small Business
Rural Development Loan Revolving Glacier Valley Endodontics, Inc
32,266 Small Business
Rural Development Loan Revolving Parkman Properties, LLC
69,446 Small Business
Rural Development Loan Revolving Whipps, LLC
43,421 Small Business
Rural Development Loan Revolving Bill and Jana Goodman
31,897 Small Business
Subtotal Other Governmental Funds
574,124
Total Governmental Funds
$ 2,294,619
*Long Term Loans Receivable - Matures 2032
74
CITY OF KALISPELL
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013
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, 2013, amounted to $2,186,537.
Q. Wastewater Treatment Plant agreement with Evergreen
The City of Kalispell entered into an Interlocal Agreement with the Evergreen Sewer District 41 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, 2013 is $1,252,082 of which
Evergreen's interest is $293,432.
R. Subsequent Events
Assessments and fees
In August of 2013, the City Council voted to raise some fees related to commercial solid waste removal and assessments
related to street maintenance. These increased fees are expected to add approximately $25,000 revenue to the solid waste
department and $173,500 revenue to the street maintenance department.
Kalispell City Airport
During fiscal year 2014 budget discussions, consideration was given to the concept of privatizing airport management
services as a potential avenue for reducing expenditures within the airport fund. The City released a Request for Proposal
(RFP) for airport management services in September 2013. On December 2, 2013, the City Council approved an agreement
for airport management services recommended by a 5 person committee. As of January 1, 2014, the City Airport services are
being managed privately.
Union Contracts
At a City Council meeting on October 7, 2013, the Council unanimously approved a new contract between the City of
Kalispell and Members of the International Association of Firefighters Local Union 4547. This 3 year contract, fiscal years
2014, 2015, and 2016, includes 2% base salary adjustments in fiscal year 2015 and 2016, and various language adjustments.
Fiscal impact is estimated to be $22,000 in fiscal year 2014, $62,000 in fiscal year 2015, and $65,000 in fiscal year 2016.
Water System Impact Fees
At a City Council meeting on November 4, 2013, by Resolution No. 5654, the Council approved the 2013 Water Impact Fee
Report and adjustments to the Kalispell Water System Impact Fees. This resolution increases the water impact fees charged
to fund capital improvements related to expansion. Total amount of the increase was 16%, from $2,213/ERU to $2,567/ERU.
75