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3. Management's Discussion and AnalysisMANAGEMENT'S DISCUSSION AND ANALYSIS MANAGEMENT'S DISCUSSION AND ANALYSIS As management of the City of Kalispell, we offer readers of the City of Kalispell's financial statements this narrative overview and analysis of the financial activities of the City of Kalispell for the fiscal year ended June 30, 2014. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal. FINANCIAL HIGHLIGHTS ➢ The assets of the City of Kalispell exceeded its liabilities at the close of the recent fiscal year by $161,870,822 (net position). Of this amount, $15,952,508 (unrestricted net position) may be used to meet the government's ongoing obligations to citizens and creditors. ➢ Total net position increased by $2,875,607 over the prior fiscal year. ➢ As of June 30, the City's governmental funds reported combined ending fund balances of $10,970,044, an increase of $1,040,842 over the prior year. Of this amount, $2,024,152 is available for spending at the government's discretion (committed, assigned, and unassigned fund balances). ➢ The City's total debt, excluding compensated absences, decreased by $958,405 (4%) during fiscal year 2014; the result of minimal new borrowing. AN OVERVIEW OF THE FINANCIAL STATEMENTS There are three main components to the City of Kalispell's financial statements: 1) government -wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. Other supplementary material is included in this report in addition to the basic financial statements themselves. The City of Kalispell intends for this discussion and analysis to be used in conjunction with the basic financial statements, and other material, as an introduction and also as a means to help the user better understand the information. Government -wide Financial Statements The government -wide financial statements are designed to provide readers with a broad overview of the City of Kalispell's finances. The way information is presented in these statements is comparable to how the financial information of a private -sector business would be presented. The statement of net position presents information on all of the City of Kalispell's assets and liabilities. The difference between these two (assets minus liabilities) is reported as net position. Net position can be a useful tool in evaluating the financial health of an entity. A substantial decrease in net position may be a sign of deteriorating financial outlook. The change in net position during the most recent fiscal period is presented by the statement of activities. The statement of activities reports changes in net position at the time the event takes place without regard to the corresponding cash transaction. This results in some revenues and expenses being reported in this statement that will not result in cash flow until a future fiscal period. Some examples of this would be uncollected but earned taxes and earned leave benefits. The government -wide financial statements of the City of Kalispell are segregated to distinguish between functions supported predominantly by taxes and intergovernmental revenues (governmental activities) and those that are intended to recover the majority of their costs through user fees and charges for services (business -type activities). The governmental activities of the City of Kalispell include general government/administration, public safety, public works, parks and recreation, and community 13 development. The business -type activities of the City of Kalispell include water distribution, sewer collection and treatment, solid waste collection, and an airport. The government -wide financial statements include, in addition to the primary government described in the above paragraph, a legally separate Business Improvement District and a legally separate Tourism Business Improvement District. The financial information of these component units is reported separately on the Government -wide financial statements. Fund Financial Statements The City of Kalispell, like most other governmental entities, uses fund accounting. Funds are set up to account for specific activities or objectives of the government. Funds also aid in ensuring compliance with legal requirements. The City of Kalispell categorizes its funds as either governmental, proprietary, or fiduciary. ➢ Governmental funds correspond with the functions reported as governmental activities in the government -wide financial statements. Governmental fund financial statements, by focusing on near -term inflows and outflows of spendable resources, may be more useful in evaluating a government's short-term fiscal health than the government -wide financial statements. A reconciliation has been prepared to help users more easily compare the governmental fund balance sheet to the government -wide statement of net position and the governmental fund statement of revenues, expenditures, and changes in fund balance to the government -wide statement of activities. These reconciliations can be useful in contrasting, comparing and understanding the long-term impact (government -wide statements) of near -term decisions (governmental fund statements). ➢ The City of Kalispell maintains numerous individual governmental funds. The governmental fund balance sheet and statement of revenues, expenditures, and changes in fund balance present information separately only for funds which are considered major. Major funds are determined by a formula which considers the percentage of total governmental assets, liabilities, revenues, and expenditures contained in each individual fund. The City of Kalispell has four major governmental funds; the General Fund (always a major fund), the Street Maintenance (special revenue) Fund, the Community Development Loan Revolving (special revenue) Fund, and the Special Improvement District 344 (debt service) Fund. All non -major funds are presented as a group. The City of Kalispell adopts an annual appropriated budget for its funds. A budgetary comparison statement has been provided for the general fund and the major special revenue funds to demonstrate compliance with this budget. ➢ The City of Kalispell maintains two different types of proprietary funds. Enterprise funds and internal service funds. Enterprise funds are used to report the same functions presented as business -type activities in the government -wide financial statements. Water, sewer, solid waste, and the airport make up the City of Kalispell's enterprise funds. The City of Kalispell uses two internal service funds to accumulate and allocate its information technology transactions and central garage transactions internally among its various functions. Under the old reporting model internal service funds were reported as proprietary funds because they recovered most of their cost through user fees from other funds. Under the new model these funds are eliminated through an allocation process and categorized as either a governmental or business -type activity. 14 Because the City of Kalispell's internal service funds benefit governmental more so than business -type functions, it has been included within the governmental activities in the government -wide financial statements. ➢ Information in the proprietary fund financial statements is of the same type as that provided in the government -wide financial statements, however, it is more detailed. Individual fund data is provided for the water fund, and the sewer fund, classified as major funds. Individual data is not required for the airport fund or the solid waste fund, because they are not classified as major funds. ➢ The City of Kalispell maintains three funds to account for resources held by the government for the benefit of outside parties. These fiduciary funds are not reflected in the government -wide financial statements because the resources are not available to support the City of Kalispell's own programs. The City of Kalispell must ensure that the assets reported in these funds are used for their intended purpose. The accounting method used for fiduciary funds is similar to that used for proprietary funds. Notes to the Financial Statements The information contained in the government -wide and fund financial statements is meant to be used in concurrence with the notes to the financial statements. The notes present further detail of the data provided by these statements. Other Information All required supplementary information other than GASB Statement 45 — Other Postemployment Benefits (OPEB) schedules and the general and major special revenue funds budgetary comparison schedules is included in the basic financial statements or the accompanying notes. Therefore, the only information presented in the section for required supplementary information is the OPEB information and required budgetary comparison schedules on pages 74 - 77. The combining statements for non -major governmental and non -major proprietary funds are presented immediately following the required supplementary information section. Combining and individual fund statements and schedules can be found beginning on page 78 of this report. ANALYZING THE CITY AS A WHOLE As mentioned prior, net position can be an important indicator of an entities financial well-being. For the period ending June 30, 2014, the City of Kalispell's assets exceeded liabilities by $161,870,822. The largest portion of the City's net position ($129,750,383 or 81%) reflects its investment in capital assets (e.g., land, buildings, machinery and equipment, infrastructure); less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. 15 A summary of net position is shown in the following table. City of Kalispell -Net Position Governmental Business -type Activities Activities Change Change FYI FY13 Inc(Dec)FYI FY13 Inc(Dec) Current and other assets $ 20,059,734 $ 18,227,470 $ 1,832,264 $ 16,800,092 $ 14,907,429 $ 1,892,663 Capital assets 81,349,530 83,322,670 (1,973,140) 73,856,422 73,437,357 419,065 Total assets $ 101,409,264 $ 101,550,140 $ (140,876) $ 90,656,514 $ 88,344,786 $ 2,311,728 Long-term debt outstanding $ 11,532,336 $ 12,391,631 $ (859,295) $ 16,109,613 $ 16,201,715 $ (92,102) Other liabilities 2,048,179 1,688,022 360,157 504,828 618,343 (113,515) Total liabilities $ 13,580,515 $ 14,079,653 $ (499,138) $ 16,614,441 $ 16,820,058 $ (205,617) Net position: Net investment in capital assets $ 71,734,631 $ 72,872,788 $ (1,138,157) $ 58,015,752 $ 56,139,329 $ 1,876,423 Restricted 8,577,197 7,745,994 831,203 7,590,734 6,735,034 855,700 Unrestricted (deficit) 7,516,921 6,851,705 665,216 8,435,587 8,650,365 (214,778) Total net position $ 87,828,749 $ 87,470,487 $ 358,262 $ 74,042,073 $ 71,524,728 $ 2,517,345 An additional portion of the City's net position ($16,167,931 or 10%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position ($15,952,508 or 9%) may be used to meet the City's ongoing obligations to citizens and creditors. At June 30, the City is able to report positive balances in all three categories of net position, both for the City as a whole, as well as for its separate governmental and business -type activities. Net position of the City increased by just about 2% for fiscal year 2014 in comparison to fiscal year 2013 ($161.9 million compared to $161.2 million). City of Kalispell - Changes in Net Position Revenues Program revenues (by major source): Charges for services Operating grants and contributions Capital grants and contributions General revenues (by major source): Property Taxes for general purposes Video poker apportionment Miscellaneous Interestlinvestment earnings State entitlement Gas Tax Total revenues Program expenses General government Public safety Public works Parks and recreation Community development Debt service - interest Airport Water Sewer Solid Waste Total expenses Excess (deficiency) before special items and transfers Transfers - net Increase (decrease) in net position Governmental Business -type Activities Activities Change Change FYI FY13 Inc(Dec FYI FY13 Inc(Dec) 5,870,315 $ 5,681,989 $ 188,326 $ 8,983,515 $ 8,694,254 $ 289,261 2,636,321 2,688,746 (52,425) 8,372 8,354 18 1,519,825 1,378,649 141,176 2,137,977 1,012,027 1,125,950 8,739,807 8,092,684 647,123 60,450 59,801 649 124,331 91,261 33,070 - - 48,193 71,573 (23,380) 83,224 102,311 (19,087) 2,835,264 2,657,356 177,908 - - 364,563 360,650 3,913 - - - $ 22,199,069 $ 21,082,709 $ 1,116,360 $ 11,213,088 $ 9,816,946 $ 1,396,142 5,688,135 $ 6,709,524 $ (1,021,389) 9,269,827 9,293,138 (23,311) 2,573,627 3,074,630 (501,003) 2,123,237 1,991,585 131,652 1,601,170 3,616,337 (2,015,167) 357,857 390,770 (32,913) 177,751 225,974 (48,223) 2,625,046 2,660,877 (35,831) 5,114,591 5,255,654 (141,063) $ 21,613,853 $ 25,075,984 $ (3,462,131) $ 8,730,038 $ 8,926,472 $ (196,434) 585,216 (3,993,275) 4,578,491 2,483,050 890,474 1,592,576 (218,728) (358,169) 139,441 218,728 358,169 (139,441) $ 366,488 $ (4,351,444) $ 4,717,932 $ 2,701,778 $ 1,248,643 $ 1,453,135 16 Governmental Activities. Governmental activities in fiscal year 2014 increased the City's net position by $366,488. Specifically, revenues increased about 5%, and expenses decreased 14%. The key elements of the overall net position change were: ➢ Total revenue increased slightly ($1,116,360 or 5.3%). Seventy-four percent ($825,031) of this increase is property tax revenue ($647,123) and entitlement share payment ($177,908). ➢ Governmental activities expenses decreased ($3,462,131). Ninety-nine percent ($3,412,163) of this total decrease is due to a couple of major one-time expenditures in last fiscal year, the acquisition of the permanent easement on the Kidsports property for ($2,266,336) and a loss from the transfer of the Gateway West Mall (Teletech) property of ($1,145,827). ➢ In fiscal year 2014 the City's central garage was reclassified as an internal service fund. This resulted in governmental -activities public works expenses decreasing ($501,003), offsetting some increases in other programs. ➢ Debt service interest is now reported, on the statement of activities, as a separate line item rather than being allocated to individual functions. The table and charts below and on the following page help illustrate the information presented above. The table and bar chart present the cost and net cost (total cost less revenues generated by the activity) of each of the City's largest programs; General Government (administration), Public Safety (police and fire), Public Works (streets, light maintenance and signs and signals), Culture and Recreation (parks, urban forestry, pool, etc.), and Community Development. Net cost shows the financial burden placed on City taxpayers by each of these functions. The pie chart illustrates the different revenue sources for the City's governmental activities and how much each source contributes. Governmental Activities by function (in Millions) Total Cost Net Cost of Services of Services FY14 FY13 FY14 FY13 Public Safety $ 9.3 $ 9.3 $ 5.8 $ 5.1 Public Works 2.6 3.1 - 0.3 Parks and Recreation 2.1 2.0 1.2 1.2 Conmmity Development 1.6 3.6 - 2.4 General Government 5.7 6.7 4.2 5.9 Debt Service 0.4 0.4 0.4 0.4 Totals $ 21.7 $ 25.1 $ 11.6 $ 15.3 17 Expenses and Program Revenues - Governmental Activities for fiscal year 2014 10000000 9000000 8000000 7000000 6000000 O Q 5000000 EA 4000000 3000000 2000000 1000000 gen gov't pub safety pub works parks/rec comm dev 18 Activity Governmental activities percentage of revenue by source: ■ Other 2% ■ State entitlement 13% ■ Property to 40% wgesfor services 26% Operating grants/contribu 12% ■ Capital grants/contributions 7% Business -type Activities. Business -type activities increased the City of Kalispell's net position by $2,701,778. The factors leading to this result were: ➢ Revenues of the City's business -type activities increased $1,396,142. Capital grants and contributions revenue of business -type activities increased over 100% from $1,012,027 to $2,137,977, attributable to the construction industry picking up and related contributed capital (impact fees and infrastructure contributions). ➢ Expenses decreased ($196,434) or about 3% from the prior fiscal year. The following charts help illustrate the information presented above related to business -type activities net position. 7000000 6000000 5000000 -r=4000000 D 0 Q3000000 va 2000000 1000000 0 Expenses and Program Revenues- Business -type Activities forfiscal year 2014 airport water sewer so lid waste Activity 19 Business -type activities percentage of revenue by source: ■ Investment/other Earnings 3% s for servi ces 78% ANALYZING THE CITY'S INDIVIDUAL FUNDS Governmental Funds The focus of the City of Kalispell's governmental funds is to provide information on near -term inflows, outflows, and balances of spendable resources (fund balance). Spendable fund balance (restricted, committed, assigned, and unassigned) is a useful tool when assessing the net resources a government has available to spend at the end of a fiscal period. At the end of fiscal year 2014, the City of Kalispell's governmental funds reported combined ending fund balances of $10,970,044, an increase of $1,043,893 in comparison with the prior fiscal year. Of the ending fund balance, $8,736,417 (80%) is restricted, indicating that constraints placed on the use of resources are externally imposed, or imposed by law because: assets are limited by specific grant agreements ($995,966); assets are limited by specific voter approved bonds ($571,659); assets are limited by specific special assessments ($1,564,776); assets are limited by state law ($5,594,627); assets are limited by contribution restrictions ($9,388). $2,024,152 or 19% is available for spending at the City's discretion. Following is a short analysis of each major governmental fund. The general fund is the chief operating fund of the City of Kalispell. At the end of fiscal year 2014 unassigned fund balance of the general fund was $2,107,411, while total fund balance was $2,409,409. The fund balance increased $259,126 during fiscal year 2014. 20 Revenues and other financing sources and expenditures and other financing uses changed very little; less than 1%. At the end of fiscal year 2014, unassigned fund balance represents 21% of total general fund expenditures, a 4% improvement from fiscal year 2013. The general fund balance of $2,409,409 is non - spendable and assigned as follows: GENERAL FUND BALANCE -TOTAL $ 2,409,409 NONSPENDABLE Long-term recievables $ 13,003 Prepaids 163,547 TOTAL NONSPENDABLE $ 176,550 ASSIGNMENTS Capital Equipment $ 101,906 Downtown Parking 23,542 TOTAL ASSIGNMENTS $ 125,448 UNASSIGNED $ 2,107,411 The Street Maintenance fund is a special revenue fund established to account for the maintenance, construction, equipment and other costs incurred in the maintenance of the City's streets. Assessments on properties within the City of Kalispell boundaries are the main source of this funds revenue. At June 30, 2014, the fund balance of this fund was $1,287,118, a $15,061 increase from the prior fiscal year. The Community Development Loan Revolving fund is a special revenue fund used to make low interest housing and commercial loans within the City of Kalispell. Principal and interest from these loans or the purchase and subsequent resale of a fixed asset are the only sources of revenue in this fund. At June 30, 2014, the fund balance of this fund was $434,414, a 16% increase from fiscal year 2013. For fiscal year 2014, the Community Development Loan Revolving fund made no new loans. Special Improvement District 344 (debt service) fund was established by the City of Kalispell in fiscal year 2006 for the purpose of servicing the debt attributable to the construction of the infrastructure needed in the industrial/commercial development known as Old School Station. Fund balance at June 30, 2014, for SID 344 was-$208,707, a decrease of 568% from fiscal year 2013. This extraordinary reduction in fund balance is the result of the owner of many properties within the district being in excess of 5 years delinquent on the taxes for the properties. Proprietary Funds The City of Kalispell's proprietary funds financial statements provide the same type of information found in the government -wide financial statements, but in more detail. Unrestricted net position and the total growth in net position of the proprietary funds by fund are: Proprietary Fund Net Position j % of Unrestricted Funds total Change in % Change in Net Position Net Position Net Position Net Position Water $ 4,016,081 14% $ 1,525,966 6% Sewer 3,483,534 8% 1,130,756 3% Other 935,972 24% 45,056 1% Total $ 8,435,587 46% $ 2,701,778 10% 21 For the discussion regarding major changes in net position of the proprietary funds see the explanation above in the business -type activities of the statement of activities. GENERAL FUND BUDGETARY HIGHLIGHTS The City of Kalispell's general fund expenditures budget for fiscal year 2014 was $10,600,539. Actual expenditures for the year were $10,312,944, a favorable variance of $287,595. Actual public safety expenditures were $190,504 less than budgeted, due to personal services savings. Actual general government expenditures were $91,173 less than budgeted, the result of most general government departments making efforts to hold down expenditures where possible. Actual revenues of the general fund were $10,298,801, $4,281 less than the budgeted amount of $10,303,082. Taxes and assessments revenue in excess of the budgeted amount by $118,468 was more than offset by small decreases in most other categories. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At the end of 2014, the City of Kalispell has $155,123,144, net of depreciation, invested in a broad range of capital assets, including police and fire equipment, streets, buildings, land, park facilities, garbage collection equipment, and water and sewer lines. CITY OF KALISPELL'S CAPITAL ASSETS (NET OF DEPRECIATION) Governmental Bus ines s-type Total Activities Activities 2014 2013 2014 2013 2014 2013 Land $ 2,395,299 $ 2,395,299 $ 1,701,888 $ 1,701,888 $ 4,097,187 $ 4,097,187 Buildings 9,869,926 10,461,053 53,428 62,784 9,923,354 10,523,837 hnprovements (not buildings) 8,563,405 9,029,782 8,563,405 9,029,782 Machinery and equipment 3,801,713 3,678,116 673,964 306,285 4,475,677 3,984,401 Infrastructure 56,614,224 57,720,089 56,614,224 57,720,089 Construction in progress 22,155 38,331 77,811 772,554 99,966 810,885 Source ofsupply 3,856,681 3,849,983 3,856,681 3,849,983 Pumping plant 1,961,419 2,073,864 1,961,419 2,073,864 Treatment plant 20,059,920 19,692,830 20,059,920 19,692,830 Transmission and distnbution 33,903,460 33,747,465 33,903,460 33,747,465 General plant 1,569,245 1,694,840 1,569,245 1,694,840 Storm sewer system 9,998,606 9,534,864 9,998,606 9,534,864 Total $ 81,266,722 $ 83,322,670 $ 73,856,422 $ 73,437,357 $ 155,123,144 $ 156,760,027 Major Governmental funds capital asset events during the fiscal year 2014 included the following: ➢ Continued work on the Woodland Connector Trails. Fiscal year 2014 construction cost was $164,050 which is 87% paid by a federal grant. ➢ Purchased (4) police department vehicles at a cost of $119,726. ➢ Used Montana Board of Investment funding to purchase (2) dump trucks for the street department, and an aerial lift truck for the light maintenance department. ➢ Received a Montana Air and Congestion Initiative (MACI) matching grant for a flush truck valued at $174,533. The City's shared cost was less than 13%. ➢ Completed the purchase of a hazardous materials trailer tow vehicle through the use of a U.S. Department of Homeland Security grant (Assistance for Firefighters Grant). Fiscal year 2014 cost, 100% federal grant paid, equaled $109,178. 22 ➢ Paved 7 alleys. Replaced 1,510 linear feet (5 blocks) of sidewalks. ➢ A developer donated a street valued at $904,631. ➢ Disposed equipment with a cost basis of $255,228. Major Business -type funds capital asset events during the fiscal year 2014 included the following: ➢ Made lower zone water reservoir improvements costing $68,303. ➢ Made Improvements to the South Woodland Drive water system valued at $282,447. ➢ A water distribution service truck was purchased for $26,511. ➢ Developer's contributed 31 fire hydrants valued at $111,211. ➢ 9,530 linear feet of new water main valued at $451,399 was installed and contributed to the City by developers. ➢ The water department installed 497 new meters, including 113 new domestic meters of various sizes. ➢ Completed project replacing water line on 2nd Ave WN, total project cost was $164,277. ➢ Water and sewer mains were relocated and upsized to accommodate the Highway 93 Bypass construction. City's cost was $67,743. Montana Department of Transportation contributed the balance of $160,546. ➢ Developer's contributed 3,055 linear feet of new sanitary sewer main valued at $67,519 and a lift station with a value of $46,952. ➢ Installed roof liners on two buildings in the waste water treatment plant complex at a total cost of $112,760. ➢ Completed the primary digester lid project. Fiscal year 2014 cost for construction was $770,160. Total project cost was $1,166,304. ➢ Completed the "Willows" storm water project. Total cost of project equaled $315,680. Partially funded by a SID. Business -type (sewer fund) capital contributed from governmental (capital project) fund was $218,728. ➢ Developer's contributed 294 linear feet of new storm sewer main valued at $89,460. ➢ Purchased a Vactor vacuum truck for the storm sewer fund at a cost of $327,064. ➢ Purchased 2 new solid waste trucks for $451,757. Used Montana Board of Investment financing $172,988 for the rear -loader truck and purchased the side -arm truck with replacement funds. ➢ Replaced or abandoned water and sewer transmission and distribution assets with a cost basis of approximately $110,000. Additional information on capital assets can be found in the notes of the basic financial statements (Note D. Capital Assets pages 50-53). Debt At the end of fiscal year 2014, the City of Kalispell had total long-term debt outstanding of $26,076,560. Of this amount, $3,255,000 comprises debt backed by the full faith and credit of the government and $2,145,000 represents bonds secured solely by specific revenue sources (i.e., revenue bonds). The remainder consists of $14,932,682 outstanding on State Revolving Fund loans for construction/expansion of the wastewater treatment plant, the extension of sewer lines south on Highway 93, and the construction of a water storage facility and the related distribution/supply system. There is also $3,392,922 of special assessment debt for which the City of Kalispell is liable in the event of default by the property owners subject to the assessment, and $2,350,956 of loans for the purchase of other property and equipment. 23 CITY OF KALISPELL'S OUTSTANDING DEBT Governmental Business -type Total Activities Activities 2014 2013 2014 2013 2014 2013 General obligation bonds $ 3,255,000 $ 3,700,000 $ 3,255,000 $ 3,700,000 Revenue/Urban Renewal bonds 1,410,000 1,558,000 735,000 795,000 2,145,000 2,353,000 SRF loans 14,932,682 15,143,483 14,932,682 15,143,483 Assessments 3,392,922 3,457,647 3,392,922 3,457,647 Contract debt/loans 2,177,968 2,380,835 172,988 2,350,956 2,380,835 Total $ 10,235,890 $ 11,096,482 $ 15,840,670 $ 15,938,483 $ 26,076,560 $ 27,034,965 Other obligations of the City of Kalispell include accrued vacation pay and sick leave (compensated absences). More detailed information about the City's long-term liabilities is presented in the notes to the financial statements (Note E. Long -Term Debt pages 54-60). ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES The City's elected and appointed officials considered many factors when setting the fiscal year 2015 budget, including but not limited to, tax rates and fees that will be charged by the business -type activities. Some other considerations include: Capital needs; inflation; status of the City's agreements with the bargaining units; local economics, including the citizen's ability to pay. In some instances, City data is unavailable and Flathead County data was used. Unemployment Data 24 Per Capita Personal Income $50,000 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 Flathead County State of Montana United States ■ 2011 ■ 2012 ■ 2013 Source: U.S. Department of Labor and Industry. ➢ The City of Kalispell's unemployment rate (preliminary/unadjusted) stood at 5.1% as of October of 2014, which is an improvement of 33% over the December 2013 rate of 7.6%. This is worse than the State's unemployment rate of 3.8%, but better than the Nation's rate of 5.9% for the same month and year. ➢ Applications for building permits and other internal indicators of growth, such as impact fee revenues, improved in fiscal year 2014. Short-term future forecast are more optimistic than in the recent past. ➢ The rapid population growth which Flathead County and Northwest Montana experienced for many years remains low, but has improved and is considered healthy growth. ➢ Energy costs continue to be volatile. ➢ Cost of labor, health, liability, and property insurance continue to rise. During fiscal year 2014, fund balance in the General Fund increased to $2,409,409. The City of Kalispell has not appropriated any of this amount for spending in the 2015 fiscal year budget. The City has determined that preserving this available fund balance/reserve is necessary. The City Council approved the following rate increases for fiscal year 2015: ➢ Governmental: o All 4 categories of street maintenance assessments were increased. Category 1 & 2 maximums were not increased. These changes will result in an estimated revenue increase for the street maintenance fund of $173,500. ➢ Business -type: o Sewer bi-monthly administrative (base) charge increased from $15.00 to $16.88. 25 Request for Information This financial report is designed to provide a general overview of the City of Kalispell's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City of Kalispell, Finance Director, P.O. Box 1997, Kalispell, MT 59903-1997.